9.1

CHAPTER 9:CHAPTER 9: MEASURING SOURCES OF BRAND MEASURING SOURCES OF BRAND

EQUITY: CAPURING CUSTOMER EQUITY: CAPURING CUSTOMER MINDSETMINDSET

Kevin Lane KellerKevin Lane KellerTuck School of BusinessTuck School of Business

Dartmouth CollegeDartmouth College

9.2

Qualitative Research Qualitative Research TechniquesTechniques

Free associationFree association What do you like best about the brand? What do you like best about the brand?

What are its positive aspects? What are its positive aspects? What do you dislike? What are its What do you dislike? What are its

disadvantages?disadvantages? What do you find unique about the What do you find unique about the

brand? How is it different from other brand? How is it different from other brands? In what ways is it the same?brands? In what ways is it the same?

9.3

Free AssociationsFree Associations

LEVI’S501

High quality, long lasting, and durable

Blue denim, shrink-to-fit cotton fabric, button-fly,

two-horse patch, and small red pocket tag

Feelings of self-confidenceand self-assurance

Comfortable fittingand relaxing to wear

Honest, classic,Contemporary, approachable,

independent, and universal

Appropriate for outdoorwork and casual social

situations

Western, American, blue collar, hard-working,

traditional, strong, rugged, and masculine

BENEFITS

ATTRIBUTES

Symbolic

Usage ImageryUser Imagery

Brand Personality

Functional

Product-Related

Experiential

9.4

Qualitative Research Qualitative Research TechniquesTechniques

Projective techniquesProjective techniques Diagnostic tools to uncover the true Diagnostic tools to uncover the true

opinions and feelings of consumers opinions and feelings of consumers when they are unwilling or otherwise when they are unwilling or otherwise unable to express themselves on these unable to express themselves on these matters matters

9.5

Projective TechniquesProjective Techniques

Consumers might feel that it would Consumers might feel that it would be socially unacceptable to express be socially unacceptable to express their true feelingstheir true feelings

Projective techniques are diagnostic Projective techniques are diagnostic tools to uncover the true opinions tools to uncover the true opinions and feelings of consumersand feelings of consumers

Examples:Examples: Completion and interpretation tasksCompletion and interpretation tasks Comparison tasksComparison tasks

Projective TechniquesProjective Techniques

Word association testsWord association tests Sentence completion methodSentence completion method Third-person techniqueThird-person technique Role playingRole playing T.A.T.T.A.T. Picture frustration version of Picture frustration version of

T.A.T.T.A.T.

Expressive Expressive TechniquesTechniques

In In expressive techniquesexpressive techniques, respondents are presented , respondents are presented with a verbal or visual situation and asked to relate the with a verbal or visual situation and asked to relate the feelings and attitudes of other people to the situation. feelings and attitudes of other people to the situation.

Role playing.Role playing. Respondents are asked to play the role Respondents are asked to play the role or assume the behavior of someone else. or assume the behavior of someone else.

Third-person technique.Third-person technique. The respondent is The respondent is presented with a verbal or visual situation and the presented with a verbal or visual situation and the respondent is asked to relate the beliefs and attitudes respondent is asked to relate the beliefs and attitudes of a third person rather than directly expressing of a third person rather than directly expressing personal beliefs and attitudes. This third person may personal beliefs and attitudes. This third person may be a friend, neighbor, colleague, or a “typical” person.be a friend, neighbor, colleague, or a “typical” person.

Word AssociationWord Association

Subject is presented with a list of Subject is presented with a list of wordswords

Asked to respond with first word Asked to respond with first word that comes to mindthat comes to mind

Word Association Word Association ExamplesExamples

GREENGREEN MoneyMoney LawnLawn Eggs and HamEggs and Ham

Word Association Word Association ExamplesExamples

CHEESECHEESE KraftKraft CheddarCheddar GoatGoat

Word AssociationWord AssociationEXAMPLEEXAMPLE

STIMULUSSTIMULUS MRS. MMRS. M MRS. C MRS. C

washday washday everyday everyday ironing ironing

fresh fresh and sweet and sweet clean clean

pure pure air air soiled soiled

scrub scrub don't; husband does don't; husband does clean clean

filth filth this neighborhood this neighborhood dirt dirt

bubbles bubbles bath bath soap and soap and

water water

family family squabbles squabbles children children

towels towels dirty dirty washwash

Completion Completion TechniquesTechniquesInIn sentence completion sentence completion, respondents are given incomplete , respondents are given incomplete

sentences and asked to complete them. Generally, they are sentences and asked to complete them. Generally, they are asked to use the first word or phrase that comes to mind.asked to use the first word or phrase that comes to mind.

A person who shops at Sears is ______________________A person who shops at Sears is ______________________  A person who receives a gift certificate good for Sak's Fifth A person who receives a gift certificate good for Sak's Fifth Avenue would be __________________________________Avenue would be __________________________________  J. C. Penney is most liked by _________________________J. C. Penney is most liked by _________________________  When I think of shopping in a department store, I ________When I think of shopping in a department store, I ________

A variation of sentence completion is paragraph completion, A variation of sentence completion is paragraph completion, in which the respondent completes a paragraph beginning in which the respondent completes a paragraph beginning with the stimulus phrase. with the stimulus phrase.

Sentence CompletionPeople who drink beer are ______________________

A man who drinks light beer is ___________________

Imported beer is most liked by ___________________

A woman will drink beer when____________________

Completion Completion TechniquesTechniquesInIn sentence completionsentence completion,, respondents are given incomplete respondents are given incomplete

sentences and asked to complete them. Generally, they are sentences and asked to complete them. Generally, they are asked to use the first word or phrase that comes to mind.asked to use the first word or phrase that comes to mind.

A person who shops at Sears is ______________________A person who shops at Sears is ______________________  A person who receives a gift certificate good for Sak's Fifth A person who receives a gift certificate good for Sak's Fifth Avenue would be __________________________________Avenue would be __________________________________  J. C. Penney is most liked by _________________________J. C. Penney is most liked by _________________________  When I think of shopping in a department store, I ________When I think of shopping in a department store, I ________

A variation of sentence completion is paragraph completion, A variation of sentence completion is paragraph completion, in which the respondent completes a paragraph beginning in which the respondent completes a paragraph beginning with the stimulus phrase. with the stimulus phrase.

Completion Completion TechniquesTechniques

In In story completionstory completion,, respondents are respondents are given part of a story – enough to direct given part of a story – enough to direct attention to a particular topic but not to attention to a particular topic but not to hint at the ending. They are required to hint at the ending. They are required to give the conclusion in their own words.give the conclusion in their own words.

Construction Construction TechniquesTechniques

With a With a picture response,picture response, the respondents are the respondents are asked to describe a series of pictures of ordinary asked to describe a series of pictures of ordinary as well as unusual events. The respondent's as well as unusual events. The respondent's interpretation of the pictures gives indications of interpretation of the pictures gives indications of that individual's personality. that individual's personality.   In In cartoon testscartoon tests,, cartoon characters are shown in cartoon characters are shown in a specific situation related to the problem. The a specific situation related to the problem. The respondents are asked to indicate what one respondents are asked to indicate what one cartoon character might say in response to the cartoon character might say in response to the comments of another character. Cartoon tests are comments of another character. Cartoon tests are simpler to administer and analyze than picture simpler to administer and analyze than picture response techniques.response techniques.

A Cartoon A Cartoon TestTest

Let’s see if we can pick up some house

wares at Sears.

Figure 5.4

SearsSears

Thematic Apperception Test

T.A.T.

Thematic Apperception Test Thematic Apperception Test (TAT)(TAT)

Construct a story about what you see on Construct a story about what you see on the following picturethe following picture

Describe:Describe: - what led up to the scene- what led up to the scene - what is happening- what is happening - what the characters in the story might - what the characters in the story might think or feelthink or feel - how the story will end- how the story will end

9.20

New approach: ZMETNew approach: ZMET

Zaltman Metaphor Elicitation Zaltman Metaphor Elicitation Technique (ZMET)Technique (ZMET)

ZMET is “a technique for eliciting ZMET is “a technique for eliciting interconnected constructs that interconnected constructs that influence thought and behavior.” influence thought and behavior.”

9.21

ZMETZMET The guided conversation consists of a The guided conversation consists of a

series of steps that includes some or all of series of steps that includes some or all of the following:the following: Story tellingStory telling Missed imagesMissed images Sorting taskSorting task Construct elicitationConstruct elicitation The most representative pictureThe most representative picture Opposite imagesOpposite images Sensory imagesSensory images Mental mapMental map Summary imageSummary image VignetteVignette

9.22

ZMETZMET Step 1. Storytelling: Participants describe the content of each Step 1. Storytelling: Participants describe the content of each

picture.picture. Step 2. Missed Image: Participants describe the picture or Step 2. Missed Image: Participants describe the picture or

pictures that he orpictures that he or she was unable to obtain and explain their she was unable to obtain and explain their relevance.relevance.

Step 3. Sorting Task: Participants sort pictures into meaningful Step 3. Sorting Task: Participants sort pictures into meaningful groups andgroups and provide a label or description for each group.provide a label or description for each group.

Step 4. Step 4. Construct elicitationConstruct elicitation: Participants sort pictures into : Participants sort pictures into meaningful groups andmeaningful groups and provide a label or description for each provide a label or description for each group.group.

Step 5. The Most Representative Picture: Participants indicate Step 5. The Most Representative Picture: Participants indicate which picturewhich picture is most representative. is most representative.

Step 6. Opposite Images: Participants indicate picture that Step 6. Opposite Images: Participants indicate picture that describe thedescribe the opposite of the brand or the task that they were opposite of the brand or the task that they were given.given.

Step 7. Sensory Images: Participants indicate what does or does Step 7. Sensory Images: Participants indicate what does or does not describenot describe the concept in terms of color, emotion, sound, the concept in terms of color, emotion, sound, smell, taste, and touch.smell, taste, and touch.

9.23

ZMETZMET Step 8. Mental Map: After reviewing the entire Step 8. Mental Map: After reviewing the entire

construct discussed andconstruct discussed and asking Participants if the asking Participants if the constructs are accurate representations ofconstructs are accurate representations of what was what was meant and if any important ideas are missing, meant and if any important ideas are missing, ParticipantsParticipants create a map or causal model connecting create a map or causal model connecting the constructs that havethe constructs that have been elicited. been elicited.

Step 9. Summary Images: Participants create a Step 9. Summary Images: Participants create a summary image or montagesummary image or montage using their own images using their own images (sometimes augmented by images from an(sometimes augmented by images from an images from images from an image bank) to express important issues. Digitalan image bank) to express important issues. Digital Imaging techniques may be employed to facilitate the Imaging techniques may be employed to facilitate the creation of thecreation of the image. image.

Step 10. Vignette: Participants put together vignette or Step 10. Vignette: Participants put together vignette or short video to helpshort video to help communicate important issues. communicate important issues.

9.24

Brand Personality and Brand Personality and ValuesValues

Brand personalityBrand personality refers to the human refers to the human characteristics or traits that can be characteristics or traits that can be attributed to a brand.attributed to a brand.

The Big FiveThe Big Five Sincerity (down-to-earth, wholesome, and Sincerity (down-to-earth, wholesome, and

cheerful)cheerful) Excitement (daring, spirited, imaginative, and Excitement (daring, spirited, imaginative, and

up-to-date)up-to-date) Competence (reliable, intelligent, and successful)Competence (reliable, intelligent, and successful) Sophistication (upper class and charming)Sophistication (upper class and charming) Ruggedness (outdoorsy and tough)Ruggedness (outdoorsy and tough)

Jennifer Aaker, 1997Jennifer Aaker, 1997

9.25

Identifying Key Brand Identifying Key Brand Personality AssociationsPersonality Associations

BUSHBUSH KERRYKERRY CoffeeCoffee Dunkin’ DonutsDunkin’ Donuts

StarbucksStarbucks TechnologyTechnology IBMIBM AppleApple AutoAuto FordFord BMWBMW RetailRetail KmartKmart TargetTarget Fast FoodFast Food McDonald’sMcDonald’s SubwaySubway

2004 U.S. presidential election, random sample of undecided voters

9.26

Experiential MethodsExperiential Methods By tapping more directly into their actual home, By tapping more directly into their actual home,

work, or shopping behaviors, researchers might work, or shopping behaviors, researchers might be able to elicit more meaningful responses from be able to elicit more meaningful responses from consumers. consumers.

Advocates of the experiential approach have sent Advocates of the experiential approach have sent researchers to consumers’ homes in the morning researchers to consumers’ homes in the morning to see how they approach their days, given to see how they approach their days, given business travelers Polaroid cameras and diaries business travelers Polaroid cameras and diaries to capture their feelings when in hotel rooms, and to capture their feelings when in hotel rooms, and conducted “beeper studies” in which participants conducted “beeper studies” in which participants are instructed to write down what they’re doing are instructed to write down what they’re doing when they are paged. when they are paged.

9.27

Quantitative Research Quantitative Research TechniquesTechniques

AwarenessAwareness ImageImage Brand responsesBrand responses Brand relationshipsBrand relationships

9.28

AwarenessAwareness

RecognitionRecognition Ability of consumers to identify the Ability of consumers to identify the

brand (and its elements) under various brand (and its elements) under various circumstancescircumstances

RecallRecall Ability of consumers to retrieve the Ability of consumers to retrieve the

actual brand elements from memoryactual brand elements from memory Unaided vs. aided recall Unaided vs. aided recall

9.29

AwarenessAwareness Corrections for guessing Corrections for guessing

Any research measure must consider the issue of Any research measure must consider the issue of consumers making up responses or guessing. consumers making up responses or guessing.

Strategic implications Strategic implications The advantage of aided recall measures is that they The advantage of aided recall measures is that they

yield insight into how brand knowledge is yield insight into how brand knowledge is organized in memory and what kind of cues or organized in memory and what kind of cues or reminders may be necessary for consumers to be reminders may be necessary for consumers to be able to retrieve the brand from memory. able to retrieve the brand from memory.

The important point to note is that the category The important point to note is that the category structure that exists in consumers’ minds—as structure that exists in consumers’ minds—as reflected by brand recall performance—can have reflected by brand recall performance—can have profound implications for consumer choice and profound implications for consumer choice and marketing strategy. marketing strategy.

9.30

ImageImage

Ask open-ended questions to tap Ask open-ended questions to tap into the strength, favorability, and into the strength, favorability, and uniqueness of brand associations.uniqueness of brand associations.

These associations should be rated These associations should be rated on scales for quantitative analysis.on scales for quantitative analysis.

9.31

Brand ResponsesBrand Responses

Research in psychology suggests that Research in psychology suggests that purchase intentions are most likely to be purchase intentions are most likely to be predictive of actual purchase when there is predictive of actual purchase when there is correspondence between the two in the correspondence between the two in the following categories:following categories:

Purchase IntentionsPurchase Intentions Action (buying for own use or to give as a gift)Action (buying for own use or to give as a gift) Target (specific type of product and brand)Target (specific type of product and brand) Context (in what type of store based on what Context (in what type of store based on what

prices and other conditions)prices and other conditions) Time (within a week, month, or year)Time (within a week, month, or year)

9.32

Brand RelationshipsBrand Relationships

Behavioral loyaltyBehavioral loyalty Brand substitutabilityBrand substitutability Other brand resonance dimensionsOther brand resonance dimensions

For example, in terms of engagement, For example, in terms of engagement, measures could explore word-of-mouth measures could explore word-of-mouth behavior, online behavior, and so forth in behavior, online behavior, and so forth in depth depth

9.33

Comprehensive Models of Comprehensive Models of Customer-Based Brand Customer-Based Brand

EquityEquity Brand dynamics Brand dynamics Equity enginesEquity engines Young & Rubicam’s Brand Asset Young & Rubicam’s Brand Asset

Valuator (BAV)Valuator (BAV)

9.34

Brand DynamicsBrand Dynamics

The Brand Dynamics model adopts a The Brand Dynamics model adopts a hierarchical approach to determine hierarchical approach to determine the strength of relationship a the strength of relationship a consumer has with a brand. consumer has with a brand.

The five levels of the model are:The five levels of the model are: PresencePresence Relevance Relevance PerformancePerformance AdvantageAdvantage Bonding Bonding

9.35

Equity EnginesEquity Engines

This model delineates three key dimensions This model delineates three key dimensions of brand affinityof brand affinity——the emotional and the emotional and intangible benefits of a brandintangible benefits of a brand——as follows:as follows: Authority:Authority: The reputation of a brand, whether as The reputation of a brand, whether as

a long-standing leader or as a pioneer in a long-standing leader or as a pioneer in innovation innovation

Identification:Identification: The closeness customers feel for a The closeness customers feel for a brand and how well they feel the brand matches brand and how well they feel the brand matches their personal needs their personal needs

Approval:Approval: The way a brand fits into the wider The way a brand fits into the wider social matrix and the intangible status it holds social matrix and the intangible status it holds for experts and friendsfor experts and friends

9.36

Young & Rubicam’s Brand Young & Rubicam’s Brand Asset Valuator (BAV)Asset Valuator (BAV)

There are five key components of brand There are five key components of brand health in BAV—the five pillars. health in BAV—the five pillars.

Each pillar is derived from various Each pillar is derived from various measures that relate to different aspects of measures that relate to different aspects of consumers’ brand perceptions and that consumers’ brand perceptions and that together trace the progression of a brand’s together trace the progression of a brand’s development.development. Differentiation Differentiation Energy Energy Relevance Relevance Esteem Esteem KnowledgeKnowledge

9.37

240,000+ consumers 240,000+ consumers Up to 181 categoriesUp to 181 categories 137 studies137 studies 40 countries40 countries 8 years8 years 56 different brand 56 different brand

metricsmetrics Common Common

methodologymethodology

BrandAsset® Valuator BrandAsset® Valuator (BAV)(BAV)

9.38

Four Primary Four Primary AspectsAspects

How Brands Are BuiltHow Brands Are Built

KnowledgeKnowledge• The culmination of brand building efforts; acquisition of consumer experience

EsteemEsteem • Consumer respect, regard, reputation; afulfillment of perceived consumer promise

RelevanceRelevance• Relates to usage and subsumes the five Ps of marketing; relates to sale

DifferentiationDifferentiation• The basis for consumer choice; the essence of the brand, source of margin

9.39

Room to grow... Brand has power to build relevance.

D > R

0

10

20

30

40

50

60

70

80

90

100

DifferentiationRelevance

Healthy Brands Have Healthy Brands Have Greater Differentiation Greater Differentiation

than Relevancethan Relevance

Examples:

Harley DavidsonYahoo!AOLWilliams-SonomaIkeaBloomberg Business News

9.40

R > D

0

10

20

30

40

50

60

70

80

90

100

DifferentiationRelevance

Uniqueness has faded; price becomes dominant reason to buy.

Brands with greater Relevance than Brands with greater Relevance than Differentiation Are in Danger of Differentiation Are in Danger of

Becoming CommoditiesBecoming Commodities

Examples:

ExxonMott’sMcDonald’sCrestMinute MaidFruit of the LoomPeter Pan (peanut butter)

9.41

E > K

0

10

20

30

40

50

60

70

80

90

100

Esteem Knowledge

Brand is better liked than known.

More Esteem than Knowledge More Esteem than Knowledge Means, “I’d like to get to know you Means, “I’d like to get to know you

better”better”

Examples:

Coach leatherwearTag HeuerCalphalonMovadoBlaupunktPella WindowsPalm PilotTechnics

9.42

K > E

0

10

20

30

40

50

60

70

80

90

100

Esteem Knowledge

Brand is better known than liked.

Too Much Knowledge Can Be Dangerous:Too Much Knowledge Can Be Dangerous:

“I know you and you’re nothing special”“I know you and you’re nothing special”

Examples: PlymouthTV GuideSpamWoolworthsChryslerMaxwell HouseNational EnquirerSanka

9.43

BrandAsset® Valuator

Leading

Brand Strength

Differentiation Relevance

Lagging

Brand Stature

Esteem Knowledge

A Two-Dimensional Framework for A Two-Dimensional Framework for Diagnosing Brands: The Power GridDiagnosing Brands: The Power Grid

9.44

Power Leaders

New

Niche/Unrealized Potential

Declining Leaders

UnfocusedBR

AN

D S

TR

EN

GT

H(D

iffere

nti

ati

on

an

d

Rele

van

ce)

BRAND STATURE(Esteem and Knowledge)

Eroded

Brand Health Is Captured Brand Health Is Captured on the PowerGridon the PowerGrid

Base: USA Total Adults BAV 2000

9.45

BRAND STATUREBRAND STATURE

BR

AN

D S

TR

EN

GT

HB

RA

ND

ST

RE

NG

TH

Base: USA Total Adults BAV 1999Base: USA Total Adults BAV 1999

00

2020

4040

6060

8080

100100

00 2020 4040 6060 8080 100100

PlymouthPlymouthBazookaBazooka

Ivory SnowIvory SnowPertPert

RolaidsRolaidsKedsKeds

Howard JohnsonHoward JohnsonTWATWA

GreyhoundGreyhound

Arizona Iced TeaArizona Iced TeaAeropostaleAeropostale

Newman’s OwnNewman’s OwnSundance ChannelSundance Channel

DreamWorksDreamWorksBloomberg Business Bloomberg Business

NewsNewsCDnowCDnowIKEAIKEA

Coca-ColaCoca-ColaOcean SprayOcean Spray

NikeNikePepperidge FarmPepperidge Farm

M&MsM&MsDisneyDisney

Jeopardy!Jeopardy!Hallmark Hallmark

San PellegrinoSan PellegrinoSun MicrosystemsSun Microsystems

WiredWiredQuest TelecommQuest Telecomm

NokiaNokiaiVillage.comiVillage.comNetGrocerNetGrocer

IridiumIridium

USA 1999 PowerGrid USA 1999 PowerGrid SampleSample

9.46

Y&R Resonance ResearchY&R Resonance Research

Usage

Loyalty (60%)

Attachment (30%)

Community Engagement

Resonance(10%)

 

15%

Base: 2001 BAV Data

9.47

0

50

100

0 50 100

Brand Stature

Bra

nd

Str

en

gth

Attached

Loyal

Community

ResonanceEngaged

Non-Loyals

Resonance

Engaged

Community

Attached

Loyal Users

Non-Loyal Users

Base: BAV USA Adults 2001

Differentiation

Y&R Resonance Research with Y&R Resonance Research with BAVBAV

9.48

Average U.S. Packaged Goods Average U.S. Packaged Goods BrandBrandProportion

of ConsumersConsumer Loyalty

7%Bonded

32%Advantage

35%Performance

43%Relevance

76%Presence

38%

19%

17%

13%

20%

9.49

Commonalty Between the Commonalty Between the Basic BAV Model and the Basic BAV Model and the

CBBE FrameworkCBBE Framework BAV’s knowledge relates to CBBE’s brand BAV’s knowledge relates to CBBE’s brand

awareness and familiarity.awareness and familiarity. BAV’s esteem relates to CBBE’s BAV’s esteem relates to CBBE’s

favorability of brand associations.favorability of brand associations. BAV’s relevance relates to CBBE’s BAV’s relevance relates to CBBE’s

strength of brand associations (as well as strength of brand associations (as well as perhaps favorability).perhaps favorability).

BAV’s energy relates to CBBE’s BAV’s energy relates to CBBE’s favorability of associations.favorability of associations.

BAV’s differentiation relates to CBBE’s BAV’s differentiation relates to CBBE’s uniqueness of brand associations.uniqueness of brand associations.

10.50

CHAPTER 10:CHAPTER 10: MEASURING OUTCOMES OF BRAND MEASURING OUTCOMES OF BRAND

EQUITY: CAPURING MARKET EQUITY: CAPURING MARKET PERFORMANCEPERFORMANCE

Kevin Lane KellerKevin Lane KellerTuck School of BusinessTuck School of Business

Dartmouth CollegeDartmouth College

10.51

Measuring Brand EquityMeasuring Brand Equity Multi-dimensional conceptMulti-dimensional concept Many different measures requiredMany different measures required The ultimate value of a brand The ultimate value of a brand

depends on the underlying depends on the underlying components of brand knowledge components of brand knowledge and sources of brand equityand sources of brand equity

10.52

Comparative MethodsComparative Methods Brand-based comparative approachesBrand-based comparative approaches Marketing-based comparative Marketing-based comparative

approachesapproaches Conjoint analysisConjoint analysis

10.53

Brand-Based ApproachesBrand-Based Approaches

The marketing element under The marketing element under consideration is fixed.consideration is fixed.

Consumer response is examined based on Consumer response is examined based on changes in brand identification.changes in brand identification.

Application example:Application example: Blind testing Blind testing Advantage:Advantage: Isolates the value of the brand Isolates the value of the brand Disadvantage:Disadvantage: The totality of what is The totality of what is

learned depends on how many learned depends on how many applications are examined.applications are examined.

10.54

Marketing-Based ApproachesMarketing-Based Approaches

The brand is held fixed and consumer The brand is held fixed and consumer response is examined based on changes in response is examined based on changes in marketing programs.marketing programs.

Applications:Applications: Explore price premiums’ effect Explore price premiums’ effect on switching, consumer evaluations of on switching, consumer evaluations of marketing activities, brand extensions, etc.marketing activities, brand extensions, etc.

Advantage:Advantage: Ease of implementation Ease of implementation Disadvantage:Disadvantage: Difficult to determine whether Difficult to determine whether

consumer responses are caused by brand consumer responses are caused by brand knowledge or generic product knowledgeknowledge or generic product knowledge

10.55

Conjoint AnalysisConjoint Analysis A survey-based multivariate technique that enables A survey-based multivariate technique that enables

marketers to profile the consumer decision process marketers to profile the consumer decision process with respect to products and brandswith respect to products and brands

Helps researchers determine the trade-offs Helps researchers determine the trade-offs consumers make between brand attributesconsumers make between brand attributes

Applications:Applications: Assess advertising effectiveness and Assess advertising effectiveness and brand value; analyze brand/price trade-offbrand value; analyze brand/price trade-off

Advantage:Advantage: Allows for different brands or different Allows for different brands or different aspects of the product to be analyzed aspects of the product to be analyzed simultaneouslysimultaneously

Disadvantage:Disadvantage: May violate consumers’ expectations May violate consumers’ expectations based on what they already know about brandsbased on what they already know about brands

Example: Laptop ProfilesExample: Laptop Profiles

Brand Hard Drive RAM Screen Price A B

Dell 320 GB 2 GB 15.4 in $1,200 9 6

Apple 320 GB 4 GB 15.4 in $1,200 6 12

Dell 160 GB 4 GB 15.4 in $900 12 5

Apple 320 GB 2 GB 15.4 in $900 11 11

Dell 320 GB 4 GB 12.1 in $1,500 4 3

Apple 320 GB 2 GB 12.1 in $1,500 1 9

Apple 160 GB 4 GB 15.4 in $1,500 3 10

Apple 160 GB 2 GB 12.1 in $900 8 7

Apple 160 GB 4 GB 12.1 in $1,200 5 8

Dell 160 GB 2 GB 12.1 in $1,200 7 1

Dell 320 GB 4 GB 12.1 in $900 10 4

Dell 160 GB 2 GB 15.4 in $1,500 2 2

10.57

Holistic MethodsHolistic Methods Attempt to place an overall value on Attempt to place an overall value on

the brand in either abstract utility the brand in either abstract utility terms or concrete financial termsterms or concrete financial terms

Net out various considerations to Net out various considerations to determine the unique contribution of determine the unique contribution of the brandthe brand

Holistic methods:Holistic methods: Residual approachesResidual approaches Valuation approachesValuation approaches

10.58

Residual ApproachesResidual Approaches

Examine the value of the brand by Examine the value of the brand by subtracting consumers’ preferences based subtracting consumers’ preferences based on physical product attributes alone from on physical product attributes alone from their overall brand preferencestheir overall brand preferences

Advantage:Advantage: Useful benchmark for Useful benchmark for interpreting brand equity, especially from interpreting brand equity, especially from a financially oriented perspectivea financially oriented perspective

Disadvantage:Disadvantage: Static view. Limited Static view. Limited diagnostic value for strategic decision diagnostic value for strategic decision makingmaking

10.59

Valuation ApproachesValuation Approaches Attempt to place a financial value on Attempt to place a financial value on

brand equity for accounting purposesbrand equity for accounting purposes Useful in cases of mergers and Useful in cases of mergers and

acquisitions, brand licensing, fund acquisitions, brand licensing, fund raising, and brand management raising, and brand management decisionsdecisions

Valuation approaches:Valuation approaches: Accounting backgroundAccounting background Historical perspectivesHistorical perspectives General approachesGeneral approaches Interbrand’s brand valuation methodologyInterbrand’s brand valuation methodology

10.60

Accounting BackgroundAccounting Background Intangible assetsIntangible assets are typically lumped are typically lumped

under the heading of under the heading of goodwill goodwill and include and include things such as patents, trademarks, and things such as patents, trademarks, and licensing agreements, as well as “softer” licensing agreements, as well as “softer” considerations such as the skill of the considerations such as the skill of the management and customer relations. management and customer relations.

In an acquisition, the goodwill item often In an acquisition, the goodwill item often includes a premium paid to gain control, includes a premium paid to gain control, which, in certain instances, may even which, in certain instances, may even exceed the value of tangible and exceed the value of tangible and intangible assets.intangible assets.

10.61

Historical PerspectivesHistorical Perspectives In Australia Rupert Murdoch’s News In Australia Rupert Murdoch’s News

Corporation included a valuation of some of Corporation included a valuation of some of its magazines on its balance sheets in 1984.its magazines on its balance sheets in 1984.

British firms used brand values primarily to British firms used brand values primarily to boost their balance sheets. boost their balance sheets.

In the United States, generally accepted In the United States, generally accepted accounting principles mean that placing a accounting principles mean that placing a brand on the balance sheet would require brand on the balance sheet would require amortization of that asset for up to 40 years. amortization of that asset for up to 40 years. Such a charge would severely hamper firm Such a charge would severely hamper firm profitability; as a result, firms avoid such profitability; as a result, firms avoid such accounting maneuvers. accounting maneuvers.

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General ApproachesGeneral Approaches

In determining the value of a brand in an In determining the value of a brand in an acquisition or merger, firms can choose acquisition or merger, firms can choose from three main approaches:from three main approaches: Cost approach:Cost approach: Brand equity is the amount of Brand equity is the amount of

money that would be required to reproduce or money that would be required to reproduce or replace the brand replace the brand

Market approach:Market approach: The present value of the The present value of the future economic benefits to be derived by the future economic benefits to be derived by the owner of the asset owner of the asset

Income approach:Income approach: The discounted future cash The discounted future cash flow from the future earnings stream for the flow from the future earnings stream for the brand brand

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Interbrand’s Brand ValuationInterbrand’s Brand Valuation Assumes that brand value is the present worth Assumes that brand value is the present worth

of the benefits of future ownershipof the benefits of future ownership Follows five valuation steps: Follows five valuation steps:

Market segmentation Market segmentation Financial (role of branding) analysis Financial (role of branding) analysis Demand (brand strength) analysis Demand (brand strength) analysis Competitive benchmarking Competitive benchmarking Brand value calculationBrand value calculation

Brand value calculation : Calculate the brand Brand value calculation : Calculate the brand value as the net present value (NPV) of the value as the net present value (NPV) of the forecast brand earnings, discounted by the forecast brand earnings, discounted by the brand discount rate brand discount rate

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Interbrand’s Brand ValuationInterbrand’s Brand Valuation

1. Market segmentation. Brands influence customer 1. Market segmentation. Brands influence customer choice, but the influence varies depending on the choice, but the influence varies depending on the market in which the brand operates. The brand is market in which the brand operates. The brand is valued in each segment and the sum of the segment valued in each segment and the sum of the segment valuations constitutes the total value of the brand.valuations constitutes the total value of the brand.

2. Financial analysis. Identify and forecast revenues 2. Financial analysis. Identify and forecast revenues and earnings from intangibles generated by the and earnings from intangibles generated by the brand for each of the distinct segments determined brand for each of the distinct segments determined in Step 1. Intangible earnings are defined as brand in Step 1. Intangible earnings are defined as brand revenue less operating costs, applicable taxes and a revenue less operating costs, applicable taxes and a charge for the capital employed. The concept is charge for the capital employed. The concept is similar to the notion of economic profit.similar to the notion of economic profit.

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Interbrand’s Brand ValuationInterbrand’s Brand Valuation3. Demand analysis. Assess the role that the brand 3. Demand analysis. Assess the role that the brand

plays in driving demand for products and services plays in driving demand for products and services in the markets in which it operates, and determine in the markets in which it operates, and determine what proportion of intangible earnings is what proportion of intangible earnings is attributable to the brand measured by an indicator attributable to the brand measured by an indicator referred to as the “role of branding index.” This is referred to as the “role of branding index.” This is done by first identifying the various drivers of done by first identifying the various drivers of demand for the branded business, then determining demand for the branded business, then determining the degree to which each driver is directly the degree to which each driver is directly influenced by the brand. The role of branding index influenced by the brand. The role of branding index represents the percentage of intangible earnings represents the percentage of intangible earnings that are generated by the brand. Brand earnings that are generated by the brand. Brand earnings are calculated by multiplying the role of branding are calculated by multiplying the role of branding index by intangible earnings.index by intangible earnings.

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Interbrand’s Brand ValuationInterbrand’s Brand Valuation4. Competitive benchmarking. Determine the competitive 4. Competitive benchmarking. Determine the competitive

strengths and weaknesses of the brand to derive the strengths and weaknesses of the brand to derive the specific brand discount rate that reflects the risk profile specific brand discount rate that reflects the risk profile of its expected future earnings (this is measured by an of its expected future earnings (this is measured by an indicator referred to as the “brand strength score”). indicator referred to as the “brand strength score”). This comprises extensive competitive benchmarking This comprises extensive competitive benchmarking and a structured evaluation of the brand’s market, and a structured evaluation of the brand’s market, stability, leadership position, growth trend, support, stability, leadership position, growth trend, support, geographic footprint and legal protectability.geographic footprint and legal protectability.

5. Brand value calculation. Brand value is the net present 5. Brand value calculation. Brand value is the net present value (NPV) of the forecast brand earnings, discounted value (NPV) of the forecast brand earnings, discounted by the brand discount rate. The NPV calculation by the brand discount rate. The NPV calculation comprises both the forecast period and the period comprises both the forecast period and the period beyond, reflecting the ability of brands to continue beyond, reflecting the ability of brands to continue generating future earnings. generating future earnings.

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CHAPTER 11:CHAPTER 11: DESIGNING AND IMPLEMENTING DESIGNING AND IMPLEMENTING

BRANDING STRATEGIESBRANDING STRATEGIES

Kevin Lane KellerKevin Lane KellerTuck School of BusinessTuck School of Business

Dartmouth CollegeDartmouth College

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Branding strategyBranding strategy Branding strategy is critical because it Branding strategy is critical because it

is the means by which the firm can help is the means by which the firm can help consumers understand its products and consumers understand its products and services and organize them in their services and organize them in their minds. minds.

Two important strategic tools: The Two important strategic tools: The brand-product matrixbrand-product matrix and the and the brand brand hierarchyhierarchy help to characterize and help to characterize and formulate branding strategies by formulate branding strategies by defining various relationships among defining various relationships among brands and products. brands and products.

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Branding Strategy or Brand Branding Strategy or Brand ArchitectureArchitecture

The The branding strategybranding strategy for a firm for a firm reflects the number and nature of reflects the number and nature of common or distinctive brand common or distinctive brand elements applied to the different elements applied to the different products sold by the firm.products sold by the firm. Which brand elements can be applied to Which brand elements can be applied to

which products and the nature of new which products and the nature of new and existing brand elements to be and existing brand elements to be applied to new productsapplied to new products

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The role of Brand The role of Brand ArchitectureArchitecture

Clarify: brand awareness Clarify: brand awareness Improve consumer understanding and Improve consumer understanding and

communicate similarity and differences communicate similarity and differences between individual products between individual products

Motivate: brand image Motivate: brand image Maximize transfer of equity to/from the Maximize transfer of equity to/from the

brand to individual products to improve brand to individual products to improve trial and repeat purchase trial and repeat purchase

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Brand-Product MatrixBrand-Product Matrix

Must define:Must define: Brand-Product relationships (rows)Brand-Product relationships (rows)

Line and category extensionsLine and category extensions Product-Brand relationships (columns)Product-Brand relationships (columns)

Brand portfolioBrand portfolio

1 2 3 4

A

B

C

Products

Brands

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Important DefinitionsImportant Definitions Product lineProduct line

A group pf products within a product A group pf products within a product category that are closely relatedcategory that are closely related

Product mix (product assortment)Product mix (product assortment) The set of all product lines and items that The set of all product lines and items that

a particular seller makes available to a particular seller makes available to buyersbuyers

Brand mix (brand assortment)Brand mix (brand assortment) The set of all brand lines that a particular The set of all brand lines that a particular

seller makes available to buyersseller makes available to buyers

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Breadth of a Branding Breadth of a Branding StrategyStrategy

Breadth of product mixBreadth of product mix Aggregate market factorsAggregate market factors Category factorsCategory factors Environmental factorsEnvironmental factors

Depth of product mixDepth of product mix Examining the percentage of sales and Examining the percentage of sales and

profits contributed by each item in the profits contributed by each item in the product line product line

Deciding to increase the length of the Deciding to increase the length of the product line by adding new variants or product line by adding new variants or items typically expands market coverage items typically expands market coverage and therefore market share but also and therefore market share but also increases costs increases costs

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Depth of a Branding Depth of a Branding StrategyStrategy

The number and nature of different The number and nature of different brands marketed in the product brands marketed in the product class sold by a firmclass sold by a firm

Referred to as Referred to as brand portfoliobrand portfolio The reason is to pursue different The reason is to pursue different

market segments, different channels market segments, different channels of distribution, or different of distribution, or different geographic boundariesgeographic boundaries

Maximize market coverage and Maximize market coverage and minimize brand overlapminimize brand overlap

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Ford Brand PortfolioFord Brand Portfolio

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Designing a Brand Designing a Brand PortfolioPortfolio

Basic principles:Basic principles: Maximize market coverageMaximize market coverage so that no so that no

potential customers are being ignoredpotential customers are being ignored Minimize brand overlapMinimize brand overlap so that brands so that brands

aren’t competing among themselves to aren’t competing among themselves to gain the same customer’s approval gain the same customer’s approval

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Brand Roles in the PortfolioBrand Roles in the Portfolio FlankersFlankers: : Flanker or "fighter" brands are Flanker or "fighter" brands are

positioned with respect to competitors' brands positioned with respect to competitors' brands so that more important (and more profitable) so that more important (and more profitable) flagship brands can retain their desired flagship brands can retain their desired positioning. positioning.

Cash cowsCash cows: : Some brands may be kept around Some brands may be kept around despite dwindling sales because they still despite dwindling sales because they still manage to hold on to a sufficient number of manage to hold on to a sufficient number of customers and maintain their profitability with customers and maintain their profitability with virtually no marketing support. These "cash virtually no marketing support. These "cash cow" brands can be effectively "milked" by cow" brands can be effectively "milked" by capitalizing on their reservoir of existing capitalizing on their reservoir of existing brand equity. brand equity.

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Brand Roles in the PortfolioBrand Roles in the Portfolio Low-end entry-levelLow-end entry-level: : The role of a relatively The role of a relatively

low-priced brand in the brand portfolio often low-priced brand in the brand portfolio often may be to attract customersmay be to attract customers.. Retailers like to Retailers like to feature these "traffic builders" because they feature these "traffic builders" because they are able to "trade up" customers to a higher-are able to "trade up" customers to a higher-priced brand. For example, BMW introduced priced brand. For example, BMW introduced certain models into its 3-series automobiles in certain models into its 3-series automobiles in part as a means of bringing new customers part as a means of bringing new customers into the brand franchise with the hope of later into the brand franchise with the hope of later "moving them up" to higher-priced models "moving them up" to higher-priced models when they later decided to trade in their cars. when they later decided to trade in their cars.

High-end prestige brandsHigh-end prestige brands

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Brand Roles in the PortfolioBrand Roles in the Portfolio High-end prestige brandsHigh-end prestige brands: : The role of a The role of a

relatively high-priced brand in the relatively high-priced brand in the brand family often is to add prestige brand family often is to add prestige and credibility to the entire portfolio. and credibility to the entire portfolio. For example, one analyst argued that For example, one analyst argued that the real value of its Corvette high the real value of its Corvette high performance sports car to Chevrolet performance sports car to Chevrolet was in "its ability to lure curious was in "its ability to lure curious customers into showrooms and at the customers into showrooms and at the same time help improve the image of same time help improve the image of other Chevrolet cars. other Chevrolet cars.

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Brand HierarchyBrand Hierarchy A means of summarizing the A means of summarizing the

branding strategy by displaying the branding strategy by displaying the number and nature of common and number and nature of common and distinctive brand elements across distinctive brand elements across the firm’s products, revealing the the firm’s products, revealing the explicit ordering of brand elementsexplicit ordering of brand elements

A useful means of graphically A useful means of graphically portraying a firm’s branding portraying a firm’s branding strategy strategy

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Brand Hierarchy Tree: Brand Hierarchy Tree: ToyotaToyota

Toyota Corporation

Toyota(Trucks)

Toyota(SUV/vans)

LexusToyotaFinancialServices

Toyota(Cars)

Corolla PriusAvalon Celica ECHO MatrixMR2

SpyderCamry

CESLE

SELEXLE

Platinum EditionXLXLS

SESLE

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Brand Hierarchy LevelsBrand Hierarchy Levels

Family Brand (Buick)

Corporate Brand (General Motors)

Modifier: Item or Model (Ultra)

Individual Brand (Park Avenue)

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Corporate Brand EquityCorporate Brand Equity Occurs when relevant constituents Occurs when relevant constituents

hold strong, favorable, and unique hold strong, favorable, and unique associations about the corporate associations about the corporate brand in memorybrand in memory

Encompasses a much wider range of Encompasses a much wider range of associations than a product brandassociations than a product brand

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Family BrandsFamily Brands Brands applied across a range of Brands applied across a range of

product categoriesproduct categories An efficient means to link common An efficient means to link common

associations to multiple but distinct associations to multiple but distinct productsproducts

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Individual BrandsIndividual Brands Restricted to essentially one product Restricted to essentially one product

categorycategory There may be multiple product types There may be multiple product types

offered on the basis of different offered on the basis of different models, package sizes, flavors, etc.models, package sizes, flavors, etc.

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ModifiersModifiers Signals refinements or differences in Signals refinements or differences in

the brand related to factors such as the brand related to factors such as quality levels, attributes, functions, quality levels, attributes, functions, etc.etc.

Plays an important organizing role in Plays an important organizing role in communicating how different communicating how different products within a category that products within a category that share the same brand name areshare the same brand name are

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Corporate Image Corporate Image DimensionsDimensions

Corporate product attributes, benefits or Corporate product attributes, benefits or attitudesattitudes QualityQuality InnovativenessInnovativeness

People and relationshipsPeople and relationships Customer orientationCustomer orientation

Values and programsValues and programs Concern with the environmentConcern with the environment Social responsibilitySocial responsibility

Corporate credibilityCorporate credibility ExpertiseExpertise TrustworthinessTrustworthiness LikabilityLikability

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Brand Hierarchy DecisionsBrand Hierarchy Decisions The number of levels of the hierarchy The number of levels of the hierarchy

to use in generalto use in general How brand elements from different How brand elements from different

levels of the hierarchy are combined, levels of the hierarchy are combined, if at all, for any one particular if at all, for any one particular productproduct

How any one brand element is linked, How any one brand element is linked, if at all, to multiple productsif at all, to multiple products

Desired brand awareness and image at Desired brand awareness and image at each leveleach level

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Number of Hierarchy LevelsNumber of Hierarchy Levels Principle of simplicityPrinciple of simplicity

Employ as few levels as possibleEmploy as few levels as possible Principle of clarityPrinciple of clarity

Logic and relationship of all brand Logic and relationship of all brand elements employed must be obvious elements employed must be obvious and transparentand transparent

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Levels of Awareness and Levels of Awareness and AssociationsAssociations

Principle of relevancePrinciple of relevance Create global associations that are Create global associations that are

relevant across as many individual items relevant across as many individual items as possibleas possible

Principle of differentiationPrinciple of differentiation Differentiate individual items and brandsDifferentiate individual items and brands

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Linking Brands at Different Linking Brands at Different LevelsLevels

Principle of prominencePrinciple of prominence The relative prominence of brand The relative prominence of brand

elements affects perceptions of product elements affects perceptions of product distance and the type of image created distance and the type of image created for new productsfor new products

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Linking Brands Across Linking Brands Across ProductsProducts

Principle of commonalityPrinciple of commonality The more common elements shared by The more common elements shared by

products, the stronger the linkagesproducts, the stronger the linkages

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Brand Architecture Brand Architecture GuidelinesGuidelines

Adopt a strong customer focusAdopt a strong customer focus Avoid over-brandingAvoid over-branding Establish rules and conventions and be Establish rules and conventions and be

disciplineddisciplined Create broad, robust brand platformsCreate broad, robust brand platforms Selectively employ sub-brands as means Selectively employ sub-brands as means

of complementing and strengthening of complementing and strengthening brandsbrands

Selectively extend brands to establish Selectively extend brands to establish new brand equity and enhance existing new brand equity and enhance existing brand equitybrand equity

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Corporate Brand Corporate Brand CampaignCampaign

Different objectives are possible:Different objectives are possible: Build awareness of the company and the nature of Build awareness of the company and the nature of

its businessits business Create favorable attitudes and perceptions of Create favorable attitudes and perceptions of

company credibilitycompany credibility Link beliefs that can be leveraged by product-Link beliefs that can be leveraged by product-

specific marketingspecific marketing Make a favorable impression on the financial Make a favorable impression on the financial

communitycommunity Motivate present employees and attract better Motivate present employees and attract better

recruitsrecruits Influence public opinion on issues Influence public opinion on issues

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Using Cause Marketing to Using Cause Marketing to Build Brand EquityBuild Brand Equity

The process of formulating and The process of formulating and implementing marketing activities implementing marketing activities that are characterized by an offer that are characterized by an offer from the firm to contribute a specified from the firm to contribute a specified amount to a designated cause when amount to a designated cause when customers engage in revenue-customers engage in revenue-providing exchanges that satisfy providing exchanges that satisfy organizational and individual organizational and individual objectives objectives

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Advantages of Cause Advantages of Cause MarketingMarketing

Building brand awarenessBuilding brand awareness Enhancing brand imageEnhancing brand image Establishing brand credibilityEstablishing brand credibility Evoking brand feelingsEvoking brand feelings Creating a sense of brand Creating a sense of brand

communitycommunity Eliciting brand engagementEliciting brand engagement

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Green MarketingGreen Marketing A special case of cause marketing A special case of cause marketing

that is particularly concerned with that is particularly concerned with the environmentthe environment

Explosion of environmentally Explosion of environmentally friendly products and marketing friendly products and marketing programsprograms

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Crisis Marketing Crisis Marketing GuidelinesGuidelines

The two keys to effectively managing The two keys to effectively managing a crisis are that the firm’s response a crisis are that the firm’s response should be swift and that it should be should be swift and that it should be sincere. sincere.