Strategic Brand Management - Keller-chapter 3.pdf

CHAPTER 3 BRAND RESONANCE AND BRAND VALUE CHAIN Kevin Lane Keller  Tuck School of Business Dartmouth College

Review from previous chapter 

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Chapter 2 outlined the concept of CBBE and introduced a brand positioning model based on the concepts of point-of-parity and point-ofdifference  This chapter will elaborate two other model; mod el; the brand resonance model and brand value chain model, which all together make up the brand planning system

Review from previous chapter 



Chapter 2 outlined the concept of CBBE and introduced a brand positioning model based on the concepts of point-of-parity and point-ofdifference  This chapter will elaborate two other model; mod el; the brand resonance model and brand value chain model, which all together make up the brand planning system

Brand Resonance and Brand Value Chain Model 

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Brand Resonance: describe how to create intense, active loyalty relationship with customers –  considers  considers how brand positioning affects what customer think, feel and do and the degree to which they resonance/connected Brand Value Chain: by which marketers can trace the value creation process for their brand to better understand the financial impact of their marketing expenditures and investments

 The Brand Resonance Resonance Model  The Four Steps of Brand Building Building CBBE model looks at building a brand as a sequence of steps, each of  which is contigent contigent on successfully successfully achieving the objectives objectives of the previous one: 1. Ensure identification of the brand with customers and an association of the brand in customers’ minds with a specific product class/consumer need 2. Establish the totality of brand meaning in the minds of consumers by strategically linking a host of tangible and intangibla brand associations with certain properties Elicit the proper customer responses to the brand identification 3. and brand meaning 4. Convert brand response to create an intense, active loyalty relationship between customers and the brand

Four Questions Customers ask of Brands  The previous steps represent a set of fundamental questions that customers invariably ask about the brands 1.  Who are you? (brand identity) 2.  What are you? (brand meaning) 3.  What about you? What do I think or feel about you? (brand responses) 4.  What about you and me? What kind of association and how much of a connection would I like to have  with you? (brand relationships)

Customer-Based Brand Equity Pyramid and its sub-dimensions (rational –  emotional)

 The ordering steps in brand laddering 

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Cannot establish meaning unless we have created identity Responses cannot occur unless we have developed the right meaning Cannot forge relationship unless we have elicited the proper responses

Level 1 Salience Dimensions Brand salience measures awareness of the brand: “how often andeasily the brand is evoked under the various situation?”

Depth  of brand awareness  Ease of recognition and recall (how likely for brand element to come to mind, brand with high recall is stronger than only recognition)  Strength and clarity of category idenification/ membership  of brand awareness  Breadth   The range if Purchase and Usage/Consumption consideration 

Brand Salience It’s important to understand how critical brand salience is to the branding process. Brand salience relates to awareness of your organization and its importance to your audience. This, of course, translates to the importance of marketing, advertising, and public relations in your ongoing communications efforts as they help generate awareness and communicate an organization’s relative importance, value proposition, and differentiation.

Salience: Depth and Breadth Importance 

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 The product category hierarchy shows us not only the depth of awareness matters but also the breadth.  The brand must not only be top-of-mind and have sufficient “mind share,” but it must also do so at the right times and places.  To fully understand brand recall, we need to appreciate product category structure,  or how product categories are organized in memory.  The product category hierarchy plays important role in customer decision making High brand salience: customer make sufficient purchase as well as always think of the brand accross variety of setting

Example Drinks Category Hierarchy/Structure Product category structure: how product categories are organized in memory

Level 1 Product Class Level 2 Product Category Level 3 Product Type Information Level 4 Product Info (specific) or Brand

in to other consumption situation beyond meals ... (gathering, rilex, thirsty, etc)

 After meal only...

Level 2 Brand Meaning 

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In brand salience –  (e.g. Aware of the brand by knowing the product category) - is important but not sufficient because the meaning/image of the brand might also considered Creating brand meaning includes establishing a brand image  –  what the brand is characterized by and should stand for in the minds of customer  Two major categories of associations in brand meaning: performance and imagery  Those two categories can be formed directly from customer experience, advertising, WOM, etc

Level 2 A Performance Dimensions “the product” itself is at the heart of Brand Equity  Brand performance: how well the product meets its functional needs,

how well its quality, what extent does the brand satisfy utilitarian asthetic and economics? Five types of Brand Attributes and Benefits (that underlie brand performance) 1. Primary characteristics and supplementary features 2. Product reliability (consistency performance over time), durability (expected economic life of the product), and serviceability the ease of repairing the product if needed) 3. Service effectiveness(how well it satisfies), efficiency (speed and responsiveness of services), and empathy (the extent of service providers are seen as trusting, caring, and having cust. Interest) 4. Style and design (go beyond its functional aspect: e.g. Size, material/sensory) 5. Price (how relative expensive/inexpensive the brand?frequent discount?)

Example : Ads that emphasize on Brand Performance

Level 2 B Imagery Dimensions Depends on the extrinsic properties of the product, incl. The attempts to meet customer’s psychological and social needs (more intangible) Many kind intangibles - the way customer think the abstract aspect of the brand  –  instead of the brand actually does - can be link to the brand, such as:  User Profiles/Imagery: the type of person or organization who uses the brand   

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Purchase and usage Imagery: what conditions/situations they can/should buy the brand  

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 Type of channel (e.g. supermarket, specialty stores, internet), specific stores, ease of purchase  Time (day, week, month, year, etc.), location, and context of usage/type activity (formal/informal)

Brand Personality and values 

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Demographic characteristics (e.g. gender, age, race, income) Psychographic characteristics (e.g. attitude toward, careers, possessions, social issues) (in B2B context): e.g. size/type of organization

Sincerity (down-to-earth, honest, wholesome and cheerful), excitement (daring, spirited, imaginative and up-to-date), competence (reliable, intelligent, successful), sophistication (upper class and charming), and ruggedness (outdoor and tough)

History, heritage, and experiences: associations to their past and certain noteworthy events in the brand’s history   

Nostalgia Memories

Example Imagery

Performance & Imagery  This level of the pyramid is all about features and visual representation. That is, everyone who experiences your brand, regardless of whether it’s a product, service, individual, etc., will experience and evaluate it based on a variety of characteristics. Succesfull result of the: strength, favourability and uniqueness dimension and sufficient knowledge about brand meaning produce the most positive brand response. From these experiences, users will begin to form judgments and feelings about your brand, which is the next level up on the pyramid.

Level 3 A Judgment Dimensions Brand Judgement: Personal opinions about and evaluation of a brand which consumers form by putting together all the different brand performance and imagery associations Four types of Brand Judgement  

Brand quality: Judgement of the quality will determine brand attitudes or overall evaluation of a brand 

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Brand credibility (judgement about the the company/organization behind a brand)   

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Expertise (competent, innovative and market leader?)  Trustworthiness (dependable and keeping customer interest in mind) Likeability (fun, interesting, and worth spending time with)

Brand consideration 

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 Value and Satisfaction

 Attitude and perception will not enough if the customer do not consider about the brand from the very beggining, i.e. how personally relevant customer find the brand? –  the extent to which strong and favorable brand associations can be created as part of the brand image

Brand superiority 

 The extent to which customer view the brand as uique and better than other brand i.e. Differentiation

Level 3 B Feelings Dimensions Customers’ emotional responses and reactions to

the brand: what feeling are evoked by marketing programs (e.g. Ads)?   Warmth: make customer feel a sense of calm/peacefulness  Fun: upbeat type of feelings; amused, lighearted, joyous etc  Excitement: make customers feel energized, excited  Security: produces feeling of safety, comfort, self-assurance  Social Approval: other looks favourably on their appearance  Self-respect: make consumers feel better about themselves

 Judgment & Feeling the transition level. It’s a critical one because it’s the bridge between the feature and resonance levels. In this level, users of your brand form important judgments and feelings about your brand based on its performance and imagery. If your brand’s performance is sub-par, your users’ judgments and feelings will reflect that, never allowing you to achieve brand resonance in their minds. From a branding, marketing, and public relations standpoint, much of what you do is based on helping those who experience your brand to form the judgments and feelings you desire to help achieve brand resonance.

Level 4 Resonance Dimensions Ultimate relationship, the extent cust feel “in sync” with the brand: two dimensions; Intensity (depth of the physcological bound) and activity engendered by this loyalty –  both divided into four categories: Behavioral loyalty  

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 Attitudinal attachment  

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Love brand (favorite possessions; “a little pleasure”) Proud of brand

Sense of community  

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Frequency and amount of repeat purchases

Kinship  Affiliation

 Active engagement (willing to invest time, energy, money, etc)    

Seek information  Join club  Visit website, chat rooms Become brand ambassador/evangelist 2.22

Example Brand Resonance 

Loyalty: lifetime value of diapers customers? 

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1 baby RM100/month x 24-30months = RM3,000!

 Atachment Sense of community Engaged

Resonance  A key difference, however, is that brand resonance involves two entities, not just one. It is characterized by incredibly strong connections with a brand, resulting in intense loyalty by a brand’s users and a stronger ability of the brand to resist competitive actions taken by another brand, whether they are financially-based, related to advertising and marketing, etc. In essence, brand resonance is like achieving brand nirvana.

Example: Cadbury CBBE Pyramid

 Application: Identify the Key Drivers of Brand Equity

Performance

Judgment

0.65

0.49

0.66

0.17

Imagery

Resonance

0.58

0.24

Feelings

Brand Building Implications 

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Customers own brands. (the measure of the brand-strength is the way consumer think, feel and act with respect to the brand) Don’t take shortcuts with brands.

Brands should have a duality. (appeals both heart and head. Rational and Emotional aspects) Brands should have richness Brand resonance provides important focus for their brand-related marketing activities.

 The Brand Value Chain 

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Developing a strong positioning and building brand resonance are crucial, but to better understand the ROI of marketing investment, the BVC tool is necessary BVC: structured approach to assesing the source and outcomes of brand equity and the manner by which marketing activities create brand value BVC profides insights to support bran managers, chief marketing officers, managing directors, and CEO

Brand Value Chain Model

 Value Stages Stage 1 Marketing Program investment  Stage 2 Customer Mindset as reflected in Brand Resonance  Stage 3 Market/Brand Performance  Stage 4 Sharehorder Value  With three moderating multipliers: 1. Program Quality multiplier 2. Marketplace condition multiplier 3. Investor sentiment multiplier 

Stage 1 Marketing Program Investment 

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 Any marketing program/investment (product research, direct/interactive marketing, publicity, etc) can contribute to the brand value development It depends on qualitative aspects of the program and program quality multiplier, i.e.:   

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Distinctinevess: how unique/creative/differentiating? Relevance: how meaningful? Integrated: How well integrated the marketing program, past, present, future?  Value: how much short/long-run value created? Will it build sales (s/r) or brand equity (l/r)? Excellence: is the individual marketing activity designed to satisfy the highest standard?

Fulfillling all the criteria is likely to achive greater ROI 2.31

Stage 2: Customer Mind-Set 

 The 5As of customer mind-set (BR) that influence the Brand value:     

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 Marketplace Condition Multipliers: 1. 2. 3.

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Deep, Broad brand Awareness, Favourable, unique and strong POP and POD Associations, Positive Brand Attitudes (Judgements and Feelings), Intense brand Attachment and High degree of Brand Activity Competitive superiority Channel and other intermediary support Customer size and profile

 The value in customer’s mind-set will be translated into favorable performance if no significant threat from competitor, support from distribution channels and sizable profitable customers that are attracted to the brand - exist

Stage 3: Market Performance 

 The customer mind-set affects customer’s reactions  

 The ability to expand the brand (brand extension or new-brand into related categories)  Cost structure (due to reduces marketing expenditures)   All factors above lead to Brand Profitability  The ability of the brand value to reach the final stage (stock market valuation) depends on the Investor sentiment multiplier 1. Market dynamic (interest rates, supply of capital, etc) 2. Growth potential (prospects of the brand at the current industry) 3. Risk profile (how vulnerable the brand?) 4. Brand contribution (how important is the brand to the firm portfolio?) 

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Price premiums and demand elasticity of the brand Brand sales leads to market share

Stage 4: Shareholder Value 

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Based on current and forecasted information about a brand as well as many other considerations, the financial marketplace formulates assessments and opinion that have  very direct implications for the brand value  Three important indicators 1. 2. 3.

Stock price Price/earnings multiple, and Market capitalization for the firm

Implications of BVC 

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 According to BVC, marketers create value first by making shrewd investments in their marketing program and then maximising, as much as possible, the program, customer, and market multiplier that translate the investment into financial benefits Implications of BVC: 1.

 Value creation begins with the marketing program investment  –  should be well-funded, well-designed, well-implemented

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 Value creation require more than marketing invest,ent, because each of the three multipliers can increase/decrease market value  This BVC provides a detailed road map for tracking value creation that make marketing research and marketing intelligence efforts easier

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 The Brand Planning Model 3. Brand Value Chain Model

2. Brand Resonance Model

1. Brand Positioning Model

POPs

PODs

Customer Equity 

Other than CRM, some Marketing observers encourage firm to formally define and manage the  value of their customers CE: The sum of lifetime values of all customers  Customer lifetime value (CLV) is affected by revenue and by the cost of customer acquisition, retention, and cross-selling  Consists of three components (  Rust, Zeithamal & Lemon, 2004) 

 Value equity (objective assessment benefit minus cost)  Brand equity (subjective assessment, above & beyond value)  Relationship equity (cust tendency to stick with the brand, above and beyond subjective assesment) 

Customer Equity 

Blattberg and Deighton (1996) offer eight guidelines as a means of maximizing customer equity:        

Invest in highest-value customers first  Transform product management into customer management Consider how add-on sales and cross-selling can increase customer equity Look for ways to reduce acquisition costs  Track customer equity gains and losses against marketing programs Relate branding to customer equity Monitor the intrinsic retainability of your customer Consider writing separate marketing plans — or even building two marketing organizations — for acquisition and retention efforts

Relationship of Customer Equity to Brand Equity 

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One way to reconcile the two is to combine both into a matrix, manade and decide the optimal marketing solutions/combinations Brand and Customer Management: CUSTOMERS

Segment1 Brand 1

B

Brand 2

R A N D

Brand M

Segment2

Segment N

Brand Equity vs Customer Equity: Differences between the two points of view

Reconciling the two points of  views Customers drive the success of brands but brands are the necessary touch-point that firms have to connect  with their customers.  CBBE maintains that brands create value by eliciting differential consumer response to marketing activities  In practice; CE and BE are complementary notions  with different emphasis: BE emphasizes on “front end” of marketing program and intangible value potentially created by Marketing Program; CE emphasis on “back end” of marketing programs and the realized value of marketing activities in term of revenue 

CLASS DISCUSSION: PRODUCT TEAM CIALIS

Background: Viagra  

Pfizer launched Viagra 1998  Treatment of erectile dysfunction (ED) (male impotence)

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150 million men worldwide suffer (50% of all between age 40 and 70)

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Immediate success - 600 000 prescriptions filled in first month

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 Viagra set back - deaths reported  Viagra regained confidence $ 1.8 billion sales (2007)

New Entrants: Competition Cialis from Lilly ICOS LLC Levitra from Bayer

 The Cialis case 

How to segment the market and position a follower product  

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How to communicate to target audience   

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 Viagra well positioned and well-known Cialis unknown Patients Partners Doctors

How to price the new product Competitive response from Pfizer

Segmentation criteria 

Demographics  Age  Income  Education 

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 Viagra usage status Current Viagra users   Viagra dropouts  Never tried Viagra 

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Benefit of duration

Segmentation: Age 

Strong correlate between age and reason for not seeking treatment 

 Young patients: Temporary condition

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Old patients: Natural aging process

 The rest: Embarrassed and temporary condition

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Segmentation: Usage status 

Current Viagra users 

Experience with ED Good grasp of duration attribute

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Most willing to try new drugs that offer improvement in key dimension

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Smallest segment

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 Viagra dropouts   

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Some experience with ED Duration probably not key dimension for dropout Maybe hard to treat group

 Viagra never used  

 Very large segment, but no usage familiarity Duration not important, but safety important

Positioning and Pricing 

 Vertical positioning 

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Horizontal positioning 

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36 is much better than 4?  Attitude towards sex: Wild, naughty activity vs. romanc e

 Viagra is priced at $10 (without health coverage) Pay more for better performance? If benefit is positioned more horizontally than vertically, unclear if higher charge is appropriate If affluent consumer are targeted, higher price OK If going for broad appeal, consider lower price

Communication strategy 

Communicate to whom?      

Patients Partners Doctors Insurance companies Regulators Media

Cialis Ads

Case Study: Cialis

 Viagra Ads