CHAPTER 2: CUSTOMER-BASED BRAND EQUITY

Lecture 3

2.1

2.2

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

Salience Dimensions

• Depth of brand awareness– Ease of recognition and recall– Strength and clarity of category membership

• Breadth of brand awareness– Purchase consideration– Consumption consideration

2.4

Depth and Breadth Importance

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

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

2.5

Product Category Structure

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

2.6

Performance Dimensions

• Primary characteristics and supplementary features

• Product reliability, durability, and serviceability

• Service effectiveness, efficiency, and empathy

• Style and design

• Price

2.7

Imagery Dimensions• User profiles

– Demographic and psychographic characteristics– Actual or aspirational– Group perceptions—popularity

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

• Personality and values– Sincerity, excitement, competence, sophistication, and ruggedness

• History, heritage, and experiences– Nostalgia– Memories

2.8

Judgment Dimensions

• Brand quality– Value– Satisfaction

• Brand credibility– Expertise– Trustworthiness– Likeability

• Brand consideration– Relevance

• Brand superiority– Differentiation

2.9

Feelings Dimensions

• Warmth• Fun• Excitement• Security• Social Approval• Self-respect

2.10

Resonance Dimensions • Behavioral loyalty– Frequency and amount of repeat purchases

• Attitudinal attachment– Love brand (favorite possessions; “a little pleasure”)– Proud of brand

• Sense of community– Kinship– Affiliation

• Active engagement– Seek information– Join club– Visit website, chat rooms

2.11

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-3

F-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-1

R-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-1

2R

-12

0.58

0.49

Brand Building Implications

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

2.14

Creating Customer Value

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

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

2.15

Is a company consumer-centric?

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

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

3. Is someone accountable for customers?4. Is the company managed for shareholder value?5. Is the company testing new customer offers and

learning from the results?

2.16Sources: Larry Selden and Geoffrey Colvin, 2004.

Customer Relationship Management (CRM)

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

2.17

Customer Equity

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

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

equity– Look for ways to reduce acquisition costs– Track customer equity gains and losses against marketing programs– Relate branding to customer equity– Monitor the intrinsic retainability of your customer– Consider writing separate marketing plans—or even building two

marketing organizations—for acquisition and retention efforts

2.18

Customer Equity

• The sum of lifetime values of all customers• Customer lifetime value (CLV) is affected by

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

• Consists of three components:– Value equity– Brand equity– Relationship equity

Rust, Zeithamal & Lemon, 2004

2.19

Relationship of Customer Equity to Brand Equity

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

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

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

2.20