1. Ashesi University COURSE TITLE : STRATEGIC BRAND MANAGEMENT SEMESTER 2 : SPRING 2016 MODULE 2: What is Customer Based Brand Equity? Lecturer: Ebow Spio

2. Learning Outcomes Explain the concept of customer based brand equity Understand what makes a strong brand Learn how to build a strong brand Appreciate what it entails to create value for customers.

3. 1.3 The Brand Equity Concept 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.

4. 2.4 Customer-Based Brand Equity (CBBE) Model CBBE Model provides a unique point of view of what brand equity is and how it should be built, measured and managed. CBBE approaches brand equity from the perspective of the consumer The basic premise of the CBBE model is that the power of a brand lies in what customers have learned, felt, seen and heard about the brand as a result of their experiences over time ……the power of a brand resides in the minds of customers

5. 2.5 Customer-Based Brand Equity Customers-Based Brand Equity is defined “ as the differential effect that brand knowledge has on consumer response to the marketing of that brand.” Keller, 1993

6. 2.6 Customer-Based Brand Equity Differential effect – Differences in consumer response Brand knowledge – A result of consumers’ knowledge about the brand Consumer response to marketing – Choice of a brand – Recall of copy points from an ad – Response to a sales promotion – Evaluations of a proposed brand extension

7. 2.7 Brand Equity as a “ Bridge ” Reflection of past investments in the marketing of a brand Direction for future marketing actions or programs The brand knowledge that marketers create over time dictates appropriate and inappropriate future directions for the brand.

8. 2.8 Making a Brand Strong: Brand Knowledge Brand knowledge is the key to creating brand equity. Brand knowledge consists of a brand node in memory with a variety of associations linked to it. Brand knowledge has two components: brand awareness and brand image.

9. 2.9 Sources of Brand Equity Brand awareness is a measure of the consumer’s ability to identify the brand under different conditions – Brand recognition – Brand recall Brand image : Consumer’s perception of a brand as reflected by the brand associations held in consumer memory – Strong, favorable, and unique brand associations

10. 2.10 Brand Awareness Advantages Learning advantages – Register the brand in the minds of consumers 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

11. 2.11 Establishing Brand Awareness Increasing the familiarity of the brand through repeated exposure (for brand recognition) Forging strong associations with the appropriate product category or other relevant purchase or consumption cues (for brand recall)

12. 2.12 Creating a Positive Brand Image Brand Associations – Does not matter which source of brand association – Need to be favorable, strong, and unique – Marketers should recognize the influence of these other sources of information by both managing them as well as possible and by adequately accounting for them in designing communication strategies.

13. Creating a Positive Brand Image 1.Strength of Brand Association : The more deeply a person thinks about product information and relates to its existing knowledge, the stronger the resulting brand association will be. - Personal Relevance and consistency with which is presented over time. 2.Favourability of Brand Associations: Those associations that are desirable to consumers (convenient, reliable, effective, efficient, colourful) successfully delivered by the product, and conveyed by the supporting marketing programme. 3.Uniqueness of Brand Associations: Associations not shared with competing brands

14. 2.14 Building a Strong Brand: The Four Steps of Brand Building 1.Ensure identification of the brand with customers and an association of the brand in customers’ minds 2.Establish the totality of brand meaning in the minds of consumers 3.Elicit the proper customer responses to the brand identification and brand meaning 4.Convert brand response to create an intense, active loyalty relationship between customers and the brand

15. 2.15 Four Questions Customers ask of Brands 1.Who are you? (brand identity) 2.What are you? (brand meaning) 3.What about you? What do I think or feel about you? (brand responses) 4.What about you and me? What kind of association and how much of a connection would I like to have with you? (brand relationships)

16. 2.16t Customer-Based Brand Equity Pyramid RESONANCE SALIENCE JUDGMENTS FEELINGS PERFORMANCE IMAGERY 4. RELATIONSHIPS = What about you and me? 4. RELATIONSHIPS = What about you and me? 3. RESPONSE = What about you? 3. RESPONSE = What about you? 2. MEANING = What are you? 2. MEANING = What are you? 1. IDENTITY = Who are you? 1. IDENTITY = Who are you?

17. Sub-Dimensions of CBBE Pyramid LOYALTY ATTACHMENT COMMUNITY ENGAGEMENT QUALITY CREDIBILITY CONSIDERATION SUPERIORITY WARMTH FUN EXCITEMENT SECURITY SOCIAL APPROVAL SELF-RESPECT CATEGORY IDENTIFICATION NEEDS SATISFIED PRIMARY CHARACTERISTICS & SECONDARY FEATURES PRODUCT RELIABILITY, DURABILITY & SERVICEABILITY SERVICE EFFECTIVENESS, EFFICIENCY & EMPATHY STYLE AND DESIGN PRICE USER PROFILES PURCHASE & USAGE SITUATIONS PERSONALITY & VALUES HISTORY, HERITAGE & EXPERIENCES

18. 2.18 Salience Dimensions Depth of brand awareness – Ease of recognition and recall – Strength and clarity of category membership Breadth of brand awareness – Purchase consideration – Consumption consideration

19. 2.19 Depth and Breadth Importance The product category hierarchy shows us not only the depth of awareness matters but also the breadth. The brand must not only be top-of-mind and have sufficient “mind share,” but it must also do so at the right times and places.

20. 2.20 Product Category Structure To fully understand brand recall, we need to appreciate product category structure, or how product categories are organized in memory. A highly salient brand is one that has both depth and breadth of brand awareness, such that customers always make sufficient purchases as well as always think of the brand across a variety of settings in which it could possibly be employed or consumed.

21. 2.21 Brand Meaning: Brand Performance Dimensions Brand Performance: How well the product or service meets customer’s more functional needs (e.g. utilitarian, aesthetic & economic needs). Primary characteristics and supplementary features Product reliability, durability, and serviceability Service effectiveness, efficiency, and empathy Style and design Price NB: Often, the strongest brand positioning relies on performance advantages of some kind, and it is rare that a brand can overcome severe performance deficiencies.

22. 2.22 Imagery Dimensions User profiles – Demographic and psychographic characteristics – Actual or aspirational – Group perceptions — popularity Purchase and usage situations – Type of channel, speciafic stores, ease of purchase – Time (day, week, month, year, etc.), location, and context of usage Personality and values – Sincerity, excitement, competence, sophistication, and ruggedness History, heritage, and experiences – Nostalgia – Memories

23. 2.23 Brand Response: Brand Judgment Dimensions Brand quality – Value – Satisfaction Brand credibility – Expertise (competent, innovative and market leader) – Trustworthiness (dependable and keeping customer interest in mind) – Likeability (fun, interesting and worth spending time with) Brand consideration – Relevance Brand superiority – Differentiation (extent to which it is unique and better than other brands) Brand Judgments are customers’ personal opinions about and evaluations of the brand, which consumers form by putting together all the different brand performance and imagery associations. It is more rational or about the HEAD

24. 2.24 Brand Feelings Dimensions Brand feelings are customers’ emotional responses and reactions to the brand. Feeling also relates to the social currency evoked by the brand Types of Brand-Building Feelings Warmth Fun Excitement Security Social Approval Self-respect

25. 2.25 Brand Resonance Dimensions Brand Resonance is the ultimate relationship and level of identification that the customer has with the brand. Resonance is characterized in terms of intensity, or the depth of the psychological bond that customers have with the brand, as well as the level of activity engendered by this loyalty Behavioral loyalty – Frequency and amount of repeat purchases Attitudinal attachment – Love brand (favorite possessions; “a little pleasure”) – Proud of brand Sense of community – Kinship – Affiliation Active engagement – Seek information – Join club – Visit website, chat rooms

26. Customer-Based Brand Equity Model Consumer- Brand Resonance Brand Salience Consumer Judgments Consumer Feelings Brand Performance Brand Imagery INTENSE, ACTIVE LOYALTY RATIONAL & EMOTIONAL REACTIONS POINTS-OF- PARITY & POINTS-OF- DIFFERENCE DEEP, BROAD BRAND AWARENESS

27. Brand Resonance : Apple Brand Loyalty

29. 2.29 Brand Building Implications Customers own brands : The strongest brands are those which consumers become so attached and passionate about that in effect, become evangelists. The power of the brand and its ultimate value to the firm reside with customers. Don’t take shortcuts with brands : A great brand is not built by accident but is the product of carefully accomplishing a series of logically linked steps with consumers. Brands should have a duality : A strong brand appeals to both the head and the heart. It blends product performance and imagery to create a rich, varied but complementary set of consumer responses to the brand. Brands should have richness : There are number of possible ways to create meaning with consumers and range of possible avenues to elicit consumer responses. Brand resonance provides important focus : Pinnacle of effort to build a strong brand should engage the attention of marketers in decision making.

30. 2.30 Creating Customer Value Customer-brand relationships are the foundation of brand resonance and building a strong brand. The customer-based brand equity model certainly puts that notion front and center.

31. 2.31 Customer Equity The sum of lifetime values of all customers Customer lifetime value (CLV) is affected by revenue and by the cost of customer acquisition, retention, and cross-selling Consists of three components: – Value equity : Customer’s objective assess of the utility of a brand. Drivers are quality, price and convenience. – Brand equity : Customers’ subjective and intangible assessment of the brand above and beyond its objectively perceived value. Drivers are customer brand awareness, customer brand attitudes and customer perception of brand ethic – Relationship equity : Customers tendency to stick with the brand over and above objective and subjective assessments of the brand. Drivers are loyalty programmes, special recognition and treatment programmes, community building programmes and knowledge- building programmes. Rust, Zeithamal & Lemon, 2004

32. 2.32 Customer Relationship Management (CRM) Customer relationship management (CRM) is the overall process of building and maintaining profitable customer relationships by delivering superior value and satisfaction Uses a company’s data systems and applications to track consumer activity and manage customer interactions with the company

33. 2.33 Customer Equity Blattberg and Deighton (1996) offer eight guidelines as a means of maximizing customer equity: – Invest in highest-value customers first – Transform product management into customer management – Consider how add-on sales and cross-selling can increase customer equity – Look for ways to reduce acquisition costs – Track customer equity gains and losses against marketing programs – Relate branding to customer equity – Monitor the intrinsic retainability of your customer – Consider writing separate marketing plans—or even building two marketing organizations—for acquisition and retention efforts

34. 2.34 Relationship of Customer Equity to Brand Equity Customers drive the success of brands but brands are the necessary touchpoint that firms have to connect with their customers. Customer-based brand equity maintains that brands create value by eliciting differential customer response to marketing activities. The higher price premiums and increased levels of loyalty engendered by brands generate incremental cash flows.

35. Key Points 1.Customer-based brand equity is the differential effect of brand knowledge on consumer response to the marketing of a brand. 2.Positive brand equity results when consumers are familiar with the brand and have strong, favorable and unique associations for it. 3.The power of the brand and its ultimate value to the firm resides with customers.

36. Tutorials 1.Pick a brand. Attempt to identify its sources of brand equity. Assess its level of brand awareness and the strength, favorability, and uniqueness of its associations. 2. Pick a brand. Assess the extent to which the brand is achieving the various benefits of brand equity. 3. Bring in or have students bring in examples of consumer sales promotions. Analyze each in terms of its ability to build or bash brand equity. Suggest alternative promotion ideas. Pick the best and worst of the lot and explain what makes them good or bad.