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Strategic Brand ManagementStrategic Brand Management

Exeter MBA and MSc Exeter MBA and MSc –– Day 2Day 2

Lecture 1Lecture 1

Brand Equity Brand Equity –– Concepts and Concepts and

ApproachesApproaches

Jack Buckner

Brand Equity Brand Equity –– what is it?what is it?

�� The added value to the firm, the trade, or the The added value to the firm, the trade, or the

consumer which a given brand endows a product consumer which a given brand endows a product

(P.(P.FarquaharFarquahar))

�� The brandThe brand’’s source of value to the company and s source of value to the company and

the consumer (the consumer (KapfererKapferer))

�� A set of brand assets and liabilities linked to a A set of brand assets and liabilities linked to a

brand, its name and symbol, that add or subtract brand, its name and symbol, that add or subtract

from the value provided by a product or service to from the value provided by a product or service to

a firm and/or to that firma firm and/or to that firm’’s customers (s customers (AakerAaker))

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Jack Buckner

Brand EquityBrand Equity

Financial

“Goodwill”

P/E ratios

Managerial

Audit

Evaluate

Strategy

Jack Buckner

Brand EquityBrand Equity

�� ……is a relatively recent conceptis a relatively recent concept

�� ……combines finance with marketingcombines finance with marketing

�� ……may be more relevant in mature may be more relevant in mature

industriesindustries

�� ……may be more relevant in larger may be more relevant in larger

companiescompanies

�� ……will probably vary geographicallywill probably vary geographically

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Jack Buckner

Three Big Brand Equity StoriesThree Big Brand Equity Stories

Coke’s formula

change

Marlboro’s

price cutP&G’s value

pricing

Jack Buckner

Building a Brand in Building a Brand in MindspaceMindspace

Brand

Awareness

Brand Stage 1

Brand Stage 2

Brand

Stage 3

Risk Reduction

Differentiation

Relevance

Esteem

Relationship

Trust

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Jack Buckner

AakerAaker’’s s Sources of EquitySources of Equity

�� Brand name awarenessBrand name awareness

�� Brand loyaltyBrand loyalty

�� Perceived qualityPerceived quality

�� Brand associationsBrand associations

Jack Buckner

Brand AwarenessBrand Awareness

�� Recognition Recognition –– spontaneousspontaneous

�� Recognition Recognition –– promptedprompted

�� Recall Recall

�� SalienceSalience

–– AwareAware

–– In brand repertoireIn brand repertoire

–– In consideration setIn consideration set

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Jack Buckner

The Graveyard ModelThe Graveyard Model

Low

High

High

Recognition

Recall

Niche Brand

Graveyard

Source: Y & R

Jack Buckner

Out of the GraveyardOut of the Graveyard

Aga Foodservice

High brand recognition

Low brand salience

Identified younger

target market

Product range

refreshed

Brand/marketing

investment

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Jack Buckner

Graveyard ModelGraveyard Model

�� Illustrates the difference between Illustrates the difference between

recognition and saliencerecognition and salience

�� Works best for heritage brandsWorks best for heritage brands

�� Much harder for mass and discount brandsMuch harder for mass and discount brands

Jack Buckner

Brand LoyaltyBrand Loyalty

�� LoyaltyLoyalty

–– Purchase loyalty Purchase loyalty –– market sharemarket share

–– Attitude loyalty Attitude loyalty –– price premiumprice premium

�� Double Jeopardy (Double Jeopardy (EhrenbergEhrenberg))

–– Small brands have fewer buyers AND their Small brands have fewer buyers AND their

buyers buy less often (loyalty)buyers buy less often (loyalty)

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Jack Buckner

Double JeopardyDouble Jeopardy

2.02.017%17%9%9%BrimBrim

2.92.915%15%13%13%NescafeNescafe

2.72.713%13%18%18%FolgersFolgers

2.62.618%18%22%22%High PointHigh Point

2.82.824%24%22%22%TastersTasters

3.33.320%20%21%21%SankaSanka

3.63.620%20%24%24%MaxwellMaxwell

Volume per Volume per

BuyerBuyer

ExclusiveExclusive

BuyersBuyers

MarketMarket

PenetrationPenetration

BrandBrand

Source:Ehrenberg et al (1990) Journal of Marketing

Jack Buckner

Brand LoyaltyBrand Loyalty

�� Costs of attracting new customers much Costs of attracting new customers much

higher than retentionhigher than retention

�� MBNA (financial services) 5% increase in MBNA (financial services) 5% increase in

retention increased company profits by 60% retention increased company profits by 60%

over 5 yearsover 5 years

�� Stronger brands characterised by greater Stronger brands characterised by greater

loyaltyloyalty

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Jack Buckner

Loyalty GroupingsLoyalty Groupings

VulnerableVulnerableSwitchableSwitchable

LoyalLoyalFrustratedFrustrated

Satisfaction

Low High

High

Low

Perceived Risk

in switching

Source: Rossiter & Elliott (2001)

Jack Buckner

Perceived QualityPerceived Quality

�� The one measure to directly impact ROIThe one measure to directly impact ROI

�� Improve Improve ‘‘perceived qualityperceived quality’’ and ROI will and ROI will

improveimprove

�� Requires product frame of referenceRequires product frame of reference

�� More effective in mature industriesMore effective in mature industries

�� Harder to measure in Harder to measure in ““coolcool”” industriesindustries

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Jack Buckner

Brand AssociationsBrand Associations

Emotional and selfEmotional and self--expressive benefitsexpressive benefits

Brand as productBrand as product

Brand as organizationBrand as organization

Brand as personBrand as person

Brand as symbolBrand as symbol

BRAND IDENTITYBRAND IDENTITY

Jack Buckner

Brand Equity 10 (Brand Equity 10 (AakerAaker))

Loyalty Measures

1.Price Premium

2.Satisfaction/Loyalty

Perceived Quality/Leadership measures

3.Perceived quality

4.Leadership/popularity

Associations/Differentiation Measures

5.Perceived Value

6.Brand Personality

7.Organizational Associations

Awareness Measures

8.Brand Awareness

Market Behaviour Measures

9.Market Share

10.Market price and distribution coverage

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Jack Buckner

From Assets to EquityFrom Assets to EquityBrand Awareness

+ Image

+Perceived Quality

+Evocations

+Familiarity/liking

= Brand AssetsBrand added value,

perceived by consumers

-Cost of branding

- Cost of invested capital

= Brand Financial Value

(Brand Equity)Source:Kapferer

Jack Buckner

InterbrandInterbrand’’s s Top BrandsTop Brands

Leadership

Stability

Market

International

Trend

Support

Protection

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Jack Buckner

Interbrand in 1990Interbrand in 1990

1. Coca-Cola

2. Kellogg’s

3. McDonald’s

4. Kodak

5. Marlboro

6. IBM

7. American Express

8. Sony

9. Mercedes-Benz

10. Nescafe

Jack Buckner

Financial World 1996Financial World 1996

1. Marlboro

2. Coca-Cola

3. McDonalds

4. IBM

5. Disney

6. Kodak

7. Kellogg’s

8. Budweiser

9. Nescafe

10. Intel

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Jack Buckner

Interbrand in 2004Interbrand in 20041.Coca-Cola

2.Microsoft

3.IBM

4.GE

5.Intel

6.Disney

7.McDonalds

8.Nokia

9.Toyota

10.Marlboro

Jack Buckner

2004 Big Winners2004 Big Winners

Apple

Amazon.com

Yahoo

Samsung

HSBC

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Jack Buckner

2004 Big Losers2004 Big Losers

Kodak

Nintendo

Nokia

AOL

Ford

Brandchannel.com

Jack Buckner

Challenges to Brand Equity ModelsChallenges to Brand Equity Models

�� Increasing power of ownIncreasing power of own--labels and masslabels and mass--

merchandisingmerchandising

�� Brand proliferation and extensionsBrand proliferation and extensions

�� Increasing number of brand alliancesIncreasing number of brand alliances

�� Rapid growth and erosion of brand equityRapid growth and erosion of brand equity

�� NonNon--traditional marketing techniquestraditional marketing techniques

�� Regional variationsRegional variations

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Jack Buckner

Brand EquityBrand Equity

Financial

“Goodwill”

P/E ratios

Managerial

Audit

Evaluate

Strategy