Keller SBM3 01

CHAPTER 1:CHAPTER 1:BRANDS & BRAND MANAGEMENTBRANDS & BRAND MANAGEMENT

DS HwangDS HwangFrom Kevin Lane KellerFrom Kevin Lane Keller

1.1

What is a brand?What is a brand?What is a brand?What is a brand?

For the American Marketing Association (AMA), a brand is a For the American Marketing Association (AMA), a brand is a “name, term, sign, symbol, or design, or a combination of them,“name, term, sign, symbol, or design, or a combination of them,name, term, sign, symbol, or design, or a combination of them, name, term, sign, symbol, or design, or a combination of them, intended to intended to identifyidentify the goods and services of one seller or group the goods and services of one seller or group of sellers and to of sellers and to differentiatedifferentiate them from those of competition.” them from those of competition.” These different components of a brand that identify and These different components of a brand that identify and differentiate it are differentiate it are brand elementsbrand elements. .

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What is a brand?What is a brand?What is a brand?What is a brand?

Many practicing managers refer to a brand as more than thatMany practicing managers refer to a brand as more than that——as something that has actually created a certain amount ofas something that has actually created a certain amount ofas something that has actually created a certain amount of as something that has actually created a certain amount of awareness, reputation, prominence,awareness, reputation, prominence, and so on in the marketplace. and so on in the marketplace. We can make a distinction between the AMA definition of a We can make a distinction between the AMA definition of a “brand” with a small b and the industry’s concept of a “Brand” “brand” with a small b and the industry’s concept of a “Brand” with a capital b. with a capital b.

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Brands vs ProductsBrands vs ProductsBrands vs. ProductsBrands vs. Products

A A productproduct is anything we can offer to a market for is anything we can offer to a market for attention, acquisition, use, or consumption that mightattention, acquisition, use, or consumption that mightattention, acquisition, use, or consumption that might attention, acquisition, use, or consumption that might satisfy a need or want. satisfy a need or want. A A productproduct may be a physical good, a service, a retail may be a physical good, a service, a retail pp y p y gy p y goutlet, a person, an organization, a place, or even an outlet, a person, an organization, a place, or even an idea.idea.

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Five Levels of Meaning for a ProductFive Levels of Meaning for a ProductFive Levels of Meaning for a ProductFive Levels of Meaning for a Product

ThTh b fit l lb fit l l i h f d l d hi h f d l d hThe The core benefit levelcore benefit level is the fundamental need or want that is the fundamental need or want that consumers satisfy by consuming the product or service. consumers satisfy by consuming the product or service. The The generic product levelgeneric product level is a basic version of the product containing is a basic version of the product containing g pg p p gp gonly those attributes or characteristics absolutely necessary for its only those attributes or characteristics absolutely necessary for its functioning but with no distinguishing features. This is basically a functioning but with no distinguishing features. This is basically a strippedstripped--down, nodown, no--frills version of the product that adequately frills version of the product that adequately pppp ,, p q yp q yperforms the product function.performs the product function.The The expected product levelexpected product level is a set of attributes or characteristics that is a set of attributes or characteristics that buyers normally expect and agree to when they purchase abuyers normally expect and agree to when they purchase abuyers normally expect and agree to when they purchase a buyers normally expect and agree to when they purchase a product. product. The The augmented product levelaugmented product level includes additional product attributes, includes additional product attributes, b fi l d i h di i i h h d fb fi l d i h di i i h h d fbenefits, or related services that distinguish the product from benefits, or related services that distinguish the product from competitors. competitors. The The potential product levelpotential product level includes all the augmentations and includes all the augmentations and

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p pp p ggtransformations that a product might ultimately undergo in the transformations that a product might ultimately undergo in the future.future.

A brand is therefore more than a product, as it A brand is therefore more than a product, as it can have dimensions that differentiate it in some can have dimensions that differentiate it in some way from other products designed to satisfy the way from other products designed to satisfy the same needsame needsame need. same need.

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Some brands create competitive advantages with Some brands create competitive advantages with product performance; other brands create product performance; other brands create p pp pcompetitive advantages through noncompetitive advantages through non--productproduct--related meansrelated meansrelated means. related means.

1.7

Why do brands matter?Why do brands matter?Why do brands matter?Why do brands matter?

What functions do brands perform that make What functions do brands perform that make them so valuable to marketers?them so valuable to marketers?

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Importance of Brands to ConsumersImportance of Brands to ConsumersImportance of Brands to ConsumersImportance of Brands to Consumers

Identification of the source of the productIdentification of the source of the productIdentification of the source of the productIdentification of the source of the productAssignment of responsibility to product makerAssignment of responsibility to product makerRisk reducerRisk reducerS h t dS h t dSearch cost reducerSearch cost reducerPromise, bond, or pact with product makerPromise, bond, or pact with product makerp pp pSymbolic deviceSymbolic deviceSi l f liSi l f liSignal of qualitySignal of quality

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Reducing the Risks in Product DecisionsReducing the Risks in Product DecisionsReducing the Risks in Product DecisionsReducing the Risks in Product Decisions

C i diff f i k i b iC i diff f i k i b iConsumers may perceive many different types of risks in buying Consumers may perceive many different types of risks in buying and consuming a product:and consuming a product:

Functional riskFunctional risk——The product does not perform up toThe product does not perform up toFunctional riskFunctional risk The product does not perform up to The product does not perform up to expectations.expectations.

Physical riskPhysical risk——The product poses a threat to the physical wellThe product poses a threat to the physical well--yy p p p yp p p ybeing or health of the user or others. being or health of the user or others.

Financial riskFinancial risk——The product is not worth the price paid.The product is not worth the price paid.Social riskSocial risk——The product results in embarrassment from others.The product results in embarrassment from others.Psychological riskPsychological risk——The product affects the mental wellThe product affects the mental well--being of being of

the userthe userthe user.the user.Time riskTime risk——The failure of the product results in an opportunity The failure of the product results in an opportunity

cost of finding another satisfactory product.cost of finding another satisfactory product.

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g y pg y p

Importance of Brands to FirmsImportance of Brands to FirmsImportance of Brands to FirmsImportance of Brands to Firms

To firms, brands represent enormously valuable To firms, brands represent enormously valuable pieces of legal property, capable of influencing pieces of legal property, capable of influencing p g p p y, p gp g p p y, p gconsumer behavior, being bought and sold, and consumer behavior, being bought and sold, and providing the security of sustained futureproviding the security of sustained futureproviding the security of sustained future providing the security of sustained future revenues. revenues.

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Importance of Brands to FirmsImportance of Brands to FirmsImportance of Brands to FirmsImportance of Brands to Firms

Identification to simplify handling or tracingIdentification to simplify handling or tracingIdentification to simplify handling or tracingIdentification to simplify handling or tracingLegally protecting unique featuresLegally protecting unique featuresSignal of quality levelSignal of quality levelE d i d t ith i i tiE d i d t ith i i tiEndowing products with unique associationsEndowing products with unique associationsSource of competitive advantageSource of competitive advantagep gp gSource of financial returnsSource of financial returns

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Can everything be branded?Can everything be branded?Can everything be branded?Can everything be branded?

l l b d h h dl l b d h h dUltimately a brand is something that resides in Ultimately a brand is something that resides in the minds of consumers. the minds of consumers. The key to branding is that consumers perceive The key to branding is that consumers perceive differences among brands in a product category. differences among brands in a product category. g p g yg p g yEven commodities can be branded:Even commodities can be branded:

Coffee (Maxwell House) bath soap (Ivory) flourCoffee (Maxwell House) bath soap (Ivory) flourCoffee (Maxwell House), bath soap (Ivory), flour Coffee (Maxwell House), bath soap (Ivory), flour (Gold Medal), beer (Budweiser), salt (Morton), (Gold Medal), beer (Budweiser), salt (Morton), oatmeal (Quaker) pickles (Vlasic) bananasoatmeal (Quaker) pickles (Vlasic) bananasoatmeal (Quaker), pickles (Vlasic), bananas oatmeal (Quaker), pickles (Vlasic), bananas (Chiquita), chickens (Perdue), pineapples (Dole), and (Chiquita), chickens (Perdue), pineapples (Dole), and even water (Perrier) even water (Perrier)

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( )( )

An Example of Branding a CommodityAn Example of Branding a CommodityAn Example of Branding a CommodityAn Example of Branding a Commodity

De Beers Group added the phrase “A Diamond De Beers Group added the phrase “A Diamond Is Forever” Is Forever”

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What is branded?What is branded?What is branded?What is branded?

Physical goodsPhysical goodsPhysical goodsPhysical goodsServicesServicesRetailers and distributorsRetailers and distributorsO li d t d iO li d t d iOnline products and servicesOnline products and servicesPeople and organizationsPeople and organizationsp gp gSports, arts, and entertainmentSports, arts, and entertainmentG hi l iG hi l iGeographic locationsGeographic locationsIdeas and causesIdeas and causes

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Source of Brands StrengthSource of Brands StrengthSource of Brands StrengthSource of Brands Strength

“The real causes of enduring market leadership are vision and will. Enduring market leaders have a grevolutionary and inspiring vision of the mass market and they exhibit an indomitable will tomarket, and they exhibit an indomitable will to realize that vision. They persist under adversity, i t r l tl l it fi i l r rinnovate relentlessly, commit financial resources, and leverage assets to realize their vision.”

Gerald J. Tellis and Peter N. Golder, “First to Market, First to Fail? Real Causes of Enduring Market Leadership,” MIT Sloan Management Review, 1 January 1996

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g , J y

Importance of Brand ManagementImportance of Brand ManagementImportance of Brand ManagementImportance of Brand Management

The bottom line is that any brandThe bottom line is that any brand——no matter no matter how strong at one point in timehow strong at one point in time——is vulnerable, is vulnerable, g pg p ,,and susceptible to poor brand management. and susceptible to poor brand management.

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What are the strongest brands?What are the strongest brands?

Top Ten Global BrandsTop Ten Global Brandspp

BrandBrand 2006 ($Billion)2006 ($Billion) 2005 ($ Billion)2005 ($ Billion)

1.1. CocaCoca--ColaCola2.2. MicrosoftMicrosoft

67.0067.0056.9356.93

67.5367.5359.9459.94

3.3. IBMIBM4.4. GEGE

56.2056.2048.9148.91

53.3853.3847.0047.00

5.5. IntelIntel6.6. NokiaNokia

32.3232.3230.1330.13

35.5935.5926.4526.45

7.7. ToyotaToyota8.8. DisneyDisney

27.9427.9427.8527.85

24.8424.8426.4426.448.8. DisneyDisney

9.9. McDonald’sMcDonald’s1010 MercedesMercedes--BenzBenz

27.8527.8527.5027.5021.8021.80

26.4426.4426.0126.0120.0020.00

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10.10. MercedesMercedes BenzBenz 21.8021.80 20.0020.00

Branding Challenges and OpportunitiesBranding Challenges and Opportunities

Savvy customersSavvy customersSavvy customersSavvy customersBrand proliferationBrand proliferationMedia fragmentationMedia fragmentationIncreased competitionIncreased competitionIncreased competitionIncreased competitionIncreased costsIncreased costsGreater accountability Greater accountability

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The Brand Equity ConceptThe Brand Equity Conceptq pq p

No common viewpoint on how it should be No common viewpoint on how it should be conceptualized and measuredconceptualized and measuredIt stresses the importance of brand role in It stresses the importance of brand role in t st esses t e po ta ce o b a d o et st esses t e po ta ce o b a d o emarketing strategies.marketing strategies.Brand equity is defined in terms of the marketingBrand equity is defined in terms of the marketingBrand equity is defined in terms of the marketing Brand equity is defined in terms of the marketing effects uniquely attributable to the brand.effects uniquely attributable to the brand.

Brand equity relates to the fact that different outcomes result Brand equity relates to the fact that different outcomes result in the marketing of a product or service because of its brand in the marketing of a product or service because of its brand name as compared to if the same product or service did notname as compared to if the same product or service did notname, as compared to if the same product or service did not name, as compared to if the same product or service did not have that name.have that name.

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Strategic Brand ManagementStrategic Brand ManagementStrategic Brand ManagementStrategic Brand ManagementIt involves the design and implementation of It involves the design and implementation of marketing programs and activities to build, marketing programs and activities to build, measure, and manage brand equity. measure, and manage brand equity. , g q y, g q y

The The Strategic Brand Management ProcessStrategic Brand Management Process is defined as is defined as involving four main steps:involving four main steps:1 Id tif i d t bli hi b d iti i d l1 Id tif i d t bli hi b d iti i d l1. Identifying and establishing brand positioning and values1. Identifying and establishing brand positioning and values

2. Planning and implementing brand marketing programs2. Planning and implementing brand marketing programs

3. Measuring and interpreting brand performance3. Measuring and interpreting brand performance

4 G i d i i b d i4 G i d i i b d i1.22

4. Growing and sustaining brand equity4. Growing and sustaining brand equity

Strategic Brand Management ProcessStrategic Brand Management Processg gg g

Mental mapsCompetitive frame of referenceP i t f it d i t f diff

Key ConceptsSteps

Identify and establishPoints-of-parity and points-of-differenceCore brand valuesBrand mantra

brand positioning and values

Mixing and matching of brand elementsIntegrating brand marketing activitiesLeveraging of secondary associations

Plan and implement brand marketing programs

Brand value chainBrand auditsBrand tracking

Measure and interpretbrand performance Brand tracking

Brand equity management system

Brand-product matrixB d tf li d hi hiGrow and sustain

p

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Brand portfolios and hierarchiesBrand expansion strategiesBrand reinforcement and revitalization

Grow and sustainbrand equity