CHAPTER 2: CUSTOMER-BASED BRAND EQUITY

Kevin Lane Keller Tuck School of Business Dartmouth College

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Review previous chapter : The Brand Equity Concept

No common viewpoint on how it should be conceptualized and measured It stresses the importance of brand role in marketing strategies. Brand equity is defined in terms of the marketing effects uniquely attributable to the brand.

Brand equity relates to the fact that different outcomes result in the marketing of a product or service because of its brand name, as compared to if the same product or service did not have that name.

Toughtful and imaginative brand planning is needed to develop great brands, with the aid of three tools/models:
1.
2. 3.

Brand Positioning Model (ch 2) Brand Resonance Model (ch 3)

Brand Value Chain Model (ch 3)
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Brand and Brand Equity (example: eye radar)

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Customer-Based Brand Equity

The differential effect that brand knowledge has on consumer response to the marketing of that brand.
Keller, 1993

Note that:
Customer-based brand equity occurs when the consumer has a high level of awareness and familiarity with the brand and holds strong, favorable, and unique brand associations in memory.
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Customer-Based Brand Equity a definition breakdown:

Differential effect

BE arises from differences in consumer response. If no difference can be classified as generic product/commodity

Brand knowledge (learned, felt, seen, heard about brand)

These differeces in response is a result of consumers knowledge about the brand . It is strongly influenced by marketing activities (but the BE ultimately depends on what resides in the mind of customers)

Consumer response to marketing consumer differential response, which make up brand equity, are reflected in perception, preferences and behavior related to:

Choice of a brand Recall of copy points from an ad Response to a sales promotion Evaluations of a proposed brand extension
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Marketing Advantages of Strong Brands

Improved perception of product performance Greater loyalty Less vulnerability to competitive marketing actions/marketing crises Larger margins More inelastic consumer response to pricec increases More elastic customer to price decreases Greater trade cooperation and support Increased marketing communication effectiveness Possible licensing opportunities Additional brand extension opportunities
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Daihatsu and Toyota

Avanza vs. Xenia

http://www.rentalmobilbali.net/wp-content/uploads/2012/01/All-New-Avanza-VS-All-New-Xenia.jpg?9d7bd4

Rush vs. terios

Source: http://www.autobildindonesia.com/spaw/uploads/images/article/image/20110323_025942_terios-rush.jpg

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e.g. Avanza vs. Xenia: their engines are slightly different!

ENGINE
Engine series Engine type

All New 1.3 Avanza G M/T

K3-VE IL, 4 Cyl, 16 V, DOHC, VVT-i

All New Xenia R M/T

K3-VE IL, 4 Cyl, 16 V, DOHC, VVT-i

(cc)
(mm) Max Capacity (Ps/rpm) Max Tor. (Kgm/rpm) Fuel system Fuel

1,298
72.0 x 79.7 92/6,000 11,9/4,400 EFI Unleaded Gasoline

1,298
72.0 x 7 92/6,000 13,9/4,400 EFI Unleaded Gasoline

Fuel Capacity (liter) Steering (Power Steering)

45 (Electric Power Steering)

45 (Electric Power Steering)

Price

145 million IDR

122 million IDR

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Brand Equity as a Bridge

Reflection of past investments in the marketing of a brand

it is a clear indication that past investment (time, money, etc) have found there mark..

If in present, customer has developed favorable attitude towards the brand then

Direction for future marketing actions or programs

The present also leads the way how marketers

should plan future course, as to achieve desired results

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Making a Brand Strong: Brand Knowledge

1.
2.

Brand knowledge is the key to creating brand equity creates differential effect that drives Brand Equity (in CBBE concept) The associative network memory model views memory as a network of nodes (represents stored info/concepts) in memory with a variety of associations linked (strong/not) to it. Verbal/contextual info will be stored in the memory network Brand knowledge has two components: brand awareness, and brand image.
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Possible MTV association/mental map

Sources of Brand Equity: Two Components of Brand Knowledge

Brand awareness: related to the strength of the brand node in memory. Measure the ability of the consumer to identify the brand under different conditions

Brand recall: consumer ability to retrieve the brand from the memory when given the product category or a purchase/usage situation as a cue Brand recognition: consumer ability to confirm prior exposure to the brand when given the brand as a cue

Brand image: consumer perception about the brand, as reflected by the brand association held in consumers memory

Strong, favorable, and unique brand associations

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Brand Awareness test

What brand comes to mind when you think about: non carbonated beverages (in Malaysia?)

Your 1st answer called: top of mind, a brand recall of brand awareness
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A hint online dictionary: noncarbonated beverage is...

adj.1.not having supersaturated carbon dioxide in solution; not carbonated; - of beverages.

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Have you ever heard a brand called

V8? Can you explain what is that?

Your answer called: brand recognition of brand awareness
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You probably mentioned any of these??:

Source: various sources from Google Image and personal picture

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Or this?

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Have you ever seen this before? V8 Juice

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Brand Awareness Advantages

What are the benefits of creating a high-levelof BA? Learning advantages

Register the brand in the minds of consumers (help customers to relate the brand node and influence the formation of strong associations positive image)

Consideration advantages

Likelihood that the brand will be a member of the consideration set (the handful of brands that receive serious consideration for purchase)
Affect choices among brands in the consideration set
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Choice advantages

Establishing Brand Awareness

Increasing the familiarity of the brand through repeated exposure (for brand recognition). The more consumer hearing/seeing/thinking of it, the more likely the brand stay in their memory Forging strong associations with the appropriate product category or other relevant purchase or consumption cues (for brand recall). A slogan/ jingle creatively pairs the brand and the appropriate cues
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Example brand awareness ad

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IMB (other) Promotion

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Creating a Positive Brand Image

Once a sufficient brand awareness is created, marketers can put more emphasize on brand image

Source of brand association (direct experience, commercial/ad, WOM, consumer reports, assumption on brand elements, identification with country/company/channel of distribution/person/place/ event, etc) Need to be favorable, strong, and unique (to create a positive brand image) Marketers should recognize the influence of each of these sources of information by both managing them as well as possible and by adequately accounting for them in designing communication strategies.
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SFU Brand Associations Brand Image

Strength of brand association The more deeply a person thinks about product info and relates to the existing brand knowledge, the stronger brand association will be Two factors strenthen association: personal relevance and consistency over time

Brand attributes: those descriptive features that characterize a product. Brand benefit: personal value and meaning that consumer attach to a product

Direct experience creates the strongest brand attribute and benefit association and influence decision Favourability of brand association To choose which favourable and unique association, marketers should carefully analyze customer and competition Favorable association if the image desirable to customers (how relevant, how distinctive and how believable) and sucessfully delivered by the the product (actual/potential ability to perform, current/future prospect of communication the performance, and sustaiability communication over time)

Uniqueness of brand association

Brand has to have sustainable competitive advantage and unique selling preposition Strategy: direct comparison with competitos, emphasize on product/non product related, 2.24

Example: Brand Association Map Samsung vs Sonny LCD TV

Source: http://www.rajeshgoli.com/academic/brand-concept-maps-1/

A brand concept/association map is a representation of network of associations in the minds consumers The strength of association between two concepts is shown by the number of lines that connect the two. The connection with three lines is the strongest and a connection with one line is the weakest.

How do you read above maps?

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How to read...Contd.

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Brand Positioning

Is at the heart of the marketing strategy

. . . the act of designing the companys offer and image so that it occupies a distinct and valued place in the target customers minds.
Philip Kotler

Finding the proper location in the minds of consumers/market segment, so they think about the product in the right/desired way to maximize the potential benefit to the firm
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Determining a frame of reference for Positioning

Marketers need to know:
1.
2. 3.

4.

Who the target consumer is Who the main competitors are How the brand is similar to these competitors (ideal points-of-parity) How the brand is different from them (points-ofdifference)

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1. Who the target consumer is?

A market is the set of all actual and potential buyers who have sufficient interest in, income for, and access to a product. Market segmentation divides the market into distinct groups of homogeneous consumers who have similar needs and consumer behavior, and who thus require similar marketing mixes. Market segmentation requires making tradeoffs between costs and benefits (mass vs. specialized)
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Segmenting Individual Consumer/markets

Behavioral: user status, usage rate, usage occasion, brand loyalty, benefit sough Demographic: income, age, sex, race, family Psychographic: values, opinion, attitudes, activities, lifestyle Geographic: International, Regional
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Source: http://watermarked.cutcaster.com/cutcaster-photo-801038496-Market-segmentation-business-diagram.jpg

Segmenting business markets

Kind of relationship Type of customer

Purchasing methods

Segmenting Dimensions for Business Markets

Demographics

Type of buying situation

Source: McCharty et.al. 2010)

How customers will use the product

Example of the toothpaste market

Four main segments:

1.
2. 3. 4.

Sensory: Seeking flavor and product appearance Sociables: Seeking brightness of teeth Worriers: Seeking decay prevention Independent: Seeking low price
Close up: Target the first two segments

Crest: Target the third segment

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Criteria for Segmentation

Identifiability: Can we easily identify the segment? Size: Is there adequate sales potential in the
segment?

Accessibility: Are specialized distribution outlets

and communication media available to reach the segment? Responsiveness: How favorably will the segment respond to a tailored marketing program?

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2. Nature of Competition who is the main competitor are?

Deciding to target a certain type of consumer often defines the nature of competition Competitive analysis considers: the resources, capability, likely intentions of various other firms Do not define competition too narrowly (often competition is at the benefit rather than attribute level)

Ex: a luxury good with a strong hedonic benefit like stereo equipment may compete as much with a vacation as with other durable goods like furniture

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What is their main competitor?

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Did you guess:

Or

Or

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Actually.....

In Gift product category

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3. Points-of-Parity

1.

2.

Points-of-parity associations (POPs), are not necessarily unique to the brand but may in fact be shared with other brands. are those elements that are considered mandatory for a brand to be considered a legitimate competitor in its specific category Category point of parity: represent ecessary-but not necessarily sufficient- conditions for brand choice. They exist minimally at the generic or expected product level Competitive point of parity: those associations designed to negate competitors point of difference, shoud be in a strong and perhaps unbeatable competitive position.

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4. Points-of-Difference

Points-of-difference (PODs) are attributes or benefits that consumers strongly associate with a brand, positively evaluate, and believe that they could not find to the same extent with a competitive brand (either functional, performancerelated, or abstract imagery-related consideration) PODs are the things that help a brand stand out. Points where you are claiming superiority or exclusiveness over other products in the category. it also has to be something your customer actually wants The concept has much in common with unique selling preposition (USP) or sustainable competitive advantage (SCA)

FUNCTIONAL: e.g. Swedish Retailer IKEA built their reputation on the notion that Sweeden produces good, safe, well-built things, for the masses (due to some of the most innovative designs at the lowest cost) PERFORMANCE: e.g. Hyundai provides six front and back seat side curtains airbags as standard equipment on all its model for icreased safety IMAGERY: e.g.Louis Vuitton Luxury, British Airways worlds favourite airline Other examples are FedEx (guaranteed overnight delivery), Nike (performance), and Lexus (quality)
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Examples: PODs Ads

PERFORMANCE

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POPs vs. PODs

For the brand to achieve POPs on a particular attribute/ benefit, a sufficient customers must belief that the brand is good enough Assuming consumers feel that way... They may then be willing to base their evaluations and decisions on other factors potetially more favourable to the brand
By knowing both, you know where your brand value proposition is strong and where it is weak (and your competitors are strong), so it becomes pretty easy to craft a solid brand strategy (Grams 2009).
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Strategy of PODs and POPs

Situation
When the firm is a me-too competitor
When the firm as a market leader

What to emphasize
In this case, being a weaker competitor, the goal is to piggyback on the success of the market leader by highlighting many points-of-parity
This is the reverse situation from the one above. To maintain market leadership, the brand/product needs to be seen in as superior/different in key ways, thus highlighting the need to focus on relevant points-ofdifference In this case, the likelihood of switching is relatively lower, so points-ofdifference are required to break their habitual loyalty Fast-growing markets have primary demand (that is, first-time customers to the market), therefore points-of-parity positioning will should be quite successful in capturing new customers

When the firm enters an established and mature market When the firm and is a fast-growing market

When there is a diversity of needs, even when When there is significant diversity of consumer needs, a points-oflooking at fairly narrow market segments difference positioning should ensure that reasonable market share is generated In a target market where the firm already To reduce the risk of cannibalization of sales, the firm would need to have offers multiple products more emphasis on points-of-difference In a relatively price sensitive market Our goal in this case would be to provide additional benefits, in order to reduce the importance of price in the decision. Therefore, apoints-ofdifference positioning emphasis would be required
Source: http://www.segmentationstudyguide.com/understanding-perceptual-maps/points-of-difference-pod/

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Examples: Bank POPs

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Brand Positioning Example

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Colas problem with diet carbonated soft drinks

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Which positioning?

Diet Coke (also known as Diet Coca-Cola, Coca-Cola light or Coke Light) is a sugarfree soft drink produced and distributed by The Coca-Cola Company. It was first introduced in the United States on August 9, 1982. In the UK, a 330 ml can of Diet Coke contains around 1.3 calories (5 kilojoules) compared to 142 calories (595 kJ) for a regular can of Coca-Cola. In 2004, Coca-Cola introduced Coca-Cola C2, which it claims tastes much closer to CocaCola but contains half the carbohydrates. But this version was named as no mans land, especially Coca Cola company was launching some varieties of no harm cola in the following years In 2005, under pressure from retailer Wal-Mart (which was impressed with the popularity of Splenda sweetener), the company released a new formulation called "Diet Coke sweetened with Splenda". In 2005, the company introduced Coca-Cola Zero, a sugar-free variation of regular CocaCola. 2007 Coca-Cola Cherry Zero and Vanilla zero were introduced. Many store shelves completely replaced the Coca Cola C2, Coca Cola Splenda with Coca Cola Zero due to display, shelving and storage limitations, and with the introduction of Coca Cola Cherry Zero, the products disappeared from all store shelves where it had previously remained By late 2009, some distributors had stopped supplying Diet Coke sweetened with Splenda. And by 2010 Coca-Cola Zro sans cafine (Caffeine Free Coca-Cola Zero) was released
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Early ads of Coca Cola Zero

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Coca Cola Zero New Ads

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Brand Positioning Guidelines

Two key issues in arriving at the optimal competitive brand positioning are:
A.

B.

Defining and communicating the competitive frame of reference Choosing and establishing points-of-parity and points-of-difference

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A. Defining and Communicating the Competitive Frame of Reference

Defining a competitive frame of reference for a brand positioning is to determine category membership - with which products or sets of products does the brand compete?. The brand membership tells customer about the goal they might achieve by using the product The preferred approach to positioning is to inform consumers of a brands membership before stating its point of difference in relationship to other category members. 3 ways to convey brand category membership:

Communicating category benefits (reassure customers that brand will deliver fundamental reason to use product category) Comparing to exemplars (well-known, noteworthy brand in category) Relying on the product descriptor(compact meand of conveying category origin)

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Example: Comparing to Exemplars

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Example: Product Descriptor

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Example Category Benefits (POPs)

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B. Choosing PODs

Desirability criteria (consumer perspective)

Personally relevant and important Distinctive and superior find the point of difference that is significantly important for customers Believable and credible

Deliverability criteria (firm perspective)

Feasible for the company to create product and marketing activities Communicability: customer decode the communication and perceive the brand positively desirable associations Profitable Sustainability: is positioning Pre-emptive, defensible, and difficult to attack

Differentiation (relative to competitor) in order to be effective

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PODs Criteria

Cereal+Milk+spoon on the go. Do you like the idea of warm milk?

Company: Deliverability

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Example PODs

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Example PODs and PODs ad

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B. Establishing POPs and PODs Challenge: Attribute and Benefit Trade-offs

Price and quality Convenience and quality Taste and low calories Efficacy and mildness Power and safety Ubiquity and prestige Comprehensiveness (variety) and simplicity Strength and refinement Example: POPs and PODs are conflicting It might be difficult to position the brand as inexpensive but at the same time assert as the highest quality, or long heritage but not old-fashioned

The art and science of marketing is knowing how to deal with tradeoffs, or develop product that perform well in both dimensions: e.g. BMW luxurius and performance

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Example: BMW

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Strategies to Reconcile Attribute and Benefit Trade-offs

Establish separate marketing programs (e.g. Launch two different marketing campaigns each emphasize on different attribut/benefit run concurrently/sequentially) Leverage secondary association (e.g., co-brand, using endorser, sponsoring an event) Re-define the relationship from negative to positive by developing a credible story with which consumer can agree
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Examples: Trade-offs

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Updating Positioning over Time

Laddering: deepen the meaning of the brand to tap into core brand associations. Brand laddering involves positioning of a brand from common product attributes to more abstract values or concepts. Its moving from a focus from product attributes to brand benefits.

Brand attributes: those descriptive features that characterize a product. The physical properties of the product that in turn will deliver the desired benefits to the consumer. Brand benefit: personal value and meaning that consumer attach to a product

Reacting: to respond competitive challenges that threaten an existing positioning

Do nothing Go on defensive Go on the offensive

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Example: Laddering

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Example: Laddering contd.

Attribute: easy to cook and taste good

Benefit: Health noodle/snack

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Example: Reactions
defensive

offensive

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Core Brand Association/Values

Set of abstract concepts or phrases (attributes and benefits) that characterize the five to ten most important dimensions of the mental map of a brand Can serve asthe basis of brand positioning in terms of how they create points-of-parity and points-of-difference

How to identify the core brand associations? Mental map Core brand values Brand mantra

Mental map: portrays in detail all salient brand association and responses

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Example: Target Mental Map

Source: http://t2.gstatic.com/images?q=tbn:ANd9GcTPGBdB_uxiUo61KcGacgzJJFoYv02JdpzXV0I9RaBzth01-qy10Oj0yf12IQ 3.67

Example: Brand Association Map contd.

Source: http://www.nielsen-online.com/downloads/us/BAM_US.pdf

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Brand Mantras

An articulation of the heart and soul of the brand. Brand mantra is the core DNA of the brand. It is what the brand stands for. And like DNA, brands mantra also remains constant. similar to brand essence or core brand promise Short three- to five-word phrases that capture the irrefutable essence or spirit of the brand positioning and brand values Purpose: to ensure all employees and external marketing partners understand what the brand most fundamentaly is to represent to customer so they can adjust their action accordingly

example: McD brand philosophy: Food, Folks and Fun

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Brand Mantra contd.

Your Brand Mantra is Desirable by customers and distinct from your competition, your brand mantra is the rallying cry of employees and the driver of customer BM can provide guide about what products to introduce under brand, mental filter to screen marketing activities, help the brand present a consistent image, it also provides memorable shorthand as to what are the crucial considerations of the brand that should be kept most salient and top-of-mind; but it is not an advertising slogan, and, in most cases, it wont be something company use publicly. BM should be developed at the same time as Positioning, Considerations,

Communicate: define the category(ies) and clarify the uniqueness Simplify: memorable short, crisp, vivid Inspire: meaningful and relevant and tap into higher level meaning for employee+cust
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Designing the Brand Mantra

BM must economically communicate what the brand is and what it is not The term brand functions describes the nature of the product or service or the type of experiences or benefits the brand provides. The descriptive modifier further clarifies its nature. The emotional modifier provides another qualifierhow exactly does the brand provide benefits, and in what way?
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Example: Nikes Brand Mantra

Nikes brand mantra put a particular emphasis on maintaining authenticity, by which we also meant integrity and purity, front and center All products and activities associated with Nike likewise had to be athletic, not leisurely Finally, every Nike product had to exude worldclass performance and meet the demands of the worlds finest athletes, even though such athletes represented a microscopic piece of Nikes total business Authentic Athletic Performance was a simple idea, but like so many simple ideas, its execution and implementation could be complex, not to mention challenging, daunting, and even painful, when it came down to forgoing revenuegenerating activities because they violated these accepted core values.
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it kept the Nike brand on track, it differentiated the brand from its main competitor at the time (Reebok), and it genuinely inspired Nike employees.

Example: Betty Crockers BM

Another example of a brand mantra that was effective as a descriptive ad tag line, Betty Crockers brand mantra remarkably staked out three points of difference (quality, family, and a rewarding baking experience) as well as a crucial point of parity (convenience) at the same time.
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Designing the Brand Mantra

Emotional Modifier Descriptive Modifier
Athletic

Brand Functions
Performance

Nike

Authentic

Disney

Fun

Family

Entertainment

Fun

Folks

Food
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Implementing Brand Mantra

Communicate: A good brand mantra should both define the

category (or categories) of the business to set the brand boundaries and clarify what is unique about the brand Simplify: An effective brand mantra should be memorable (short, crisp and vivid. A three-word mantra is ideal because it is the most economical way to convey the brand positioning Inspire: ideally, the brand mantra should also stake out ground that is personally meaningful and relevant to as many employeesas possible. Brand mantra can do as information, guide, and they can also inspire the employee as well as customer
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Internal Branding

Positioning the brand internally; Members of the organization are properly aligned with the brand and what it represents (and know ho to apply brand mantra into their activities!). Crucial for service companies (will be elaborated further in session 9: Brand Culture)
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Example: Ritz Carlton Internal Branding

At The Ritz-Carlton, our staff is the most important resource in our service commitment to our guests. Our motto (Brand Mantra) states that We are Ladies and Gentlemen serving Ladies and Gentlemen, and in doing so we create exceptional memories for our guests and for each other. Warmth and genuine caring are the hallmarks of every RitzCarlton employee. Every employees contribution is valued and they are encouraged to fulfill individual aspirations. We trust each employee to use their creativity and accommodating personality to build strong relationships and provide a memorable experience to each guest.
Source: http://corporate.ritzcarlton.com/en/Careers/WorkingAt.htm
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