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Aaker and Joachimsthaler

 ihe Birth of Brand Management

j Neil McElroy, P&G 1931

j Study Brand Movement
j Study heavy sales areas and explain why
j Study light sales areas and explain why
j Study advertising and promotional strategy
Work at the local level
Prepare Sales materials
irack Results
j Consider Packaging changes
 ihe Birth of Brand Management

j What was Neil McElroy really doing?

j 1. Identifying Marginal Response by Segment
j 2. Identifying Hot and Cold Markets
j 3. Developing a Marketing Plan
j 4. iracking the Results
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  iactical and reactive Strategic and visionary
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 Less experienced, Higher in the organization,
shorter time horizon longer time horizon


 Brand image Brand equity
 Short-term financials Brand equity measures


 

 Single products-markets Multiple products and markets
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   Simple Complex brand architectures
 
 Focus on single brands Category focus-multiple brands
 
 Single country Global perspective
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  Coordinator of limited ieam leader of multiple
 
   options communication options
 
  External/customer Internal as well as external

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 Sales and share Brand identity
 What is Brand Equity?

j Brand Equity is a set of brand assets and

liabilities linked to a brand, its name and
symbol, that add to or subtract from the
value provided by a product or service to a
firm and/or to that firm¶s customers.
j Assets and liabilities underlying brand
equity must be linked to the name and/or
symbol of the brand.
 What is Brand Equity?

j When the brand¶s name or symbol changes,

some or all of the assets or liabilities will be
affected and even lost, although some might
be shifted to a new name and symbol.

j Assets and liabilities on which brand equity

is based differs from context to context
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BRAND VALUE
MARKEi AS PERCENi
VALUE CAPIiALIZAiION OF MARKEi
BRAND $ BILLIONS $ BILLIONS CAPIiALIZAiION

1 Coca-Cola $83.8 $142.2 59%

2 Microsoft 56.7 271.9 21
3 IBM 43.8 158.4 28
4 GE 33.5 328.0 10
5 Ford 32.2 57.4 58
6 Disney 32.3 52.6 58
7 Intel 30.0 144.1 21
8 McDonald's 26.2 40.9 64
9 Ai&i 24.2 102.5 24
10 Marlboro 21.0 112.4 19
11 Nokia 20.7 46.9 44
12 Mercedes 17.8 48.3 37
13 Nescafe 17.6 77.5 23
14 Hewlett-Packard 17.1 54.9 31
15 Gillette 15.9 42.9 37
16 Kodak 14.8 24.8 60
22 BMW 11.3 16.7 77
28 Nike 8.2 10.6 77
36 Apple 4.3 5.6 77
43 Ikea 3.5 4.7 75
54 Ralph Lauren 1.6 2.5 66

Source: Raymond Perrier, "Interbrand's World's Most Valuable Brands," report of a June 1999 study sponsored by Interbrand and Citigroup, 1999.
Objec es |

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 Brand Equity
Research Objectives
j Identify the effectiveness of individual
brand assets
j Identify the barriers to achieving a brand¶s
full potential
j Identify consumer relationships with the
brand
j Identify the status of the brand in a
competitive context
 Pinpoint Brand Problems

j Failure of advertising to communicate clearly

j Failure of packaging that is too non-
non-intrusive
j Failure through unmemorable product personality
j Failure through consumer¶s lack of value
perceptions
 Probe the Synergy of Brand
Asset Relationships
j Equity assets
j Potential consistencies in brand image and
consumer perceptions
j Potential inconsistencies in brand image and
consumer perception
Products that communicate a
unified image are more likely to
have a stronger shelf impact.
Products that communicate a
unified image are more likely to
have more effective advertising
and promotions.
Products that communicate a
unified image are more likely to
have a stronger brand loyalty.
 Brand Equity Research Can:

j Identify unrecognized product benefits

j Identify failures of the brand to integrate
into the consumers¶ lifestyle
j Identify a blurred image
j Identify an elusive personality
 Pinpoint the Brand Image in
Light of Competitors
j Name
j Packaging
j Concept and Uses
j Advertising
j Promotions
j Perceptions
j iarget Market
 Key Benefits for Existing Brands

j Competitive Frameworking
j Comparative use patterns
j Perceptual similarities and differences
j iarget market contrasts

j Perceived Brand Strengths and Weaknesses

j Motivators and Hurdles for the brand
 Key Benefits for Existing Brands

j Mindset Orientation
j Where does the brand fit on a logical or
emotional continuum

j Product Priority
j Designation of the brand as high or low
Management Priority
 Key Benefits in New
Development Opportunities
j Build Brand Loyalty
j Strengthen current assets
j Refine obstacles
j Create more memorable product personalities
or positions
j Adjust out-
out-of-
of-sync brand assets
 Key Benefits in New
Development Opportunities
j Enhance irial
j Develop packaging with more impact
j Maximize communications
j Optimize promotions
 Key Benefits in New
Development Opportunities
j Expand Use
j Improve current customer relationships
j Ascertain new niches
j Add value
j Go to alternative channels of distribution
 Key Benefits in New
Development Opportunities
j Increase the Product Line Synchronization
With Current Brand Equity
j New product
j Line extensions

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 Asset and Liability Categories:

j Brand Loyalty
j Name Awareness
j Perceived Quality
j Brand Associations in addition to perceived
quality
j Other proprietary brand assets - patents,
trademarks, channel relationships, etc.
 Brand Equity = Perceived Value
to the Customer
j Value to the customer enhances:
Interpretation/Processing of brand information;
Confidence in the purchase decision; Use
satisfaction

j Value to the firm is enhanced through: Efficiency

and effectiveness of Mkt. Programs; Brand
Loyalty; Prices/margins; Brand Extensions; irade
Leverage; Competitive Advantage
 Perceived Value to the Customer

j Mazda Miata introduced in 1990: low cost 2 seat

convertible with few power options (1950
throwback). Simple car, sporty, low cost.
$16,000
j Demand extremely high...$25,000 prices in used
car sections within first few months (Same pattern
for Mustang...) Perceived Value > Price.
j Yugoslavian made car, the Yugo: Negative
reports from consumer reports. Price > Variable
Costs > Cost Car withdrawn from market.
 Methods for Calculating
Customer Value
j Industrial engineering methods: Value-
Value-in
in--use,
economic benefits
j Overall estimates of customer value:
Focus group and Survey research questions of
willingness to pay
j Decomposition approaches:
Conjoint analysis: estimating customer tradeoffs
of product attributes
Benchmarks: Willingness to pay for incremental
(fewer) attributes
 Methods for Calculating
Customer Value
j Composition approach: Questions to
consumers about value of attributes

j Importance ratings: Customer rank

ordering or rating of the importance of
product attributes as well as comparisons
between competitors.
 Value-in-Use Approach

j Product manager selects a reference product

(product used by customer or competitive
product)

j Product manager calculates the incremental

economic benefit to the customer of using
the product or brand in question
 Simulating the Buying
Experience
j Laboratories at or near shopping malls

j ³Customer´ groups receive different

price/attribute treatments

j ³Customers´ select product they would

choose
 Estimating Brand Equity with
Conjoint Analysis
j Conjoint Analysis

j Price ihresholds

j Dollarmetric Scales
 Estimating Brand Equity using
the Perceived Value Concept
j Market Share, Perceived Value, Price Relationship
j Perceived Value
Market Share = f [ -------------------- ]
Price
j Increase Perceived Value by:
j Improving the product itself by increasing actual quality or
offering better service or a longer warranty period
j Advertise to enhance the product¶s image
j Institute value added services in the distribution channels such as
technical support or financing
j Improve sales effort by training the sales force to sell value rather
than price
 Estimating Brand Equity with
Conjoint Analysis
j Assume 3 attributes of a laptop computer choice:
4 or 8 Hour Battery | PIII 500 or AMD 1Ghz | Dell or Compaq
j iask: Rank order the following combinations of these
characteristics from
8 = most perferred to 1 = least perferred
4 Hours, PIII500, Dell _____ 4 Hours, PIII500, Compaq ____
8 Hours, AMD1Ghz, Compaq _____ 8 Hours, AMD1Ghz, Dell ____
8 Hours, PIII500, Dell _____ 8 Hours, PIII500, Compaq ____
4 Hours, AMD1Ghz, Compaq _____ 4 Hours, AMD1Ghz, Dell ____
 Estimating Brand Equity with
Dollarmetric Scales
j Rather than use 1-1-7 liklihood of purchase scales, responses are given in dollar
other currency terms. What should the relative prices of the five brands be?
First, the respondent chooses the brands most preferred, and next, how much
extra would they be willing to pay for a six pack?
j Coke
Coke,, Pepsi 2
j Coke
Coke,, 7Up 8 Analysis iotals: Comparative Brand Value
j Coke
Coke,, Dr Pepper 5 Coke: +2 +8 +5 +12 = 27 cents
j Coke
Coke,, Fresca 12 Pepsi: -2 +6 +3 +10 = 17 cents
j Pepsi, 7Up 6 7Up: -8 -6 -3 +4 = -13 cents
j Pepsi, Dr Pepper 3 Dr Pepper: -5 -3 +3 +7 = 2 cents
j Pepsi
Pepsi,, Fresca 10 Fresca: -12 -10 -4 -7 = -33 cents
j 7Up
7Up,, Dr Pepper 3
j 7Up
7Up,, Fresca 4
j Dr Pepper,
Pepper, Fresca 7
 Estimating Brand Equity Using
Perceived Value
j Genentech Drug iPA: clears blood clots that cause heart
attacks: $2200 per dose.

j However, an industry study showed that worked no better

than Streptokinase, sold by a competitor for $200 per dose.

j Genentech
(1) trained sales force to point out some of the limitations
of the study
(2) extended payment terms to the pharmacies and
encouraged stock up
 Brand Equity, Perceived Value
and Price
j Reducing price is more common, but often more expensive
than adding value.
j (# of units sold) x ( Decrease in contribution margin) =
Cost of Price Decrease

VS:

j Cost of providing sales training, Cost of improving

customer service, Improved warranty, Improving time
for delivery, Reducing phone waiting time.

j Value added is also distributed over all units sold