2.1

CHAPTER 2:CHAPTER 2: CUSTOMER-BASED BRAND EQUITY CUSTOMER-BASED BRAND EQUITY

Kevin Lane KellerKevin Lane KellerTuck School of BusinessTuck School of Business

Dartmouth CollegeDartmouth College

2.2

Customer-Based Brand Customer-Based Brand EquityEquity

““The differential effect that brand The differential effect that brand knowledge has on consumer knowledge has on consumer response to the marketing of that response to the marketing of that brand.”brand.”

Keller, 1993Keller, 1993

2.3

Customer-Based Brand Customer-Based Brand EquityEquity

Differential effect Differential effect Differences in consumer response Differences in consumer response

Brand knowledge Brand knowledge A result of consumers’ knowledge about A result of consumers’ knowledge about

the brand the brand Consumer response to marketing Consumer response to marketing

Choice of a brand Choice of a brand Recall of copy points from an ad Recall of copy points from an ad Response to a sales promotionResponse to a sales promotion Evaluations of a proposed brand extension Evaluations of a proposed brand extension

2.4

Brand Equity as a “Bridge”Brand Equity as a “Bridge”

Reflection of Reflection of pastpast investments in the investments in the marketing of a brandmarketing of a brand

Direction for Direction for futurefuture marketing marketing actions or programsactions or programs

2.5

Making a Brand Strong: Making a Brand Strong: Brand KnowledgeBrand Knowledge

Brand knowledge is the key to Brand knowledge is the key to creating brand equity. creating brand equity.

Brand knowledge consists of a brand Brand knowledge consists of a brand node in memory with a variety of node in memory with a variety of associations linked to it.associations linked to it.

Brand knowledge has two Brand knowledge has two components: brand awareness and components: brand awareness and brand image. brand image.

2.6

Sources of Brand EquitySources of Brand Equity

Brand awarenessBrand awareness Brand recognitionBrand recognition Brand recallBrand recall

Brand image Brand image Strong, favorable, and unique brand Strong, favorable, and unique brand

associationsassociations

2.7

Brand Awareness Brand Awareness AdvantagesAdvantages

Learning advantagesLearning advantages Register the brand in the minds of Register the brand in the minds of

consumers consumers Consideration advantagesConsideration advantages

Likelihood that the brand will be a Likelihood that the brand will be a member of the member of the consideration setconsideration set

Choice advantages Choice advantages Affect choices among brands in the Affect choices among brands in the

consideration set consideration set

2.8

Establishing Brand Establishing Brand AwarenessAwareness

Increasing the familiarity of the Increasing the familiarity of the brand through repeated exposure brand through repeated exposure (for brand recognition) (for brand recognition)

Forging strong associations with the Forging strong associations with the appropriate product category or appropriate product category or other relevant purchase or other relevant purchase or consumption cues (for brand recall) consumption cues (for brand recall)

2.9

Creating a Positive Creating a Positive Brand ImageBrand Image

Brand AssociationsBrand Associations Does not matter which source of brand Does not matter which source of brand

associationassociation Need to be favorable, strong, and uniqueNeed to be favorable, strong, and unique Marketers should recognize the influence Marketers should recognize the influence

of these other sources of information by of these other sources of information by both both managingmanaging them as well as possible them as well as possible and by adequately and by adequately accounting foraccounting for them in them in designing communication strategies. designing communication strategies.

2.10

The Four Steps of Brand The Four Steps of Brand Building Building

1.1. Ensure identification of the brand with Ensure identification of the brand with customers and an association of the customers and an association of the brand in customers’ mindsbrand in customers’ minds

2.2. Establish the totality of brand meaning in Establish the totality of brand meaning in the minds of consumersthe minds of consumers

3.3. Elicit the proper customer responses to Elicit the proper customer responses to the brand identification and brand the brand identification and brand meaningmeaning

4.4. Convert brand response to create an Convert brand response to create an intense, active loyalty relationship intense, active loyalty relationship between customers and the brandbetween customers and the brand

2.11

Four Questions Customers ask Four Questions Customers ask of Brandsof Brands

1.1. Who are you? (brand identity)Who are you? (brand identity)

2.2. What are you? (brand meaning)What are you? (brand meaning)

3.3. What about you? What do I think or What about you? What do I think or feel about you? (brand responses)feel about you? (brand responses)

4.4. What about you and me? What kind What about you and me? What kind of association and how much of a of association and how much of a connection would I like to have connection would I like to have with you? (brand relationships)with you? (brand relationships)

2.12

Customer-Based Brand Equity Customer-Based Brand Equity PyramidPyramid

RESONANCE

SALIENCE

JUDGMENTS FEELINGS

PERFORMANCE IMAGERY

4. RELATIONSHIPS =

What about you and me?

4. RELATIONSHIPS =

What about you and me?

3. RESPONSE =

What about you?

3. RESPONSE =

What about you?

2. MEANING =

What are you?

2. MEANING =

What are you?

1. IDENTITY =

Who are you?

1. IDENTITY =

Who are you?

Sub-Dimensions of CBBE Sub-Dimensions of CBBE PyramidPyramid

LOYALTYATTACHMENTCOMMUNITYENGAGEMENT

QUALITY CREDIBILITYCONSIDERATIONSUPERIORITY

WARMTHFUNEXCITEMENTSECURITYSOCIAL APPROVALSELF-RESPECT

CATEGORY IDENTIFICATIONNEEDS SATISFIED

PRIMARY CHARACTERISTICS &SECONDARY FEATURES

PRODUCT RELIABILITY, DURABILITY & SERVICEABILITY

SERVICE EFFECTIVENESS, EFFICIENCY & EMPATHY

STYLE AND DESIGN PRICE

USER PROFILESPURCHASE & USAGE

SITUATIONSPERSONALITY &

VALUESHISTORY, HERITAGE & EXPERIENCES

2.14

Salience DimensionsSalience Dimensions

DepthDepth of brand awareness of brand awareness Ease of recognition and recallEase of recognition and recall Strength and clarity of category Strength and clarity of category

membershipmembership

BreadthBreadth of brand awareness of brand awareness Purchase considerationPurchase consideration Consumption considerationConsumption consideration

2.15

Depth and Breadth Depth and Breadth ImportanceImportance

The product category hierarchy The product category hierarchy shows us not only the depth of shows us not only the depth of awareness matters but also the awareness matters but also the breadth.breadth.

The brand must not only be The brand must not only be top-of-top-of-mindmind and have sufficient “mind and have sufficient “mind share,” but it must also do so share,” but it must also do so at the at the right times and places.right times and places.

2.16

Product Category Product Category StructureStructure

To fully understand brand recall, we To fully understand brand recall, we need to appreciate need to appreciate product category product category structure,structure, or how product categories or how product categories are organized in memory.are organized in memory.

2.17

Performance DimensionsPerformance Dimensions

Primary characteristics and Primary characteristics and supplementary featuressupplementary features

Product reliability, durability, and Product reliability, durability, and serviceabilityserviceability

Service effectiveness, efficiency, and Service effectiveness, efficiency, and empathyempathy

Style and designStyle and design

PricePrice

2.18

Imagery DimensionsImagery Dimensions User profilesUser profiles

Demographic and psychographic characteristicsDemographic and psychographic characteristics Actual or aspirationalActual or aspirational Group perceptionsGroup perceptions——popularitypopularity

Purchase and usage situationsPurchase and usage situations Type of channel, specific stores, ease of purchaseType of channel, specific stores, ease of purchase Time (day, week, month, year, etc.), location, and Time (day, week, month, year, etc.), location, and

context of usagecontext of usage

Personality and valuesPersonality and values Sincerity, excitement, competence, sophistication, and Sincerity, excitement, competence, sophistication, and

ruggednessruggedness

History, heritage, and experiencesHistory, heritage, and experiences NostalgiaNostalgia MemoriesMemories

2.19

Judgment DimensionsJudgment Dimensions

Brand qualityBrand quality ValueValue SatisfactionSatisfaction

Brand credibilityBrand credibility ExpertiseExpertise TrustworthinessTrustworthiness LikeabilityLikeability

Brand Brand considerationconsideration RelevanceRelevance

Brand superiorityBrand superiority DifferentiationDifferentiation

2.20

Feelings DimensionsFeelings Dimensions

WarmthWarmth FunFun ExcitementExcitement SecuritySecurity Social ApprovalSocial Approval Self-respectSelf-respect

2.21

Resonance DimensionsResonance Dimensions Behavioral loyaltyBehavioral loyalty

Frequency and amount of repeat purchasesFrequency and amount of repeat purchases

Attitudinal attachmentAttitudinal attachment Love brand (favorite possessions; “a little Love brand (favorite possessions; “a little

pleasure”)pleasure”) Proud of brandProud of brand

Sense of communitySense of community KinshipKinship AffiliationAffiliation

Active engagementActive engagement Seek informationSeek information Join clubJoin club Visit website, chat roomsVisit website, chat rooms

Customer-Based Brand Equity Customer-Based Brand Equity ModelModel

Consumer-BrandResonance

Brand Salience

Consumer Judgments

Consumer Feelings

BrandPerformance

BrandImagery

INTENSE, ACTIVE LOYALTY

INTENSE, ACTIVE LOYALTY

RATIONAL & EMOTIONAL REACTIONS

RATIONAL & EMOTIONAL REACTIONS

POINTS-OF-PARITY &

POINTS-OF-DIFFERENCE

POINTS-OF-PARITY &

POINTS-OF-DIFFERENCE

DEEP, BROAD BRAND

AWARENESS

DEEP, BROAD BRAND

AWARENESS

Application:Application:Identify the Key Drivers of Identify the Key Drivers of

Brand EquityBrand Equity

0.17 0.66

0.24

0.65

P-2

P-2

PerformancePerformance

P-1P-1

P-10 P-10

P-7

P-7

P-8P-8

P-9P-9

P-3

P-3

P-4P-4

P-6P-6

P-5P-5

P-11 P-11 P-12

P-12

I-2I-2

I-9I-9

ImageryImagery

I-1I-1

I-3I-3

I-6I-6

I-5I-5

I-10 I-10

I-7I-7

I-8I-8

I-11

I-11 I-12

I-12

I-4I-4

F-2

F-2

FeelingsFeelings

F-1F-1

F-3F-3

F-4F-4

F-6F-6

F-5F-5

F-7

F-7

F-8F-8

F-9F-9

F-11 F-11 F-12

F-12

F-10F-10

J-2J-2

JudgmentJudgment

J-1J-1

J-3J-3

J-4J-4

J-6J-6

J-5J-5

J-10J-10

J-7J-7

J-8J-8

J-9J-9

J-11

J-11 J-12

J-12

R-2R-2

ResonanceResonance

R-1R-1

R-3

R-3

R-4R-4

R-6

R-6

R-5R-5

R-10 R-10

R-7

R-7

R-8

R-8

R-9R-9

R-11

R-11 R-12

R-12

0.58

0.49

2.24

Brand Building Brand Building ImplicationsImplications

Customers own brands. Customers own brands. Don’t take shortcuts with brands. Don’t take shortcuts with brands. Brands should have a duality. Brands should have a duality. Brands should have richness. Brands should have richness. Brand resonance provides important Brand resonance provides important

focus. focus.

2.25

Creating Customer ValueCreating Customer Value

Customer-brand relationships are Customer-brand relationships are the foundation of brand resonance the foundation of brand resonance and building a strong brand.and building a strong brand.

The customer-based brand equity The customer-based brand equity model certainly puts that notion model certainly puts that notion front and center. front and center.

2.26

Is a company consumer-Is a company consumer-centric?centric?

1.1. Is the company looking for ways to take Is the company looking for ways to take care of you?care of you?

2.2. Does the company know its customers Does the company know its customers well enough to differentiate between well enough to differentiate between them? them?

3.3. Is someone accountable for customers?Is someone accountable for customers?

4.4. Is the company managed for Is the company managed for shareholder value?shareholder value?

5.5. Is the company testing new customer Is the company testing new customer offers and learning from the results?offers and learning from the results?

Sources: Larry Selden and Geoffrey Colvin, 2004.

2.27

Customer Relationship Customer Relationship Management (CRM)Management (CRM)

Uses a company’s data systems and Uses a company’s data systems and applications to track consumer applications to track consumer activity and manage customer activity and manage customer interactions with the company interactions with the company

2.28

Customer EquityCustomer Equity

Blattberg and Deighton (1996) offer eight guidelines as Blattberg and Deighton (1996) offer eight guidelines as a means of maximizing customer equity:a means of maximizing customer equity:

Invest in highest-value customers firstInvest in highest-value customers first Transform product management into customer managementTransform product management into customer management Consider how add-on sales and cross-selling can increase Consider how add-on sales and cross-selling can increase

customer equitycustomer equity Look for ways to reduce acquisition costsLook for ways to reduce acquisition costs Track customer equity gains and losses against marketing Track customer equity gains and losses against marketing

programsprograms Relate branding to customer equityRelate branding to customer equity Monitor the intrinsic retainability of your customerMonitor the intrinsic retainability of your customer Consider writing separate marketing plans—or even building Consider writing separate marketing plans—or even building

two marketing organizations—for acquisition and retention two marketing organizations—for acquisition and retention effortsefforts

2.29

Customer EquityCustomer Equity The sum of lifetime values of all The sum of lifetime values of all

customerscustomers Customer lifetime value (CLV) is affected Customer lifetime value (CLV) is affected

by revenue and by the cost of customer by revenue and by the cost of customer acquisition, retention, and cross-sellingacquisition, retention, and cross-selling

Consists of three components:Consists of three components: Value equityValue equity Brand equityBrand equity Relationship equity Relationship equity

Rust, Zeithamal & Lemon, 2004Rust, Zeithamal & Lemon, 2004

2.30

Relationship of Customer Relationship of Customer Equity to Brand EquityEquity to Brand Equity

Customers drive the success of brands Customers drive the success of brands but brands are the necessary touchpoint but brands are the necessary touchpoint that firms have to connect with their that firms have to connect with their customers. customers.

Customer-based brand equity maintains Customer-based brand equity maintains that brands create value by eliciting that brands create value by eliciting differential customer response to differential customer response to marketing activities. marketing activities.

The higher price premiums and The higher price premiums and increased levels of loyalty engendered by increased levels of loyalty engendered by brands generate incremental cash flows. brands generate incremental cash flows.