Chapter 9 – Building Brand Equity
I. Learning Objectives
After reading this chapter, students should:
q Know what a brand is and how branding works
q Know what brand equity is
q Know how brand equity is built, measured, and managed
q Know the important decisions in developing a branding strategy

II. Chapter Summary
A brand is a name, term, sign, symbol, or design, or some combination of these elements, intended to identify the goods and services of seller or group of sellers and to differentiate them from those of competitors. The different components of a brand—brand names, logos, symbols, package designs, and so on—are brand elements.

Brands offer a number of benefits to customers and firms. Brands are valuable intangible assets that need to be managed carefully. The key to branding is for consumers to perceive differences among brands in a product category.

Brand equity should be defined in terms of marketing effects uniquely attributable to a brand. That is, brand equity relates to the fact that different outcomes result from marketing a product or service by its brand, as compared to the results if that same product or service was not identified by its brand.

Building brand equity depends on three main factors: (1) the initial choices for the brand elements or identities making up the brand; (2) the way the brand is integrated into the supporting marketing program; and (3) the associations indirectly transferred to the brand by linking it to some other entity (e.g. the company, country of origin, channel of distribution, or another brand).

Brand equity needs to be measured in order to be managed well. Brand audits measure “where the brand has been”, and tracking studies measure “where the brand is now” and whether marketing programs are having the intended effects.

A branding strategy for a firm identifies which brand elements the firm chooses to apply across various products it sells. In a brand extension, a firm uses an established brand name to introduce a new product. Potential extensions must be judged by how effectively they leverage existing brand equity to a new product, as well as how effectively the extension, in turn, contributes to the equity of the existing parent brand.

Brands can play a number of different roles within the brand portfolio. Brands may expand coverage, provide protection, extend an image, or fulfill a variety of other roles for the firm. Each brand name product must have a well-defined positioning. In this way, brands can maximize coverage and minimize overlap, thus optimizing the portfolio.

Customer equity is a complementary concept to brand equity that reflects the sum of lifetime values of all customers for a brand.

III. Chapter Outline
I. What Is Brand Equity?
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, and offer legal protection for unique features or elements
3. Signal information to consumer
B. The Scope of Branding - teach the consumer who the product comes from, what it does, and why they should be concerned about these
C. Defining Brand Equity
1. Definition of a brand - 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
2. Customer-based brand equity - differential effect that brand knowledge has on consumer response to the marketing of the brand
3. With no differences in response, product is classified as a commodity or generic version
4. Differences in response related to consumer brand knowledge and beliefs
5. Differential response related to brand equity is reflected in perceptions, preferences, and behavior
D. Brand Equity as a Bridge
1. All marketing dollars spent on offerings are investments in building consumer brand knowledge
2. Investment quality, not quantity, is the critical factor
3. Brand knowledge includes future directions for the brand
4. Brand promise - marketer’s vision of what that brand must be and do for consumers

II. Creating Brand Equity - three drivers (choosing brand elements, marketing activities, and other associations)
A. Choosing Brand Elements - these are trademarkable devices that serve to identify and differentiate the brand
1. Brand element choice criteria
a) For building the brand (memorable, meaningful, likeable)
b) For defending the brand (transferable, adaptable, protectable)
2. Developing brand elements
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
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 - 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 (“co-branding”). Target entities may include:
1. Product origin (i.e. geographic)
2. Company itself
3. Countries
4. Other brands

III. Developing a Brand Strategy
A. The Branding Decision: to brand or not to brand? - commodities can be a target for branding if appropriate differentiation can be applied
1. General brand strategies - choosing a name
a) Individual names
b) Blanket family names
c) Separate family names for all products
d) Corporate name combined with individual product names
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. Co-branding and Ingredient Branding
1. Co-branding
a) Two or more well-known brands combined into a joint product or marketed together
b) Benefits - can increase sales, produce more information on consumers, reduce costs, accelerate adoption by virtue of combined brands
c) Risks - lose control, overexposure leading to dilution of association transfer, lose focus on existing brands
2. Ingredient branding – create brand equity by including materials, components as part of a product into other branded products (e.g. “Intel inside”)
D. 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 - 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 contributes to parent
b) Must identify the fit of an extension with the consumer
c) Must take all consumer brand knowledge into account

IV. Managing and Measuring Brand Equity  
A. Brand Reinforcement
1. Requires innovation and relevance
2. Marketing activity must be consistent and move the brand forward and in the right direction
B. Brand Revitalization
1. Restore fading brand
a) “Return to roots”
b) Establish new sources of brand equity
2. Refresh brand
a) Expand  the depth and/or breadth of brand awareness by improving consumer recall and recognition
b) Improve strength, favorability, and uniqueness of brand image
C. Measuring Brand Equity  
1. Brand audits
a) 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
b) Study sources of brand equity from both the consumer and organization’s perspective
c) Two steps to a brand audit
(1) Brand inventory - current comprehensive profile of how the organization’s offerings are being marketed including association programs
(2) 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
a) Tracking studies collect information from consumers over time
b) Use quantitative measures to provide valuable diagnostic insight into the collective host of marketing activity relative to supporting and building the brand
3. Brand valuation - differs from brand equity in that valuation is the estimation of the total financial value of the brand

V. Summary

IV. Opening Thought
This chapter will present some challenges to students new to marketing. The concept of a “brand” is discussed in depth in the chapter and because that concept comprises much more than a product, some students will have difficulty in understanding it. The instructor is urged to use a number of concrete examples gleaned from the student’s personal experiences of what a brand is. The instructor is urged to spend a considerable amount of time trying to differentiate between the symbol or package, and the total brand. This concept of a brand should be satisfactorily understood by the students before proceeding further with the chapter material.

The second challenge presented in the chapter is the fact that brands represent financial assets to a company, are valuable intangible assets that need to be managed and symbolize perceived differences in product performances. The instructor is encouraged to use examples of competing products in a category to demonstrate to students the differences and perceptual differences among and between alike products. An in-class exercise could include asking students to mention products or services that they are loyal to and the accompanying reasons. The instructor could compare and contrast a variety of such opinions to demonstrate brand loyalty and brand switching. This chapter also contains a number of definitions that the instructor is urged to define and differentiate clearly so that the students understand them.

V. Teaching Strategy and Class Organization
PROJECTS
1. At this point, students are to have developed the branding strategy for their project. Questions to have been completed include the brand name, its equity position, and the decisions in developing the brand strategy.

2. In small groups (five students suggested as the maximum), have them list their favorite branded product or service (e.g. Google, Nike). Based upon the information contained in this chapter, the students are to collect information, via on-campus research, on the brand’s brand equity based upon the Brand Asset Valuator developed by Young and Rubicam.

ASSIGNMENTS
Small Group Assignment
1. In small groups, ask the students to conduct a small research project with other students on campus regarding their  brand knowledge of a particular brand (again, the students can select their brand for this exercise). In their research, they are to delineate the brands based on unique brand association, the thoughts, feelings, images, experiences, and beliefs elicited by the brand. This exercise builds on the concepts of marketing research covered in Chapter 3 of this text. Students should postulate why some of the respondents held such beliefs about the brand and while others did not.

2. Refer to the world’s most valuable brands in 2007 displayed in this chapter. Students are to research on financial, stock, and other information about these companies. Does the financial valuation metrics account for all of the brand valuation? On the other hand, does the presence of a strong brand provide incremental “value” to the company beyond the tangible assets of the firm? Why or why not?

3. To prepare case studies based on the following materials from Chapter 9 and to present these:
• Mini Case: Apple 
• Mini Case: Haier

Individual Assignments
1. Figure 9.4 illustrates secondary sources of brand knowledge. Selecting a brand of their choice, students should attempt to illustrate the secondary sources of their brand knowledge by using this figure as a guide. Specifically, students should delineate all of these elements and show how these secondary sources affect/effect/impact their brand perceptions.

2. In Seth Godin’s book, Permission Marketing: Turning Strangers into Friends, and Friends into Customers (New York: Simon & Schuster, 1999), he lists five steps in developing effective permission marketing. After reading the book, comment on whether you believe that permission marketing will work for all products and services in the future. Specifically, explore whether the proliferation of permission marketing will wear out its effectiveness, just like spam, “pop-ups”, and other forms of customer-specific marketing techniques.

Think-Pair-Share
1. From a reading of Scott Bedbury’s book, A New Brand World (Viking Press, 2002), students are to comment on the appropriateness of his eight branding principles to the future of marketing. Specifically, are these principles “on target”, applicable to all brands, or only to emerging brands? If you were asked to implement such principles to the branding of an existing product (say your school or university), how and what would you change in order to follow these principles?

2. The website www.allaboutbranding.com lists a number of articles and books about branding products today. Assign students to read four articles from the website and to comment in class about the information contained and the new knowledge about branding learned. 

END-OF-CHAPTER SUPPORT
MARKETING DEBATE

Are Brand Extensions Good or Bad?

Brands cannot be expected to last forever versus There is no reason for a brand to ever become obsolete.
VI. Case Study
1. Marketing in China: Huawei’s Brand Image Re-forming
1) Why did Huawei have to undergo brand re-form?
2) Find out the differences of brand image and brand value proposition (between the “aardwolf” and the “elephant”).
2. Innovative Marketing: L’Oreal in China    
1) Analyze the advantages and shortcomings of L’Oreal’s “brand pyramid strategy”.
2) What is the main reason for L’Oreal’s success in China? Go on to make a comparison with P&G’s success in China.
3. Chapter Case: P&G
1)  As the most successful global supplier of consumer goods, what are the major features of P&G’s marketing innovation?
2)  Analyze the strengths and weaknesses of P&G’s multibrand strategy.

VII. Main Topic(s)
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.

Marketing Insight: What is a Brand Worth? 

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 again pull out of mistakes with their strong cultures and will to succeed. This may be true, but more importantly their success or failure rests 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 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 dom­inance, if firms do not reinvent their corporate charter and product fran­chise, someone else will. Nothing is forever or sacrosanct in the world of global product marketing, and the only thing 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 chal­lenge conventional wisdom, and the confidence to think outside the comfort zone. This activity taps all of the com­pany’s resources to leverage its assets and skills. It has the power to increase sales and profits, or if performed badly, 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 cor­porate 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 in­corporated improvements into the disposa­ble models. Competitors followed, and consumers saw little reason to pay a 40% to 50% premium for system razors. The result was that they flocked to disposables. Gillette’s share of 70% of the wet-shave market declined to under 60%, and this was only the beginning.
Disposables grew by 17% a year, while system sales were declining by 1%. By 1985, Gillette put more than 60% of its consumer ad spending behind disposables. As a result, disposables captured 60% of category units and 53% 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 tin­kered with a system that set thin blades on springs so the razor followed the con­tours of the face. Eventually, this system would be called the Sensor. Development costs ex­ceeded $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 success­ful. By 1992, sales of Sensor and Lady Sensor exceeded $500 million. Gillette successfully reinvented its fran­chise 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 be­cause 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 have also 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 con­tinually 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.
1. Marketing Insight: The Basic Defects in Branding of China  
2. Marketing in China: Revitalize China’s Time-Honored Brands 

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 consumers’ one-time obsession with brands, the brand-holders 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% of supermarket unit sales in 1990 to around 22% in recent years.
Despite the problems that microbeers, 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) has also 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 switch­ers 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 Ger­many, 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% to 14% since its price was cut by 16%, 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: de­spite a flat beer market, High Life’s sales jumped 9%, to 5 million barrels after Miller cut its price 20% 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 ri­vals but not so good that it will clobber the company’s top brands or its profit margins. To offset the lower margins on its Fun­time film, for example, Kodak also launched a high‑end film for special occasions, Kodak Royal Gold. For Luvs diapers, P&G eliminated jumbo packages, stream­lined package design, simplified print­ing 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% to 12% on store‑brand diapers. As part of the Luvs repositioning, P&G increased the retail margins to over 8% from just over 3%. 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.
VIII. Background Article(s)
A. Issue: Improving Brand Image
Source: “Forever Young (Budweiser’s 125th anniversary)” Beverage Aisle, October 15, 2001, p. 38.
 
Thanks to shrewd marketing, the growth of Bud Light has done nothing to lessen the strength of Anheuser-Busch’s flagship brand. Indeed, when looked upon as a team, Budweiser and Bud Light represent the most powerful brand in beer history. Not bad for a 125-year-old entity.
It was 1994, and Anheuser-Busch was six years into its sponsorship of the Super Bowl telecast, when, in the words of Bob Lachky, Anheuser-Busch’s vice president of brand management and director of global brand creative, the Budweiser marketing team realized it could “no longer devote that powerful forum to ‘bottles banging into bottles’”. While the team knew it could count on the bottle-banging Bud Bowl to augur a January sales spike at the retail level, the marketers suspected they could reach higher if they risked a fresh new play during the Super Bowl telecast. After all, the nation’s No. 1 beer was being pushed by U.S. consumers’ march to light beers, and young adults in particular had broadened their brand sets beyond a steady diet of any beer, including the category king. Budweiser’s national share and volume were slipping. The brand’s greatest risk lay in courting consumer irrelevance.
“We told ourselves, ‘We’ve got to use the Super Bowl stage to blaze new trails, to showcase our strengths and our leadership,’” Lachky recalls. “Super Bowl is an opportunity to kick off our sales season, to really connect with young adults, and to get people talking about Budweiser at the water cooler again. We realized we had to capture a truly contemporary voice.”
When Bud’s new voice broke during Super Bowl 1995, it croaked. Budweiser’s breakthrough Frogs campaign demonstrated that risk could reap reward for the tradition-rich brand.
Staying Fresh
According to August Busch IV, group VP for marketing and wholesale operations, Budweiser’s current image strategy is built upon three distinct campaigns: quality, values and contemporary appeal. “These campaigns work together to build the brand’s core identity and communicate it to our consumers,” he says. “The foundation for this strategy has been in place for years. For example, quality descriptions, such as all-natural ingredients and product freshness, deliver a personal message to consumers, while values imagery like the Budweiser Clydesdales communicate what the brand stands for: friendship, an honest day’s work, and enjoying a cold, fresh Budweiser with friends.” “Finally,” continues Busch, “the brand’s ‘contemporary appeal’ marketing efforts focus on memorable characters and humorous story lines.”
Lachky explains that the breakthrough Frogs campaign (and its lizard and ferret derivatives) built on successes Bud has crafted over its 125-year history. “We’ve always said, ‘Don’t blow up campaigns. Evolve them.’ When we look at reels of historic Budweiser advertising, we can spot quality work, even if the casting or the production work seems dated. When I review some vintage ‘This Bud’s for You.’ work, I get chills. They’re that good. But you couldn’t run the sports today. Consumers have changed.”
Indeed. They’re more skeptical, more diverse, and less bound by custom. The promise of work-reward—the cornerstone of much traditional beer advertising, in which the 5 o’clock brewski signals a welcome end to the day’s blue-collar drudgery—no longer resonates broadly. But, perhaps most importantly, consumers today exercise the luxury of choice.
“The most amazing thing I’ve seen in the 12 years I’ve been with the brewery is how much the brand sets have changed,” says Lachky. “Ten years ago, a Bud drinker had maybe one other brand in his or her set. Today the Bud drinker is a Bud Light drinker, a Heineken drinker, a Smirnoff Ice drinker, a Diet Coke drinker ... and more, depending on the occasion.”
“Choice” underscores consumers’ media habits as well. During Bud’s fast-growing 1970s and early 1980s, three major networks dominated consumers’ TV time. Broad-appeal campaigns and price-off competition enabled Bud to treble its volume from 1969 to 1985.
In the late 1980s, TV exploded with channels—many packed with the sort of sports and big-event programming that played to Bud’s big-brand strengths. Budweiser’s industry share ticked up, reaching its zenith in 1988, at 26.5%. But by the early 1990s, as blue- and gray-collar lifestyles winked out, and faster-paced campaigns wooed young adults increasingly ready to spend up for the occasion-correct beverage, Budweiser struggled to find the right message.
As the season progressed toward Super Bowl XXIX, Anheuser-Busch was ready to take a calculated risk to ensure the long-term strength of its flagship.
Bold Marketing
Despite its recent share slippage, no cynics within—or without—the King of Beers’ St. Louis castle muttered about the quality of the monarch’s character, or the acumen of its advisors. This king still rode high. The brand was in its 37th year atop the U.S. beer throne, with a 22% share of nationwide beer volume—70% of the domestic premium business. Its throne-mate, Bud Light, was No. 2, with 8.7% of the overall market.
As Anheuser-Busch prepared for the frog-festooned 1995 Super Bowl, a transition was taking place in the company’s marketing department. August Busch IV became vice president of brand management in 1994 and was ready to spread the wings of his marketing staff. In addition, the company had recently reinvented its relationship with its ad agencies, upping their number and tasking Anheuser-Busch marketers to nurture the best from them. “The idea was to have multiple agencies pitching multiple ideas and to pick the hottest ones,” Lachky explains. “In 1994 we had two ad agencies. Today we have 14.” All of whom “are like family”.
Several watersheds have helped to contemporize Bud’s image over the last few years. For instance, Bud’s more free-wheeling idea lab and its mandate to “be nimble, be intuitive, and take some risks” spawned one of the most buzz-making campaigns in recent consumer packaged goods history: the “Whassup” campaign.
“The new Budweiser script logo, which was placed on all of our Budweiser packaging last year, conveys a more sophisticated and upscale message to our contemporary adult consumers,” explains Busch. “Memorable advertising campaigns, featuring characters, such as the Budweiser frogs and lizards and the ‘Whassup’ guys, have contributed to the brand’s contemporary appeal in recent years.”
“‘Whassup’ was probably the riskiest thing we’ve done here,” seconds Lachky. “It was perhaps even more daring than having the lizards assassinate the frogs on Super Bowl Sunday, 1998.” One risk Bud marketers hedged in “Whassup” was talking away from its older core drinkers. The campaign generated such media chat that Bud fans of all ages embraced it. “Reaching the contemporary adult is critical, but we can’t turn our backs on the older generation of drinkers,” notes Lachky. “That’s death to a brand.”
Budweiser’s Born-On campaign, in which it challenged the competition to follow the leader and print the brew date on its labels or cans so the public could tell just how fresh a product it was buying, was another marketing milestone for the brand. “Through our Born-On freshness campaign, we want adult consumers to know the simple fact that fresh beer tastes better,” explains Busch. “Finally, sports sponsorships and sales promotions let contemporary beer drinkers know that Budweiser speaks their language.”
Siamese Kings
Bud Light has almost surely surpassed Budweiser as America’s best-selling beer. Official numbers will tell the tale at year-end. But for most observers—in St. Louis and elsewhere—Bud Light’s throne-stealing is a nonstory.
“In some parts of the country, Bud Light has outsold Budweiser for years,” notes Anheuser-Busch’s vice president of premium brands. “In the world in total, Bud Light is years away from outselling Budweiser—if it ever does. As far as investing in the two brands, we’re going to do the same things tomorrow as we do today.” “It’s something we can never quantify, but a healthy Budweiser message is of tremendous value to a healthy Bud Light.” A healthy Bud Light message is invaluable to Budweiser.
“Budweiser provides the ‘heritage’ message and the ‘quality’ message for the whole Anheuser-Busch portfolio,” says English. “That allows Bud Light to focus single-mindedly on being fun, young, and social.”
While Bud and Bud Light enjoy certain standalone equities—the blimp bears only a Budweiser logo, for example—the two brands generally go to market as a single entry. In addition, the two products are co-branded, and most floor displays stack both brands. Given the way that consumers choose their brands in the marketplace, it can be argued that Bud and Bud Light comprise a single brand. Many view Bud and Bud Light not just as twins, but as Siamese twins.
Outside the U.S., Bud’s marketers foresee this king only enlarging its kingdom. “While Budweiser is already sold in 80 countries and is considered one of the world’s most valuable trademarks, Busch argues that their strategy is to build Budweiser into a leading global brand outside the United States. The company targets several key countries, including China, Canada, the United Kingdom, and Ireland.
“We know the world is ready for Budweiser,” according to Busch. “First, its clean and light signature taste is refreshingly different from most local brands in global markets. Second, Budweiser is known around the world as a premium international beer that is gaining popularity among contemporary adult beer drinkers. Third, in some international markets, the company has licensing agreements for Budweiser with highly motivated, experienced local partners, including Labatt (Canada), Guinness (Ireland), Kirin (Japan), and Peroni (Italy).”
Meanwhile, in the U.S., consumers have shifted away from premium regular beer, and Budweiser has not escaped the pinch. In fact, the segment remains as huge as it is today largely by virtue of what Budweiser has done. Should U.S. consumers ever shift back to domestic regular premiums, Budweiser is in an excellent position to capitalize.
Budweiser’s marketing team can take a lot of the credit for the brand’s continued U.S. strength. Its willingness to take risks with ad concepts that challenge and engage consumers—and abjuring the safety net of “overproduction” that a big budget tempts—stamps the brand with a character pledged on every Bud bottle or can: “genuine”.
The core Bud drinker is not limited to a closely defined demographic. It’s a mindset: Bud is American-made, it is a good, consistent brand, and it stands for quality. The strength of those realities is the Anheuser-Busch platform for stability and future growth, not only internationally but in the U.S. as well.
According to Bud officials, the Bud drinker is getting young again. And that’s a good thing for Anheuser-Busch. “It means our contemporary marketing is reaching the younger customer,” they explain, adding that the brand is attracting an increasingly diverse ethnic mix, particularly among African-American and Latino consumers. “That’s what we see as the future of Budweiser: increasingly diverse in its consumer base, increasingly international, and always young.”

B. Issue: Holding Brand Position
“Biggest Brands,” PR Week, August 9, 2002, p. 11.

“U.S. Brands Hit the Mark for Global Success in 2002 - How Top Brands Communicate with Customers
Running public relations (PR) for even the biggest and best-known brands has been a tough challenge in the past year. The dismal financial performance of scores of companies has increased the need for communications. But as Interbrand’s annual survey and ranking of the world’s biggest brands is published, it is clear that those brands that have done best have followed a particular strategy.
The enduring lesson for marketers during economic decline has always been to ensure the quality and consistency of customers’ experience of the brand and its values over time. As Interbrand director Andy Milligan says: “Customers demand greater value from their experience of a brand.”
Using publicly available financial data only, Interbrand has calculated the value of—and ranked—the world’s leading brands based on the net present value of the earnings that a brand is expected to generate and secure in the future. In other words, using indicators such as share price, the consultancy has estimated how each brand will affect sales and earnings, how likely it is this will be delivered, and then given those future earnings a value today.
Within these parameters, consumer brands such as McDonald’s (ranked at No. 8) and Budweiser (ranked at No. 24)—i.e. those that are close to everyday patterns of consumption and are therefore fairly recession-proof—have fared best.
But outside the Top 75, a number have progressed using stealth through brand extensions, most notably Caterpillar, which made a strong debut at No. 79 and Nivea at No. 91, which via its move into men’s grooming and improved skin protection ranges, increased its brand value in 2001 by 16 % to more than $2 billion.
“They are both interesting cases, as despite its new lines, Nivea has kept its positioning as the staple of skincare and related products, not promising miracles, while Caterpillar’s expansion from its main earth-moving equipment into licensed clothing tells you how far you can take brand extensions if you do it properly,” says Interbrand global MD of brand valuation Jan Lindemann.
However, it is in the beleaguered sectors of telecoms, consumer electronics, and semi-conductors that the issue of brand becomes truly imperative. While AT&T’s (No. 17) brand value fell 30% and Ericsson (No. 71) lost an astonishing 49% (forcing it out of the Top 10), Nokia (No. 6) kept its losses to 14%.
Nokia’s position looks relatively rosy when compared to AT&T and Ericsson’s business troubles, but Lindemann adds: “With Ericsson cutting its market spending and pulling out of the market a bit, it’s not as clear what its brand actually stands for.” Nokia itself, however, attributes its market leader status to the trust its brand engenders among its various audiences. “We’re very transparent with the press and on investor relations, and we accept competitors,” says Nokia head of corporate communications (UK and Ireland) Mark Squires.
An example of this is the new Nokia 7650 digital-camera-in-a-phone that uses the Symbian operating system, a joint venture between various organizations, allowing users to communicate with non-Nokia devices, such as PCs. “We don’t dictate to the market and we are constantly working with other manufacturers, as consumer trust is vital. You can’t trick people into buying a product that then doesn’t deliver,” Squires adds.
However, the real star of the telecoms and consumer electronics sector is Korea’s Samsung (No. 34), which turned in a remarkable 30% growth, increasing in brand value to $8.3 billion from $6.4 billion in 2001. In the teeth of the decline in the telco industry, Samsung excelled at delivering superior product design and communicated this to customers through various channels, notably by using strategic PR.
“Through focusing the PR on a select number of high-end aspirational consumer products in the Samsung portfolio that strongly support the core brand values, we have been able to talk to a wider and deeper breadth of media over the past 18 months, including the consumer lifestyle media,” says Ginni Arnold, head of Samsung’s UK PR account at Cohn & Wolfe Digital. Similarly, tech brand Dell (No. 31) stands out in Interbrand’s ranked list. While Compaq (No. 27) lost 21% off its brand value—despite its obvious attractions to Hewlett-Packard—Dell made a 12 % increase.
Much of this success is attributable to Dell’s low-inventory manufacturing process and its direct sales model, both complicated concepts to explain to customers. “PR has been absolutely crucial, especially at the front end of moving into a new market,” says Rob Shimmin, global corporate practice MD for Dell’s retained agency Ogilvy PR Worldwide.
“Strong product-led advertising has been able to promote the direct-sell proposition, but PR has been the powerful driver for explaining the benefits and giving that buzz that says it really works,” he adds.
However the Interbrand study also identifies a number of brands that appear to have lost their way, including Ford (No. 11) and Merrill Lynch (No. 25), which dropped 32% and 25%, respectively.
With some of the best corporate names under fire, brand marketers have spent much effort this year on sustaining the trust that is so hard won but so easily lost from customers. But as perceptions and experiences of the brand increasingly flow straight to the bottom line, PR clearly has a growing role in promoting and protecting what is increasingly regarded as a precious corporate asset.

       TOP 75 WORLD BRANDS 2002

Rank-2002 Brand Value in US dollars (m)
from 2001 % change   
1 Coca-Cola 69,637 1   
2 Microsoft 64,091 -2   
3 IBM 51,188 -3   
4 GE 41,311 -3   
5 Intel 30,861 -11   
6 Nokia 29,970 -14   
7 Disney 29,256 -10   
8 McDonald’s 26,375 4   
9 Marlboro 24,151 10   
10 Mercedes 21,010 -3   
11 Ford 20,403 -32   
12 Toyota 19,448 5   
13 Citibank 18,066 -5   
14 Hewlett-Packard 16,776 -7   
15 American Express 16,287 -4   
16 Cisco 16,222 -6   
17 AT&T 16,059 -30   
18 Honda 15,064 3   
19 Gillette 14,959 -2   
20 BMW 14,425 4   
21 Sony 13,899 -7   
22 Nescafe 12,843 -3   
23 Oracle 11,510 -6   
24 Budweiser 11,349 5   
25 Merrill Lynch 11,230 -25   
26 Morgan Stanley 11,205  —   
27 Compaq 9,803 -21   
28 Pfizer 9,770 9   
29 JPMorgan 9,693 - —   
30 Kodak 9,671 -10   
31 Dell 9,237 12   
32 Nintendo 9,219 -3   
33 Merck 9,138 -6   
34 Samsung 8,310 30   
35 Nike 7,724 2   
36 Gap 7,406 -15   
37 Heinz 7,347 4   
38 Volkswagen 7,209 -2   
39 Goldman Sachs 7,194 -9   
40 Kellogg’s 7,191 3   
41 Louis Vuitton 7,054 —   
42 SAP 6,775 7   
43 Canon 6,721 2   
44 IKEA 6,545 9   
45 Pepsi 6,394 3   
46 Harley-Davidson 6,266 13   
47 MTV 6,078 -8   
48 Pizza Hut 6,046 1   
49 KFC 5,346 2   
50 Apple 5,316 -3   
51 Xerox 5,308 -12   
52 Gucci 5,304 -1   
53 Accenture 5,182 —   
54 L’Oreal 5,079- —   
55 Kleenex 5,039 -1   
56 Sun 4,773 -7   
57 Wrigley’s 4,747 5   
58 Reuters 4,611 -12   
59 Colgate 4,602 1   
60 Philips 4,561 -7   
61 Nestle 4,430 —   
62 Avon 4,399 1   
63 AOL 4,326 -4   
64 Chanel 4,272 —   
65 Kraft 4,079 1   
66 Danone 4,054 —   
67 Yahoo! 3,855 -12   
68 Adidas 3,690 1   
69 Rolex 3,686 —   
70 Time 3,682 -1   
71 Ericsson 3,589 -49   
72 Tiffany 3,482 —   
73 Levi’s 3,454 -8   
74 Motorola 3,416 -9   
75 Duracell 3,409 -18 
Source: Interbrand

C. Issue: Brand Loyalty
“Going My Way? Loyalty and Brand Gurus Find Common Ground,” Marketing Management, July/August 2002, p 10.

Introductory Themes
  
· “Since the only way a business can retain customer and employee loyalty is by
delivering superior value, high loyalty is a certain sign of solid value
creation.” 
· “Getting the right customers often depends more on the magnetism of the value
proposition and the referrals it generates than on brilliant salesmanship.”
· “Perceived relevant differentiation is the key to earning customer loyalty.”
· “In the end, the most important element . . . within your organization is
your employees.”
· It’s hard to tell who’s talking about customer loyalty and who’s talking
about brand management. The customer loyalty gurus and the brand gurus are
starting to sound alike! This really shouldn’t come as a surprise if we take a
brief look back at the evolution of the two fields.
From Customer Satisfaction to Customer Commitment  
Seminal academic work on customer satisfaction can be traced to the 1960s. Initial practitioner interest in customer satisfaction was fueled by the consumerism movement of the 1970s and by the emergence of the marketing concept as a philosophy for the practice of marketing. Customer satisfaction measurement was mainly focused on the strength of bonds with existing customers. It answered the question “What is the likelihood and what are some reasons that customers might defect?”
As more and more companies gained experience measuring customer satisfaction, research indicated that customer satisfaction simply wasn’t enough to compete successfully. The results of applied and basic research indicated that customer satisfaction was only mildly predictive of customer retention in competitive markets. In the 1980s, after realizing the limits of satisfaction, researchers shifted their focus to other measures of customer evaluation—most notably, customer perceptions of quality and value. These measures were even more predictive of a firm’s growth opportunities, and they focused attention on the entire market, including both customers and noncustomers.
The problem is these measures are mainly concerned with how customers feel about the company and its products and services. Ultimately, to affect the bottom line, we need to influence how customers actually behave toward the company. This moved the field to the concept of loyalty, an extremely complex and dynamic system.
More recently, the field of customer measurement has progressed to the construct of commitment rather than loyalty to avoid confusion with the narrower concept of repeat purchase. Commitment also conveys the notion that customers have increasing degrees of attachment to a company, its brand, and its offerings.
From Commodity Busting to Brand Commitment  
In the second half of the 19th Century, goods began to be manufactured in factories, and the market was flooded with uniform mass-produced products that were virtually indistinguishable from one another. Competitive branding became a necessity of the Industrial Age. The first task of branding was to name previously generic goods and to create a familiar “personality” in an effort to replace the shopkeeper and counter the anonymity of packaged goods.
The next step was for the entire corporation itself to embody a meaning of its own. So by the end of the 1940s, a brand wasn’t just a catchy phrase or a picture printed on the label of a company’s product. The company as a whole could have a brand identity.
The defining moment that confirmed the true value of a strong brand arrived in 1988 when Philip Morris purchased Kraft for $12.6 billion—six times what the company was worth on paper. The difference was the perceived price of the word “Kraft”. With the Kraft purchase, a huge dollar value had been assigned to something that had previously been abstract and unquantifiable—a brand name. This brand equity was valued for accounting purposes—for asset valuation on the balance sheet or for merger, acquisition, or divestiture purposes.
Most recently, much attention has been given to understanding the underlying reasons for a brand’s commercial success or failure. These underlying reasons are the things that create brand commitment in the marketplace. Understanding brand commitment improves marketing productivity through better strategic decisions about target market definition, product positioning, and specific marketing mix strategies.
The Common Destination Customer Relationships  
The two fields now have great overlap and appear to be converging because they both have the same destination—building long-term, profitable customer relationships. This evolution and convergence has been driven, in part, by companies’ continuing efforts to make their interactions with customers—and their business processes—less transaction-oriented and more relationship-oriented. And it’s changing the rules in every sector.
Most industrial manufacturers clung to the idea that their core business was production. But as product differentiation became more difficult, many of these same manufacturers turned to value-added services and solutions and redefined their businesses and cultures based on a service-management perspective. Because services are inherently relational, these firms are moving to managing customer relationships as an alternative to focusing on transactions. Firms choosing a service perspective as their strategic approach almost inevitably have to focus on relationships with their customers and other stakeholders.
Many consumer goods manufacturers differentiated their products by creating a brand image around their products. This was mainly created by advertising and marketing—in fact, many companies still believe the advertising agency should take care of branding. But as the markets become more crowded and profit margins shrink, these same companies are recognizing a need to build a brand based on solid positioning and strategy rather than entertainment value or coupons. These firms, too, are looking to build relationships with their consumers—not just getting them to make that next purchase.
When a strong brand/customer relationship emerges, not only will the company enjoy repeat sales, but profits per customer will increase with customer longevity. This is because the longer customers are with a company, the more willing they are to pay premium prices. An analysis of Market Research Corporation of America (MRCA) panel data found that loyal packaged-goods customers generally pay 7% to 10% more than nonloyal customers.
Who would have ever thought that industrial manufacturers (e.g. timber and wood) and consumer-goods manufacturers (e.g. beer) would adopt similar market philosophies? Their tactics may be different, but their destination is the same—profitable, long-term customer relationships.
Common Themes  
Whether you call it loyalty management, brand management, or relationship management, the success of your strategy will depend on a number of things. First, it’s important to understand the drivers of customer behaviors and attitudes. You also must be able to build a company, brand, product, or service that people trust. To ensure success, senior management should lead the charge and employees must bring the promise to life.
As the lines between branding and loyalty continue to overlap, one thing becomes clear. The best way to simultaneously run a company, build relationships, and build a brand is to consider them one and the same.