Customer Equity Management Vs

Brand Equity Management

WASS – 16/4/15

Dr. Chandan Chavadi

CMS, Presidency College, Bangalore

What is CE & BE?

• Customer equity - the sum of the lifetime values(LTV) of all the firm’s customers, across all the firm’s brands.

• Brand equity - the sum of customers’ assessments of a brand’s intangible qualities, positive or negative.

Note: LTV is the projected revenue that a customer will generate during their lifetime.

What Managers Talk & Act?

• How ? Maximize customer lifetime value?

• Focus? Managing customer relationship as finite universe of buyers are out there.

• Talk? Customer, Customer & Customer

• Act ? Its all about the Brand

Problem Area

Customer

Customer

Customer

What most managers say...

What they do in reality…

Brand

Brand

Brand

Incompatible with Growth

Brand Management

• Brand management still trumps customer management in most large companies.

EXAMPLE• Ad Age article by Jack Neff ( June 30th 2014) – “It's the End of

'Marketing' As We Know It at Procter & Gamble”.

• Organization re-design - P&G announced in February, in which the marketing organization becomes "Brand Management" with "single-point responsibility for the strategies, plans and results for the brands“.

• Hundreds of marketing directors and associate marketing directors at the world's biggest advertising spender will officially becomebrand directors and associate brand directors.

OLDSMOBILE Tragedy…

• 1980s - enjoyed outstanding brand equity.

• 1988 - ad campaign featuring the slogan, “This is not your father’s Oldsmobile”.

• 1990 - ad campaign featuring the slogan “A New Generation of Olds.”

• By 2000, Oldsmobile’s market share had sputtered to 1.6%, from 6.9% in 1985.

• And in December 2000, General Motors announced that the Oldsmobile brand would be phased out.

• Question?• Why did General Motors spend so many years

and so much money trying to reposition and refurbish such a tired image?

• It’s because, in large consumer-goods companies like General Motors, brands are the raison d’être.

• Absolute focus is on brands not on customers.

How to avoid such problems?

• Reinvention of Brand Management.. Change the thinking style of management

• Larger goal…..Growing Customer Equity

It’s OK, I’m with the Brand

• George Clinton- songwriter and performer. Known as one of the founders of funk music.

• In the 1970s he sought the attention of two different segments of record buyers—mainstream listeners, who liked vocal soul music with horns, and progressive listeners, who liked harder-edged funk.

• Clinton knew that his band was accomplished enough to play both kinds of music, but he realized that alternating between the styles would muddy the band’s image and serve neither audience well.

• The same group of musicians, essentially, recorded and performed under twodifferent band names: Parliament, when the music was aimed at popular tastes, and Funkadelic, when it was edgier.

• His branding reflected his customers’ identities instead of his band members’.

Honda’s Successful Brand Strategy

• In the 1980s, U.S. buyers, much more than their counterparts elsewhere, associated the Honda brand with economy cars.

• Rather than work to change that image(which served the company well with other models), management decided to launch a new brand “Acura Legend ” in the United States.

• The same car was introduced in most other countries, including Japan, as the Honda Legend.

• “Acura” had no positive equity established with upscale buyers, but neither did it have baggage to overcome.

Volkswagen.. Disappointment … with Phaeton Brand

• Volkswagen is one of the world’s most recognizable brands and has excellentbrand equity among buyers of low- to medium-priced cars.

• The Phaeton, however, is a high-priced luxury car, positioned to compete with such icons as BMW and Mercedes.

• Unfortunately, the company’s brand is defined not so much by its exacting producers as by its customers.

• When the Phaeton was launched in Europe in 2003, Volkswagen predicted 15,000 would be sold.

• Several months later, it admitted that only about 2,500 had been.

WiLL– Japanese Brand• Marketing approach shared by a small group of Japanese

companies from August 1999 until July 2004 in Japan.

Kao Corporation Toyota Asahi Breweries

PanasonicEzaki Glico Candy Kokuyo Co., Ltd.

WiLL Brand

• Target segment of consumers—“new

generation” women in their twenties or

thirties who like things that are “genuine” and fun—defines the WiLL brand.

• Exclusively focused on narrow demographic and psychographic profile.

• WiLL Vi (an automobile manufactured by Toyota),

• WiLL PC (made by Panasonic),

• WiLL Beer (brewed by Asahi).

• These megabrands have chosen to become, in essence, private label manufacturers behind a brand they own jointly.

• Independently, none of them would have invested so heavily in a branding effort.

• WiLL brand would remain strong—because its meaning and value stem from its customers.

Best Perspective

Growing Life time value

of Customer Relationship

Building Loyalty and Retention

Fulfilling more

customer needs

Customer Equity

Emphasis….

• Forward thinkers like George Clinton, Honda, and the WiLL consortium aside, most companies today are geared toward aggrandizing(enhance) their brands, on the assumption that sales will follow.

• But for firms to be successful over time, their focus must switch to maximizing customer lifetime value i.e. the net profit a company accrues from transactions with a given customer during the time that the customer has a relationship with the company.

• The attitude of the company should be that Brands come and go but Customers must remain.

The sum of customers’

assessments of a brand’s intangible qualities, positive

or negative

Brand Equity Customer Equity

The sum of the lifetime values of all the firm’s customers, across all the firm’s

brands

More Focus on Customer Equity

Value of a Brand Depends on the Customer

• The value of Brand is highly individualized.

• For some Coke is best and for others Pepsi is more valuable.

• One reader sees the Wall Street Journal as the pinnacle of probity; another calls it a reactionary rag.

• For some people, Stouffer’s stands for taste and convenience; for others, trans fats and carbs.

• A customer might grow tired of a brand, independent of how other customers are responding to it.

• Most marketing managers measure brand equity with a summary metric of brand strength. i.e.

– The “flaw of averages.”

• The value they arrive at is true for practically no one - and hardly a useful management tool.

Customers Differ on Brand Equity

• Survey in two cities to measure brand equity for 23 brands in five industries.

• For American Airlines brand, customers had widely varying perceptions of the value of the brand.

• Managers defined value as average and took actions which were not right for many customers.

• Assigning an average value to brand equity is dangerous– Because it obscures the fact that brand value is

individually assigned by the customer.

• In truth, with consumers in the United States have very high equity while people in South America were more likely to favor local brands.

• The company only redoubled its efforts at what could be called brand imperialism, with limited success.

Seven directives that go against the grain of current

practice

1- Make brand decisions subservient to decisions

about customer relationship

This means creating or strengthen the role of the customersegment manager.

Assigning Managers to specific customers.

In Business- to- Business World, this is known as managing keyaccounts.

Companies like Ericsson and IBM assign account managers and give them broad authority in marketing to important customers.

2- Build brands around customer segments, not the

other way around.

Focus on the needs and requirements of a particular customersegment.

Develop a product in such a way that consumers think that thisproduct is just for them..they are made for this product…

World largest Women Clothing Company Liz Claiborne has a similarfocus on the customers.

1. High- end Dana Buchman Brand for Professional Women

2. The stylish Ellen Tracy Brand for Sophisticated but

Casual Women

3. The young, upscale Laundry Brand for Individualistics

4. The Liz Claiborne Brand for its Traditional Casual Market

5. The Elizabeth Brand for Plus-Size Women

2- Build brands around customer segments, not the other way around…

• Procter & Gamble markets an extensive portfolio of soap brands, each targeted to a different psychographic or demographic segment.

• Its laundry detergents, too—Tide, Gain, Cheer, Ivory, Bold—are differentiated more by target customer segment than by product features.

3- Make your Brand as narrow as possible

The purpose of a brand here is to satisfy a small customer segmentas it is economically feasible.

Magzines:

Women Magzines, Fashion Magzines, Sports Magzines, BusinessMagzines, Religious Magzines, Children Magzines.

Television Channels:

Women Channel, Movies Channel, Fashion Channel, CookingChannel, sports Channel, News Channel , Cartoon Channel etc...

3- Make your brands as narrow as possible

• Henry Ford may have sold the Model T to a broad cross section of consumers, but today there are men’s and women’s formulas of vitamins and distinct television channels for Latinos, African-Americans, women, golfers, senior citizens, and gays.

• A tighter focus can only enhance the clarity and value of the brand in customers’ eyes.

• Today, the Lifes, Looks, and Saturday Evening Posts are gone, and even the idea of a women’s magazine is laughably vague.

• Depending on the woman, the right magazine might focus on general fitness(Shape), health (Natural Health), self-esteem (Self), parenting (Working Mother), high fashion (Vogue), high fashion in midlife (More), shopping(Lucky), ethnic women (Essence), gay women (Curve)—the choices go on and on.

• TOI April12, 2015 – Amazon (Ross School of Business, Michingan), McKinsey(Kellogg School of Management, Northwestern), Apple ( Fuqua School , Duke), Own company (Harvard Business School), Private Equity (Standford Graduate School)…

4- Plan Brand extensions based on Customer needs, notcomponent similarities

Brand extension are more likely to successful if .....

The customers are similar, even if the products are not similar.

1- Same customer but unsimilar products:

Virgin, for example has extended into a wide variety of unrelated products like Airlines,music, stores, soft drinks, and mobilephones.

Value pricing, high quality and a hip, fun image that attracts a particular customersegment.

Similarly Tiffany’s(expensive jewelry to perfumes – wealthy prestige buyer) and Disney(movies, hotels, and amusement parks - the young and the young at heart who want to beentertained) did…

2- Same customer & similar products:

Visa-credit cards to debit cards

Yamaha- organs to pianos to guitars

Attempts which failed- Customers of IBM’s PC (individuals) were entirely different fromcustomers of its mainframe computers (business buyers)

5- Develop the capability and the mind-set to hand

off customers to other brands in the company

Future profits are driven not by repeat purchases of particularproduct but by customer’s purchases across all brands.

There’s absolutely no sense in spending greatly to hold on to abrand’s customer relationship if the customer is more natural fitwith another brand in the company portfolio.

Ex: Mariott Fairfield Inn Vs Mariott International

6- Take no heroic measure.

Sometime a brand becomes very unattractive to a customers segment.

Reversing that impression might simply be too hard to do.

ValueJet

In May 1996 one of its airline crashed, killing all abroad.

The national transport safety board accused ValueJet failing to ensure safety related issue..

Then ValueJet dumped the name, and it merged with another carrier, AirTran……

7- Change how you measure brand equity

Brand

awarenessAttitude toward

the brandBrand ethics

Value Equity Brand EquityRelationship

Equity

Brand Choice

Customer Lifetime

Value

CUSTOMER EQUITY

Brands are important, but

they are not all-important

• Value Equity:

• Quality, Price and Convenience

• Brand equity:

• Brand Equity is the value, both tangible and intangible,that a brand adds to a product/service.

• Relationship Equity:

• Switching cost

• Simply as friendship with salespeople

• Customer equity:

• Customer equity may be defined as the sum of allcustomer lifetime value in company

Some Basic Concepts

What Brands means to Company?

• Monopoly creation

• New avatars

• Most valuable assets

• Targets of acquisition.

• Relationship management

• Drivers of financial performance

• Legal protection

What Brands means to Customers?

• Identification of the source

• Assignment of responsibility to product maker

• Risk reducer

• Search cost reducer

• Promise, bond, or pact with product maker

• Symbolic device

• Signal of quality

1.36

Brand Evolution –Stages….

1)Unbranded

2)Brand as reference

3)Brand as personality

4) Brand as Icon

5) Brand as company

6) Brand as Policy

How has the word’s (Brand)application changed over time?

• Cattle , Distilleries, Potters

• Producer names

• Place names

• Scientific names

• Artificial names

• Descriptive names.

Brands that took the names of Creators….

Henry Royce & Charles Rolls Henry Ford

Karl Benz & Gottlieb Daimler

Theron T. PondLevi Strauss Lewis Waterman

Brands that took names from Places

Island - Indonesia Hamburg -Germany

Region - France

Teak- Burma

Brand that took names from Animals

Cougar

Scope of Branding

Scope of Branding

Brand Dimensions

Brand Hierarchy

Do all brands become Power Brands?

Nirma, Amul, Parachute, Fevicol …… have become large power brands

Customer Engagement Practices to enhance brand equity

• IKEA – Make Small Spaces Big

• Dove – Brilliant audience insight

• Apple – 3Fs , abbreviation(Approach, Probe, Present, Listen, End)

• For example, if the customer talks about price issues, the Genius might reply: “I can see how you’d feel this way. I felt the price was a little high, but found it’s a real value because of all the build-in software and capabilities.”

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