STRATEGIC BRAND MANAGEMENET

ESSAY QUESTIONS SUMMER 2016

1. Discuss the cycle of brand management and problems of brand
commoditization using an example of an arbitrary brand.
Brands draw attention through the new products they create and bring onto the
market. Any brand innovation necessarily generates plagiarism. Any progress made
quickly becomes a standard to which buyers grow accustomed: competing brands
must then adopt it themselves if they do not want to fall short of market
expectations. For a while, the innovative brand will thus be able to enjoy a fragile
monopoly, which is bound to be quickly challenged unless the innovation is or can
be patented. The role of the brand name is precisely to protect the innovation: it
acts as a mental patent, by becoming the prototype of the new segment it creates
advantage of being a pioneer. Dynamic view of market reveals in turn who
innovated first, and who has simply followed the leader: brands protect innovators,
granting them momentary exclusiveness and rewarding them for their risk-taking
attitude.
Brands cannot, therefore, be reduced to a mere sign on a product, a mere graphic
cosmetic touch: they guide a creative process, which yields the new product A
today, the new products B and C tomorrow, and so on. Products come to life, live
and disappear, but brands endure. The permanent factors of this creative process
are what gives a brand its meaning and purpose, its content and attributes. A brand
requires time in order for this accumulation of innovations to yield a meaning and a
purpose. As shown in Figure 2.2, brand management alternates between phases of
product differen- tiation and brand image differentiation. Thetypical example is
Sony, whose advertising focuses on innovations when they exist, and on image in
between.
2. Explain the brand identity prism. Use the examples.

The brand identity prism consists of six integrated parts that are essential to
building a strong brand.
o Physique: physical specificities and qualities. It is both the brands
backbone and its tangible added value.
o Personality: the way it speaks of its products or services shows what
kind of person it would be if it were human.
o Culture: the set of values feeding the brands inspiration. Basic
principles governing the brand in its outward signs
o Relationship: this facet defines the mode of conduct that most
identifies the brans. This has a number of implications for the way the
brand acts, delivers services, and relates to its customers.
o Customer reflection: because its communication and its most striking
products build up over time, a brand will always tend to build a
reflection of an image of the buyer or user which it seems to be
addressing.
o Self-image: self-image is the targets own internal mirror (I feel, I
am.).

For an example of all these aspects, we can use Coca-Cola. The physique part
is the classic coca-cola bottle that is a part of the design of all the products (it
is present even on the cans), as well as the iconic red color that it is famous
for. The personality part reflects happiness, good times, sharing, etc. The
culture part reflects the typical American culture. The relationship part is
particularly strong. Coca-cola consumers form a community. They are part of
a team and they share similar values. The reflection part shows coca-cola to
be for young, vibrant, energetic people that are always on the move and
always with friends. however, the brand is intended for almost everyone.
Coca-colas self-image is pushed onto the consumers constantly. Virtually
every day there is some type of communication they are faced with. They
push boundaries and try to show consumers that they are more than just a
drink.

3. What are the justifications for creating distributors brands from

consumers perspective? Use an
example to support your statements.
The counter branddistributors branda privatelabel, created to divert clientele
from a particular big brand imitating and vey similar to the big brand
Private label has changed to the point where retailers are using it as the premium
brand in some cases Tesco is an example of this. At Tesco, the number one
distributor in Britain, a survey of the fruit juice aisle is revealing: far from being a
product, the distributors brand is in reality a segmented range, from the lowest
possible price (Tesco Value), priced at s0.33 per litre, to s1.84 for the top of the

range, under the label Tesco Finest. Tropicanas product, by the way, is sold at
s1.62 per litre. In fact, distributors are well schooled in distributors brands. They:

allocate the majority of their shelf space to them, eliminating all weaker
brands;

have segmented their portfolio of distributors brands in order to meet the

different expectations of their clients (a far cry from the Soviet own brand,
signalling the absence of choice) without forcing them to identify with the
shop name (Wal-Mart named its mens clothing range George);
segment their range in order to cover not only different price levels, from the
cheapest to the highest price on the entire shelf, but also the emerging needs
known as trends (such as Tesco Fair Trade, Tesco Organic and Tesco Healthy
Eating).
Distributors brands occur in all countries, from the richest and most developed to
devel- oping countries. In Eastern countries, low- cost products and hard discount
are growing rapidly. However, the hard discounters were also a bolt from the blue
for mass distribution in the highly developed countries of Western Europe: their
growth in France stabilised only this year. And yet these are rich countries. The
distributors brand is thus not a phenomenon linked to low income. In Switzerland
which has one of the highest per capita incomes in the world the leading food
brand is Migros, well ahead of Nestl. This is hardly surprising, as Migros is a
dominan
4. Explain the process of building brands in services. Use the example to
show the importance of the
human component, service process and other characteristics of the
service for brands building.
Service brands do exist: Europcar, Hertz, Ecco, Manpower, Visa, Club Med,
Marriotts, Mridien, HEC, Harvard, BT, etc.
Service brands are characterized by the need to maintain a consistently high level
of service delivery throughout hundreds, or even thousands of staff and service
encounters.
Although a product component may be involved, it is essentially the service that is
the brand.
These are more complex than product brands for two reasons:
because it is always harder to brand something you cant touch
because they are delivered directly by employees
Service brands conditions
Internal branding

 External branding
Delivering everything that company promissed
Connection of satisfaction with concrete brand
Names and logos are not enough
In services, there is no difference between the internal and the external. In other
words, it is what is behind the brand that makes the brand.

Service brand is constructed internally. Orange is built up through hours and

hours of training all staff how to behave in an Orange way, according to
Oranges codes and values. This concerns all points of contact with the
customer, in the store, from the call centre or over the internet.
The second consequence is that employees cannot be expected to treat
customers well if they are not happy themselves. In order to create the
relaxed, warm atmosphere that characterises Starbucks, its founder Howard
Schultz innovated by responding to the worries of many part-time staff: with
good health insurance cover, for example.
Another essential distinction between services and products is that the
factory is in the store. The location for the service production is also the
place of its consumptionThis is why it is so important to take care of the little
details, since they lead to expectations and feelings.
Since service is carried out by people, their variability is a risk for the brand.
The brand promises regular and dependable quality hence the importance
of defining strong behavioural norms, supported by plenty of training
(McDonalds and Disney are models of this type)
Brand is necessarily linked to the setting up of internal and customer-facing
processes. IT is necessary to homogenise the internal processes, to provide more
regularity and the client experience.. In services, it is important to make the
intangible. For the employer brand, the task is to develop its reputation among
executives or students of the top universities, based not on better salaries, but on
shared values.
5. There are two approaches to luxury brand building. On the example of
Calvin Klein (CK) brand, analyze and argument: which approach is used
and what are the differences between the approaches when comparing CK
and Louis Vuitton brands?
Two types of approaches- the first includes brands with a history behind them,
while the second covers brands that, lacking such a history of their own, have
invented a story for themselves. It comes as no surprise that these companies are
US-based: this young, modern country is a past master in the art of weaving dreams
from stories. the European luxury brands rooted as they are in a craftspersonbased tradition predicated upon rare, unique pieces of work place considerable
emphasis on the actual product as a factor in their success, while the US brands

concentrate much more on merchandising, and the atmosphere and image created
by the outlets dedicated to their brand, in the realm of customer contact and distribution
CK je ovaj sa izmiljenom priom a LV ovaj sa historijom.
Known as much for its provocative advertising campaigns as it is for its designs
sleek lines, the CK brand has consistently gained the attention of the public. It can
be credited with revolutionizing designer jeans in the 1980s and pushing the
boundaries of sex in advertising. Philips-Van Heusen acquired the brand in 2003,
allowing it to continue its international growth.
In 1985, moviegoing teens catching the summer blockbuster Back to the Future
walked out of theaters sure of two things: the possibility of time travel, and the
coolness of Calvin Klein underwear.
Louis Vuitton is a French fashion house founded in 1854 by Louis Vuitton. What was
once a tiny little Parisian luggage shop is now the multifaceted jewel in the crown
that sits atop the head of Bernard Arnault, CEO of the fashion conglomerate LVMH.
For well more than a century, Louis Vuitton was best known for canvas-covered
travel cases with flat, stackable shapes that made them ideal for modern travel via
planes, trains, and automobiles
6. Describe in detail the process of brand positioning. Use an example for
each phase of the process.
Positioning a brand means emphasising the distinctive characteristics that make it
different from its competitors and appealing to the public. It results from an
analytical process based on the four following questions:

A brand for what benefit? This refers to the brand promise and consumer
benefit aspect: Orangina has real orange pulp, The Body Shop is environment
friendly, Twix gets rid of hunger, Volkswagen is reliable. l
A brand for whom? This refers to the target aspect. For a long time,
Schweppes was the drink of the refined, Snapple the soft drink for adults,
Tango or Yoohoo the drink for teenagers.
Reason? This refers to the elements, factual or subjective, that support the
claimed benefit.
A brand against whom? In todays compet- itive context, this question defines
the main competitor(s), ie those whose clientele we think we can partly
capture. Tuborg and other expensive imported beers thus also compete
against whisky, gin and vodka.
Positioning is a two-stage process:

First, indicate to what competitive set the brand should be associated and
compared.
Second, indicate what the brands essential difference and raison dtreis in
comparison to the other products and brands of that set.

Choosing the competitive set is essential. While this may be quite easy to do for a
new toothpaste, it is not so for very original and unique products. The Gaines burger
launched by the Gaines company, for instance, was a new dog food, a semidehydrated product presented as red ground meat in a round shape like a
hamburger. Unlike normal canned pet foods, moreover, it did not need to be
refrigerated, nor did it exude that normal open-can smell.
Given these characteristics, the product could be positioned in several different
ways, for example by:

l Attacking the canned pet food market by appealing to well-to-do dog

owners. The gist of the message would then be the can without the can, in
other words, the benefits of meat without its inconven iences (smell,
freshness constraints, etc). L
Attacking the dehydrated pet food segment (dried pellets) by offering a
product that would help the owner not to feel guilty for not giving meat to the
dog on the basis that it is just not practical. The fresh-ground, round look
could justify this positioning. L
Targeting owners who feed leftovers to their dogs by presenting Gaines as a
complete, nutritious supplement (and no longer as a main meal as in the two
former strategies).
Targeting all dog owners by presenting this product as a nutritious treat, a
kind of doggy Mars bar.

7. There are six different ways brand extensions may influence the brand
and its capital. Explain each of them through the example and then
comment how it is possible to balance between brand identity
and adaptation through new segments.
brand extensions influence the brand and its capital in six different ways:
1

Some extensions exploit the brand capital: the new product sells thanks to its
name. This is what happens when the product receiving the brand is no
different from the existing competitors on the market: the brand has not
entirely played its transformation role, but it enables the product to benefit
from its image.By using this practice too frequently the brand capital wears
out as the brand becomes associated with these now commonplace products,
and with their unjustified price premium. Industrial brands often fill up the
gaps in their lines by buying the missing items from their competitors. This is
typical of the copiers market
Other extensions destroy the brand capital, for instance when the extension
is downwards. Porsche has cancelled its 924 range, cars which only justified
their considerable price difference against their competitors by the
prestigious name. None of the objective or subjective values of Porsche could
be found in the 924 model. To return to its source, the brand ceased to
manufacture the 924 and reinvested in the 911.

Some extensions have a neutral effect on the brand capital. The product is
not out of place but is in tune with what isexpected from the brand.
Significantly, in the field of home appliances, some brands are thought to
offer many more types of products than are actually produced, but if they
decided to actually penetrate these markets, their image would not suffer.
This shows that consumers have a perception of the brand which is different
from that of those who manufacture it. They attribute to the brand areas of
competence which are larger than and not limited to just the existing
products.
Some extensions influence the meaning of the brand: when Rossignol added
branded tennis rackets, the status of the brand changed. It is now less
specialised and is characterised by a wider range of interests. Yet the two
sports covered by Rossignol were not chosen randomly: the brand is still
offering the equipment which extends the individuals body to help gain
access to pleasure and performance. Nestl increased its modernity by
competing upfront under its own name with Danone on the ultra- fresh
market (ie yoghurt).
Some extensions are regenerating. They revive the brand and its core, and
re- express its base values in a new, stronger manner. Thus, the classic green
blazer is a regenerating product for Lacoste. It repre- sents a rare symbiosis
between the features building the Lacoste brand: conformity, discretion,
sociability but also a certain distance on fashion. As for the green colour, it is
more casual than the blue blazer (too uniform for Lacoste) and refers to the
green grass of the original tennis courts at Wimbledon. The green blazer
brings Lacoste up to date and at the same time expresses its roots. The
Marlboro Classics line allows the brand to recommunicate its history, its
roots and founding values.
Finally, some extensions, although not desired by the brand, are necessary
to defend the brand capital: their purpose is, above all, to prevent the use of
the brand name by another company in another category of products. Thus,
Cartier may not want to develop along those lines, but they have to in order
to prevent another company from registering the brand name Cartier on an
international scale in the textiles category.

8. Which branding architecture alternative would you choose for

companies in fast moving consumer
goods (FCMG) industry: branded house or house of brands? Justify your
answers with examples.
The branded house expresses the desire to give coherence to the whole under the
auspices of a brand with central values that find embodiment at the market and
product level. This path brings together the master- brand and also dominant
(source) brand strategies, giving a strongly normative structure to the daughter
brands on the second level. This strategy is pursued by Nivea for example, lOral

Paris and Kinder. This second level must express the values of the parent brand. In
this way the necessary coherence can be instilled, as dealt with in Chapter 11. The
branded house is a family with a high degree of internal unity.
Ovdje se jos malo nasrat o nekom brandu i to je to.
9. What are main cues and perimeters for identifying potential brand
extensions and how do they relate to the notion of brand values? To
support your arguments, illustrate your answer.
1

2
3

6
7
8

Think of the big plan first - The brand wants to be a leader of what? How
should we define its leadership by product? by category? by need? by
target? One thing is sure: the ambition must be to construct some kind of
leadership.
The limits of consumer research for managing extensions- It indicates what
difficulty may arise when using the same name on an extension.
Are our values here really valued there? - Many extensions fail because
someone has overestimated the value of the brand assets in the extension
category. Are they really assets there? Do they really have a motivating
value?A second key question concerns compe- tition. Does the proposed
extension really beat its competition
Think of the full marketing mix of the extension - An extension is not simply a
new product or
service, it entails a full new marketing mix. It requires in fact that the
organisation think more about the consumer than the brand. When Nike
launched its Nike Women extension, its management was so infatuated with
the brand itself that it forgot consumers - same design as their male
counterparts, and only the sizes were adapted to women. Nike Women was
not really a line for women at all. Soon it was discovered that to succeed in
this extension, it was first necessary to create relevant products.
Extension should meet trade expectations too- The success of Smirnoff
Mule(za youth) demonstrates that all good innovations must provide value to
the distributor and to the consumer.
The question of resources - The main source of failure of extensions is a lack
of resources for the launch.
How will the competition react?
Is the market really attractive?the fact that a brand can be extended does not
mean it should be extended. One must take into account future competition
and the costs of remaining a significant player in the category (the rate of
innovation, rate of launches, marketing and sales investment and so on).
Extension is not an inside feat: it must deliver a sustainable advantage

10. Explain the brand architecture position regarding corporate strategy.

Give arguments of advocates and opponents for the idea of the
connection both of them at the top of the company.

Each type of brand strategy has its own advantages and disadvantages. However, a
simple list of the pros and cons does not provide a procedure for making a choice in
a given company in a given market. The choice of brand policy is not a stylistic
exercise, but more a strategic decision aimed at promoting individual products and
ranges as well as capitalising the brand in the long term. It should be considered in
the light of three factors: the What parameters should be taken into account when
choosing a branding strategy?
The first is corporate strategy, of which branding strategy is in fact the symbol, The
second parameter is the business model, The third parameter for choosing a brand
architecture is cultural. For example, in 2003, Schneider Electric, one of the leaders
in the field of electrical distrbution and industrial control, decided to revitalise its
Merlin Gerin and Telemecanique brands, which were well known to research
departments and electrical integrators and installers throughout the world. In so
doing, Schneider ended an initiative launched some 10 years previously with a
different aim in mind, namely to replace individual brands with a single, group
brand. The companys new director, who had come from Steelcase, outlined the
strategic positioning of Schneider Electric against GE, ABB and Siemens. Compared
with these general electrical and electronic giants, Schneider Electric is not a small
general electrical company but rather likes to see itself as a multi-specialist
company. In fact, because it sells intermediate products, its customers are looking
for a specialist company. On the other hand, when compared with its many singlespecialist competitors, Schneider Electric is more of a general electrical company.
So if it wants to position itself as a multi-specialist company, the specialities must
be offered by specialist brands, united by a group brand, a single entity, which
facilitates customer relations. This is why it was decided not to follow the singlebrand path, but to bring the range of 50 product brands together under three integrated international brands Merlin Gerin, Telemecanique and the US company
Square D, in 130 countries. There is therefore a Schneider Electric front office and a
Schneider Electric sales force organised by type of customer, and these customers
are able to purchase products under different product brands.
Another consequence is that distributors will once again become the official distributors of Merlin Gerin or Telemecanique without there being any obligation, as in the
past, to automatically reference both brands. Similarly, Groupe SEB, world leader in
small household appliances, decided to form itself into a multi-brand group, with
four interna- tional brands Moulinex, Tefal, Krups and Rowenta. Why not follow the
tempting single-brand path, like Philips? Precisely because of Philips. The strategy
lies in the art of being different. The single brand is an advantage if you are already
a single brand like Philips, one of the few international brands whose reputation is
based on the fact that it is distributed throughout the world even, via its light
bulbs, in the depths of the Amazon basin. It is basically too late to try to emulate
Philips. In todays fragmented markets, with their aggressive distribution networks
and consumer segments, it is far better to exploit the targeted reputation (in terms
of product and values) of the brands that people have bought precisely because
they were brands

Where brand architecture fits

Corporate Objectives & Brand Architecture - Benefits of Optimizing Brand
Architecture
Brand Architecture is part of corporate strategy. It should be established prior to
creating a brand strategy business

Allows for fewer stronger brands with less overlap

Minimizes waste and marketing inefficiency
Builds credibility for leveraging the brand into new opportunities for growth
Enables equity to flow through the portfolio

Challenges regarding brand levels and names

The accumulation of levels damages clarity and appropriation by the client.

Companies have to decide about the presence or
Companies have to decide about the presence or absence of the corporate
brand on the markets
That decision cannot be made using customers opinion only.

11. There are three different approaches to umbrella brand strategies plus
the mixed strategy. Explain
each of them and select which one is the best from the customers' point of
view. Give arguments for
your choice.
1. The flexible umbrella brand strategy:
a. Characterized by a single brand level: the products are not given a
daughter brand. The umbrella brand covers several product categories.
The flexible umbrella brand architecture gives subsidiaries a great deal
of autonomy, which can motivate them and make it easier to recruit
bosses with entrepreneurial profiles, which is very useful during the
phase of conquering market shares. Another advantage is that since
the name is more a corporate name than a brand, there is no
hesitation in placing it on products that are highly disparate. On the
communications level, the emphasis is placed on the specific qualities
and advantages of the products. There is little intangible added value.
The disadvantages of this approach make themselves felt late in the
brands life. It is devoid of emotional content. The problem with this
strategy is that the value system is not perceived; and it is through
these values that the tacit agreement and the affective relationship are
developed, beyond the satisfaction linked with the product or the
excellence of the service. The brand could become diluted.

2. The aligning umbrella brand (masterbrand):

a. The company accepts only a single brand for the whole, and
consequently imposes descriptive names for the products and services
or divisions and branches. The parent brand provides not just a name,
but a frame of reference behind which everything should align, in order
eventually to become the embodiment of it, the living spokesperson.
The brand is the surrounding framework (branded house). The
masterbrand is strong because it brings together a broad offering of
products under highly differentiating common values. The name
masterbrand implies a guardian of the temple: a person, judge or
authority capable of policing, not dissident logos but projects,
innovations and even advertisments that do not fully embody the
brands central values, since these are what dilutes its promise. Offers
economies of scale linked to the variety of products and markets that
the brand can cover while creating a brand identity.
3. Source brand strategy:
a. Identical to the umbrella brand strategy except for the fact that the
products have their own brand name. also known as double-branding.
Within the source brand concept, the family spirit dominates even if
the offspring all have their own individual names. The benefit from the
source brand strategy lies in its ability to provide a two-tiered sense of
difference and depth. The parent brand offers its significance and
identity, modified and enriched by the daughter brand in order to
attract a specific customer segment. The limits of the source brand lie
in the necessity to respect the core, the spirit and the identity of the
parent brand. This defines the strict boundaries not to be infringed as
far as brand extension and also product communication are concerned.
4. Mixed approaches:
a. In reality, companies adopt mixed configurations where the same
brand can be, according to the product, range, umbrella, parent or
endorsing brand. , many hybrid situations result out of the series of
small decisions that are taken as and when a new product is launched.
Due to the lack of an overall plan for a brands relationship with its
products, a number of non-coherent branding decisions often exist side
by side.
5. From the customers point of view, the source brand strategy is the best
because there is a strong tie to the parent brand, while also allowing for
freedom of choosing what is most interesting to the customer. So, for
example, when we are talking about perfumer, Yves Saint Laurent has a wide

range of perfumes, and each has its own specific name. however, the selling
point for all of them is the fact that they are tied to YSL.
12. What is the difference between brand endorsement and brand
umbrella strategies? Do you think that customers are able to notice the
main role (idea) of using them?
Endorsing brand strategy
Endorsed brands, and sub-brands - For example, Nestle KitKat,
Cadbury Dairy Milk, Sony PlayStation or Polo by Ralph Lauren.
These brands include a parent brand - which may be a
corporate brand, an umbrella brand, or a family brand - as an
endorsement to a sub-brand or an individual, product brand.
The endorsement should add credibility to the endorsed subbrand in the eyes of consumers.
The brand gets the endorsement that it belongs to specified company; e.g. Kit Kat
gives the signal that it belongs to Nestle and Diary Milk conveys that it belongs to
Cadburys.
In case of Cadburys and Nestle, the brands mentioned above have their own
unique position and image. Cadburys or Nestle support the brands to the extent
that they transfer certain qualities or associations which enhance customers trust.
Brands are identified by their own name.
Umbrella brand strategies
Umbrella branding is a marketing practice involving the use of a single brand name
for the sale of two or more related products. Umbrella branding is mainly used by
companies with a positive brand equity (value of a brand in a certain marketplace).
All products use the same means of identification and they don't have additional
brand names or symbols.
Umbrella Branding only works when the company has a line of very similar
products. The master brand has to be
acknowledged on products because it
commands trust, respect & loyalty
So what I would say is the difference
between brand endorsement and brand
umbrella strategies is that in umbrella
branding all products use the same means of identification and they don't have
additional brand names or symbols, while in endorsment brand strategies they do,
and also I don't think that that customers are able to notice the main role (idea) of
using them.

13. Comment multi-brand portfolio connection with different business

strategy and explain rationality of the companies decision to reduce or
increase number of brands depending on strategies they apply?
Most companies operating in todays complex market environment own and
manage a brand portfolio: a complex set of brands designed in response to market
fragmentation, channel dynamics, global realities, heightened competition,
commoditization, and pressures to leverage and extend existing brand assets in
cost-effective ways. Firms are motivated to be concerned with brand portfolio
strategy because it provides the structure and discipline needed to support and
enable a successful business strategy. Brand portfolio strategy becomes particularly
salient when a company confronts pressing growth goals or pending mergers,
acquisitions, and alliances.
CEOs acknowledge brand portfolio strategy as a powerful driver of shareholder
value and thus a crucial boardroom decision. Five portfolio strategy variations along
what has been referred to as the brand relationship spectrum help firms structure
and organize their branded offerings in a way that best meets market conditions
and company goals. The spectrum includes branded house, sub-branding, endorsed
branding, and house of brands strategies, as well as a hybrid mix of the above. The
five strategies differ significantly in (1) their leverage and prominence or visibility of
corporate brand equity (i.e., the corporate brand connection), and (2) the specific
brand entity that drives consumer behavior (i.e., the brand driver role); these
variations in turn affect expected patterns of rewards and risks.
14. What are the main factors of brand decline and how should companies
address them?
Main factors which cause brand decline include:
1. Managerial Action
Brands often decline because of leadership, management, and employees making
excuses rather than acting with integrity
2. Environmental factors
Markets are dynamic in nature and can be significantly Influenced by the larger
environment in which they operate. They can undergo major transformations, which
in turn have an impact on the various companies in an industry and their brands.
Kodak a leading photography brand faced an Environmental change when its old
camera model started declining due to arrival of digital era. Soon Kodak realized the
implications of this environmental factor, and made necessary investments in the
future. Kodaks actions helped it to maintain a leading role in the new market.
3. Competative Actions

In most markets today, a brand faces relentless onslaught from its competitors. This
can become particularly problematic if the competitors have deep pockets. Initially
there were four brands in USA for sporty apparels. Puma and Adidas are good
examples of brands that declined in the face of intense competition. While very
strong in Europe, both were almost completely squeezed out of the U.S. market by
Nike and Reebok, which were more in tune with the trends in the American market.
There are three ways in which companies may address to them in order to
overcome brand declining:
1. Rebuild quality
2. Resist temptation to milk the brand
3. Pursue a defined target market
15. Explain the basic difference between brand rejuvenation and brand
repositioning on the example of brand you are familiar with.
Difference between brand rejuvenation and brand repositioning is that bran
rejuvenation is just improvements of existing brands. In this case, companies are
trying to improve product attributes and enchance its overall appeal. It helps
overcome the consumers boredom in seeing the same product on the selves for
years and help bring attention to the product once again. It's often visible in car
industry when companies often put new version of a car on the market (golf 4,5 and
6... or sport version), they are all pretty similar but not the same.
Unlike brand rejuvenation, where a company changes characteristics of a product,
in brand positioning company changes brand's status in the marketplace. Usually
this is done through change of marketing mix. It is usually done to keep up with
consumer wants and needs. On B&H market, Retro shoes is currently working on
repositioning itself from medium-quality and lower price shoes retailer to high
quality, high price shoe retailer. They are changing their product.
16. Which method of brand rejuvenation is used by Sony? Give us
arguments for your statements.
Sonys success
Three major factors contributed to Sonys ascent to global supremacy in the
consumer electronics sector and they are:
Innovation defined the brand character of Sony - ability to constantly create
products
Visionary leadership - create an environment that nurtured experimentation, and
innovation; importance of branding

 Pioneer advantage - defining the rules of the game

Sonys decline
Unrelated diversification - Sony still seems to have stuck up in multiple
businesses.
Innovation dearth after the Walkman Sony did not follow up with any
outstanding and innovative
product line to sustain the initial success
Lack of brand evolution - Sonys past surely contributes an enormous amount of
heritage, history and achievements into the brand identity, but...
Sonys brand rejuvenation 1
Regain focus - from a brand perspective, unrelated diversification will be more
detrimental than helpful
Elevate marketing/branding to the boardroom - Sony should revamp R&D, design,
and marketing; Sony needs to elevate the marketing function to the boardroom and
enable marketing to take a lead of the business and the strategy Sonys brand
rejuvenation 2
Brand oriented leadership - Sonys path back to brand supremacy can happen
only if it is guided by a brand oriented leadership
Design, features and the cool factor it is very important for Sony to regain the
cool factor and beef up its designs and features
17. What are the main options and methods for brand valuation? Which
one would you choose if you are a manager of the company with the
strong brand and why?
A number of methods have been proposed to define the value posted in the balance
sheet when a brand is part of the assets of an acquired company, or any other
instance when this valuation is needed.
Therefore, main methods include following ones.
Two dimensional mapping: horizontal axis refers to time- valuation based on
historical costs and present earnings, the vertical axis is real/virtual dimension
which rely on hard facts
Valuation by historical costs: The brand is an asset whose value comes from
investments over a period of time (even though accountants do not strictly regard
this as a true form of investment).

Valuation by replacement costs: To overcome the difficulties arising from the

historical costs approach, it might be better to place oneself in the present and to
confront the problem by resorting to the classic alternative -By taking its various
characteristics into account (awareness, percentage of trial purchases and
repurchases, absolute and relative market share, distribution network, image,
leadership, quality of the legal deposition and presence in how many countries).
This method would be preferred in case of dealing with strong brand as it takes
various elements in consideration and all of them have to be strong in order to
achieve strong brand.
Valuation by market price: When valuing a brand why not start with the value of
similar brands on the market? This is how property or second-hand cars are valued.
Each apartment or car is inspected and given a price that is above, equal to or
below the average market price of similar goods.
Valuation by royalties: What annual royalties could the company hope to receive if it
licensed the rights to use the brand? The answer to this question would form a
means of directly measuring the brands financial contribution and would also solve
the problem of separability.
Valuation by future earnings: Since the brand aspires to become an asset, it is best
to begin by a reminder of what an asset is. It is an element which will generate
future profits with reasonable certainty. Valuation methods have been developed on
the basis of expected returns of brand ownership
Valuation by present earnings: Who can predict the future? How can one be sure
that the forecasts of a business plan will be matched? In fact, one of the reasons so
many internet brands have been heavily overvalued is that they made no profit
whatsoever (eBay excepted).
The multiple method: The multiple method, which was developed in the UK, is
becoming a classic. It was, in fact, used by such companies as Rank Hovis
McDougall and Grand Metropolitan whose decisions to post brand values to their
balance sheets caused a controversy which is still not settled.
18. Explain the main elements (factors) which are evaluated in Brand
Asset Valuator model. Evaluate the model itself and its potential for the
brand valuation.
It is a metric applied for the measurement of brand value of an entity. Developed by
an agency called Young and Rubicam, it measures a brand under the 2 broad
heads of

1. Brand Vitality which refers to the current and future growth potential that a brand
holds in it.
2. Brand Stature which refers to the power of a brand.
Both of these heads can be further divided to have the following parameters for
judging the brand:

Differentiation measures the degree to which a brand is seen as different

from others, it is the ability of a brand to stand apart from its competitor. A
brand should be unique as possible.
o Differentiation has three constituents to it. These are
Different-refers to how do the brands offering differs from its
rivals.
Unique- refers to the brands quality and carries the essence of
its existence. It has more to do with the credibility, authenticity
and originality of the idea that the brand carries.
Distinctive-refers to the worthiness of a brand.

Relevance measures the breadth of a brands appeal.This refers to how closely can the
consumers relate to the brands offering and is a significant driver for a brands
penetration.
Esteem measures how well the brand is regarded and respected. This refers to the
consumer perception about the brand. Whether a brand is popular or not, whether it
delivers on its stated promises- all this contribute in building up the esteem of the brand.
Knowledge measures how familiar and intimate consumers are with the brand. This
refers to the degree of awareness about a brand in the minds of its consumers. This is
very important in building a brand and making the consumers understand of what the
brand actually stands for and its implicit message to the consumers.

Based on research with almost 200,000 consumers in 40 countries, BAV provides

comparative measures of the brand equity of thousands of brands across hundreds of
different categories.

Differentiation and Relevance combine to determine Brand Strength. These two pillars point to
the brands future value, rather than just reflecting its past. Taken together they say a lot about its
growth potential( Brand Vitaliity) while Esteem and Knowledge together create Brand Stature,
which is more of a report card on past performance.
A brands Relevance and Differentiation viewed in relationship represent Brand Strength, which
is a strong indicator of future performance. Relevant Differentiation - remaining both relevant
and differentiated - is the central challenge of every brand. It is critical for all brands all over the
world.
As Brand Strength was found between Relevance and Differentiation, Brand Stature is
discovered in the combination of Esteem and Knowledge. Brand Stature indicates brand status
and scope - the consumers response to brand. As such, it reflects current brand performance and

is a strong strategic indicator. For example, Esteem rises before Knowledge for a growing brand.
If the data shows the opposite relationship, a problem has been identified.
New brands, just after they are launched, show low levels on all four pillars. Strong new brands
tend to show higher levels of Differentiation than Relevance, while both Esteem and Knowledge
are lower still. Leadership brands show high levels on all four pillars. Finally, declining brands
show high Knowledgeevidence of past performancerelative to a lower level of Esteem, and
even lower Relevance and Differentiation.
By plotting all four measures - Differentiation,Relevance, Esteem and Knowledge - BAV serves
as an exceptional diagnostic tool for building and managing brands. BAVs Power Grid sets the
strategic process in gear by showing the strengths and weaknesses of a brand. It identifies the
strategic direction to maximize brand strength and helps clarify the role of elements in the
marketing mix.
19. Is brand an identifiable asset in the accounting terms? Address the
debate about the accounting for brand and give your opinion whether to
value brands or not. Then, explain the difference between all models for
brand valuation in theory and practice and brand values that are
published annually in different press and by different organizations.
In accounting terms, brand is an intangible asset.
A number of methods have been proposed to define the value posted in the balance
sheet when a brand is part of the assets of an acquired company, or any other
instance when this valuation is needed.
1 Valuation by historical costs
The brand is an asset whose value comes from investments over a period of
time (even though accountants do not strictly regard this as a true form of
investment). The logical approach would therefore be to add together the
costs associated with a particular period: development costs, marketing
costs, advertising and communication costs, etc. These costs can be
determined objectively, and will have been in past income statements.
Valuation by costs causes several basic problems which are linked directly to
a partial understanding of the brand:
a When creating a brand, a large part of the long-term investment does
not involve a cash outlay, and therefore cannot be posted to the
accounts. These include stringent quality controls, accumulated knowhow, specific expertise, involvement of personnel, etc (e.g. no trace in
the accounts of brands like Rolls-Royce because there were no
advertisements for it)
b One of the major strategies to create a strong brand consists of
choosing a competitive launch price, which may be the same as that of
competitors even though the product is upgraded. Swatch is an ideal
example of this. They set an aggressive price that was equal to that of
their competitors, thus maximising the brands price/quality ratio and

enhancing its attractiveness. This is one of its key success factors.

Unfortunately, this non-cash investment would not appear in a system
where only cash expenditures are registered.
c The method favours brands whose value only comes from advertising
and marketing and which have a signif icant price premium. It would
not apply to brands such as Rolls-Royce or St Michael (Marks &
Spencers brand) which advertise very little, plus there are several
brands that are heavily advertised but of little value and are coming to
the end of their life.
d This method is favourable to recent brands and a fortiori to internal
brands that are in the process of being created, as we have already
seen.
2 Valuation by market price
When valuing a brand why not start with the value of similar brands on the
market? This is how property or second-hand cars are valued. Each
apartment or car is inspected and given a price that is above, equal to or
below the average market price of similar goods. Even though this method is
very appealing, it raises two major problems when applied to brands. First,
the market doesnt exist. Although such transactions are often cited in the
financial pages, acquisitions and brand sales are relatively few. Second,
unlike for real-estate markets for brands, the buyer is a price-setter, that is,
he or she sets the price of the brand. Each buyer bases his/her valuation on
his/her own views, on potential synergies and on his/her
future strategy
3 Valuation by royalties
What annual royalties could the company hope to receive if it licensed the
rights to use the brand? The answer to this question would form a means of
directly measuring the brands financial contribution and would also solve the
problem of separability. The figure obtained could subsequently be used to
calculate the discounted cashflows over several years. From a conceptual
point of view, it is not certain that this method properly separates just the
value of the brand (Barwise, 1989). In fact, companies often use licences to
reach countries where their brand is not present. However, the royalty fee
does not include solely the use of the brand.
4 Valuation by future earnings
The first step involves separating and isolating the net income associated
with the brand (and not with the company for example).
2. The second step is to estimate the future cashflows. This requires a
strategic analysis of the brand in its market or markets.
3. The third step involves choosing, by using a classic financial method, a
discount rate and period.
Sceptics of this method object to its three sources of uncer- tainty: the
anticipation of cashflows (By definition any forecast is uncertain) , the choice
of period(Why 10 years and not 15? What is the value of forecasts made so

far ahead? On the one hand, the brand may disappear after only a few years
and on the other) and the discount rate(subjective nature of the choice of a
discounting rate).
5 Valuation by present earnings
In the financial valuation of companies, it is typical to examine what is known
as the price/ earnings ratio (P/E). This ratio links the market capitalisation of a
firm to its net profits. Ahigh ratio is a signal of high investor confidence and
optimism in the growth of future profits. Even though the brand is not the
company, the same reasoning can be applied:
Firm: P/ E
=
Brand : Multiple =

Market valueof equity/ Known profits

Valuetobecalculated/ Net profitsof brand

But for a brand there are no data on its market capitalisation because it
doesnt exist, therefore it is this that companies are trying to calculate.