1 9 Creating Brand Equity

A Brand-new World

Chapter Questions What is a brand and how does branding work? What is brand equity? How is brand equity built, measured, and managed? What are the important decisions in developing a branding strategy?

Brand A name, term, sign, symbol or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. Brand

Financial Values of Strong Brands Akuisisi Rowntree oleh Nestle (Juni 1988; The New York Times, 24 Juni 1988) Akuisisi Kraft oleh Philip Morris (Oktober 1988; Coll, 1988) Philip Morris dan Nestle bersedia membayar lebih dari 6 kali lipat dan 5 kali lipat dari nilai buku perusahaan (book value) dari masing-masing perusahaan yang dibelinya karena brand Kraft dan Rowntree dianggap mempunyai nilai ekonomis yang sangat besar. Building and Sustaining Brand Equity © Ike Janita Dewi

The World’s Most Valuable Brands (2008) No Name of Brands Valuation Country of Origin 1. COCA-COLA 65,324 U.S 2. MICROSOFT 58,709 3. IBM 57,091 4. GE 51,569 5. NOKIA 33,696 Finland 6. TOYOTA 32,070 Japan 7. INTEL 30,954 8. McDONALD’S 29,398 9. DISNEY 29,210 10. MERCEDES-BENZ 23,568 Germany

1. Global Branding Strategies: World’s Most Valuable Brands (@Interbrand 2010) Chapter 12

Figure 9.7 Interbrand Brand Valuation Method Top brand-management firm Interbrand has developed a model to formally estimate the dollar value of a brand. It defines brand value as the net present value of the future earnings that can be attributed to the brand alone. The firm believes marketing and financial analyses are equally important in determining the value of a brand. Its process follows five steps as shown in Figure 9.7. 1. Market Segmentation—The first step is to divide the market(s) in which the brand is sold into mutually exclusive segments that help determine variances in the brand’s economic value. 2. Financial Analysis—Interbrand assesses purchase price, volume, and frequency to help calculate accurate forecasts of future brand sales and revenues. 3. Branding—Interbrand next attributes a proportion of Intangible Earnings to the brand in each market segment, by first identifying the various drivers of demand, then determining the degree to which the brand directly influences each. 4. Brand Strength—Interbrand then assesses the brand’s strength profile to determine the likelihood that the brand will realize forecasted Brand Earnings. Lastly we have the Brand Value Calculation—Brand Value is the net present value (NPV) of the forecasted Brand Earnings, discounted by the Brand Discount Rate.

Asian Brands The brutal truth is that branding is misunderstood by decision-makers in Asia (excluding Japan) There exists widespread misconceptions and, in many cases, a certain degree of ignorance over the value and role of brands as well as the process required to build them. Surveys confirm that Asians from across the region prefer Western brands to homegrown ones. The continued absence of genuinely great Asian brands will slow the Asian prospect.

A Brand is not made in the factory but in the mind of the consumers

Attributes of Strong Brands Excels at delivering desired benefits Stays relevant Priced to meet perceptions of value Positioned properly Communicates consistent brand messages Well-designed brand hierarchy Uses multiple marketing activities Understands consumer-brand relationship Supported by organization Monitors sources of brand equity

The Role of Brands Identify the maker Simplify product handling Organize accounting Offer legal protection Signify quality Create barriers to entry Serve as a competitive advantage Secure price premium

Branding Endowing products and services with the power of a brand.

Brand Equity The differential effect that brand knowledge has on consumer response to the marketing of that brand.

Brand Associations Strong Unique Favorable

Marketing Advantages of Strong Brands Improved perceptions of product performance Greater loyalty Less vulnerable to competition Less vulnerable to crises Larger margins Inelastic consumer response to price increases Elastic consumer response to price decreases Greater trade cooperation Increase in effectiveness of IMC Licensing opportunities Brand extension opportunities

Brand Promise The marketer’s vision of what the brand must be and do for Consumers.

Brand Equity Models Brand Asset Valuator Aaker Model BRANDZ Brand Resonance

Brand Resonance Pyramid (Keller, 2002)

Rational & Emotional Routes to Brand Building

Drivers of Brand Equity Brand elements Marketing activities Meaning transference

Brand Element Choice Criteria Memorable Meaningful Likeability Transferable Adaptable Protectible

Brand Elements Brand names Slogans Characters URLs Logos Symbols

Slogans Like a good neighbor, State Farm is there Just do it Nothing runs like a Deere Help is just around the corner Save 15% or more in 15 minutes or less We try harder We’ll pick you up Nextel – Done Zoom Zoom I’m lovin’ it Innovation at work This Bud’s for you Always low prices

Innovative slogan

Strong slogan to support a brand

Designing Holistic Marketing Activities Brands are not built by advertising alone. Brand building marketing programs: Personalization Integration Internalization

The Importance of After-Sales Support in Consumer Decision Journey Welcome to Apple Genius Bar. The Genius Bar is a tech support station located inside every Apple Retail Store, the purpose of which is to offer help and support for Apple products. Ron Johnson, the Senior Vice President for Retail, has often referred to the Genius Bar as the "heart and soul of our stores". Employees are specially trained and certified at the Genius Bar. Their role is to help customers with Apple hardware and software. All in-store repairs of Apple products are carried out by "Geniuses", formerly known as Mac Geniuses.

Managing Brand Experience: Nike+ Experience

Measuring Brand Equity Brand audits Brand tracking Brand valuation

Interbrand’s Brand Equity Formula Brand earnings Brand sales Costs of sales Marketing costs Overhead expenses Remuneration of capital charge Taxation Brand strength Leadership (25%) Stability (15%) Market (10%) Geographic spread (25%) Trend (10%) Support (10%) Protection (5%)

Managing Brand Equity Brand reinforcement Brand revitalization Brand crises

Devising a Branding Strategy Develop new brand elements Apply existing brand elements Use a combination of old and new

Branding Terms Brand line Brand mix Brand extension Sub-brand Parent brand Family brand Line extension Category extension Branded variants Licensed product Brand dilution Brand portfolio

Brand Extensions Advantages - New-Product Success - Positive Feedback Effects Disadvantages - Brand Dilution - Cannibalization

Brand Naming Individual names Blanket family names Separate family names Corporate name/individual name combo

Brand Roles in a Brand Portfolio Flankers Cash cows Low-end entry-level High-end prestige

Everything can be branded! Building and Sustaining Brand Equity © Ike Janita Dewi

Building a Strong Service Brand: Lessons from Mayo Clinic Mayo Clinic has developed one of the most powerful service brands in the world. Three branding lessons: 1. attend to organizational values. 2. play defense, not just offence 3. turn customers into marketers Berry and Seltman (2007), Building a Strong Service Brand: Lessons from Mayo Clinic, Kelley School of Business, www. elsevier.com/locate/bushor

A Service Branding Model Organization’s Presented Brand Brand Awareness Brand Equity External Brand Communications Customer Experience with Organization Brand Meaning Berry and Seltman (2007), Building a Strong Service Brand: Lessons from Mayo Clinic, Kelley School of Business, www. elsevier.com/locate/bushor

Service Branding Model vs Goods Branding Model Customers’ actual experiences are salient in both models. But, for labor-intensive services those experiences are primarily with people rather than manufactured goods. In services, it is the organization that’s typically branded (because the experience comes from the organization). For physical goods, the product is the brand.