Strategic Brand Management (Keller 2013) PDF

PA R T I OPENING PERSPECTIVES Brands and Brand Management 1 Learning Objectives...

PA R T I OPENING PERSPECTIVES Brands and Brand Management 1 Learning Objectives After reading this chapter, you should be able to 1. Define “brand,” state how brand differs from a product, and explain what brand equity is. 2. Summarize why brands are important. 3. Explain how branding applies to virtually everything. 4. Describe the main branding challenges and opportunities. 5. Identify the steps in the strategic brand management process. A brand can be a person, place, firm, or organization Sources: Pictorial Press Ltd / Alamy; Damian P. Gadal/Alamy; somchaij/Shutterstock; Jason Lindsey/Alamy 29 30 PART I OPENING PERSPECTIVES Preview Ever more firms and other organizations have come to the realization that one of their most valuable assets is the brand names associated with their products or services. In our increasingly complex world, all of us, as individuals and as business managers, face more choices with less time to make them. Thus a strong brand’s ability to simplify decision making, reduce risk, and set expectations is invaluable. Creating strong brands that deliver on that promise, and maintain- ing and enhancing the strength of those brands over time, is a management imperative. This text will help you reach a deeper understanding of how to achieve those branding goals. Its basic objectives are 1. To explore the important issues in planning, implementing, and evaluating brand strategies. 2. To provide appropriate concepts, theories, models, and other tools to make better branding decisions. We place particular emphasis on understanding psychological principles at the individual or organizational level in order to make better decisions about brands. Our objective is to be relevant for any type of organization regardless of its size, nature of business, or profit orientation.1 With these goals in mind, this first chapter defines what a brand is. We consider the func- tions of a brand from the perspective of both consumers and firms and discuss why brands are important to both. We look at what can and cannot be branded and identify some strong brands. The chapter concludes with an introduction to the concept of brand equity and the strategic brand management process. Brand Focus 1.0 at the end of the chapter traces some of the histori- cal origins of branding. WHAT IS A BRAND? Branding has been around for centuries as a means to distinguish the goods of one producer from those of another. In fact, the word brand is derived from the Old Norse word brandr, which means “to burn,” as brands were and still are the means by which owners of livestock mark their animals to identify them.2 According to the American Marketing Association (AMA), a brand is a “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition.” Technically speaking, then, whenever a marketer creates a new name, logo, or symbol for a new product, he or she has created a brand. In fact, however, many practicing managers refer to a brand as more than that—as some- thing that has actually created a certain amount of awareness, reputation, prominence, and so on in the marketplace. Thus we can make a distinction between the AMA definition of a “brand” with a small b and the industry’s concept of a “Brand” with a big B. The difference is important for us because disagreements about branding principles or guidelines often revolve around what we mean by the term. Brand Elements Thus, the key to creating a brand, according to the AMA definition, is to be able to choose a name, logo, symbol, package design, or other characteristic that identifies a product and distin- guishes it from others. These different components of a brand that identify and differentiate it are brand elements. We’ll see in Chapter 4 that brand elements come in many different forms. For example, consider the variety of brand name strategies. Some companies, like General Electric and Samsung, use their names for essentially all their products. Other manufacturers as- sign new products individual brand names that are unrelated to the company name, like Procter & Gamble’s Tide, Pampers, and Pantene product brands. Retailers create their own brands based on their store name or some other means; for example, Macy’s has its own Alfani, INC, Charter Club, and Club Room brands. Brand names themselves come in many different forms.3 There are brand names based on people’s names, like Estée Lauder cosmetics, Porsche automobiles, and Orville Reden- bacher popcorn; names based on places, like Sante Fe cologne, Chevrolet Tahoe SUV, and  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 31 British Airways; and names based on animals or birds, like Mustang automobiles, Dove soap, and Greyhound buses. In the category of “other,” we find Apple computers, Shell gasoline, and Carnation evaporated milk. Some brand names use words with inherent product meaning, like Lean Cuisine, Ocean Spray 100% Juice Blends, and Ticketron, or suggesting important attributes or benefits, like DieHard auto batteries, Mop & Glo floor cleaner, and Beautyrest mattresses. Other names are made up and include prefixes and suffixes that sound scientific, natural, or prestigious, like Lexus automobiles, Pentium microprocessors, and Visteon auto supplies. Not just names but other brand elements like logos and symbols also can be based on people, places, things, and abstract images. In creating a brand, marketers have many choices about the number and nature of the brand elements they use to identify their products. Brands versus Products How do we contrast a brand and a product? A product is anything we can offer to a market for attention, acquisition, use, or consumption that might satisfy a need or want. Thus, a product may be a physical good like a cereal, tennis racquet, or automobile; a service such as an airline, bank, or insurance company; a retail outlet like a department store, specialty store, or supermar- ket; a person such as a political figure, entertainer, or professional athlete; an organization like a nonprofit, trade organization, or arts group; a place including a city, state, or country; or even an idea like a political or social cause. This very broad definition of product is the one we adopt in the book. We’ll discuss the role of brands in some of these different categories in more detail later in this chapter and in Chapter 15. We can define five levels of meaning for a product:4 1. The core benefit level is the fundamental need or want that consumers satisfy by consuming the product or service. 2. The generic product level is a basic version of the product containing only those attributes or characteristics absolutely necessary for its functioning but with no distinguishing fea- tures. This is basically a stripped-down, no-frills version of the product that adequately per- forms the product function. 3. The expected product level is a set of attributes or characteristics that buyers normally expect and agree to when they purchase a product. 4. The augmented product level includes additional product attributes, benefits, or related ser- vices that distinguish the product from competitors. 5. The potential product level includes all the augmentations and transformations that a prod- uct might ultimately undergo in the future. Figure 1-1 illustrates these different levels in the context of an air conditioner. In many markets most competition takes place at the product augmentation level, because most firms can successfully build satisfactory products at the expected product level. Harvard’s Ted Levitt argued that “the new competition is not between what companies produce in their fac- tories but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.”5 A brand is therefore more than a product, because it can have dimensions that differenti- ate it in some way from other products designed to satisfy the same need. These differences may be rational and tangible—related to product performance of the brand—or more symbolic, emotional, and intangible—related to what the brand represents. Extending our previous example, a branded product may be a physical good like Kellogg’s Corn Flakes cereal, Prince tennis racquets, or Ford Mustang automobiles; a service such as Delta Airlines, Bank of America, or Allstate insurance; a store like Bloomingdale’s depart- ment store, Body Shop specialty store, or Safeway supermarket; a person such as Warren Buffett, Mariah Carey, or George Clooney; a place like the city of London, state of California, or country of Australia; an organization such as the Red Cross, American Automobile Asso- ciation, or the Rolling Stones; or an idea like corporate responsibility, free trade, or freedom of speech. Some brands create competitive advantages with product performance. For example, brands such as Gillette, Merck, and others have been leaders in their product categories for decades, 32 PART I OPENING PERSPECTIVES due, in part, to continual innovation. Steady investments in research and development have pro- duced leading-edge products, and sophisticated mass marketing practices have ensured rapid adoption of new technologies in the consumer market. A number of media organizations rank firms on their ability to innovate. Figure 1-2 lists 10 innovative companies that showed up on many of those lists in 2011. Other brands create competitive advantages through non-product-related means. For ex- ample, Coca-Cola, Chanel No. 5, and others have been leaders in their product categories for decades by understanding consumer motivations and desires and creating relevant and appealing images surrounding their products. Often these intangible image associations may be the only way to distinguish different brands in a product category. Brands, especially strong ones, carry a number of different types of associations, and marketers must account for all of them in making marketing decisions. The marketers behind some brands have learned this lesson the hard way. Branding Brief 1-1 describes the problems BRANDING BRIEF 1-1 Coca-Cola’s Branding Lesson O ne of the classic marketing mistakes occurred in April 1985 when Coca-Cola replaced its flagship cola brand with a new formula. The motivation behind the change was primarily a competitive one. Pepsi-Cola’s “Pepsi Challenge” promotion had posed a strong challenge to Coke’s supremacy over the cola market. Starting initially just in Texas, the promotion involved advertising and in-store sampling showcasing consumer blind taste tests between Coca-Cola and Pepsi-Cola. Invariably, Pepsi won these tests. Fearful that the promotion, if expanded na- tionally, could take a big bite out of Coca-Cola’s sales, especially among younger cola drinkers, Coca-Cola felt compelled to act. Coca-Cola’s strategy was to change the formulation of Coke to more closely match the slightly sweeter taste of Pepsi. To arrive at a new formulation, Coke conducted taste tests with an astounding number of consumers—190,000! The find- ings from this research clearly indicated that consumers “over- whelmingly” preferred the taste of the new formulation to the old one. Brimming with confidence, Coca-Cola announced the formulation change with much fanfare. Consumer reaction was swift but, unfortunately for Coca- Cola, negative. In Seattle, retired real estate investor Gay Mul- The epic failure of New Coke taught Coca-Cola a valuable lesson about branding. lins founded the “Old Cola Drinkers of America” and set up a hotline for angry consumers. A Beverly Hills wine merchant Source: Al Freni/Time & Life Pictures/Getty Images bought 500 cases of “Vintage Coke” and sold them at a pre- Although Coca-Cola made a number of other mistakes in mium. Meanwhile, back at Coca-Cola headquarters, roughly introducing New Coke (both its advertising and its packaging 1,500 calls a day and literally truckloads of mail poured in, vir- probably failed to clearly differentiate the brand and communi- tually all condemning the company’s actions. Finally, after sev- cate its sweeter quality), its biggest slip was losing sight of what eral months of slumping sales, Coca-Cola announced that the the brand meant to consumers in its totality. The psychological old formulation would return as “Coca-Cola Classic” and join response to a brand can be as important as the physiological “New” Coke in the marketplace (see the accompanying photo). response to the product. At the same time, American consum- The New Coke debacle taught Coca-Cola a very important, ers also learned a lesson—just how much the Coke brand really albeit painful and public, lesson about its brand. Coke clearly is meant to them. As a result of Coke’s marketing fiasco, it is doubt- not just seen as a beverage or thirst-quenching refreshment by ful that either side will take the other for granted from now on. consumers. Rather, it seems to be viewed as more of an Ameri- can icon, and much of its appeal lies not only in its ingredients Sources: Patricia Winters, “For New Coke, ‘What Price Success?’” but also in what it represents in terms of Americana, nostalgia, Advertising Age, 20 March 1989, S1–S2; Jeremiah McWilliams, and its heritage and relationship with consumers. Coke’s brand “Twenty-Five Years Since Coca-Cola’s Big Blunder,” Atlanta Business image certainly has emotional components, and consumers News, 26 April 2010; Abbey Klaassen, “New Coke: One of Marketing’s have a great deal of strong feelings for the brand. Biggest Blunders Turns 25,” 23 April 2010, www.adage.com.  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 33 Coca-Cola encountered in the introduction of “New Coke” when it failed to account for all the different aspects of the Coca-Cola brand image. Not only are there many different types of associations to link to the brand, but there are many different means to create them—the entire marketing program can contribute to consumers’ under- standing of the brand and how they value it as well as other factors outside the control of the marketer. By creating perceived differences among products through branding and by developing a loyal consumer franchise, marketers create value that can translate to financial profits for the firm. The reality is that the most valuable assets many firms have may not be tangible ones, such as plants, equipment, and real estate, but intangible assets such as management skills, marketing, financial and operations expertise, and, most important, the brands themselves. This value was recognized Level Air Conditioner 1. Core Benefit Cooling and comfort. 2. Generic Product Sufficient cooling capacity (Btu per hour), an acceptable energy efficiency rating, adequate air intakes and exhausts, and so on. 3. Expected Product Consumer Reports states that for a typical large air conditioner, consumers should expect at least two cooling speeds, expandable plastic side panels, adjustable louvers, removable air filter, vent for exhausting air, environmentally friendly R-410A refrigerant, power cord at least 60 inches long, one year parts-and-labor warranty on the entire unit, and a five-year parts-and-labor warranty on the refrigeration system. 4. Augmented Product Optional features might include electric touch-pad controls, a display to show indoor and outdoor temperatures and the thermostat setting, an automatic mode to adjust fan speed based on the thermostat setting and room temperature, a toll-free 800 number for customer service, and so on. 5. Potential Product Silently running, completely balanced throughout FIGURE 1-1 the room, and completely energy self-sufficient. Examples of Different Product Levels 1. Apple 2. Amazon FIGURE 1-2 3. Facebook Ten Firms Rated Highly on Innovation 4. General Electric Sources: Based on “The 50 Most Innovative 5. Google Companies,” Bloomberg BusinessWeek, 25 April 6. Groupon 2010; “The World’s Most Innovative Companies,” 7. Intel Forbes, 4 March 2011; “The World’s 50 Most 8. Microsoft Innovative Companies,” Fast Company, March 2011; 9. Twitter “The 50 Most Innovative Companies 2011,” 10. Zynga Technology Review, March 2011. 34 PART I OPENING PERSPECTIVES by John Stuart, CEO of Quaker Oats from 1922 to 1956, who famously said, “If this company were to split up I would give you the property, plant and equipment and I would take the brands and the trademarks and I would fare better than you.”6 Let’s see why brands are so valuable. WHY DO BRANDS MATTER? An obvious question is, why are brands important? What functions do they perform that make them so valuable to marketers? We can take a couple of perspectives to uncover the value of brands to both customers and firms themselves. Figure 1-3 provides an overview of the different roles that brands play for these two parties. We’ll talk about consumers first. Consumers As with the term product, this book uses the term consumer broadly to encompass all types of customers, including individuals as well as organizations. To consumers, brands provide impor- tant functions. Brands identify the source or maker of a product and allow consumers to assign responsibility to a particular manufacturer or distributor. Most important, brands take on special meaning to consumers. Because of past experiences with the product and its marketing program over the years, consumers find out which brands satisfy their needs and which ones do not. As a result, brands provide a shorthand device or means of simplification for their product decisions.7 If consumers recognize a brand and have some knowledge about it, then they do not have to engage in a lot of additional thought or processing of information to make a product decision. Thus, from an economic perspective, brands allow consumers to lower the search costs for prod- ucts both internally (in terms of how much they have to think) and externally (in terms of how much they have to look around). Based on what they already know about the brand—its quality, product characteristics, and so forth—consumers can make assumptions and form reasonable expectations about what they may not know about the brand. The meaning imbued in brands can be quite profound, allowing us to think of the relation- ship between a brand and the consumer as a type of bond or pact. Consumers offer their trust and loyalty with the implicit understanding that the brand will behave in certain ways and provide them utility through consistent product performance and appropriate pricing, promotion, and distribution programs and actions. To the extent that consumers realize advantages and benefits from purchasing the brand, and as long as they derive satisfaction from product consumption, they are likely to continue to buy it. These benefits may not be purely functional in nature. Brands can serve as symbolic devices, al- lowing consumers to project their self-image. Certain brands are associated with certain types of peo- ple and thus reflect different values or traits. Consuming such products is a means by which consumers can communicate to others—or even to themselves—the type of person they are or would like to be.8 Some branding experts believe that for some people, certain brands even play a religious role of sorts and substitute for religious practices and help reinforce self-worth.9 The cultural influence of brands is profound and much interest has been generated in recent years in under- standing the interplay between consumer culture and brands.10 Consumers Identification of source of product Assignment of responsibility to product maker Risk reducer Search cost reducer Promise, bond, or pact with maker of product Symbolic device Signal of quality Manufacturers Means of identification to simplify handling or tracing Means of legally protecting unique features Signal of quality level to satisfied customers Means of endowing products with unique associations Source of competitive advantage FIGURE 1-3 Source of financial returns Roles That Brands Play  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 35 Brands can also play a significant role in signaling certain product characteristics to con- sumers. Researchers have classified products and their associated attributes or benefits into three major categories: search goods, experience goods, and credence goods.11 For search goods like grocery produce, consumers can evaluate product attributes like stur- diness, size, color, style, design, weight, and ingredient composition by visual inspection. For experience goods like automobile tires, consumers cannot assess product attributes like durability, service quality, safety, and ease of handling or use so easily by inspection, and actual product trial and experience is necessary. For credence goods like insurance coverage, consumers may rarely learn product attributes. Given the difficulty of assessing and interpreting product attributes and benefits for expe- rience and credence goods, brands may be particularly important signals of quality and other characteristics to consumers for these types of products.12 Brands can reduce the risks in product decisions. Consumers may perceive many different types of risks in buying and consuming a product:13 Functional risk: The product does not perform up to expectations. Physical risk: The product poses a threat to the physical well-being or health of the user or others. Financial risk: The product is not worth the price paid. Social risk: The product results in embarrassment from others. Psychological risk: The product affects the mental well-being of the user. Time risk: The failure of the product results in an opportunity cost of finding another satis- factory product. Consumers can certainly handle these risks in a number of ways, but one way is obviously to buy well-known brands, especially those with which consumers have had favorable past ex- periences. Thus, brands can be a very important risk-handling device, especially in business-to- business settings where risks can sometimes have quite profound implications. In summary, to consumers, the special meaning that brands take on can change their percep- tions and experiences with a product. The identical product may be evaluated differently depend- ing on the brand identification or attribution it carries. Brands take on unique, personal meanings to consumers that facilitate their day-to-day activities and enrich their lives. As consumers’ lives become more complicated, rushed, and time starved, the ability of a brand to simplify decision making and reduce risk is invaluable. Firms Brands also provide a number of valuable functions to their firms.14 Fundamentally, they serve an identification purpose, to simplify product handling or tracing. Operationally, brands help or- ganize inventory and accounting records. A brand also offers the firm legal protection for unique features or aspects of the product. A brand can retain intellectual property rights, giving legal title to the brand owner.15 The brand name can be protected through registered trademarks; man- ufacturing processes can be protected through patents; and packaging can be protected through copyrights and designs. These intellectual property rights ensure that the firm can safely invest in the brand and reap the benefits of a valuable asset. We’ve seen that these investments in the brand can endow a product with unique associa- tions and meanings that differentiate it from other products. Brands can signal a certain level of quality so that satisfied buyers can easily choose the product again.16 This brand loyalty pro- vides predictability and security of demand for the firm and creates barriers of entry that make it difficult for other firms to enter the market. Although manufacturing processes and product designs may be easily duplicated, lasting impressions in the minds of individuals and organizations from years of marketing activity and product experience may not be so easily reproduced. One advantage that brands such as Colgate toothpaste, Cheerios cereal, and Levi’s jeans have is that consumers have literally grown up with them. In this sense, branding can be seen as a powerful means to secure a competitive advantage. In short, to firms, brands represent enormously valuable pieces of legal property, capable of influencing consumer behavior, being bought and sold, and providing the security of sustained future revenues.17 For these reasons, huge sums, often representing large multiples of a brand’s earnings, have been paid for brands in mergers or acquisitions, starting with the boom years of 36 PART I OPENING PERSPECTIVES Brand Brand Value ($MM) Market Cap ($MM) % of Market Cap Coca-Cola 70,452 146,730 48% IBM 64,727 200,290 32% Microsoft 60,895 226,530 27% Google 43,557 199,690 22% General Electric 42,808 228,250 19% McDonald's 33,578 80,450 42% FIGURE 1-4 Brand Value as a Intel 32,015 119,130 27% Percentage of Market Nokia 29,495 33,640 88% Capitalization (2010) Sources: Based on Disney 28,731 81,590 35% Interbrand. “Best Global Brands 2010.” Yahoo! Hewlett-Packard 26,867 105,120 26% Finance, February, 2011. the mid-1980s. The merger and acquisition frenzy during this time led Wall Street financiers to seek out undervalued companies from which to make investment or takeover profits. One of the primary undervalued assets of such firms was their brands, given that they were off-balance-sheet items. Implicit in Wall Street’s interest was a belief that strong brands result in better earnings and profit performance for firms, which, in turn, creates greater value for shareholders. The price premium paid for many companies is clearly justified by the opportunity to earn and sustain extra profits from their brands, as well as by the tremendous difficulty and expense of creating similar brands from scratch. For a typical fast-moving consumer goods company, net tangible assets may be as little as 10 percent of the total value (see Figure 1-4). Most of the value lies in intangible assets and goodwill, and as much as 70 percent of intangible assets can be supplied by brands. CAN ANYTHING BE BRANDED? Brands clearly provide important benefits to both consumers and firms. An obvious question, then, is, how are brands created? How do you “brand” a product? Although firms provide the impetus for brand creation through their marketing programs and other activities, ultimately a brand is something that resides in the minds of consumers. A brand is a perceptual entity rooted in reality, but it is more than that—it reflects the perceptions and perhaps even the idiosyncrasies of consumers. To brand a product it is necessary to teach consumers “who” the product is—by giving it a name and using other brand elements to help identify it—as well as what the product does and why con- sumers should care. In other words, marketers must give consumers a label for the product (“here’s how you can identify the product”) and provide meaning for the brand (“here’s what this particular product can do for you, and why it’s special and different from other brand name products”). Branding creates mental structures and helps consumers organize their knowledge about products and services in a way that clarifies their decision making and, in the process, provides value to the firm. The key to branding is that consumers perceive differences among brands in a product category. These differences can be related to attributes or benefits of the product or service itself, or they may be related to more intangible image considerations. Whenever and wherever consumers are deciding between alternatives, brands can play an important decision-making role. Accordingly, marketers can benefit from branding whenever consumers are in a choice situation. Given the myriad choices consumers make each and every day—commercial and otherwise—it is no surprise how pervasive branding has become. Consider these two very diverse applications of branding:18 1. Bonnaroo Music and Arts Festival (Bonnaroo means “good times” in Creole), a 100-band jamboree with an eclectic mix of A-list musical stars, has been the top-grossing music  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 37 Bonnaroo Music and Arts Festival has become a strong brand by creating a unique musical experience with broad appeal. Source: ZUMA Press/ Newscom festival in North America for years. Multiple revenue sources are generated through ticket sales (from $250 general admission to $18,500 luxury packages), 16 profit centers on-site (from concessions and merchandise to paid showers), licensing, media deals, and the Web. With all its success, festival organizers are exploring expanding the brand’s “curatorial voice” to nonfestival settings such as television programming and mobile phone apps. 2. Halloween night in Madison, Wisconsin, home of the University of Wisconsin–Madison, had become frightening—literally—for local businesses due to out-of-control partying. As one par- ticipant put it, “The main objective on Halloween in Madison was not to get blackout drunk... it was to incite enough of a ruckus that riot police had to show up on horseback with tear gas and pepper spray.” The success of that strategy was evident in 2005 when more than 450 people were arrested and $350,000 was spent by the town government on enforcement. The next year, the mayor of Madison tried a marketing solution instead. He branded the event “Freakfest,” install- ing floodlights in a gated stretch of a main street and providing concert entertainment for 50,000 partygoers. The number of arrests and the amount of vandalism were dramatically lower. One town official observed, “Since we rebranded the event, it’s become something we are proud of.” As another example, Branding Brief 1-2 considers how even one-time commodities have been branded. We can recognize the universality of branding by looking at some different product appli- cations in the categories we defined previously—physical goods, services, retail stores, online businesses, people, organizations, places, and ideas. For each of these different types of prod- ucts, we will review some basic considerations and look at examples. (We consider some of these special cases in more detail in Chapter 15.) Physical Goods Physical goods are what are traditionally associated with brands and include many of the best- known and highly regarded consumer products, like Mercedes-Benz, Nescafé, and Sony. More and more companies selling industrial products or durable goods to other companies are recog- nizing the benefits of developing strong brands. Brands have begun to emerge among certain types of physical goods that never supported brands before. Let us consider the role of branding in industrial “business-to-business” products and technologically intensive “high-tech” products. Business-to-business products. The business-to-business (B2B) market makes up a huge percentage of the global economy. Some of the world’s most accomplished and respected brands belong to business marketers, such as ABB, Caterpillar, DuPont, FedEx, GE, Hewlett-Packard, IBM, Intel, Microsoft, Oracle, SAP, and Siemens. Business-to-business branding creates a positive image and reputation for the company as a whole. Creating such goodwill with business customers is thought to lead to greater selling 38 PART I OPENING PERSPECTIVES BRANDING BRIEF 1-2 Branding Commodities A commodity is a product so basic that it cannot be physi- cally differentiated from competitors in the minds of consum- “A Diamond Is Forever” as the tagline in its ongoing ad cam- paign in 1948. The diamond supplier, which was founded in ers. Over the years, a number of products that at one time 1888 and sells about 60 percent of the world’s rough dia- were seen as essentially commodities have become highly dif- monds, wanted to attach more emotion and symbolic meaning ferentiated as strong brands have emerged in the category. to the purchase of diamond jewelry. “A Diamond Is Forever” Some notable examples are coffee (Maxwell House), bath soap became one of the most recognized slogans in advertising and (Ivory), flour (Gold Medal), beer (Budweiser), salt (Morton), oat- helped fuel a diamond jewelry industry that’s now worth nearly meal (Quaker), pickles (Vlasic), bananas (Chiquita), chickens $25 billion per year in the United States alone. (Perdue), pineapples (Dole), and even water (Perrier). After years of successful campaigns that helped generate These products became branded in various ways. The key buzz for the overall diamond industry, De Beers began to fo- success factor in each case, however, was that consumers be- cus on its proprietary brands. Its 2009 campaign highlighted its came convinced that all the product offerings in the category new Everlon line. Partly in reaction to the recession, De Beers’s were not the same and that meaningful differences existed. In marketing also began to focus on the long-term value and stay- some instances, such as with produce, marketers convinced ing power of diamonds; new campaigns included the slogans consumers that a product was not a commodity and could ac- “Fewer Better Things” and “Here Today, Here Tomorrow.” tually vary appreciably in quality. In these cases, the brand was seen as ensuring uniformly high quality in the product category Sources: Theodore Levitt, “Marketing Success Through Differentiation— on which consumers could depend. In other cases, like Perrier of Anything,” Harvard Business Review (January–February 1980): 83–91; bottled mineral water, because product differences were virtu- Sandra O’Loughlin, “Sparkler on the Other Hand,” Brandweek, 19 April ally nonexistent, brands have been created by image or other 2004; Blythe Yee, “Ads Remind Women They Have Two Hands,” Wall non-product-related considerations. Street Journal, 14 August 2003; Lauren Weber, “De Beers to Open First One of the best examples of branding a commodity in U.S. Retail Store,” Newsday, 22 June 2005; “De Beers Will Double Ad this fashion is diamonds. De Beers Group added the phrase Spending,” MediaPost, 17 November 2008. opportunities and more profitable relationships. A strong brand can provide valuable reassur- ance and clarity to business customers who may be putting their company’s fate—and perhaps their own careers!—on the line. A strong business-to-business brand can thus provide a strong competitive advantage. Some B2B firms, however, carry the attitude that purchasers of their products are so well- informed and professional that brands don’t matter. Savvy business marketers reject that rea- soning and are recognizing the importance of their brand and how they must execute well in a number of areas to gain marketplace success. Boeing, which makes everything from commercial airplanes to satellites, implemented the “One Firm” brand strategy to unify all its different operations with a one-brand culture. The strategy was based in part on a “triple helix” representation: 1) Enterprising Spirit (why Boeing does what it does), 2) Precision Performance (how Boeing gets things done), and 3) Defining the Future (what Boeing achieves as a firm).19 The Science of Branding 1-1 describes some particu- larly important guidelines for business-to-business branding. Here is how Infosys approaches brand differentiation to persuade businesses to select it as their partner of choice. INFOSYS Infosys is an Indian IT services company that exploited the outsourcing trend of companies to outsource its IT functions to specialist providers. It increased its drive-up sales from $100 million in 1999 to over $2 billion by 2006. Over a 25-year period, 93 percent of Infosys’s projects were delivered on time and on budget, against an industry average of 30 percent. Having taken 23 years to achieve the first $1 billion sales, it took just 23 months to reach $2 billion in sales. Once it achieved $2 billion in sales, Infosys rebranded itself to other businesses as a company that could help them improve their business models. By selling itself as a business process transformation partner rather than just an outsourcing firm, Infosys successfully differentiated itself from the competi- tion. It communicated the change in strategy to 50,000 of its employees and then formally launched it to  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 39 targeted businesses, communicating to C level employees, business line managers, sourcing executives, and IT staff members. The Infosys “think flat” campaign proposed that Infosys could enable clients to shift from: Managing information to making money from it; Achieving customer satisfaction to creating customer loyalty; Withstanding turbulence to getting ahead during industry cycles; and Growing passively to driving growth by becoming global producers. Infosys’s sales rose from $2 billion to $3 billion in just 12 months. Infosys became the first Indian company to be added to a major global index when it joined the NASDAQ-100 in December 2006. Infosys announced its March 2013 revenue forecast at approximately $7.5 billion. It continues to evolve the brand to appeal to more businesses as a reliable and effective partner.20 High-tech Products. Many technology companies have struggled with branding. Managed by technologists, these firms often lack any kind of brand strategy and sometimes see branding as simply naming their products. In many of their markets, however, financial success is no lon- ger driven by product innovation alone, or by the latest and greatest product specifications and features. Marketing skills are playing an increasingly important role in the adoption and success of high-tech products. CREATIVE TECHNOLOGY Famous for its Sound Blaster series of PC soundcards that became the gold standard for Windows-based multimedia PCs in the 1990s, Creative Technology and its subsidiary ZiiLABS announced the launch of the Creative HanZpad tablet computer in February 2012. What sets Creative apart from other tablet manufacturers is that the HanZpad has Chinese language content developed specifically for it, including textbooks for mathematics, science, and other subjects. Sim Wong Hoo, CEO of Creative Technology believes that it is this that will give them the competitive advan- tage over competitors such as Apple that do not have Chinese content. For a start, Creative is targeting China’s vast education market. Instead of going it alone, it has formed the HanZpad Alliance, a collaborative network of more than 20 Chinese and Taiwanese companies that manufacture, market, and distribute the new product. This alliance allows Creative to tap into its partners’ local knowledge and competencies to provide fully integrated solutions and supply chain management for the design, development, and marketing of tablet computers based on the HanZpad platform. To create awareness and establish its presence in the education segment, Creative is also working with a number of Chinese schools in a Creative-led e-learning pilot project with HanZpad tablets. CEO Sim’s dream is that every single Chinese student will be able to use a HanZpad for his or her education.21 Creative Technologies aims to tap into the Chinese market by creating Chinese language content for their tablet - HanZpad. Source: Mihai Simonia/Fotolia.com 40 PART I OPENING PERSPECTIVES THE SCIENCE OF BRANDING 1-1 Understanding Business-to-Business Branding B ecause business-to-business purchase decisions are com- plex and often high risk, branding plays an important role in customers or clients. Other relevant brand imagery might relate to the size or type of firm. For example, Microsoft B2B markets. Six specific guidelines—developed in greater and Oracle might be seen as “aggressive” companies, detail in later chapters—can be defined for marketers of B2B whereas 3M and Apple might be seen as “innovative.” Im- brands. agery may also be a function of the other organizations to which the firm sells. For example, customers may believe 1. Ensure the entire organization understands and that a company with many customers is established and a supports branding and brand management. market leader. Employees at all levels and in all departments must have a complete, up-to-date understanding of the vision for the 5. Find relevant emotional associations for the brand. brand and their role in supporting it. A particularly crucial B2B marketers too often overlook the power of emo- area is the sales force; personal selling is often the profit tions in their branding. Emotional associations related driver of a business-to-business organization. The sales to a sense of security, social or peer approval, and self- force must be properly aligned so that the department respect can also be linked to the brand and serve as key can more effectively leverage and reinforce the brand sources of brand equity. That is, reducing risk to improve promise. If branding is done right, the sales force can en- customers’ sense of security can be a powerful driver of sure that target customers recognize the brand’s benefits many decisions and thus an important source of brand sufficiently to pay a price commensurate with the brand’s equity; being seen as someone who works with other potential value. top firms may inspire peer approval and personal recog- nition within the organization; and, beyond respect and 2. Adopt a corporate branding strategy if possible and admiration from others, a business decision-maker may create a well-defined brand hierarchy. Because of the just feel more satisfied by working with top organiza- breadth and complexity of the product or service mix, tions and brands. companies selling business-to-business are more likely to emphasize corporate brands (such as Hewlett-Packard, 6. Segment customers carefully both within and across ABB, or BASF). Ideally, they will also create straightfor- companies. Finally, in a business-to-business setting, dif- ward sub-brands that combine the corporate brand name ferent customer segments may exist both within and across with descriptive product modifiers, such as with EMC or organizations. Within organizations, different people may GE. If a company has a distinctive line of business, how- assume the various roles in the purchase decision process: ever, a more clearly differentiated sub-brand may need Initiator, user, influencer, decider, approver, buyer and gate- to be developed, like Praxair’s Medipure brand of medi- keeper. Across organizations, businesses can vary according cal oxygen, DuPont’s Teflon coating, and Intel’s Centrino to industry and company size, technologies used and other mobile technology. capabilities, purchasing policies, and even risk and loyalty profiles. Brand building must take these different segmen- 3. Frame value perceptions. Given the highly competitive tation perspectives in mind in building tailored marketing nature of business-to-business markets, marketers must programs. ensure that customers fully appreciate how their offerings are different. Framing occurs when customers are given a perspective or point of view that allows the brand to “put Sources: James C. Anderson and James A. Narus, Business Mar- ket Management: Understanding, Creating, and Delivering Value, its best foot forward.” Framing can be as simple as mak- 3rd ed. (Upper Saddle River, NJ: Prentice Hall, 2009); Kevin Lane ing sure customers realize all the benefits or cost savings Keller and Frederick E. Webster, Jr., “A Roadmap for Branding offered by the brand, or becoming more active in shaping in Industrial Markets,” Journal of Brand Management, 11 (May how customers view the economics of purchasing, own- 2004): 388–40; Philip Kotler and Waldemar Pfoertsch, B2B Brand ing, using and disposing of the brand in a different way. Management (Berlin-Heidelberg, Germany: Springer, 2006); Kevin Framing requires understanding how customers currently Lane Keller, “Building a Strong Business-to-Business Brand,” in think of brands and choose among products and services, Business-to-Business Brand Management: Theory, Research, and and then determining how they should ideally think and Executive Case Study Exercises, in Advances in Business Market- choose. ing & Purchasing series, Volume 15, ed. Arch Woodside (Bingley, UK: Emerald Group Publishing Limited, 2009), 11-31; Kevin 4. Link relevant non-product-related brand associations. Lane Keller and Philip Kotler, “Branding in Business-to-Business In a business-to-business setting, a brand may be differen- Firms,” in Business to Business Marketing Handbook, eds. Gary tiated on the basis of factors beyond product performance, L. Lilien and Rajdeep Grewal (Northampton, MA: Edward Elgar such as having superior customer service or well-respected Publishing, 2012).  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 41 The speed and brevity of technology product life cycles create unique branding challenges. Trust is critical, and customers often buy into companies as much as products. Marketing bud- gets may be small, although high-tech firms’ adoption of classic consumer marketing techniques has increased expenditures on marketing communications. The Science of Branding 1-2 pro- vides a set of guidelines for marketing managers at high-tech companies. THE SCIENCE OF BRANDING 1-2 Understanding High-Tech Branding M arketers operating in technologically intensive markets face a number of unique challenges. Here are 10 guidelines top technology companies have highly visible CEOs, es- pecially compared with other industries. Some notable that managers for high-tech companies can use to improve high-tech CEOs with prominent public personas include their company’s brand strategy. Oracle’s Larry Ellison, Cisco’s John Chambers, Dell’s Michael Dell, and (until 2011), Apple’s Steve Jobs. In each case, the 1. It is important to have a brand strategy that provides CEO’s identity and persona are inextricably woven into the a roadmap for the future. Technology companies too fabric of the brand. often rely on the faulty assumption that the best product based on the best technology will sell itself. As the market 7. Brand building on a small budget necessitates lever- failure of the Sony Betamax illustrates, the company with aging every possible positive association. Technology the best technology does not always win. companies typically prioritize their marketing mix as fol- lows (in order from most important to least important): 2. Understand your brand hierarchy and manage it ap- industry analyst relations, public relations, trade shows, propriately over time. A strong corporate brand is vital seminars, direct mail, and advertising. Often, direct mail in the technology industry to provide stability and help and advertising are discretionary items in a company’s establish a presence on Wall Street. Since product innova- marketing budget and may in fact receive no outlay. tions provide the growth drivers for technology companies, however, brand equity is sometimes built in the product 8. Technology categories are created by customers and name to the detriment of corporate brand equity. external forces, not by companies themselves. In their quest for product differentiation, new technology compa- 3. Know who your customer is and build an appropriate nies have a tendency to reinvent the wheel and claim they brand strategy. Many technology companies understand have created a new category. Yet only two groups can truly that when corporate customers purchase business-to- create categories: analysts and customers. For this reason, business products or services, they are typically committing it is important for technology companies to manage their to a long-term relationship. For this reason, it is advisable relationships with analysts in order to attract consumers. for technology companies to establish a strong corporate brand that will endure over time. 9. The rapidly changing environment demands that you stay in tune with your internal and external environ- 4. Realize that building brand equity and selling products ment. The rapid pace of innovation in the technology sector are two different exercises. Too often, the emphasis on dictates that marketers closely observe the market condi- developing products leads to an overemphasis on branding tions in which their brands do business. Trends in brand them. When a company applies distinct brand names to too strategy change almost as rapidly as the technology. many products in rapid succession, the brand portfolio be- comes cluttered and consumers may lose perspective on the 10. Invest the time to understand the technology and brand hierarchy. Rather than branding each new innovation value proposition and do not be afraid to ask ques- separately, a better approach is to plan for future innovations tions. It is important for technology marketers to ask ques- by developing an extendable branding strategy. tions in order to educate themselves and build credibility with the company’s engineering corps and with customers. To 5. Brands are owned by customers, not engineers. In build trust among engineers and customers, marketers must many high-tech firms, CEOs work their way up the lad- strive to learn as much as they can about the technology. der through the engineering divisions. Although engineers have an intimate knowledge of products and technology, they may lack the big-picture brand view. Compounding Sources: Patrick Tickle, Kevin Lane Keller, and Keith Richey, “Brand- ing in High-Technology Markets,” Market Leader 22 (Autumn 2003): this problem is the fact that technology companies typically 21–26; Jakki Mohr, Sanjit Sengupta, and Stanley Slater, Marketing spend less on consumer research compared with other of High-Technology Products and Innovations, 3rd ed. (Upper Sad- types of companies. As a result of these factors, tech com- dle River, NJ: Pearson Prentice Hall, 2010); Eloise Coupey, Digital panies often do not invest in building strong brands. Business: Concepts and Strategies, 2nd ed. (Upper Saddle River, NJ: 6. Brand strategies need to account for the attributes Pearson Prentice Hall, 2005). of the CEO and adjust accordingly. Many of the world’s 42 PART I OPENING PERSPECTIVES Services Although strong service brands like American Express, British Airways, Ritz-Carlton, Merrill Lynch, and Federal Express have existed for years, the pervasiveness of service branding and its sophistication have accelerated in the past decade. Role of Branding with Services. One of the challenges in marketing services is that they are less tangible than products and more likely to vary in quality, depending on the particular person or people providing them. For that reason, branding can be particularly important to service firms as a way to address intangibility and variability problems. Brand symbols may also be es- pecially important, because they help make the abstract nature of services more concrete. Brands can help identify and provide meaning to the different services provided by a firm. For example, branding has become especially important in financial services to help organize and label the myriad new offerings in a manner that consumers can understand. Branding a service can also be an effective way to signal to consumers that the firm has designed a particular service offering that is special and deserving of its name. For example, British Airways not only brands its premium business class service as “Club World”; it also brands its regular coach service as “World Traveler,” a clever way to communicate to the air- line’s regular passengers that they are also special in some way and that their patronage is not taken for granted. Branding has clearly become a competitive weapon for services. Professional Services. Professional services firm such as Accenture (consulting), Goldman Sachs (investment banking), Ernst & Young (accounting), and Baker Botts (law) offer specialized expertise and support to other businesses and organizations. Professional services branding is an interesting combination of B2B branding and traditional consumer services branding. Corporate credibility is key in terms of expertise, trustworthiness, and likability. Variability is more of an issue with professional services because it is harder to standardize the services of a consulting firm than those of a typical consumer services firm (like Mayflower movers or Orkin pest control). Long-term relationships are crucial too; losing one customer can be disastrous if it is a big enough account. One big difference in professional services is that individual employees have a lot more of their own equity in the firm and are often brands in their own right! The challenge is there- fore to ensure that their words and actions help build the corporate brand and not just their For a service firm like Mayflower, dependable, high-quality service is critical. Source: Mayflower Transit, LLC  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 43 own. Ensuring that the organization retain at least some of the equity that employees (especially senior ones) build is thus crucial in case any of them leave. Referrals and testimonials can be powerful when the services offered are highly intangible and subjective. Emotions also play a big role in terms of sense of security and social approval. Switching costs can be significant and pose barriers to entry for competitors, but clients do have the opportunity to bargain and will often do so to acquire more customized solutions. Retailers and Distributors To retailers and other channel members distributing products, brands provide a number of im- portant functions. Brands can generate consumer interest, patronage, and loyalty in a store, as consumers learn to expect certain brands and products. To the extent “you are what you sell,” brands help retailers create an image and establish positioning. Retailers can also create their own brand image by attaching unique associations to the quality of their service, their product assortment and merchandising, and their pricing and credit policy. Finally, the appeal and at- traction of brands, whether manufacturers’ brands or the retailers’ own brands, can yield higher price margins, increased sales volumes, and greater profits. Retailers can introduce their own brands by using their store name, creating new names, or some combination of the two. Many distributors, especially in Europe, have actually introduced their own brands, which they sell in addition to—or sometimes even instead of—manufacturers’ brands. Products bearing these store brands or private label brands offer another way for retailers to increase customer loyalty and generate higher margins and profits. By mid-July 2009, private labels accounted for 17 percent of grocery purchases in food, drug, and mass merchandisers in North America.22 In Britain, five or six grocery chains selling their own brands account for roughly half the country’s food and packaged-goods sales, led by Sainsbury and Tesco. Another top British retailer, Marks & Spencer, sells only its own-brand goods, under the label of St. Michael. Several U.S. retailers also emphasize their own brands. (Chapter 5 considers store brands and private labels in greater detail.) The Internet has transformed retailing in recent years as retailers have adopted a “bricks and clicks” approach to their business or, in many cases, become pure-play online retailers, operating only on the Web. Regardless of the exact form, to be competitive online, many retailers have had to improve their online service by making customer service agents avail- able in real time, shipping products promptly, providing tracking updates, and adopting liberal return policies. Online Products and Services Some of the strongest brands in recent years have been born online. Google, Facebook, and Twitter are three notable examples. That wasn’t always the case. At the onset of the Internet, many online marketers made serious—and sometimes fatal—mistakes. Some oversimplified the branding process, equating flashy or unusual advertising with building a brand. Although such marketing efforts sometimes caught consumers’ attention, more often than not they failed to create awareness of what products or services the brand represented, why those products or services were unique or different, and most important, why consumers should visit their Web site. Online marketers now realize the realities of brand building. First, as for any brand, it is critical to create unique aspects of the brand on some dimension that is important to consumers, such as convenience, price, or variety. At the same time, the brand needs to perform satisfac- torily in other areas, such as customer service, credibility, and personality. For instance, cus- tomers increasingly began to demand higher levels of service both during and after their Web site visits. Successful online brands have been well positioned and have found unique ways to satisfy consumers’ unmet needs. By offering unique features and services to consumers, the best online brands are able to avoid extensive advertising or lavish marketing campaigns, relying more on word-of-mouth and publicity. Hulu enables consumers to watch videos of their past and present favorite TV programs at their own convenience. 44 PART I OPENING PERSPECTIVES Pandora allows customers to customize online radio stations with bands and genres they enjoy, while learning about other music they might also like. Online encyclopedia Wikipedia provides consumers with extensive, constantly updated, user-generated information about practically everything. Google is perhaps the classic example of how to build a successful online brand. GOOGLE Founded in 1998 by two Stanford University Ph.D. students, Google takes its name from a play on the word googol—the number 1 followed by 100 zeroes—a reference to the huge amount of data online. Google’s stated mission is “To organize the world’s information and make it universally accessible and useful.” The company has become the market leader in the search engine industry through its business focus and constant innovation. Its home page focuses on searches but also allows users to employ many other Google services. By focusing on plain text, avoiding pop-up ads, and using sophisticated search algo- rithms, Google provides fast and reliable service. Google’s revenue traditionally was driven by search ads, text-based boxes that advertisers pay for only when users click on them. Increasingly, Google is seeking additional sources of revenue from new services and acquisitions.23 Google’s classic application of branding principles has helped to make it an industry powerhouse. Source: TassPhotos/Newscom Online brands also learned the importance of off-line activities to draw customers to Web sites. Home page Web addresses, or URLs, began to appear on all collateral and marketing mate- rial. Partnerships became critical as online brands developed networks of online partners and links. They also began to target specific customer groups—often geographically widely dispersed—for which the brand could offer unique value propositions. As we will describe more in Chapter 6, Web site designs have finally begun to maximize the benefits of interactivity, customization, and timeliness and the advantages of being able to inform, persuade, and sell all at the same time.  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 45 People and Organizations When the product category is people or organizations, the naming aspect of branding, at least, is generally straightforward. These often have well-defined images that are easily understood and liked (or disliked) by others. That’s particularly true for public figures such as politicians, entertainers, and professional athletes. All these compete in some sense for public approval and acceptance, and all benefit from conveying a strong and desirable image. NIGELLA LAWSON Nigella Lawson is not a typical celebrity chef. She has no formal training, has never operated a restau- rant, and is self-admittedly lazy. In fact, her first cookbook opens with the warning that she isn’t a chef, she has never been trained as one, and her only license comes from a love of eating. Yet Lawson has been able to transform characteristics otherwise regarded as limitations into a brand spanning a series of award-winning books, a string of popular BBC television series, a cookware line, and even an iPhone app. Lawson’s connection with consumers stems from sharing their frustrations and anxieties about cooking. A former food critic, Lawson was inspired to write her first book when she witnessed the host of a dinner party bursting into tears over a spoiled crème caramel. Instead of challenging her fans to create ever more complicated recipes, Lawson strives to offer pragmatic but tasty recipes that reduce rather than add stress. Whether deliberate or not, her perceived sense of empathy with the common cook has earned her a loyal following.24 Nigella Lawson connects with consumers by empathizing with the common cook. Her books offer simple but tasty recipes that reduce stress rather than add to it. Source: AlamyCelebrity/Alamy That’s not to say that only the well-known or famous can be thought of as a brand. Certainly, one key for a successful career in almost any area is that co-workers, superiors, or even important people outside your company or organization know who you are and rec- ognize your skills, talents, attitude, and so forth. By building up a name and reputation in a business context, you are essentially creating your own brand.25 The right awareness and im- age can be invaluable in shaping the way people treat you and interpret your words, actions, and deeds.26 Similarly, organizations often take on meanings through their programs, activities, and products. Nonprofit organizations such as the Sierra Club, the American Red Cross, and Amnesty International have increasingly emphasized marketing. The children’s advocate non- profit UNICEF has initiated a number of marketing activities and programs through the years. 46 PART I OPENING PERSPECTIVES UNICEF UNICEF launched its “Tap Project” campaign in 2007, which asked diners to pay $1 for a glass of New York City tap water in restaurants, with the funds going to support the organization’s clean water pro- grams. That was the first time UNICEF had run a consumer campaign in over 50 years. The UNICEF logo was featured on the Barcelona soccer team’s jersey from 2006 to 2011 under an arrangement in which the team donated $2 million annually to the organization. UNICEF launched another consumer campaign in the UK in February 2010. This five-year “Put it Right” campaign features celebrity ambassadors for the organization and aims to protect the rights of children. One of UNICEF’s most successful corporate rela- tionships has been with IKEA. The partnership, which also emphasizes children’s rights, was established in 2000 and encompasses direct donations from IKEA and an annual toy campaign, the sales from which directly benefit UNICEF programs.27 Nonprofit organizations like UNICEF need strong brands and modern marketing practices to help them fundraise and satisfy their organizational goals and mission. Source: Picture Contact BV/Alamy Sports, Arts, and Entertainment A special case of marketing people and organizations as brands exists in the sports, arts, and entertainment industries. Sports marketing has become highly sophisticated in recent years, em- ploying traditional packaged-goods techniques. No longer content to allow win–loss records to dictate attendance levels and financial fortunes, many sports teams are marketing themselves through a creative combination of advertising, promotions, sponsorship, direct mail, digital, and other forms of communication. By building awareness, image, and loyalty, these sports franchises are able to meet ticket sales targets regardless of what their team’s actual performance might turn out to be. Brand symbols and logos in particular have become an important financial contributor to professional sports through licensing agreements. Branding plays an especially valuable function in the arts and entertainment industries that bring us movies, television, music, and books. These offerings are good examples of experience goods: prospective buyers cannot judge quality by inspection and must use cues such as the particular people involved, the concept or rationale behind the project, and word-of-mouth and critical reviews. Think of a movie as a product whose “ingredients” are the plot, actors, and director. 28 Certain movie franchises such as Spider Man, James Bond, and Twilight have established themselves as strong brands by combining all these ingredients into a formula that appeals to consumers and allows the studios to release sequels (essentially brand extensions) that rely on the title’s initial popularity. For years, some of the most valuable movie franchises have featured recurring characters or ongoing stories, and many successful recent films have  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 47 been sequels. Their success is due to the fact that moviegoers know from the title and the actors, producers, directors, and other contributors that they can expect a certain experience— a classic application of branding. HARRY POTTER With its ability to transcend its original format—books—the Harry Potter film series has been likened to the Star Wars franchise. All seven of the popular novels have been turned into blockbuster movies, gener- ating over $7.7 billion worldwide by the end of 2011. In the first year it launched Harry Potter toys, Mattel saw $160 million in sales. And in 2010, Universal Studios opened a Florida theme park based on the Harry Potter stories. The Harry Potter empire has been praised for its attention to core marketing techniques—a good product, emotional involvement of its consumers, word-of-mouth promotion, “tease” marketing, and brand consistency. Several estimates have pegged the Harry Potter brand to be worth $15 billion, which, beyond the movies and the books, included more than $1 billion in DVD sales, nearly $12 million in licensing, and $13 million in music sales related to the films.29 Few brands have generated as much worldwide consumer loyalty—and profits—as Harry Potter. Source: WARNER BROS. PICTURES/Album/Newscom A strong brand is valuable in the entertainment industry because of the fervent feelings that names generate as a result of pleasurable past experiences. A new album release from Neil Finn would probably not cause much of a ripple in the marketplace, even if it were marketed as com- ing from a founding member of the band Crowded House. If it were to actually be released and marketed under the Crowded House name, however, greater media attention and higher sales would be virtually guaranteed. 48 PART I OPENING PERSPECTIVES BRANDING BRIEF 1-3 Place Branding B randing is not limited to vacation destinations. Countries, states, and cities large and small are beginning to brand their Branding countries to increase appeal to tourists is also a growing phenomenon. Some recent success stories include respective images as they try to draw visitors or encourage relo- Spain’s use of a logo designed by Spanish artist Joan Miró, the cation. Some notable early examples of place branding include “Incredible India” campaign, and New Zealand’s marketing “Virginia Is for Lovers” and “Shrimp on the Barbie” (Australia). of itself in relation to the Lord of the Rings movie franchise. Now virtually every physical location, area, or region considers Some other tourist slogans include “No Artificial Ingredients” place branding. More recent examples include Santa Rosa’s for Costa Rica and “Mother Nature’s Best-Kept Secret” for Be- new slogan “Place of Plenty” and the “Cleveland Plus” cam- lize. Future Brand, a brand consultancy and research company, paign. The San Diego Convention and Visitors Bureau ran an ranks countries on the strengths of their respective brands. In integrated campaign, titled “Happy Happens,” in 2009. 2010, it deemed the top five country brands to be Canada, Las Vegas ran its hugely successful “What Happens Here, Australia, New Zealand, the United States, and Switzerland. Stays Here” campaign beginning in 2003. The ads were meant to sell Las Vegas as an experience. In 2008, the city took a differ- Sources: Roger Yu, “Cities Use Destination Branding to Lure Tour- ent route, selling Vegas differently and in more practical terms in ists,” USA Today, 12 February 2010; Yana Polikarpov, “Visitors Bureau light of the economy. The “What Happens Here” ads returned in Lures Tourists to ‘Happy’ San Diego,” Brandweek, 23 April 2009; Liz 2009, however, when marketing research showed that consum- Benston, “Will Vegas Advertising That Worked Before, Work Again?,” ers missed them. In 2010, the Las Vegas Convention and Visi- Las Vegas Sun, 27 September 2009; Sean O’Neill, “Careful with Those tors Authority had an $86 million advertising campaign budget, Tourist Slogans,” Budget Travel, 24 September 2009; John Cook, larger than the city’s top competitors’ budgets combined. “Packaging a Nation,” Travel + Leisure, January 2007. Geographic Locations Increased mobility of both people and businesses and growth in the tourism industry have con- tributed to the rise of place marketing. Cities, states, regions, and countries are now actively promoted through advertising, direct mail, and other communication tools. These campaigns aim to create awareness and a favorable image of a location that will entice temporary visits or permanent moves from individuals and businesses alike. Although the brand name is usually preordained by the name of the location, there are a number of different considerations in build- ing a place brand, some of which are considered in Branding Brief 1-3. Ideas and Causes Finally, numerous ideas and causes have been branded, especially by nonprofit organiza- tions. They may be captured in a phrase or slogan and even be represented by a symbol, such as AIDS ribbons. By making ideas and causes more visible and concrete, branding can provide much value. As Chapter 11 describes, cause marketing increasingly relies on sophisticated marketing practices to inform or persuade consumers about the issues sur- rounding a cause. WHAT ARE THE STRONGEST BRANDS? It’s clear from these examples that virtually anything can be and has been branded. Which brands are the strongest, that is, the best known or most highly regarded? Figure 1-5 reveals Interbrand’s ranking of the world’s 25 most valuable brands in 2011 based on its brand valuation methodology (see Chapter 10), as published in its annual “Best Global Brands” report.30 We can easily find some of the best-known brands by simply walking down a supermarket aisle. It’s also easy to identify a number of other brands with amazing staying power that have been market leaders in their categories for decades. According to research by marketing con- sultant Jack Trout, in 25 popular product categories, 20 of the leading brands in 1923 were still leading brands over 80 years later—only five have lost their leadership position.31  CHAPTER 1 BRANDS AND BRAND MANAGEMENT 49 2011 Brand 2011 Brand 2010 Brand 2011–2010 Country of Rank Value Value Percent Ownership Change 1 Coca-Cola 71,861 70,452 2% United States 2 IBM 69,905 64,727 8% United States 3 Microsoft 59,087 60,895 23% United States 4 Google 55,317 43,557 27% United States 5 GE 42,808 42,808 0% United States 6 McDonald's 35,593 33,578 6% United States 7 Intel 35,217 32,015 10% United States 8 Apple 33,492 21,143 58% United States 9 Disney 29,018 28,731 1% United States 10 Hewlett-Packard 28,479 26,867 6% United States 11 Toyota 27,764 26,192 6% Japan 12 Mercedes-Benz 27,445 25,179 9% Germany 13 Cisco 25,309 23,219 9% United States 14 Nokia 25,071 29,495 215% Finland 15 BMW 24,554 22,322 10% Germany 16 Gillette 23,997 23,298 3% United States 17 Samsung 23,430 19,491 20% South Korea 18 Louis Vuitton 23,172 21,860 6% France 19 Honda 19,431 18,506 5% Japan 20 Oracle 17,262 14,881 16% United States FIGURE 1-5 Twenty-Five Most 21 H&M 16,459 16,136 2% Sweden Valuable Global Brands 22 Pepsi 14,590 14,061 4% United States Sources: Based on 23 American Express 14,572 13,944 5% United States Interbrand. “The 100 Most Valuable Global 24 SAP 14,542 12,756 14% Germany Brands 2011,” pp. 17–43. Interbrand. “Best Global 25 Nike 14,528 13,706 6% United States Brands 2010,” p. 14. Similarly, many brands that were number one in the United Kingdom in 1933 remain strong today: Hovis bread, Stork margarine, Kellogg’s Corn Flakes, Cadbury’s chocolates, Gillette ra- zors, Schweppes mixers, Brooke Bond tea, Colgate toothpaste, and Hoover vacuum cleaners. Many of these brands have evolved over the years, however, and made a number of changes. Most of them barely resemble their original forms. At the same time, some seemingly invincible brands, including Levi-Strauss, General Motors, Montgomery Ward, Polaroid, and Xerox, have run into difficulties and seen their mar- ket preeminence challenged or even lost. Although some of these failures are related to factors beyond the control of the firm, such as technological advances or shifting consumer pref- erences, in other cases the blame could probably be placed on the action or inaction of the marketers behind the brands. Some failed to account for changing market conditions and continued to operate with a “business as usual” attitude or, perhaps even worse, rec- ognized that changes were necessary but reacted inadequately or inappropriately. The Science of Branding 1-3 provides some academic insights into factors affecting market leadership. The bottom line is that any brand—no matter how strong at one point in time—is vulnerable and susceptible to poor brand management. The next section discusses why it is so difficult to 50 PART I OPENING PERSPECTIVES THE SCIENCE OF BRANDING 1-3 Understanding Market Leadership T he extent of the enduring nature of market leader- ship has been the source of much debate. According to leadership position over time than retain it. Golder evalu- ated more than 650 products in 100 categories and a study by Dartmouth’s Tuck School of Business Profes- compared the category leaders from 1923 with the cat- sor Peter Golder, leading brands are more likely to lose their egory leaders in 1997 (see Figure 1-6). His study found that Category 1923 Leaders 1997 Leaders Cleansers Old Dutch Comet Soft Scrub Ajax Chewing gum Wrigley Wrigley’s Adams Bubble Yum Bubblicious Motorcycles Indian Harley-Davidson Harley-Davidson Honda Kawasaki Five cent Life Savers Breath-Savers mint candies Tic Tac Certs Peanut butter Beech-Nut Jif Heinz Skippy Peter Pan Razors Gillette Gillette Gem Bic Ever ready Schick Soft drinks Coca-Cola Coca-Cola Cliquot Club Pepsi Bevo Dr. Pepper/Cadbury Coffee Arbuckle’s Yuban Folger’s White House Maxwell House Hotel Astor