Chapter 8 - Creating Brand Equity
I.  Chapter Overview/Objectives/Outline
A. Overview
A brand adds dimensions differentiating the offering in some way from other offerings designed to satisfy the same need. Marketers must be able to create, maintain, enhance, and protect brands. Strategic brand management covers the design and implementation of marketing activities and programs to build, measure, and manage brands to maximize their value. This process involves:
1. Identifying and establishing brand positioning
2. Planning and implementing brand marketing
3. Measuring and interpreting brand performance
4. Growing and sustaining brand value 
All investment dollars used to provide market offerings are actually an investment in building an equity bridge with the consumer as the consumer acquires knowledge from the respective offerings. 
Marketers must choose the appropriate brand elements to identify and differentiate their brand. These elements must be tested and developed, usually with the help of market research firms. Brand elements should also capture the brand’s intangible characteristics as “The rock of Gibraltar” symbol is used by Prudential Insurance. Organizations may use “personalizing marketing” to ensure relevancy in the brand marketing efforts. This can be accomplished via the Internet, experiential marketing, one-to-one marketing, and permission marketing methods. Marketing activities throughout the organization as well as the value chain should be integrated to ensure consistency with the brand strategy. Internal branding can be used to inform and inspire employees of the organization’s branding strategy. Another way for organizations to build brand equity is to create secondary brand associations by linking associations to other entities and their respective brand, often referred to as co-branding.
There are two major approaches to measuring brand equity. First is an indirect approach, which is a quantitative method of identifying and tracking consumer brand knowledge. The direct approach assesses the “actual” impact of brand knowledge on consumer response to different aspects of marketing. Both methods are important for an organization to understand how sources of brand equity and respective outcomes of strategy change over time. Brand audits are customer-focused exercises that involve series of procedures to assess the health of the brand, uncover its sources of brand equity, and suggest ways to improve and leverage its equity. Brand audits enable the organization to better understand the sources of brand equity and how they affect outcomes of interest.
There must be a long-term brand management strategy as well. Brand reinforcement and brand revitalization techniques help support longer term strategies. The former consists of reinforcement and changes to marketing activities for current and new products. The latter may include a major change to how a product is positioned in the market place, i.e., re-inventing itself.

When devising a brand strategy, the organization must first decide whether “to brand” or “not to brand”? If the organization decides to brand, it must choose which brand names to use, i.e., individual names, blanket family names, separate family names for all products, corporate name combined with individual product names.

Co-branding is a joint effort whereby two or more established brands are linked together in a marketing branding effort. Ingredient branding is a special case of co-branding in which a component of the product also has a brand association. An example of this would be a PC “with the Intel chip inside.”

Brand extending is the process of associating a new product with an existing brand, thereby extending the brand to cover the product. This can increase the odds of success for the new product. There is the risk with extensions of diluting the brand. This occurs when consumers can no loner associate a brand with a specific product or similar set of products and start thinking less of the brand. 

Because different market segments look upon brands differently, it is important to provide multiple brands in the same category. Other reasons for having multiple brands in the same category include 1) increase shelf presence and retailer dependence in the store, 2) attract new customers seeking variety, 3) increase internal competition within the firm, 4) increase economies of scale in marketing mix activity. Multiple brands in the same category can be referred to as being in a set called the brand portfolio.
 
Companies should develop brand policies for the individual product items in their lines. They must decide on product attributes (quality, features, design), whether to brand at all, whether to employ producer or distributor branding, whether to use family brand names or individual brand names, whether to extend the brand name to new products, whether to create multiple brands, and whether to reposition any of them.
B. Learning Objectives
• Gain an appreciation of what branding means and the concepts of brand equity
• Understand how a company can make better brand decisions.
• Investigate different brand options and risks
C. Chapter Outline
I. What Is Brand Equity? Brand defined - a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of the competition. A brand has six levels of meaning: attributes, benefits, values, culture, personality, and user.
A. The Role of Brands
1. Identify source or maker of product or service
2. Simplify product handling and tracing, help organize inventory and accounting records, offer legal protection for unique features or elements
3. Signals a certain level of quality to the consumer
B. The Scope of Branding
1. Teach the consumer who the product is, what it does, and why they should care
2. Brands must stress differentiation which leads to consumers building knowledge of the brand and how it fits into their purchase decision process
C. Defining Brand Equity (also refer to Table 8.1)
1. Brand equity is the added value endowed on products and services, reflected in how consumers think, feel and act with respect to the brand as well as in the prices, market share and profitability the brand commands for the firm.
2. Customer-based brand equity –
a. Arises from differences in consumer response.
b. Differences in response are a result of consumer’s brand knowledge.
c. Brand equity is reflected in perceptions, preferences and behavior related to all aspects of the brand’s marketing.
d. Brand Promise is the marketer’s vision of what the the brand must be and do for consumers.
D. Brand Equity Models
1. BrandAsset® Valuator is Ad Agency Young & Rubicam’s model of brand equity (Refer to Figure 8.1) measures 4 pillars of brand equity – Energized Differentiation, Relevance, Esteem, Knowledge
2. BrandZ model of brand strength developed by Millard Brown and WPP identifies of series of steps leading from a weak to a strong brand relationship. Steps from weak to strong are Presence, relevance, Performance, Advantage, Bonding are illustrated in a BrandDynamcis™ Pyramid. (Refer to Figure 8.2)
3. Brand resonance Model views brand building as a series of six ascending steps or building blocks –Salience, Performance and Imagery, Judgments and Feelings, Resonance. (Refer to Figure 8.3)
II. Building Brand Equity - three drivers (choosing brand elements, the product or service and all accompanying marketing activities, other associations indirectly transferred to the brand by linking it to some other entity
A. Choosing brand elements - (brand elements are trademarkable devices that serve to identify and differentiate the brand) (Refer to Table 8.1)
1. Brand elements are “trademarkable” devices that identify and differentiate the brand. Examples: brand names, URLs, logos, symbols, characters, spokespeople, slogans, jingles, packages and signage
a. For building the brand (memorable, meaningful, likeable)
b. For defending the brand (transferable, adaptable, protectable)

2.  Brand Element Choice (6) Criteria (Refer to Table 8.1)
a. Memorable – easily recalled
b. Meaningful – credible and suggestive
c. Likeable – appealing
d. Transferable – leveraged to introduce new products, ability to extend brand equity across geographic boundaries and segments
e. Adaptable – adaptable and/or able to be updated for optimal effect over time
f. Protectable – legally and competitively protectable
3. Links to other entities
a. Use market research firms to test potential names via association, memory, and preference tests
b. Create appropriate associations
c. Capture intangible characteristics
B. Designing holistic marketing activities - customers come to know a brand through a range of contact and touch points, and a brand contact is an information-bearing experience. Key themes are personalization, integration and internalization
1. Personalization - brand and marketing activity in support of brand are made relevant to respective customers
2. Integration - mix and match marketing activities to maximize their individual and collective efforts
a. Brand awareness - consumer’s ability to identify the brand under different conditions as reflected by brand recognition and recall
b. Brand image is perceptions and beliefs held by the consumer of a particular brand
3. Internalization - the art of internal branding whereby all members of the organization understand the brand strategy and their role in supporting the brand. This leads to brand bonding with the consumer as every touch point reflects a respective brand supporting activity
C. Leveraging secondary associations - link brand to other information in consumer’s memory, usually an association with another entity. Refer to Figure 8.4 for Secondary Sources of Brand Knowledge. Target entities may include:
1. Channels of distribution (through channel strategy)
2. Company itself (through branding strategies)
3. Countries or other geographical regions (through identification of product origin)
4. Other brands (via co-branding, licensing, endorsements, sponsorship, awards or reviews by third parties)
D. Internal Branding – activities and processes that help inform and inspire employees. Should also extend to value chain partners.
E. Brand Communities – Internet has enabled the growth of specialized communities of consumers and employees whose identification and activities focus around the brand. Good example of a brand community is the Harley Owners Group. Three characteristics identify brand communities.
1. Sense of connection to the brand, firm or product or other community members.
2. Shared rituals, stories and traditions that help convey meaning
3. Shared responsibility or duty to the community and individual members

III. Measuring and Managing Brand Equity - indirect approach assesses potential sources of brand equity by identifying and tracking consumer brand knowledge structures. direct approach assesses actual impact of brand knowledge on consumer responses to different aspects of the marketing. 
A. Brand Audits and Brand Tracking
1. Brand audit - Consumer-focused exercises intended to assess the health of a brand, uncover its sources of brand equity, and suggest ways to improve and leverage its equity. Brand audits used to understand the sources of brand equity and how they affect outcomes of interest. Two steps to a brand audit:

a. Brand inventory - current comprehensive profile of how the organization’s offerings are being marketed including association programs
b. Brand exploratory - research activity to understand what consumers think and feel about the brand and its category  including how they shop for use the offerings
2. Brand tracking used to understand how the sources of brand equity change, if at all, over time. 
a. Tracking studies collect information from consumers over time.
b. Tracking studies use quantitative measures to provide valuable diagnostic insight into the collective host of marketing activity relative to supporting and building the brand.
B. Brand valuation differs from brand equity in that valuation is the estimation of the total financial value of the brand. Refer ot The Marketing Insight entitled “What is a Brand Worth?” to see the brand-management firm Interbrand’s, brand valuation model. 
C. Managing Brand equity
1. Brand reinforcement requires innovation and relevance. Marketing activity must be consistent and be moving the brand forward and in the right direction. Marketers should convey the brand’s meaning in terms of:
a. What products it represents, core benefits and needs satisfied
b. How the brand makes products superior and how positive brand associations should exist in consumer’s minds.
2. Brand revitalization 
            a.    Restore fading brand
                   1)   “Return to roots”
                   2)   Establish new sources of brand equity
            b.    Refresh brand
                    1)  Expand the depth and/or breadth of brand awareness by
                          Improving consumer recall and recognition
                    2)   Improve strength, favorability, and uniqueness of brand image
            c.     Brand crisis
                    1)   Prepared brands are able to withstand crippling brand crisis
                    2)   Reaction to crisis must be quick and sincere
3. Brand audits used to understand the sources of brand equity and how they affect outcomes of interest. Two steps to a brand audit:
a. Brand inventory - current comprehensive profile of how the organization’s offerings are being marketed including association programs
IV. Devising a Brand Strategy  . Refer to Table 8.2 for brand related definitions.
A. Branding Decision: to brand or not to brand? - commodities can be a target for branding if appropriate differentiation can be applied
1. Three main choices when introducing a new product
a) Develop new brand elements for the new product
b) Apply some of its existing brand elements
c) Use a combination of new and existing elements

 2.   General brand strategies - choosing a name
         a.  Individual or separate family brand names (e.g. different brand names
             for different quality lines). Also referred to as as a “house of brands”
             strategy.
         b. Corporate umbrella or company brand name. Benefit examples include
             lower cost, positive associations if corporate image is good. Also
             referred to as a “branded house” strategy.
         c. Sub-brand name. Combines two or more of the corporate brand, family
            brand, or individual product brand names. Company name legitimizes
            and the individual name individualizes the new product. (e.g. Kellogg’s
           Rice Krispies) .

B. Brand portfolios - set of  brands and lines in a particular category
1. Reasons for placing brands in category
a. Increase shelf presence and retailer dependence in store
b. Attract consumers seeking variety
c. Increase internal competition within organization
d. Yield economies of scale in advertising, sales, merchandising, and physical distribution
2. Roles within a portfolio
a. Flankers - also called fighter brands that are positioned close to competitor to protect positioning of flagship brands
b. Cash cows
c. Low-end entry level to attract consumers and move them up later
d. High-end prestige - add prestige and credibility to portfolio
C. Brand Extensions (use existing brand to introduce a new product)
Two types: Line - parent brand used on new product for new segment within category served by parent. Category - parent used to enter a different category than that of the parent brand
1. Advantages of brand extensions
a.         Setting up positive expectations in consumer mind reduces risk
 b.         Reduces barriers to channel acceptance
 c.         Allows consumers to switch products but stay in brand family
                                    d.         Reduces product launch cost
                                    e.         Provides feedback benefits
                                    f.         Can serve as a base for future extensions
2. Disadvantages of brand extensions
a.         May lose identity (Ries and Trout - “line-extension trap”
                                    b.        Brand dilution
                                    c.         Cannibalization
3. Success characteristics
a.  Measure not only the effectiveness of product leveraging parent
     brand but also how extended product contributed to parent
                                    b.   Must identify the fit of an extension with the consumer
                                    c.   Must take all consumer brand knowledge into account

V. Customer Equity  -
 A.       Definition – “sum of lifetime values of all customers”. Note that there
                                   are many permutations of calculating Life Time Value, almost all of
                                   which include NPV calculations.
B.        Customer lifetime value affected by revenue and cost considerations
            related to:
1.     Acquisition
2.     Retention
3.     Add-on spending
C.       Customer equity versus Brand equity
                                   1.    Both emphasize the importance of customer loyalty
2.   Customer equity focuses on bottom-line financial value and limited
      guidance for go-to-market and brand building strategies
3.  Brand equity focuses o strategic issues in managing brands in
     creating and leveraging brand awareness and image, providing much
     practical guidance for specific marketing activities
4. Brands serve as the “bait” to attract customers from whom value is
    extracted
VI.                 Executive Summary
II.  Lectures
A.  “Reinventing  Products and Companies”
The general purpose of this discussion is to tie together the product and branding aspects of the course and bring in the strategy and planning elements as well. The discussion focuses on achieving implementation in the overall marketing strategy process. Students should be able to identify readily with this concept since it brings together concepts they have studied and draws on their general knowledge of companies and products discussed to date.

Teaching Objectives
• To comprehend the major elements of the product planning and control effort.
• To understand how and where the product control effort serves as a linchpin for much of the rest of the marketing strategy effort.
• To appreciate the distinction between defining the product plan and actually committing to carrying out the program.
• To define a structure, with examples, for improving skills in composing and submitting a marketing plan.  

Discussion
INTRODUCTION - WHAT THE BEST COMPANIES DO TO REINVENT THEMSELVES
It is often said that the best companies can time and time again pull out of mistakes with their strong cultures and will to succeed. This may be true, but more importantly their success or failures rest on how well they conduct and control the product strategy that often drives the rest of the marketing strategy process. There are many examples in the marketplace of the winners and losers, but clearly one of the top winners has to be Gillette. The company operates in just about the most mundane of product categories, but due to their product and strategic planning excellence they have become one of the most successful and resilient companies in the world.   Their success is no accident.
To begin with, consider some of the things that Intel, Microsoft, General Motors, IBM, and other major firms have done right and wrong at various times in their product and branding strategy, and then compare that to what Gillette learned and did, often just before the brink of disaster. With this discussion you can begin to see the real meaning of product and branding strategic planning excellence. The message is that regardless of size or category dom¬inance, if firms do not reinvent their corporate charter and product fran¬chise, someone else will. The meaning here: Nothing is forever or sacrosanct in the world of global product marketing, and the only thing that we know for certain is that if a firm sits on its laurels for very long they will be undercut or flanked, sooner or later.
THE REQUIREMENTS FOR REINVENTING PRODUCTS—AND COMPANIES
Reinventing a company’s product and brand franchise requires foresight. It also requires the courage to chal¬lenge conventional wisdom. It requires the confidence to think outside the comfort zone. This activity taps all of the com¬pany’s resources to leverage its assets and skills. It has the power to increase sales and profits, or if performed badly it can cost the firm everything it has worked to gain.
Focusing more specifically on Gillette, razors and blades account for a third of Gillette’s sales and two-thirds of its operating income. But we should remember that there was a period when the advantages of this lucrative business were almost lost. After dominating the category for years, Gillette found itself fending off cor¬porate raiders because it lost sight of what drives the business engine. Gillette fortunately woke up soon enough and turned its fortunes around to again become a world-class leader. It is, in a phrase, the story of a successful reinvention.  
In the mid-1970s, Bic introduced the disposable razor in Europe. Gillette management was wary about moving into disposables, fearing the product would cannibalize sales of its far more lucrative shaving systems. Nonetheless, Gillette introduced Good News as the first disposable razor in the United States.
Gillette continued to develop superior shaving systems, improving upon the twin-bladed Trac II with the pivot-headed Atra in 1977. Unfortunately, following on the Trac II and Atra system successes, the company quickly in¬corporated improvements into the disposa¬ble models. Competitors followed, and consumers saw little reason to pay a 40-50 percent premium for system razors. The result was that they flocked to disposables. Gillette’s share of 70 percent of the wet-shave market declined to under 60 percent, and this was only the beginning.
Disposables grew by 17 percent a year, while system sales were declining by 1 percent. By 1985, Gillette put more than 60 percent of its consumer ad spending behind disposables. As a result, disposables captured 60 percent of category units and 53 percent of dollars at drastically lower price points and profit margins. In 1987, Gillette spent only one-fourth of the $61 million it spent in 1975 on media advertising.
Coincidentally, at the same time this was happening, the company was already in the throes of responding to another challenge that was to lead Gillette toward a reinvention of itself with a response that saved the company from some of its own mistakes. (Note to the Instructor:  there are many contemporary examples of the same type of mistake; this could include IBM, Oracle, and others discussed in the text.)
In 1986, the chairman of Gillette, in the heat of a proxy battle, promised stockholders that Gillette management would increase their value more than the raiders. Accordingly, the company had to take a chance, a very big chance. 
For years, design engineers had tin¬kered with a system that set thin blades on springs so the razor followed the con¬tours of the face. Eventually this system would be called the Sensor.  Development costs ex¬ceeded $200 million before the first unit was sold at retail. The simultaneous launch of Sensor in the United States and Europe in 1990, supported by a $100 million marketing budget, was hugely success¬ful. By 1992, sales of Sensor and Lady Sensor exceeded $500 million. Gillette successfully reinvented its fran¬chise by doing what it did best, better. Sensor returned Gillette to providing the consumer with a superior shave, and away from competing on price.
Reinvention of existing products or services is much more likely to succeed than new product development, new business development, or acquisition for two major reasons:
• The costs and risks of reinventing the franchise are substantially lower be¬cause the tools, systems, talents, and skills are already in place.
• The rewards can be considerably higher, since a company is starting with what it knows and the learning curve is flatter.
Microsoft, Intel, Ford, GM, and others also have learned how to play this game. To generate real growth, even managers of successful brands cannot just respond to change. They must anticipate change. They must be a catalyst for change. They must con¬tinually reinvent their franchise.
B.  “Brands - Are they Dead?”
This lecture and discussion focuses on strategy in a marketing setting, and the challenges and opportunities related to branding in the overall marketing process and strategy for the company.
The discussion considers a topic of considerable importance in today’s marketplace: The “death” of brands. Ask your students what they find important in making purchase decisions. Is brand name as important as it used to be? The discussion continues by providing examples of several brands and their strategies for “staying alive.” This leads into a discussion of the implications for the introduction of various branding strategies into the firm and the industry.
Teaching Objectives
• To stimulate thinking about the important issues in branding and packaging strategy. 
• To present points to consider in proceeding with a specific branding/packaging strategy
• To emphasize the role of branding/packaging strategies and policies in the overall marketing strategy. 
Discussion
INTRODUCTION - BRAND EQUITY: DEAD OR ALIVE?
One aspect of branding that has required a shift in focus has been the declining power of brand equity. The invention of the checkout scanner, which allows a company to see sales data instantaneously, has fueled price wars in the packaged goods arenas. With increasing promotional activity in the marketplace, consumers have become more value-driven in their purchases, and retailers have responded with the introduction of private label goods (goods sold under the retailer’s name) in many packaged goods categories. Frequently, the perceived difference in quality between manufacturers’ and private label goods is minimal, spurring the growth of the private labels. Brands thus have also been a party to their own decline. With a long period of prosperity, primarily based on the consumers’ one-time obsession with brands, the brands became complacent in efforts to differentiate themselves and justify their premium prices. 
RESPONDING WITH THE FIGHTING BRAND
The result is that a number of variables have put the brand names on notice, but today the brand-holders have been fighting back with so-called “fighting brands”. This approach is not new, with brand marketers using such a ploy as a temporary measure to hold customers during recessions. Today, however, many marketers see the wave of fighting brands as more than a temporary phenomenon. 
The fighting brand has been seen as a response to the fragmentation of the mass marketplace, based on taste and economic insecurity. Many consumers have become switchers, trading back and forth between branded products and store brands. The trend has spurred the growth of private label products, which have risen from approximately 18 percent of supermarket unit sales in 1990 to around 22 percent in recent years.
Despite the problems that micro beers, import beers, discount beers, etc., have brought to the brewers, there has been some positive development for at least one of the big U.S. brewers.  Miller Brewing Co. has found some sparkle in the brand, but not as a premium priced brew. Miller is one of a small number of U.S. brand marketers trying to breathe new life into their old brands. They are slashing the prices of some well known products and repositioning them as higher grade alternatives to the store brands and other low priced fare that appeal to budget minded shoppers.  
Miller dropped prices on Miller High Life and revived the old “Miller Time” ads to go after store and discount brands. Over the last few years Procter & Gamble (P&G) also has dropped prices on some products to put pressure on store brands and rivals while protecting its higher¬-priced brands. Cereal makers, including Kellogg’s, General Foods, General Mills, and Quaker, all have responded in a similar manner. Kodak, another example, launched Funtime, a new low price film aimed at store brands.
For manufacturers, the mid-tier brands offer several benefits. They can help to control the switch-ers in the marketplace without setting off price wars on premium brands. The mid-tier brands keep them producing branded product while they save the old brands from dying. This allows them to continue to profit from the efforts of years of advertising.
Now, fighting brands are being used with success on a wider scale. A number of brand holders have used price tiering before, on a limited basis. P&G has utilized this approach with shampoos in the United States, with diapers in Venezuela and Ger¬many, and with laundry detergents in the developing world. The market share for Luvs’ (also P&G) disposable diapers in unit volume is up from 11 percent to 14 percent since its price was cut by 16 percent , arresting a severe slide. Even so, it appears that Luvs initially cannibalized some of Pampers’ sales; Pampers recovered when it introduced a new, thinner diaper. P&G’s total unit share rose shortly after and has maintained the pace since then.
Using another beer example: de¬spite a flat beer market, High Life’s sales jumped 9 percent, to 5 million barrels after Miller cut its price 20 percent or more in most markets.  A 12 pack of High Life that cost $6.99  dropped to $4.99. The challenge is to calibrate a fighting brand to make it good enough to draw consumers from low priced ri¬vals but not so good that it will clobber the company’s top brands or its profit margins. To offset the lower margins on its Fun¬time film, for example, Kodak also launched a high end film for special occasions, Kodak Royal Gold. For Luvs diapers P&G eliminated jumbo packages, stream¬lined package design, simplified print¬ing on the diapers, and trimmed down promotions.
Other brand marketers figure that if they cannot beat store brands, they might as well make them.  RJR Nabisco did this by test marketing private ¬label cookies and crackers in some stores. This underscores, again, the power of retailers who love the fat margins on store brands. Research has shown that retailers, for example, make 8 percent to 12 percent on store brand diapers. As part of the Luvs repositioning, P&G increased the retail margins to over 8 percent from just over 3 percent. As a result, while it may pull back some retailers, others will not respond. For example, most divisions of Safeway Inc., no longer stock Luvs. 
CONCLUSION - FIGHTING BRANDS
Clearly the fighting brands won’t affect any change in the process if the retailers don’t give them a chance. This has led a number of brand manufacturers to make presentations to retailers regarding the strength of brand names in attracting the most profitable shoppers. This category of shopper on average purchases more during a typical visit.  In addition, the brands have altered their promotional strategies to create a new image for the brands and rebuild consumer loyalty. These efforts, to some degree, are working; and some consumers have begun to trust again because the companies are making brands worth trusting. Private label brand sales periodically plateau,  as does the  emphasis on promotional price incentives.  
Thus, the idea of branding is far from passé. When a brand is managed properly it can and will provide credibility and attract attention in the marketplace.

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