Brand Management PDF

BRAND MANAGEMENT [email protected] 1st quizz: Oct 4th - 10% 2nd quiz: Oct 28th - 10% PP delivery (Team project...

BRAND MANAGEMENT [email protected] 1st quizz: Oct 4th - 10% 2nd quiz: Oct 28th - 10% PP delivery (Team project): Limit Nov 3rd - 20% Final evaluation (written case study): Dec 3rd - 60% SESSION 1 Introduction / Importance of Brand Management → Shifting consumer trends Have become more sophisticated Shift towards hedonic and symbolic consumption ○ You’re getting something extra for the product Self-concept and self-image have become increasingly important Resulted in increased focus on creation of brand meanings and customer-brand relationships → Information technology and the Internet Rise of information technology and the Internet New ways of promoting and experiencing brands Competitive offerings of online brands versus non online brands At the same time it has become a threat to brands; rumours, false information, propaganda → Social and environmental issues Growing importance of ecology and environmental issues Clear effects on creating brand loyalty and shaping corporate culture → Cultural diversity and global mobility Strong impact of global mobility on brand management Important to identify, capture, develop and retain niche markets Culturally diverse markets – acceptability and rejection of brands Definition of Brands BRAND: A name, symbol, design or mark that enhances the value of a product beyond its functional purposes (Furquhar, 1989) A brand is not just a logo or a strap line, it is how your customers perceive your business Functional + Emotional / Intangible Brand has 2 levels 1. Core level - Product : Anything which satisfies a need. It can be divided in 2 categories 1) Services (intangibles - education, transportation, tourism) 2) goods (physical existence - computer, car, shoes) - Durable : we buy it once, and we can use it for a longer period of time - Perishable: very short shelf life (dairy products) - FMCGis (fast moving consumer goods) : shampoo, toothpaste 2. Emotional or intangible associations A product can exist without a brand but a brand cannot exist without a product A brand is more than a product → Products Attributes (Coke has a curvy glass bottle)  Uses (Apple computers are great for graphical applications) Quality/ value (Marks & Spencer delivers quality products) ○ Value: Price + Quality Functional benefits (Tesco provides extra value) → In addition to above a brand includes User imagery (those who wear designer clothes) Country of origin (Audi has German craftsmanship) Organisational association (3M is an innovative company) Brand personality (Marlboro cowboy) Self-expressive (Nike is sporty) Emotional benefits (Maserati makes it drive feel sporty and sophisticated) Importance of brands → A brand creates more favourable view of product, relative to others in the market → Branding is even more important for durable products → For marketing managers Difficult to compete merely on products ○ We should focus on brands Products and services are relatively easy to imitate Building on-going relationship between the company and the customer Premium pricing Price is a competitive tool → For consumers Branding is an important value-added aspect of products or services It often serves to denote a certain quality or characteristics Differentiation is crucial For some consumers: High prices mean high quality products (Price is the highest indicator of quality) Functions of Brands → Efficiency of information Facilitate information process by providing information regarding manufacturer and the origin of the product Help customers to repeatedly find trusted brands → Reduction of Risk Help customers to reduce risk of wrong purchase Monetary risk, functional risk, social risk, etc. Provide reassurance regarding negative effects of purchase → Image benefit creation Brands are a way to emotional and self-expressive needs Feeling safe in a Volvo Comfortable and “at home” at Starbucks Brand Relationships → Brands can be viewed as relationships → It is the promise a company makes to its current and future customers → Relationship is based on trust, fulfilment of promises and common values → Relationships change as needs change Buyers can become footloose Find new interests Become bored with their usual habits → Brands can Stagnate and focus on new customers Change in their essence → Brand relationship is also fragile → Brands can suffer chronic damage through Failure to deliver promises  Unreliability Failure to deliver on specifications → Implicit specifications also need to be taken care of Quality and implicit service promise Involvement of distribution channels → Surviving over longer periods of time through quality and innovations → Examples of selling same products for more than 100 years through marketing https://www.youtube.com/watch?v=Tz-47sI-AYM Metaphors of Branding → Metaphors are the basic frames or orientations we have towards the world around us → Shape the way we engage with the world → Are a good way to learn about customer emotions To understand a negative feeling towards a brand, advertisement or scent, it is important to discover whether shame, guilt, or some other thing is creating the adverse or negative feeling → Provide the basic foundation for the brand stories → Deep metaphors are shared by the customers who may be very different on the surface → Coke studio; Michelin tire container ​ http://www.youtube.com/watch?v=mGFe07 Ro7r0 ​ https://www.youtube.com/watch?v=gzLIaGCjw6s&ab_channel=CokeStudioAfrica Brand Components → Brand identity Strategic goal for a brand Aspirational from brand owner’s point of view → Brand image What currently resides in the minds of consumers → Brand position The process by which companies try to create an image or identity in the minds of consumers Also relative and competitive comparison in a given market → Brand equity An asset to the firm Preference in the marketplace, adding value to products and services, charging premium pricing Types of Brands → Generic Brands Names used like common names Hoover, Paracetamol → Manufacturer's or national brands Made by manufacturer Coca Cola, Pepsi, Toyota → Private or Supermarket brands Many manufacturers produce for retailers who put their own names on the products Tesco’s cola, Carrefour brands → Captive Brands National brands exclusively sold by a retail chain e.g., Marks & Spencer ○ All luxury brands are captive brands Branding Decisions → Brand strategy Whether to brand a product or not  Nature of the product, types of the outlets, perceived advantages and costs of branding Whether to add or maintain brands with the company’s portfolio Whether to create new brands or use existing brand elements (symbols, colours, packaging, etc.) → Brand naming Selecting a name Needs to be relevant to both product and audience Should be able to generate favourable associations Different types of brand names (Initialism, descriptive, suggestive, free-standing, Founders, etc. ) Simple, positive meaning, easy to understand Value = ( Functional value + emotional value ) Brand = reputation → Brand sponsorship Whether the company should manufacture the brand itself Whether to use a private label/brand Or to combine both → Brand portfolio Concerns a multi-product company Mostly FMCGs like Nestlé operating in a multi-product market e.g., coffee, baby products, chocolates, etc. Must be managed in a way that each brand is distinct, has differentiated value and unique image These products may also be competing with each other → Brand positioning / repositioning Attaching a permanent meaning and relevance to the product in the minds of consumers It determines what kind of value the brand will deliver Repositioning is an effort to redefine its value to customers Branding in the Internet Age → Information technology implications Branding used to be a welcome effect  Decreased role of traditional channels i.e., point-of-sale, promotions, local media, etc. Branding has become the key It allows a company to focus on fewer marketing points (relationships and branding) The companies on social media are exposed to unwanted situations → Online branding First, companies thought that new brands need to created for the “dotcom” age Now, realised that it may be too expensive hence old and trusted ones need to be adapted to the new environment Consumers are more willing to engage in ecommerce with known brands → Online brands versus offline brands Operating only in virtual environment Operating only in physical environment Operating in both Brand management is almost same The internet can prove a very powerful tool for building brands It can transmit information, impart experiential associations and leverage on other brand building programs Increased market transparency Ease of access to information and much more Marketing Ethics and Sustainability of Brands → Key challenges Environment and social responsibility through marketing and brand ethics Growing importance in creating brand loyalty and corporate culture Marketing versus sustainability i.e., selling more versus consuming less → Some solutions Marketing needs to move away from the traditional approach of considering volume increase as the only route to great profitability  It needs to focus on what matters to consumers and how companies perform on these attributes SESSION 2 Introduction Brand is more than a product It provides emotional and symbolic value above the functional value to consumers Brands have become part of consumers’ life and they are ready to pay higher prices Brand managers realized ○ Significant contribution of brands ○ Ability to charge premium pricing ○ Increase customer confidence ○ Create customer loyalty As a result, the concepts of brand equity and brand valuation emerged What is Brand Equity Brands are seen as valuable assets to the company A brand is a ○ A trademark (in technical terms) ○ Includes value attached to it that can make profits, increase market share and enhance organizational performance The sum of value is called “brand equity” Brand equity is defined as ○ “the set of associations and behavior on the part of a brand’s customers, channel members, and parent corporation that permits the brand to earn greater volume or greater margins and achieve company’s objectives than it could without the brand name” (Leuthesser, 1988) ○ Value attached to the brand ○ Definition: Financial value of what your stakeholders think about you This partly explains why brands have been added to company’s balance sheet In 1988, Nestlé paid six times of the book value for acquisition of brands; for example, ○ Kit Kat  ○ Quality Street ○ Smarties, etc. Implications of Leuthesser’s definition ○ Unless, a brand earns a high volume of sales and high margins the brand has no value ○ The definition only takes into account financial value of the brand Brand equity should be examined at three levels (Kapferer, 2004) What you spend in branding is an investment, not an expense → Brand Assets Awareness ○ How many people know about your brand Saliency Image Relationship Patents → Brand Strength Market share Market leadership Loyalty rate Price premium Growth rate → Brand Value Net discounted cash flow attributable to brand After paying the cost of capital The Financial Brand Valuation Methods The very first brand valuation done by Interbrand in mid 80s for Rank Hovis Mcdougall The approach was a ranking one It reflected the developments in the previous year and how it affected the company’s brand value Brands on the balance sheet ○ In London Stock Exchange, it was allowed in 1989 to have intangible assets on the balance sheet  Not all companies take brand on their balance sheet ○ MCDonald’s - no ○ Burger King , LV, Prada, L’Oréal, Gucci - yes ○ Issues with valuation methods → The cost-based method One of the simplest methods Value of brand is equal to cost of product development, test marketing, and marketing communication It includes historical costs – the resources that have already been invested in brand Also considers the amount of money that will be required to replace a brand It seeks to measure future benefits by assessing the amount to create a similar brand from a scratch Based on expert opinion and guesswork It might be subjective It may put excessive value on unsuccessful brands with huge expenditure Other issues may be related to the time period over which accounting needs to be done → The market approach Based on the amount customer or the market is willing to pay for the brand For marketer, it looks at the future benefits The evaluations tend to be hypothetical Can be calculated from a company’s stock market capitalization or market value This method ignores the customers’ reasons behind purchase which may be personal It assumes that the stock price of a company will reflect the brand value and is calculated as ○ Brand Value = (stock price x number of shares) – (tangible assets + all remaining intangible assets) → Comparable Based on something comparable It could be difficult to compare brands as every brand is unique In similar target group, channels of distribution, advertising and promotion it may provide a reasonable evaluation → Premium price Calculated on the basis of NPV of future price premiums Premium over unbranded or generic equivalent However, the primary objective is not to charge premium but to create higher future demand There are rarely generic equivalents → Financial brand equity research Very little research on brand financial value Simon & Sullivan (1993 ) developed methods of separating brand value from other assets Firm’s total brand equity can be measured by subtracting the estimated economic value (not just book value) of tangible and intangible assets from its stock market value Another approach applies “momentum accounting” Brand’s momentum is that rate at which it creates sales → Shortcoming of financial methods Focus too much on earning capacity, future revenues, and market capitalization Do not take into account all influencing factors The Behavioral Approach Offers a market or customer orientation rather than company one Takes into account attitudes of the consumer and defines (Leuthesser, 1988) ○ The set of associations ○ The behaviour on the part of the consumer ○ Early definition included customers only; later included other stakeholders as well ○ Behaviour of channels members ○ Parent corporation ○ Therefore, includes brand’s names, symbols, associations, and reputation to all target audience who interact with it → Aaker also presented a similar approach Brand as a formal sign Brand equity can be negative  It comprises a collection of advantages and disadvantages Brand equity is made of five elements (brand awareness, brand association, perceived quality; proprietary brand assets, and brand loyalty) → Steps in building brands Select a name and symbol Create awareness Position the brand to begin differentiation Create a brand image Create trust in the minds of consumers → Brand awareness Is always in customers’ minds Has significant influence on purchase decision Is created through repeated exposure of the brand and appropriate association with the related product category High awareness can considered as a solid base for good financials and for brand loyalty Brand awareness programs → Brand loyalty Without loyalty, brand name is merely a trademark To realise long term benefits, bilateral benefits need to be taken into consideration Customer Based Brand Equity Value of brand and its equity is derived from the actions of the customers Consumer based brand equity means ○ “the differential effect that consumer brand knowledge has on their response to brand marketing activity” (Keller, 2003) An indirect approach to evaluate brand equity by assessing potential sources for brand equity by measuring consumer mindset or brand knowledge Brand knowledge includes ○ Thoughts ○ Feelings ○ Perceptions  ○ Images ○ Experiences, etc. The New Approach: Brand Asset Valuator (BAV) → BAV A database of consumer perceptions of brands Created and managed by Brand Asset Consulting Result of the world’ s most extensive research project on branding Covering 30,000 brands , 400,000 consumers in 48 countries through 240 studies → BAV measures value of a brand on four dimensions Differentiation – measuring brand’s point of difference Relevance – measuring how appropriate the brand is to you Esteem – means how well regarded the brand is Knowledge – means an intimate understanding of the brand Summary - Brand Valuation Models Advantages and Applications of Brand Valuation → It helps in Making decisions on business investments Measuring the return on brand investments Making decisions on brand investments – prioritising by brand, customer segment, product or service, geographic market Making decisions on licensing the brand to subsidiary companies - Allow other company to use your brand name - Ex: ferrari caps - they do not produce those products, they licence someone Turning the marketing department from a cost centre into a profit centre Allocating marketing expenditure according to benefit each business unit derives from the brand asset Organising and optimising the use of different brands in the business mix Assessing co-branding initiatives - Collaboration between 2 brands - A product that has 2 brands Deciding appropriate branding after merger  - A+B= - AB - BA - A - B - C Managing portfolio of brands across different markets Communicating where appropriate the economic value of the brand to the capital markets in order to support share prices and obtain funding Licensing and franchising Tax planning Securitizing borrowing Litigation support Emerging Trends Intangible assets represent significant proportion of firms’ assets Mostly are not reported in financial statements Institute of Practitioners in Advertising (IPA) has come up with new ways of reporting brand intangibles ○ Using non financial performance indicators ○ Concise, comprehensive, material, cohesive, strategic, forward looking, comparative, and comparable over time. Should include human capital, customer service, marketing, customer service in KPIs, customer retention, numbers, retention rate, and customer complaints *Sponsorship: a brand expose financially an event * Endorser: when a celebrity / influencer endorses or recommends a brand in his / her private life - It can be implicit or explicit - Add: explicit - Influencer seen using a brand in their private life - implicit Calculating value Financial value * value contribution = brand contribution Financial performance - Financial analysis - Role of brand *A brand needs to stand out for something SESSION 3 Brand Building and business building Introduction - Traditionally, brand management seen as a function of marketing - Brands more important in FMCGs ???? - Managed by marketers and advertising agencies - Brands transcending their role in marketing - Companies started to view brands as strategic assets since 1990s - Becoming more of a strategic issue Business success and brands - Brands from small businesses to public services - Brand = success in business - Success in business without brands? - What is success? Achieving your goals - Depends on company's objectives - Resources required to create and sustain brands Building brands - Resources/requirements for building brands Financial resources Personnel resources A clear differentiation or a USP - Unique selling proposition: what is different about you? - USP needs to include both; Product features and add emotional level Quality and an innovative product Advertising and promotional resources Distribution network Legal infrastructure - What makes building brands difficult? Pressure to compete on price Proliferation of competitors Fragmenting markets or media Complex branding strategies and brand relationships The temptation to change identity Organisational bias against innovation  Pressure to invest elsewhere Pressure for short-term results Innovation and branding - Innovation More than “new product” Reinventing business process Building entirely new markets to meet untapped customer needs Selecting and executing the right ideas - Understanding value of the target market Not all clients are alike Different brands co-exist in the same sector and address the values of different segments That’s why companies maintain portfolios of brands (sometimes competing each other) "Well-managed brands live on - only bad brand managers die." George Bull