2.1

CHAPTER 2:

CUSTOMER-BASED BRAND EQUITY

Kevin Lane Keller

Tuck School of Business

Dartmouth College

1.2

Review previous chapter :

The Brand Equity Concept

No common viewpoint on how it should be conceptualized and measured

It stresses the importance of brand role in marketing strategies.

Brand equity is defined in terms of the marketing effects uniquely attributable to the brand.

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

Toughtful and imaginative brand planning is needed to develop great brands, with the aid of three tools/models:

1. Brand Positioning Model (ch 2)

2. Brand Resonance Model (ch 3)

3. Brand Value Chain Model (ch 3)

Brand and Brand Equity

(example: eye radar)

2.3

2.4

Customer-Based Brand Equity

“The differential effect that brand knowledge has on consumer response to the marketing of that brand.”

Keller, 1993

Note that:

“Customer-based brand equity occurs when the consumer has a high level of awareness and familiarity with the brand

and holds strong, favorable, and unique brand associations in memory.”

2.5

Customer-Based Brand Equity

a definition breakdown: Differential effect

BE arises from differences in consumer response. If no difference – can be classified as generic product/commodity

Brand knowledge (learned, felt, seen, heard about brand)

These differeces in response is a result of consumers’ knowledge about the brand . It is strongly influenced by marketing activities (but the BE ultimately depends on what resides in the mind of customers)

Consumer response to marketing

consumer differential response, which make up brand equity, are reflected in perception, preferences and behavior related to:

Choice of a brand

Recall of copy points from an ad

Response to a sales promotion

Evaluations of a proposed brand extension

Marketing Advantages of Strong

Brands Improved perception of product performance

Greater loyalty

Less vulnerability to competitive marketing actions/marketing

crises

Larger margins

More inelastic consumer response to pricec increases

More elastic customer to price decreases

Greater trade cooperation and support

Increased marketing communication effectiveness

Possible licensing opportunities

Additional brand extension opportunities

2.6

Daihatsu and Toyota

2.7

Avanza vs. Xenia

Source: http://www.autobildindonesia.com/spaw/uploads/images/article/image/20110323_025942_terios-rush.jpg

Rush vs. terios

http://www.rentalmobilbali.net/wp-content/uploads/2012/01/All-New-Avanza-VS-All-New-Xenia.jpg?9d7bd4

e.g. Avanza vs. Xenia:

their engines are slightly different!

2.8

ENGINE All New 1.3 Avanza

G M/T All New Xenia R M/T

Engine series K3-VE K3-VE

Engine type IL, 4 Cyl, 16 V, DOHC, VVT-i IL, 4 Cyl, 16 V, DOHC, VVT-i

(cc) 1,298 1,298

(mm) 72.0 x 79.7 72.0 x 7

Max Capacity (Ps/rpm) 92/6,000 92/6,000

Max Tor. (Kgm/rpm) 11,9/4,400 13,9/4,400

Fuel system EFI EFI

Fuel Unleaded Gasoline Unleaded Gasoline

Fuel Capacity (liter) 45 45

Steering (Power Steering) (Electric Power Steering) (Electric Power Steering)

Price 145 million IDR 122 million IDR

2.9

Brand Equity as a “Bridge”

Reflection of past investments in the marketing of

a brand

If in present, customer has developed favorable attitude towards the brand then

it is a clear indication that past investment (time, money, etc) have found there

mark..

Direction for future marketing actions or

programs

The present also leads the way how marketers

should plan future course, as to achieve desired results

2.10

Making a Brand Strong:

Brand Knowledge

Brand knowledge is the key to creating brand equity

creates differential effect that drives Brand Equity (in

CBBE concept)

The associative network memory model views memory

as a network of nodes (represents stored info/concepts) in

memory with a variety of associations linked (strong/not)

to it. Verbal/contextual info will be stored in the memory

network

Brand knowledge has two components:

1. brand awareness, and

2. brand image.

Possible MTV association/mental map

2.12

Sources of Brand Equity: Two

Components of Brand Knowledge

Brand awareness: related to the strength of the brand

node in memory. Measure the ability of the consumer to

identify the brand under different conditions

Brand recall: consumer ability to retrieve the brand from the

memory when given the product category or a purchase/usage

situation as a cue

Brand recognition: consumer ability to confirm prior

exposure to the brand when given the brand as a cue

Brand image: consumer perception about the brand, as

reflected by the brand association held in consumer’s

memory

Strong, favorable, and unique brand associations

Brand Awareness test

What brand comes to mind when you

think about:

“non carbonated beverages”

(in Malaysia?)

2.13

Your 1st answer called: top of mind, a brand recall – of brand awareness

A hint online dictionary: “non-

carbonated beverage is...”

2.14

adj.1.not having supersaturated carbon dioxide in

solution; not carbonated; - of beverages.

Have you ever heard a brand

called

V8?

Can you explain what

is that?

2.15

Your answer called: brand recognition – of brand awareness

You probably mentioned any of

these??:

2.16 Source: various sources from Google Image and personal picture

Or this?

2.17

Have you ever seen this before?

V8 Juice

2.18

2.19

Brand Awareness Advantages

What are the benefits of creating a high-levelof BA?

Learning advantages

Register the brand in the minds of consumers (help customers to

relate the brand node and influence the formation of strong

associations positive image)

Consideration advantages

Likelihood that the brand will be a member of the consideration set

(the handful of brands that receive serious consideration for

purchase)

Choice advantages

Affect choices among brands in the consideration set

2.20

Establishing Brand Awareness

Increasing the familiarity of the brand through

repeated exposure (for brand recognition). The

more consumer hearing/seeing/thinking of it,

the more likely the brand stay in their memory

Forging strong associations with the appropriate

product category or other relevant purchase or

consumption cues (for brand recall). A slogan/

jingle creatively pairs the brand and the

appropriate cues

Example brand awareness ad

2.21

IMB (other) Promotion

2.22

2.23

Creating a Positive Brand Image

Once a sufficient brand awareness is created, marketers

can put more emphasize on brand image

Source of brand association (direct experience,

commercial/ad, WOM, consumer reports, assumption on

brand elements, identification with

country/company/channel of distribution/person/place/

event, etc) Need to be favorable, strong, and unique (to

create a positive brand image)

Marketers should recognize the influence of each of these

sources of information by both managing them as well as

possible and by adequately accounting for them in designing

communication strategies.

SFU Brand Associations Brand Image Strength of brand association

The more deeply a person thinks about product info and relates to the existing brand

knowledge, the stronger brand association will be

Two factors strenthen association: personal relevance and consistency over time

Brand attributes: those descriptive features that characterize a product.

Brand benefit: personal value and meaning that consumer attach to a product

Direct experience creates the strongest brand attribute and benefit association and

influence decision

Favourability of brand association

To choose which favourable and unique association, marketers should carefully analyze

customer and competition

Favorable association if the image desirable to customers (how relevant, how distinctive

and how believable) and sucessfully delivered by the the product (actual/potential ability to

perform, current/future prospect of communication the performance, and sustaiability

communication over time)

Uniqueness of brand association

Brand has to have sustainable competitive advantage and unique selling preposition

Strategy: direct comparison with competitos, emphasize on product/non product

related, 2.24

Example: Brand Association Map

Samsung vs Sonny LCD TV

2.25

Source: http://www.rajeshgoli.com/academic/brand-concept-maps-1/

•A brand concept/association map is a representation of network of associations in the minds consumers

•The strength of association between two concepts is shown by the number of lines that connect the two.

The connection with three lines is the strongest and a connection with one line is the weakest.

How do you read above maps?

How to read...Contd.

2.26

3.27

Brand Positioning

Is at the heart of the marketing strategy

“. . . the act of designing the company’s offer and image

so that it occupies a distinct and valued place in the

target customer’s minds.” Philip Kotler

Finding the “proper location” in the minds of

consumers/market segment, so they think about the

product in the right/desired way to maximize the

potential benefit to the firm

3.28

Determining a frame of reference

for Positioning

Marketers need to know:

1. Who the target consumer is

2. Who the main competitors are

3. How the brand is similar to these competitors

(ideal points-of-parity)

4. How the brand is different from them (points-of-

difference)

3.29

1. Who the target consumer is?

A market is the set of all actual and potential buyers who have sufficient interest in, income for, and access to a product.

Market segmentation divides the market into distinct groups of homogeneous consumers who have similar needs and consumer behavior, and who thus require similar marketing mixes.

Market segmentation requires making tradeoffs between costs and benefits (mass vs. specialized)

Behavioral: user status,

usage rate, usage occasion,

brand loyalty, benefit

sough

Demographic: income, age,

sex, race, family

Psychographic: values,

opinion, attitudes,

activities, lifestyle

Geographic: International,

Regional

3.30 Source: http://watermarked.cutcaster.com/cutcaster-photo-801038496-Market-segmentation-business-diagram.jpg

Segmenting Individual Consumer/markets

How customers

will use the

product

Kind of

relationship Type of customer

Segmenting

Dimensions

for Business

Markets

Segmenting business markets

Kind of

relationship Type of customer

Demographics

How customers

will use the

product

Type of buying

situation

Purchasing

methods

Demographics

Type of buying

situation

Source: McCharty et.al. 2010)

3.32

Example of the toothpaste market

Four main segments:

1. Sensory: Seeking flavor and product appearance

2. Sociables: Seeking brightness of teeth

3. Worriers: Seeking decay prevention

4. Independent: Seeking low price

Close up: Target the first two segments

Crest: Target the third segment

3.33

Criteria for Segmentation

Identifiability: Can we easily identify the segment?

Size: Is there adequate sales potential in the

segment?

Accessibility: Are specialized distribution outlets

and communication media available to reach the

segment?

Responsiveness: How favorably will the segment

respond to a tailored marketing program?

3.34

2. Nature of Competition who is

the main competitor are? Deciding to target a certain type of consumer often

defines the nature of competition

Competitive analysis considers: the resources, capability,

likely intentions of various other firms

Do not define competition too narrowly (often

competition is at the benefit rather than attribute level)

Ex: a luxury good with a strong hedonic benefit like stereo

equipment may compete as much with a vacation as with

other durable goods like furniture

What is their main competitor?

3.35

Did you guess:

3.36

Or

Or

Actually.....

3.37 In “Gift” product category

3.38

3. Points-of-Parity

Points-of-parity associations (POPs), are not necessarily unique to the

brand but may in fact be shared with other brands.

are those elements that are considered mandatory for a brand to

be considered a legitimate competitor in its specific category

1. Category point of parity: represent ecessary-but not necessarily

sufficient- conditions for brand choice. They exist minimally at

the generic or expected product level

2. Competitive point of parity: those associations designed to

negate competitors’ point of difference, shoud be in a strong

and perhaps unbeatable competitive position.

4. Points-of-Difference Points-of-difference (PODs) are attributes or benefits that consumers strongly

associate with a brand, positively evaluate, and believe that they could not find

to the same extent with a competitive brand (either functional, performance-

related, or abstract imagery-related consideration)

PODs are the things that help a brand stand out. Points where you are

claiming superiority or exclusiveness over other products in the category.

it also has to be something your customer actually wants

The concept has much in common with unique selling preposition (USP) or sustainable

competitive advantage (SCA)

FUNCTIONAL: e.g. Swedish Retailer “IKEA” built their reputation on the notion that

Sweeden produces good, safe, well-built things, for the masses (due to some of the most

innovative designs at the lowest cost)

PERFORMANCE: e.g. Hyundai provides six front and back seat “side curtains” airbags as

standard equipment on all its model for icreased safety

IMAGERY: e.g.Louis Vuitton Luxury, British Airways “world’s favourite airline”

Other examples are FedEx (guaranteed overnight delivery), Nike (performance), and Lexus

(quality)

3.39

Examples: POD’s Ads

3.40

PERFORMANCE

POP’s vs. POD’s

For the brand to achieve POPs on a particular attribute/

benefit, a sufficient customers must belief that the brand

is good enough

Assuming consumers feel that way...

They may then be willing to base their evaluations and

decisions on other factors potetially more favourable to

the brand

By knowing both, you know where your brand value proposition is strong and

where it is weak (and your competitors are strong), so it becomes pretty easy to

craft a solid brand strategy (Grams 2009).

3.41

Strategy of POD’s and POP’s

3.42

Situation What to emphasize When the firm is a ‘me-too’ competitor In this case, being a weaker competitor, the goal is to piggyback on the

success of the market leader by highlighting many points-of-parity

When the firm as a market leader This is the reverse situation from the one above. To maintain market

leadership, the brand/product needs to be seen in as superior/different in

key ways, thus highlighting the need to focus on relevant points-of-

difference

When the firm enters an established and

mature market

In this case, the likelihood of switching is relatively lower, so points-of-

difference are required to break their habitual loyalty

When the firm and is a fast-growing market Fast-growing markets have primary demand (that is, first-time customers to

the market), therefore points-of-parity positioning will should be quite

successful in capturing new customers

When there is a diversity of needs, even when

looking at fairly narrow market segments

When there is significant diversity of consumer needs, a points-of-

difference positioning should ensure that reasonable market share is

generated

In a target market where the firm already

offers multiple products

To reduce the risk of cannibalization of sales, the firm would need to have

more emphasis on points-of-difference

In a relatively price sensitive market Our goal in this case would be to provide additional benefits, in order to

reduce the importance of price in the decision. Therefore, apoints-of-

difference positioning emphasis would be required

Source: http://www.segmentationstudyguide.com/understanding-perceptual-maps/points-of-difference-pod/

Examples: Bank POP’s

3.43

Brand Positioning

Example

2.44

Cola’s problem with diet carbonated soft drinks

3.45

Which positioning? Diet Coke (also known as Diet Coca-Cola, Coca-Cola light or Coke Light) is a sugar-

free soft drink produced and distributed by The Coca-Cola Company. It was first

introduced in the United States on August 9, 1982. In the UK, a 330 ml can of Diet Coke

contains around 1.3 calories (5 kilojoules) compared to 142 calories (595 kJ) for a regular

can of Coca-Cola.

In 2004, Coca-Cola introduced Coca-Cola C2, which it claims tastes much closer to Coca-

Cola but contains half the carbohydrates. But this version was named as ‘no man’s land’,

especially Coca Cola company was launching some varieties of “no harm cola” in the

following years

In 2005, under pressure from retailer Wal-Mart (which was impressed with the popularity of

Splenda sweetener), the company released a new formulation called "Diet Coke sweetened

with Splenda".

In 2005, the company introduced Coca-Cola Zero, a sugar-free variation of regular Coca-

Cola. 2007 Coca-Cola Cherry Zero and Vanilla zero were introduced. Many store shelves

completely replaced the Coca Cola C2, Coca Cola Splenda with Coca Cola Zero due to

display, shelving and storage limitations, and with the introduction of Coca Cola Cherry

Zero, the products disappeared from all store shelves where it had previously remained

By late 2009, some distributors had stopped supplying Diet Coke sweetened with Splenda.

And by 2010 Coca-Cola Zéro sans caféine (Caffeine Free Coca-Cola Zero) was released

3.46

Early ads of Coca Cola Zero

3.47

Coca Cola Zero New Ads

3.48

3.49

Brand Positioning Guidelines

Two key issues in arriving at the optimal

competitive brand positioning are:

A. Defining and communicating the competitive

frame of reference

B. Choosing and establishing points-of-parity and

points-of-difference

3.50

A. Defining and Communicating the

Competitive Frame of Reference Defining a competitive frame of reference for a brand positioning is to

determine category membership - “with which products or sets of

products does the brand compete?”.

The brand membership tells customer about the goal they might achieve by

using the product

The preferred approach to positioning is to inform consumers of a

brand’s membership before stating its point of difference in

relationship to other category members.

3 ways to convey brand category membership:

Communicating category benefits (reassure customers that brand will deliver

fundamental reason to use product category)

Comparing to exemplars (well-known, noteworthy brand in category)

Relying on the product descriptor(compact meand of conveying category origin)

Example: Comparing to Exemplars

3.51

Example: Product Descriptor

3.52

Example Category Benefits (POP’s)

3.53

3.54

B. Choosing POD’s

Desirability criteria (consumer perspective)

Personally relevant and important

Distinctive and superior – find the point of difference that is significantly

important for customers

Believable and credible

Deliverability criteria (firm perspective)

Feasible for the company to create product and marketing activities

Communicability: customer ‘decode’ the communication and perceive the

brand positively desirable associations

Profitable

Sustainability: is positioning Pre-emptive, defensible, and difficult to attack

Differentiation (relative to competitor) in order to be

effective

POD’s Criteria

Cereal+Milk+spoon

on the go. Do you like

the idea of warm milk?

3.55

Company:

Deliverability

Example POD’s

3.56

Example POD’s and POD’s ad

3.57

3.58

B. Establishing POP’s and POD’s

Challenge: Attribute and Benefit Trade-offs Price and quality

Convenience and quality

Taste and low calories

Efficacy and mildness

Power and safety

Ubiquity and prestige

Comprehensiveness (variety) and simplicity

Strength and refinement

Example: POP’s and POD’s are conflicting

It might be difficult to position the brand as inexpensive but at the same time assert

as the highest quality, or long heritage but not old-fashioned

The art and science of marketing is knowing how to deal with tradeoffs, or develop

product that perform well in both dimensions: e.g. BMW luxurius and performance

Example: BMW

3.59

3.60

Strategies to Reconcile

Attribute and Benefit Trade-offs

Establish separate marketing programs (e.g.

Launch two different marketing campaigns each

emphasize on different attribut/benefit – run

concurrently/sequentially)

Leverage secondary association (e.g., co-brand,

using endorser, sponsoring an event)

Re-define the relationship from negative to

positive – by developing a credible story with

which consumer can agree

Examples: Trade-offs

3.61

Updating Positioning over Time

Laddering: deepen the meaning of the brand to tap into core brand

associations. Brand laddering involves positioning of a brand from common

product attributes to more abstract values or concepts. Its moving from a

focus from product attributes to brand benefits.

Brand attributes: those descriptive features that characterize a product. The

physical properties of the product that in turn will deliver the desired benefits to

the consumer.

Brand benefit: personal value and meaning that consumer attach to a product

Reacting: to respond competitive challenges that threaten an existing

positioning

Do nothing

Go on defensive

Go on the offensive

3.62

Example: Laddering

3.63

Example: Laddering contd.

3.64

Attribute: easy to

cook and taste good

Benefit: Health

noodle/snack

Example: Reactions

3.65 offensive

defensive

3.66

Core Brand Association/Values

Set of abstract concepts or phrases (attributes and

benefits) that characterize the five to ten most important

dimensions of the mental map of a brand

Can serve asthe basis of brand positioning – in terms of

how they create points-of-parity and points-of-difference How to identify the core brand associations?

Mental map Core brand values Brand mantra Mental map: portrays in detail all salient brand association and responses

Example: Target Mental Map

3.67

Source: http://t2.gstatic.com/images?q=tbn:ANd9GcTPGBdB_uxiUo61KcGacgzJJFoYv02JdpzXV0I9RaBzth01-qy10Oj0yf12IQ

Example: Brand Association Map contd.

3.68 Source: http://www.nielsen-online.com/downloads/us/BAM_US.pdf

3.69

Brand Mantras An articulation of the “heart and soul” of the brand. Brand mantra is

the core DNA of the brand. It is what the brand stands for. And like DNA, brand’s mantra also remains constant.

similar to “brand essence” or “core brand promise”

Short three- to five-word phrases that capture the irrefutable essence or spirit of the brand positioning and brand values

Purpose: to ensure all employees and external marketing partners understand what the brand most fundamentaly is to represent to customer so they can adjust their action accordingly

example: McD brand philosophy: Food, Folks and Fun

Brand Mantra contd.

Your Brand Mantra is Desirable by customers and distinct from your

competition, your brand mantra is the rallying cry of employees and the

driver of customer

BM can provide guide about what products to introduce under brand, mental filter to screen marketing activities, help the brand present a consistent image, it also provides memorable shorthand as to what are the crucial considerations of the brand that should be kept most salient and top-of-mind; but it is not an advertising slogan, and, in most cases, it won’t be something company use publicly.

BM should be developed at the same time as Positioning, Considerations,

Communicate: define the category(ies) and clarify the uniqueness

Simplify: memorable “short, crisp, vivid”

Inspire: meaningful and relevant and tap into higher level meaning for employee+cust

3.70

3.71

Designing the Brand Mantra

BM must economically communicate what the brand is

and what it is not

The term brand functions describes the nature of the

product or service or the type of experiences or

benefits the brand provides.

The descriptive modifier further clarifies its nature.

The emotional modifier provides another qualifier—how

exactly does the brand provide benefits, and in what

way?

Example: Nike’s Brand Mantra Nike’s brand mantra put a particular emphasis

on maintaining authenticity, by which we also

meant integrity and purity, front and center… All

products and activities associated with Nike

likewise had to be athletic, not leisurely…

Finally, every Nike product had to exude world-

class performance and meet the demands of the

world’s finest athletes, even though such athletes

represented a microscopic piece of Nike’s total

business… “Authentic Athletic Performance” was

a simple idea, but like so many simple ideas, its

execution and implementation could be complex,

not to mention challenging, daunting, — and even

painful, when it came down to forgoing revenue-

generating activities because they violated these

accepted core values.

3.72

it kept the Nike brand on track, it

differentiated the brand from its main

competitor at the time (Reebok), and it

genuinely inspired Nike employees.

Example: Betty Crocker’s BM

Another example of a brand mantra

that was effective as a descriptive ad

tag line, Betty Crocker’s brand

mantra remarkably staked out

three points of difference (“quality,”

“family,” and a “rewarding baking

experience”) as well as a crucial point

of parity (“convenience”) at the same

time.

3.73

3.74

Designing the Brand Mantra

Emotional

Modifier

Descriptive

Modifier

Brand

Functions

Nike

Authentic

Athletic

Performance

Disney

Fun

Family

Entertainment

Fun

Folks

Food

Implementing Brand Mantra

Communicate: A good brand mantra should both define the

category (or categories) of the business to set the brand

boundaries and clarify what is unique about the brand

Simplify: An effective brand mantra should be memorable

(short, crisp and vivid. A three-word mantra is ideal because it

is the most economical way to convey the brand positioning

Inspire: ideally, the brand mantra should also stake out

ground that is personally meaningful and relevant to as many

employeesas possible. Brand mantra can do as information,

guide, and they can also inspire the employee as well as

customer

3.75

3.76

Internal Branding

Positioning the brand

internally; Members of the

organization are properly

aligned with the brand and

what it represents (and know

ho to apply brand mantra

into their activities!).

Crucial for service companies

(will be elaborated further in

session 9: Brand Culture)

Example: Ritz Carlton Internal Branding

At The Ritz-Carlton, our staff is the most important resource in

our service commitment to our guests. Our motto (Brand

Mantra) states that “We are Ladies and Gentlemen serving

Ladies and Gentlemen,” and in doing so we create

exceptional memories for our guests and for each other.

Warmth and genuine caring are the hallmarks of every Ritz-

Carlton employee. Every employee’s contribution is valued

and they are encouraged to fulfill individual aspirations. We

trust each employee to use their creativity and accommodating

personality to build strong relationships and provide a

memorable experience to each guest.

3.77

Source: http://corporate.ritzcarlton.com/en/Careers/WorkingAt.htm