Lecture 7-8

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Questions and Answers

What is the primary goal of strategic brand management?

To maximize brand value by building, measuring, and managing brand (correct)

To implement marketing activities that are not related to brand management

To focus solely on the emotional role of a brand

To create a unique brand identity and logo

What is the primary difference between a brand's functional and emotional roles?

The functional role is focused on emotional connections, while the emotional role is focused on practical needs

The functional role is focused on practical needs, while the emotional role is focused on emotional connections (correct)

The functional role is focused on product design, while the emotional role is focused on advertising

The functional role is focused on customer satisfaction, while the emotional role is focused on brand recognition

What is an example of a brand's functional role?

A product's ability to perform its intended function (correct)

A brand's logo and design

A brand's ability to create a sense of belonging

A customer's loyalty to a brand due to its emotional connection

What is the purpose of identifying and establishing brand positioning in strategic brand management?

To distinguish a brand from its competitors Signup and view all the answers

What is an example of branding in ancient history?

The use of trademarks on farm animals in ancient Egypt Signup and view all the answers

What is the primary focus of strategic brand management?

Building the brand after positioning choices have been made Signup and view all the answers

What is the primary characteristic of a 'House of brands' strategy?

Many individually named brands Signup and view all the answers

What is the term for the process of transferring certain associations indirectly by linking a brand to other entities?

Creating secondary brand associations Signup and view all the answers

What is the primary advantage of co-branding?

Greater sales from existing markets Signup and view all the answers

What is ingredient branding an example of?

A special case of co-branding Signup and view all the answers

What is the primary goal of designing a brand portfolio?

To minimize brand overlap and maximize market coverage Signup and view all the answers

What is the focus of brand reinforcement marketing actions?

Enhancing brand awareness and brand image Signup and view all the answers

What is the relationship between price and perceived quality?

Price has both a positive and negative function on perceived quality Signup and view all the answers

What is the purpose of reference prices in consumer psychology?

To compare an observed price with an internal price or external cue Signup and view all the answers

What is the impact of increasing a product's price on profits?

Increases profits at a disproportionately high rate Signup and view all the answers

What is the primary reason why customers perceive prices ending with a 9 as bargains?

Because they are perceived as being closer to the lower rounded number Signup and view all the answers

What is the main objective of a company that sets a price based on the maximum current profit?

To maximize current profits, ignoring long-term performance Signup and view all the answers

What is the term for the responsiveness of demand to changes in price levels?

Price elasticity Signup and view all the answers

What is the purpose of estimating costs in the pricing process?

To set the price floor Signup and view all the answers

What is the characteristic of a mark-up pricing method?

A standard mark-up is added to the product cost Signup and view all the answers

What is the primary limitation of mark-up pricing?

It ignores current demand, perceived value, and competition Signup and view all the answers

What is the key to successful perceived-value pricing?

Delivering more value than competitors and communicating this to customers Signup and view all the answers

What is the main characteristic of going-rate pricing?

It is based on competitors' prices Signup and view all the answers

What is the purpose of a sealed-bid auction?

To allow would-be suppliers to submit only one bid Signup and view all the answers

What is the primary goal of price-adaption strategies?

To reflect certain variations in the pricing structure Signup and view all the answers

What is the primary purpose of Loss-Leader Pricing?

To stimulate more store traffic Signup and view all the answers

What is an example of differentiated pricing?

Charging different prices for the same product in different regions Signup and view all the answers

What is an alternative to price increases?

Shrinking the amount of product instead of raising its price Signup and view all the answers

What is the availability heuristic?

A strategy for making predictions based on the ease of retrieving examples Signup and view all the answers

What is framing in the context of consumer behavior?

The method of presenting information to influence consumer choice Signup and view all the answers

What is the primary psychological mechanism behind the concept of loss aversion?

The tendency to overweight the importance of losses Signup and view all the answers

What is the main difference between the value function for gains and the value function for losses?

The value function for losses is steeper than the value function for gains Signup and view all the answers

Which of the following is an example of a framing effect?

A reward framed as a gain versus a penalty framed as a loss Signup and view all the answers

What is the primary difference between the two programs presented in the 'coronavirus problem'?

The probability of success in each program Signup and view all the answers

What is the expected value of program A in the 'coronavirus problem'?

200,000 people saved Signup and view all the answers

What is the primary psychological mechanism behind the concept of risk aversion in the domain of gains?

The tendency to overestimate the probability of gains Signup and view all the answers

What is the primary difference between the two versions of the 'coronavirus problem'?

The framing of the outcomes in each program Signup and view all the answers

What is the primary implication of prospect theory for decision-making?

People tend to make decisions based on the framing of the outcomes Signup and view all the answers

What is the primary difference between the domain of gains and the domain of losses?

The domain of gains is characterized by risk aversion, while the domain of losses is characterized by risk seeking Signup and view all the answers

What is the primary goal of message framing?

To influence people's decisions by framing the outcomes in a particular way Signup and view all the answers

Study Notes

Strategic Brand Management

Combines design and implementation of marketing activities to build, measure, and manage a brand to maximize brand value.
Consists of:
- Identifying and establishing brand positioning.
- Planning and implementing brand marketing.
- Measuring and interpreting brand performance.
- Growing and sustaining brand value.

What is a Brand?

A name, symbol, logo, design, or image that identifies a product or service and distinguishes it from competitors.
Adds value beyond functional performance.
Can evoke feelings of belonging, love, and affection.
Related to products, services, shops, people, places, organizations, groups, and ideas.

Roles of a Brand

Two main roles:
- Functional: Focus on the tangible, rationally assessed performance and benefits that satisfy customers' practical needs.
- Emotional: Ability to build emotional ties with customers, engaging them and creating a deep, lasting connection.

Brand Identity and Brand Image

Brand Identity: The way a company aims to identify or position itself or its products/services in the minds of consumers.
Brand Image: The way consumers perceive the visual or verbal expressions of a brand, reflected in psychological or emotional associations.

Brand Management Program

Focuses on building the brand after positioning choices have been made.
Consists of six focal activities:
- Creating and managing brand identities.
- Managing individual or house brand names.
- Managing brand extensions.
- Managing brand portfolios.
- Brand reinforcing and revitalization.
- Growing and sustaining brand equity.

Creating and Managing Brand Identities

Three main challenges:
- Making initial brand identity choices (e.g., selecting brand names, logos, symbols).
- Aligning marketing mix activities to support the brand.
- Creating secondary brand associations.

Brand Elements

Devices that identify and differentiate a brand, which can be trademarked.
Six key criteria for choosing brand elements:
- Three brand-building criteria.
- Three defensive criteria.

Brand Slogans and Brand Mantras

Brand Slogans: Communicate what the brand is and what makes it special, enhancing customers' emotional attachment.
Brand Mantras: Articulation of a brand's heart and soul, capturing its essence or spirit.

Managing Individual or House Brand Names

Four options:
- Individual brand names (House of brand).
- Blanket family names (Branded house).
- Separate family or house names.
- Corporate name combined with individual product name.

Co-Branding

Two or more well-known brands combined into a joint product or marketed together.
Advantages:
- Greater sales from existing markets.
- Opportunities for new markets and channels.
- Reduces costs and speeds adoption.
Disadvantages:
- Lack of control in aligning with another brand.
- Unsatisfactory performance can have negative consequences.

Ingredient Branding

Special case of co-branding, creating brand equity for materials, components, or parts within other branded products.

Brand Extensions

Two categories:
- Line extensions: Covering a new product/service within an existing product/service category.
- Category extensions: Covering a new product/service from a different product/service category.
Advantages and disadvantages of brand extensions.

Brand Portfolios

The set of all brands in a particular category or market segment.
Key principle: Maximize market coverage while minimizing brand overlap.
Each brand should be clearly differentiated and appeal to a sizable enough market segment to justify marketing and production costs.

Brand Reinforcing and Brand Revitalization

Brand Reinforcement: Marketing actions that consistently convey the brand meaning.
Brand Revitalization: Old positioning of a brand is changed and reinvented, refreshing or identifying new sources of brand equity.

Brand Equity

The added value endowed on products and services through the brand.
Can be understood from the perspective of tangible financial assets or intellectual and emotional associations.

Brand Resonance Model

The process by which a brand builds a strong, lasting relationship with customers.

Brand Associations

Brands can be used to trigger associations in customers' minds.
These associations can enable customers to construe a psychosocial meaning.

Brand Personality

The set of human characteristics associated with a brand.
Connects the brand to self-perception and self-identity.

Pricing Strategies

An ideal price cannot be identified by only focusing on production costs or competitors' prices.
Pricing should be based on the value of a company's offerings to customers.

Consumer Psychology and Pricing

Reference prices: Consumers compare an observed price with an internal price or external cue.
Price-quality inferences: Many customers use price as a mental shortcut to perceive quality.
Price endings: Manipulating what counts as a reference price.
Prospect theory: Losses loom larger than gains.

Value Function

The original data.
The "coronavirus" problem: Which program would you choose?

Pricing Cues

Odd number pricing: Prices ending with a 9 are perceived as bargains.
Scarcity effect: Products that are difficult to reach or exist in limited quantity are perceived as more valuable.

Pricing Objectives

Survival: A short-term objective where prices are set just above company costs.
Maximum Current Profit: Prices set to maximize current profits.
Maximum Market Share: Prices set low to generate higher sales volumes and gain market share.
Maximum Market Skimming: Prices start high and decline over time.
Product-Quality Leadership: Prices set to reflect a leadership role in product quality.

Pricing Models

Three major considerations: costs, competitors' prices, and customers' assessment of unique features.
Six common price-setting methods:
- Mark-up pricing.
- Target-return pricing.
- Perceived-value pricing.
- Value pricing.
- Going-rate pricing.
- Auction-type pricing.

Price Discounts and Allowances

Companies adjust their prices and give discounts and allowances for early payment, volume, and off-season buying.

Promotional Pricing

Loss-leader pricing: Dropped prices on well-known brands to stimulate more store traffic.
Special-event pricing: Special prices during certain seasons to draw customers.
Cash rebates: Time-specific rebates to encourage purchases.
Low-interest financing: Instead of lower prices, low-interest financing can be an option.

Differentiated Pricing

Customer-segment pricing: Different customer groups pay different prices for the same product or service.
Product-form pricing: Different versions of the product are priced differently.
Image pricing: The same product is priced at two different levels based on image differences.
Channel pricing: Price is channel-adjusted.
Location pricing: Price is location-adjusted.
Time pricing: Price is varied by season, day, or hour.

Initiating and Responding to Price Changes

Initiating price increases: Often done due to cost inflation, sometimes through anticipatory pricing.
Responding to competitors' price changes: Its complex and situation-specific, considering various aspects.

Behavioral Decision Theory and Behavioral Economics

Emphasize that consumers' preferences are contextually sensitive and can be constructed on the spot.
Heuristics: Availability, representativeness, and anchoring-and-adjustment.
Framing: Presenting information in different but objectively identical ways can influence consumers' choice behavior.### Mark-Up Pricing
A company can earn a 500% mark-up on sales by calculating the mark-up price using the formula: Mark-up Price = Unit cost / (1 – Desired Return on Sales)
The mark-up price is 40$ if the unit cost is 20$ and the desired return on sales is 500%
Standard mark-ups may lead to suboptimal prices if they ignore current demand, perceived value, and competition

Target-Return Pricing

The target-return price is calculated using the formula: Target-Return Price = Unit Cost + (desired Return x Invested Capital) / Unit sales
Example: If the unit cost is 30$, invested capital is 2 million$, and the desired return on investment is 30%, the target-return price is 36$

Perceived-Value Pricing

Pricing is based on customer-perceived value, considering factors such as product performance, delivery time, warranty quality, customer support, and reputation
Companies can set premium prices if customers perceive added value, but some customers prioritize low prices

Value Pricing

Companies charge a relatively low price for a high-quality offering to win loyal customers
Everyday Low Pricing (EDLP) involves constant low prices with few promotions, while High-Low Pricing involves higher everyday prices with frequent promotions

Going-Rate Pricing

Pricing is based on competitors' prices, charging the same, slightly lower, or slightly higher
Firms tend to follow the market leader's prices, especially in industries with a small number of sellers

Auction-Type Pricing

English Auctions involve ascending bids, while Dutch Auctions involve descending bids
Sealed-Bid Auctions involve one-time bids without knowledge of other bids

Pricing Structure

Companies develop a pricing structure that reflects variations, including:
- Geographical Pricing, which considers customer location and payment methods
- Price Discounts and Allowances
- Promotional pricing
- Differentiated Pricing

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Test your knowledge on strategic brand management, including brand positioning, marketing, performance measurement, and value growth. Learn how to design and implement marketing activities to maximize brand value.