1. Imperatives for Market-Driven Strategy

2. Markets and Competitive Space

3. Strategic Market Segmentation

4. Strategic Customer Relationship Management

5. Capabilities for Learning about Customers and Markets

6. Market Targeting and Strategic Positioning

7. Strategic Relationships

8. Innovation and New Product Strategy

9. Strategic Brand Management

10. Value Chain Strategy

11. Pricing Strategy

12. Promotion, Advertising and Sales Promotion

Strategies

13. Sales Force, Internet, and Direct Marketing Strategies

14. Designing Market-Driven Organizations

15. Marketing Strategy Implementation And Control

Strategic Marketing

Chapter 9Chapter 9

Strategic BrandStrategic BrandManagementManagement

McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.

9-3

STRATEGIC BRAND MANAGEMENT

Strategic Brand Management

Strategic Brand Analysis

Brand Equity Measurement and Management

Brand Identity Strategy

Managing Brand Strategy

Managing the Brand Portfolio

Brand Leveraging Strategy

9-4

A product is anything that is potentially A product is anything that is potentially valued by a target market for the benefits valued by a target market for the benefits or satisfaction it provides, including or satisfaction it provides, including objects, services, organizations, places, objects, services, organizations, places, people, and ideaspeople, and ideas

STRATEGIC BRAND MANAGEMENT

9-5

A brand is a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers.

American Marketing Association

A compelling logic has been proposed that the distinction between goods and services should be replaced by a view that services are the dominant perspective in the 21st century, consisting of both tangible and intangible components.**Stephen LVargo and Robert F. Lusch, “Evolving to a New Dominant Logic for Marketing,” Journal of Marketing, January 2004, 1-17.

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Strategic Role of Brands

A strategic brand perspective requires managers to be clear about what role brands play for the company in creating customer value and share-holder value.

FOR BUYERS, BRANDS CAN:• reduce customer search costs by identifying products quickly and accurately,

• reduce the buyer’s perceived risk by providing an assurance of quality and consistency (which may then be transferred to new products),

• reduce the social and psychological risks associated with owning and using the “wrong” product by providing psychological rewards for purchasing brands that symbolize status and prestige.

9-7

FOR SELLERS, BRANDS CAN FACILITATE:

• repeat purchases that enhance the company’s financial performance because the brand enables the customer to identify and re-identify the product compared to alternatives,• the introduction of new products, because the customer is familiar with the brand from previous buying experience,• promotional effectiveness by providing a point of focus,• premium pricing by creating a basic level of differentiation compared to competitors,• market segmentation by communicating a coherent message to the target audience, telling them for whom the brand is intended and for whom it is not,• brand loyalty, of particular importance in product categories where loyal buying is an important feature of buying behavior.

Source: Marketing Science Institute Report No. 97-422, 1997

9-8

Brand Management Challenges*

Internal and external forces create hurdles for product brand managers in their brand building initiatives:

Intense Price and Other Competitive Pressures

Fragmentation of Markets and Media

Complex Brand Strategies and Relationships

Bias Against Innovation

Pressure to Invest Elsewhere

Short-Term Pressures

*David A. Aaker, Building Strong Brands, 1996, 26-35.

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TM 5-1

Product/Brand ManagementProduct/Brand Management Planning, managing, and coordinating the Planning, managing, and coordinating the

strategy for a specific product or brandstrategy for a specific product or brand

Product Group/Marketing ManagementProduct Group/Marketing Management Product director, group manager, or Product director, group manager, or

marketing managermarketing manager

Product Portfolio ManagementProduct Portfolio Management Chief executive at SBUChief executive at SBU Team of top executivesTeam of top executives

Responsibility for Managing ProductsResponsibility for Managing Products

9-10

Strategic Brand Management

Brand Identity Strategy

Identity Implementation

Brand Strategy Over Time

Managing the Brand Portfolio

Leveraging the Brand

BRAND EQUITY

MANAGEMENT

STRATEGIC BRAND

ANALYSIS

9-11

GLOBAL FEATURE

Recharging Sony’s Strategy Brand Management

Sir Howard Stringer, a Welsh-born American citizen, was appointed CEO of Sony, the

troubled Japanese electronics giant in 2005. Sony’s past strategic brand management

initiatives had failed to close the digital gap between software/services/content/

devices. During the CEO’s first year several cost reduction and portfolio initiatives

were implemented to launch the turnaround strategy: The Aibo, a beloved robotic pet,

was put to sleep. They shut down the Qualia line of boutique electronics that included

a $4,000 digital camera and a $13,000 70-inch television. They eliminated 5,700 jobs

and closed nine factories, including one in south Wales. (He took some flak back home

for that). They have sold $705 million worth of assets. You probably don’t know that

Sony owned a chain of 1,221 cosmetics salons and the 18 Japanese outlets of the

Maxim’s de Paris restaurant chain. They’re gone. Gone, too, is a group of salary-men

in their 60s, 70s, and 80s who, after retiring from senior management positions, were

given the title of “advisor,” a tradition established by Sony’s founders. “That was very

symbolic,” says Hideki (Dick) Komivama, a Sony executive and key ally of Stringer’s.

The 45 advisors each had a secretary, a car and driver, and worst of all, the ability to

gum up decision-making and second-guess people doing real jobs. No more.

Source: Marc Gunther, “The Welshman, the Walkman, and the Salary Men,” Fortune, June 12, 2006, 72.

9-12

STRATEGIC BRAND ANALYSIS

AnalysesAnalyses ProductProduct Product LineProduct Line Portfolio of Portfolio of Product LinesProduct Lines

□ □ Market andMarket and

CustomerCustomer

□ □ CompetitionCompetition

□ □ Brand(s)Brand(s)

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Tracking Brand PerformanceTracking Brand Performance

Performance Objectives

Select Method(s) forEvaluation

Identify Problem Products

Decide How to Resolve the Problem

9-14

Analyzing Brand

Performance

Product life cycleanalysis

Financialanalysis

Product performance

analysis

Researchstudies Standardized

informationservices

Brandpositioning

analysis

9-15

Relevant issues in PLC analysis include:Relevant issues in PLC analysis include:

* Determining the length and rate of change of the PLCDetermining the length and rate of change of the PLC* Identifying the current PLC stage and selecting the Identifying the current PLC stage and selecting the

product strategy that corresponds to that stageproduct strategy that corresponds to that stage* Anticipating threats and finding opportunities for altering Anticipating threats and finding opportunities for altering

and extending the PLCand extending the PLC

Product Life Cycle AnalysisProduct Life Cycle Analysis

9-16

* Product Performance AnalysisProduct Performance Analysis Management’s performance criteriaManagement’s performance criteria Strengths and weaknesses relative to portfolioStrengths and weaknesses relative to portfolio

* Brand Positioning AnalysisBrand Positioning Analysis Perceptual maps for brand comparisonPerceptual maps for brand comparison Buyer preferences Buyer preferences

* Other Product Analysis MethodsOther Product Analysis Methods Information ServicesInformation Services Research studies Research studies Financial analysisFinancial analysis

9-17

BRAND EQUITYBRAND EQUITY

Company/Customer Value of Brand Name and

Symbol of a Product

Determined by the brand’s set of

assets (and liabilities)

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Brand Equity

Effective strategic brand management requires that we understand brand equity and evaluate its impact when making brand management decisions:

“Brand equity is a set of brand assets and liability linked to a brand, its name,and symbol, that add to or subtract from the value provided by a product orservice to a firm and/or to that firm’scustomers.*

* David A. Aaker, Managing Brand Equity, The Free Press, 1991, 15.**Ibid, 102-120.

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Measuring Brand Equity. Several measures are needed to capture all relevant aspects of brand equity.**

* loyalty (price premium, satisfaction/loyalty),* perceived quality/leadership measures (perceived

quality, leadership/popularity),* associations/differentiation (perceived value, brand

personality, organizational associations),* awareness (brand awareness), and* market behavior (market share, price and

distribution indices).These components provide the basis for developing

operational measures of brand equity.

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BRAND IDENTITY STRATEGY

Brand identity is a unique set of brand associations that the brand strategist aspires to create or maintain. These associations represent what the brand stands for and imply a promise to customers from the organization members.*

Four Brand Identity PerspectivesProduct

Organization

Person

Symbol* David A. Aaker, Building Strong Brands, 1996, 68.

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SpecificProduct

Lineof

Products

PrivateBranding

CorporateBranding

BRAND FOCUS

CombinationBranding

9-22

MANAGING BRAND MANAGING BRAND STRATEGYSTRATEGY

Proactive efforts should be devoted to

managing each brand over time.

9-23

Strategies for Improving Product Strategies for Improving Product PerformancePerformance

Product lineStrategy

Addnew

product(s)

Costreduction

Productimprovement Alter

marketingstrategy

Eliminatespecific

product(s)

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MANAGING THE BRAND PORTFOLIOMANAGING THE BRAND PORTFOLIO

LeverageCommonalities to Generate Synergy

Allocate Resources

Reduce Brand

Identity Damage

Facilitate Change and Adaptation

Achieve Clarity of Product Offerings

Source: David A. Aaker, Building Strong Brands, New York: The Free Press, 1996, 241-242.

BRAND PORTFOLIO OBJECTIVES

9-25

Strategies for Brand StrengthStrategies for Brand Strength

Brand-Building StrategiesBrand-Building Strategies

* Developing the brand identification strategyDeveloping the brand identification strategy

* Coordinate identity across the organizationCoordinate identity across the organization Brand RevitalizationBrand Revitalization

* Find new uses for mature brandsFind new uses for mature brands

* Add products related to heritageAdd products related to heritage Strategic Brand VulnerabilitiesStrategic Brand Vulnerabilities

* Brand equity can be negativeBrand equity can be negative

* Retailer private brands compete with manufacturer brandsRetailer private brands compete with manufacturer brands

* Major shifts in consumer tastesMajor shifts in consumer tastes

* Competitive actionsCompetitive actions

* Unexpected eventsUnexpected events

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Motivation for changing the product mix:Motivation for changing the product mix:

* Increase the growth rate of the businessIncrease the growth rate of the business

* Offer a more complete range of products Offer a more complete range of products to wholesalers and retailersto wholesalers and retailers

* Gain marketing strength and economies Gain marketing strength and economies in distribution, advertising, and personal in distribution, advertising, and personal sellingselling

* Leverage an existing brand positionLeverage an existing brand position

* Avoid dependence on one product line or Avoid dependence on one product line or categorycategory

Product Mix ModificationsProduct Mix Modifications

9-27

STRATEGY FEATURE

Limited Brands Shifts its Focus from Apparel to Accessories

Ten years ago apparel represented 70% of Limited’s sales.Ten years ago apparel represented 70% of Limited’s sales.

By 2005 70% of sales were from skin-care By 2005 70% of sales were from skin-care

products, cosmetics, and lingerieproducts, cosmetics, and lingerie Clothes are increasingly out of fashion—after declines for 3 years, U.S. apparel Clothes are increasingly out of fashion—after declines for 3 years, U.S. apparel

sales increased only 4% in 2004 to $172.8 billion.sales increased only 4% in 2004 to $172.8 billion. Apparel $ sales declines are due to discount pricing and households spending Apparel $ sales declines are due to discount pricing and households spending

more on electronics, home improvement, and spa services.more on electronics, home improvement, and spa services. Limited is trying to make itself over as a high-end Procter & Gamble.Limited is trying to make itself over as a high-end Procter & Gamble. Victoria’s Secret is adding hair and cosmetics lines to its beauty business (has 3 Victoria’s Secret is adding hair and cosmetics lines to its beauty business (has 3

of the top 10 selling fragrances in the U.S.).of the top 10 selling fragrances in the U.S.).

Sources: Limited Brands 2005 Annual Report; Value Line; and Amy Merrick, “For Limited Brands Clothes Become the Accessories,” The Wall Street Journal, March 8, 2005, A1 and A14.

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One new product is “Tutti Dolci” (all sweets), food inspired One new product is “Tutti Dolci” (all sweets), food inspired scents-lotion and lip gloss in fragrances like lemon meringue, scents-lotion and lip gloss in fragrances like lemon meringue, angel-food cake, and chocolate fondue.angel-food cake, and chocolate fondue.

Victoria’s Secret has also accelerated new product development.Victoria’s Secret has also accelerated new product development. From 2003 through 2005 Intimate Brands (lingerie and beauty From 2003 through 2005 Intimate Brands (lingerie and beauty

products) accounted for all the corporation’s operating income.products) accounted for all the corporation’s operating income. Limited is also partnering with other companies to sell its brands Limited is also partnering with other companies to sell its brands

and develop new products.and develop new products. Limited has three business groups:Limited has three business groups:

• • Beauty and Personal CareBeauty and Personal Care• • LingerieLingerie• • ApparelApparel

Apparel is a continuing challenge with 2004 operating margins @ Apparel is a continuing challenge with 2004 operating margins @ 1.4% compared to over 19% for Bath & Body Works and 1.4% compared to over 19% for Bath & Body Works and Victoria’s Secret.Victoria’s Secret.

Limited has about 3700 stores. 2005 sales were nearly $9.7 Limited has about 3700 stores. 2005 sales were nearly $9.7 billion with net profits at $51 million.billion with net profits at $51 million.

9-29

BRAND EXTENSION

LINE EXTENSION

Extensions of the brand name to other product categories

--Similar

--Dissimilar

Minor variants of a single product are marketed under the same brand name

BRAND LEVERAGING STRATEGY

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LINE EXTENSIONS BRAND EXTENSIONS

HorizontalExtension

VerticalExtension

AnotherProductClass

RangeBrand

Co-Branding

Up fromCore

Brand

Down fromCore

Brand

LEVERAGING ALTERNATIVES

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BRAND LEVERAGING IN UPSCALE AND VALUE BRAND LEVERAGING IN UPSCALE AND VALUE MARKETSMARKETS

Vertical Brand Extensions*

Core Brand

NewUp-Market

Brand

NewDown-Market

Brand

CoreBrand

* ONE OF THE MOST DIFFICULT BRAND PORTFOLIO CHALLENGES

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MOVING DOWN IS EASY BUT RISKYMOVING DOWN IS EASY BUT RISKY

Affects perceptions of the brand –perhaps Affects perceptions of the brand –perhaps even more significantly than other brand even more significantly than other brand management options.management options.

We are influenced more by We are influenced more by unfavorable information than by unfavorable information than by

favorable information.favorable information.The brand’s ability to deliver self-expressive The brand’s ability to deliver self-expressive

benefits may be reduced.benefits may be reduced.Potential cannibalization problem.Potential cannibalization problem.Potential failure risk.Potential failure risk.

Problem when the value entry is perceived to Problem when the value entry is perceived to be inconsistent with the quality expected from be inconsistent with the quality expected from the brand.the brand.

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MOVING A BRAND UPMOVING A BRAND UP

THE DRIVERS•Enhanced Margins at the High End

•Energy & Vitality

•Enhance Credibility and Prestige of the Brand

THE RISKS OF DAMAGING THE CORE BRAND

•Lacks Credibility

•Lacks Self-Expressive Benefits

•Falls Short of Expectations

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BRAND EXTENSION DECISIONSBRAND EXTENSION DECISIONS

Extending into Different Product Classes

THE PROCESS

◊Identify product categories for which the product fits and adds value. Determine existing brand associations and the brand identity.◊Identify related product category opportunities Screening should be limited◊Evaluate each category Attractive Growing Good margins Competition Assets/Capabilities◊Select the most promising extension concept◊Develop a viable Brand Strategy

9-35

CO-BRANDINGCO-BRANDING

Co-branding (dual branding) involves two or more established brands making a joint offer of their product brands —

The participant’s brand namesare identified on the good orservice.

Several different forms –

Component co-branding(Volvo and Michelin)

Same company co-branding

Alliance co-branding(Delta and American Express)

Ingredient co-branding

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BRAND LEVERAGING EVALUATION CRITERIA

Brand Relevance/Differentiation

Capabilities/Perceived Value Match

Market/Segment Opportunity

Cannibalization Risks

Potential for Core Brand Damage

Clarity of Product Offerings

Estimated Financial Performance

Brand Equity Impact

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SEVEN DEADLY SINS OF BRAND MANAGEMENT*

Failure to fully understand the meaning of the brand.Failure to live up to the brand promise.Failure to adequately support the brand.Failure to be patient with the brand.Failure to adequately control the brand.Failure to properly balance consistency and change with the brand.Failure to understand the complexity of brand equity measurement and management.*Kevin Lane Keller, Strategic Brand Management, Prentice Hall, 2003, 736.