Strategic Brand Management Building, Measuring, and Managing Brand Equity Global Edition 1 This page intentionally left blank Strategic Brand Management 4e Building, Measuring, and Managing Brand Equity Global Edition Kevin Lane Keller Tuck School of Business Dartmouth College Boston Columbus Indianapolis New York San Francisco Upper Saddle River Amsterdam Cape Town Dubai London Madrid Milan Munich Paris Montreal Toronto Delhi Mexico City São Paulo Sydney Hong Kong Seoul Singapore Taipei Tokyo Editor in Chief: Stephanie Wall Senior Acquisitions Editor: Erin Gardner Senior Acquisitions Editor, Global Edition: Steven Jackson Senior Editorial Project Manager: Kierra Bloom Editorial Assistant: Jacob Garber Editorial Assistant, Global Edition: Toril Cooper Director of Marketing: Maggie Moylan Executive Marketing Manager: Anne Fahlgren Marketing Manager, International: Dean Erasmus Senior Managing Editor: Judy Leale Senior Production Project Manager: Ann Pulido Senior Operations Supervisor: Arnold Vila Operation Specialist: Cathleen Petersen Creative Art Director: Blair Brown Senior Art Director: Janet Slowik Interior Designer: Karen Quigley Cover Designer: Jodi Notowitz Cover Image: © t_kimura Media Project Manager, Editorial: Denise Vaughn Media Project Manager, Production: Lisa Rinaldi Composition/Full-Service Project Management: PreMediaGlobal Cover Printer: Lehigh-Phoenix Color/Hagerstown Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearson.com/uk © Pearson Education Limited 2013 The rights of Kevin Lane Keller to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. Authorised adaptation from the United States edition, entitled Strategic Brand Management, 4th Edition, ISBN: 978-0-13-266425-7 by Kevin Lane Keller, published by Pearson Education, Inc., © 2013. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. 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ISBN 13: 978-0-273-77941-4 ISBN 10: 0-273-77941-9 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library 10 9 8 7 6 5 4 3 2 1 16 15 14 13 12 Typeset in Times LT Std by PreMediaGlobal Printed and bound by Courier/Kendallville in The United States of America The publisher’s policy is to use paper manufactured from sustainable forests. Dedication This book is dedicated to my mother and the memory of my father with much love, respect, and admiration. This page intentionally left blank Brief Contents PART I Opening Perspectives Chapter 1 PART II 29 Brands and Brand Management 29 Developing a Brand Strategy 67 Chapter 2 Chapter 3 Customer-Based Brand Equity and Brand Positioning PART III Designing and Implementing Brand Marketing Programs 141 Chapter Chapter Chapter Chapter 4 5 6 7 PART IV Chapter 8 Chapter 9 Chapter 10 PART V Chapter Chapter Chapter Chapter 11 12 13 14 PART VI Chapter 15 Brand Resonance and the Brand Value Chain 67 106 Choosing Brand Elements to Build Brand Equity 141 Designing Marketing Programs to Build Brand Equity 177 Integrating Marketing Communications to Build Brand Equity 217 Leveraging Secondary Brand Associations to Build Brand Equity 259 Measuring and Interpreting Brand Performance 291 Developing a Brand Equity Measurement and Management System 291 Measuring Sources of Brand Equity: Capturing Customer Mind-Set 324 Measuring Outcomes of Brand Equity: Capturing Market Performance 362 Growing and Sustaining Brand Equity 385 Designing and Implementing Branding Architecture Strategies 385 Introducing and Naming New Products and Brand Extensions 431 Managing Brands Over Time 477 Managing Brands Over Geographic Boundaries and Market Segments Closing Perspectives Closing Observations 509 547 547 7 This page intentionally left blank Contents Prologue: Branding Is Not Rocket Science Preface 21 Acknowledgments 26 About the Author 28 PART I Opening Perspectives 29 Chapter 1 Brands and Brand Management Preview 30 What Is a Brand? 19 29 30 Brand Elements 30 Brands versus Products 31 BRANDING BRIEF 1-1: Coca-Cola’s Branding Lesson Why Do Brands Matter? 34 Consumers Firms 35 32 34 Can Anything Be Branded? Physical Goods 36 37 BRANDING BRIEF 1-2: Branding Commodities 38 THE SCIENCE OF BRANDING 1-1: Understanding Business-to-Business Branding THE SCIENCE OF BRANDING 1-2: Understanding High-Tech Branding 41 40 Services 42 Retailers and Distributors 43 Online Products and Services 43 People and Organizations 45 Sports, Arts, and Entertainment 46 BRANDING BRIEF 1-3: Place Branding 48 Geographic Locations 48 Ideas and Causes 48 What Are the Strongest Brands? 48 THE SCIENCE OF BRANDING 1-3: Understanding Market Leadership Branding Challenges and Opportunities 52 50 Savvy Customers 52 Economic Downturns 54 Brand Proliferation 54 THE SCIENCE OF BRANDING 1-4: Marketing Brands in a Recession 55 Media Transformation 55 Increased Competition 56 Increased Costs 56 Greater Accountability 56 The Brand Equity Concept 57 9 10 CONTENTS Strategic Brand Management Process 58 Identifying and Developing Brand Plans 58 Designing and Implementing Brand Marketing Programs Measuring and Interpreting Brand Performance 60 Growing and Sustaining Brand Equity 60 Review 61 Discussion Questions 61 BRAND FOCUS 1.0: History of Branding Notes 64 PART II 58 61 Developing a Brand Strategy 67 Chapter 2 Customer-Based Brand Equity and Brand Positioning Preview 68 Customer-Based Brand Equity 67 68 Defining Customer-Based Brand Equity Brand Equity as a Bridge 70 68 Making a Brand Strong: Brand Knowledge 71 THE SCIENCE OF BRANDING 2-1: Brand Critics Sources of Brand Equity 73 72 Brand Awareness 73 Brand Image 76 Identifying and Establishing Brand Positioning Basic Concepts 79 Target Market 79 Nature of Competition 81 Points-of-Parity and Points-of-Difference 79 82 Positioning Guidelines 85 Defining and Communicating the Competitive Frame of Reference Choosing Points-of-Difference 87 Establishing Points-of-Parity and Points-of-Difference 88 BRANDING BRIEF 2-1: Positioning Politicians 85 89 Straddle Positions 90 Updating Positioning over Time 91 Developing a Good Positioning 93 Defining a Brand Mantra Brand Mantras 93 93 BRANDING BRIEF 2-2: Nike Brand Mantra 94 BRANDING BRIEF 2-3: Disney Brand Mantra 95 THE SCIENCE OF BRANDING 2-2: Branding Inside the Organization Review 97 Discussion Questions 98 BRAND FOCUS 2.0: The Marketing Advantages of Strong Brands 98 Notes 100 Chapter 3 Brand Resonance and the Brand Value Chain Preview 107 Building a Strong Brand: The Four Steps of Brand Building Brand Salience 107 Brand Performance 111 Brand Imagery 113 106 107 97 CONTENTS THE SCIENCE OF BRANDING 3-1: Luxury Branding 11 114 Brand Judgments 117 Brand Feelings 118 Brand Resonance 120 BRANDING BRIEF 3-1: Building Brand Communities Brand-Building Implications 122 122 THE SCIENCE OF BRANDING 3-2: Putting Customers First The Brand Value Chain 128 126 Value Stages 129 Implications 131 Review 132 Discussion Questions 134 BRAND FOCUS 3.0: Creating Customer Value Customer Equity Notes PART III 134 134 138 Designing and Implementing Brand Marketing Programs 141 Chapter 4 Choosing Brand Elements to Build Brand Equity Preview 142 Criteria for Choosing Brand Elements 141 142 Memorability 143 Meaningfulness 143 Likability 143 Transferability 144 Adaptability 144 THE SCIENCE OF BRANDING 4-1: Counterfeit Business Is Booming Protectability 146 147 Options and Tactics for Brand Elements 147 Brand Names 147 URLs 155 Logos and Symbols 155 Characters 156 Slogans 158 BRANDING BRIEF 4-1: Updating the Disneyland Castle 159 THE SCIENCE OF BRANDING 4-2: Balance Creative and Strategic Thinking to Create Great Characters 160 BRANDING BRIEF 4-2: Benetton’s Brand Equity Management 162 Jingles 164 Packaging 164 Putting It All Together 167 BRANDING BRIEF 4-3: Do-Overs with Brand Makeovers 168 THE SCIENCE OF BRANDING 4-3: The Psychology of Packaging Review 170 Discussion Questions 171 BRAND FOCUS 4.0: Legal Branding Considerations 171 Notes 173 169 Chapter 5 Designing Marketing Programs to Build Brand Equity Preview 178 New Perspectives on Marketing 178 177 12 CONTENTS Integrating Marketing Personalizing Marketing 179 181 THE SCIENCE OF BRANDING 5-1: Making Sense Out of Brand Scents Reconciling the Different Marketing Approaches Product Strategy 183 186 187 Perceived Quality 187 Aftermarketing 187 Summary 190 Pricing Strategy 191 Consumer Price Perceptions 191 THE SCIENCE OF BRANDING 5-2: Understanding Consumer Price Perceptions Setting Prices to Build Brand Equity BRANDING BRIEF 5-1: Marlboro’s Price Drop Summary 192 193 193 199 Channel Strategy 199 Channel Design 199 Indirect Channels 201 Direct Channels 205 BRANDING BRIEF 5-2: Goodyear’s Partnering Lessons Online Strategies Summary 208 206 208 Review 209 Discussion Questions 209 BRAND FOCUS 5.0: Private-Label Strategies and Responses Notes 212 210 Chapter 6 Integrating Marketing Communications to Build Brand Equity Preview 218 The New Media Environment 219 Challenges in Designing Brand-Building Communications Role of Multiple Communications 221 Four Major Marketing Communication Options Advertising 219 221 221 THE SCIENCE OF BRANDING 6-1: The Importance of Database Marketing Promotion 232 Online Marketing Communications Events and Experiences 239 236 BRANDING BRIEF 6-1: Tough Mudder: The Toughest Event on the Planet Mobile Marketing Brand Amplifiers 229 242 244 246 Public Relations and Publicity Word-of-Mouth 246 246 Developing Integrated Marketing Communication Programs 247 Criteria for IMC Programs 248 Using IMC Choice Criteria 250 THE SCIENCE OF BRANDING 6-2: Coordinating Media to Build Brand Equity Review 252 Discussion Questions 253 BRAND FOCUS 6.0: Empirical Generalizations in Advertising 254 Notes 255 251 217 CONTENTS Chapter 7 Leveraging Secondary Brand Associations to Build Brand Equity 259 Preview 260 Conceptualizing the Leveraging Process 261 Creation of New Brand Associations 261 Effects on Existing Brand Knowledge 261 Guidelines 262 Company 263 BRANDING BRIEF 7-1: IBM Promotes a Smarter Planet 264 Country of Origin and Other Geographic Areas 266 BRANDING BRIEF 7-2: Selling Brands the New Zealand Way 268 Channels of Distribution 269 Co-Branding 269 THE SCIENCE OF BRANDING 7-1: Understanding Retailers’ Brand Images Guidelines 271 Ingredient Branding 270 272 THE SCIENCE OF BRANDING 7-2: Understanding Brand Alliances 273 Licensing 275 BRANDING BRIEF 7-3: Ingredient Branding the DuPont Way 276 Guidelines 278 Celebrity Endorsement Potential Problems Guidelines 281 278 279 Sporting, Cultural, or Other Events 282 BRANDING BRIEF 7-4: Managing a Person Brand 283 Third-Party Sources 284 Review 285 Discussion Questions 286 BRAND FOCUS 7.0: Going for Corporate Gold at the Olympics Notes 288 PART IV 286 Measuring and Interpreting Brand Performance Chapter 8 Developing a Brand Equity Measurement and Management System 291 Preview 292 The New Accountability 292 Conducting Brand Audits 293 Brand Inventory 294 Brand Exploratory 295 Brand Positioning and the Supporting Marketing Program 298 THE SCIENCE OF BRANDING 8-1: The Role of Brand Personas Designing Brand Tracking Studies 300 What to Track 300 BRANDING BRIEF 8-1: Sample Brand Tracking Survey How to Conduct Tracking Studies 303 How to Interpret Tracking Studies 305 301 299 291 13 14 CONTENTS Establishing a Brand Equity Management System 305 BRANDING BRIEF 8-2: Understanding and Managing the Mayo Clinic Brand Brand Charter 307 Brand Equity Report 308 Brand Equity Responsibilities 306 309 THE SCIENCE OF BRANDING 8-2: Maximizing Internal Branding 310 BRANDING BRIEF 8-3: How Good Is Your Marketing? Rating a Firm’s Marketing Assessment System 312 Review 314 Discussion Questions 315 BRAND FOCUS 8.0: Rolex Brand Audit 315 Notes 322 Chapter 9 Measuring Sources of Brand Equity: Capturing Customer Mind-Set 324 Preview 325 Qualitative Research Techniques 325 BRANDING BRIEF 9-1: Digging Beneath the Surface to Understand Consumer Behavior 326 Free Association 326 Projective Techniques 328 BRANDING BRIEF 9-2: Once Upon a Time . . . You Were What You Cooked Zaltman Metaphor Elicitation Technique BRANDING BRIEF 9-3: Gordon Ramsay Neural Research Methods 332 Brand Personality and Values 333 Ethnographic and Experiential Methods 331 334 BRANDING BRIEF 9-4: Making the Most of Consumer Insights Summary 329 330 335 338 Quantitative Research Techniques 338 Brand Awareness 339 Brand Image 342 THE SCIENCE OF BRANDING 9-1: Understanding Categorical Brand Recall Brand Responses 344 Brand Relationships 346 THE SCIENCE OF BRANDING 9-2: Understanding Brand Engagement Comprehensive Models of Consumer-Based Brand Equity 351 BrandDynamics 351 Relationship to the CBBE Model 352 Review 352 Discussion Questions 353 BRAND FOCUS 9.0: Young & Rubicam’s BrandAsset Valuator Notes 359 353 Chapter 10 Measuring Outcomes of Brand Equity: Capturing Market Performance 362 Preview 363 Comparative Methods 364 Brand-Based Comparative Approaches 364 349 343 15 CONTENTS Marketing-Based Comparative Approaches Conjoint Analysis 367 Holistic Methods 365 368 Residual Approaches 369 Valuation Approaches 371 THE SCIENCE OF BRANDING 10-1: The Prophet Brand Valuation Methodology BRANDING BRIEF 10-1: Beauty Is in the Eye of the Beholder 378 Review 379 Discussion Questions 380 BRAND FOCUS 10.0: Branding and Finance 380 Notes 382 PART V Growing and Sustaining Brand Equity 385 Chapter 11 Designing and Implementing Brand Architecture Strategies Preview 386 Developing a Brand Architecture Strategy Step 1: Defining Brand Potential 375 385 386 386 THE SCIENCE OF BRANDING 11-1: The Brand–Product Matrix 387 THE SCIENCE OF BRANDING 11-2: Capitalizing on Brand Potential 390 Step 2: Identifying Brand Extension Opportunities 392 Step 3: Branding New Products and Services 392 Summary 393 Brand Portfolios 393 BRANDING BRIEF 11-1: Expanding the Marriott Brand Brand Hierarchies 398 396 Levels of a Brand Hierarchy 398 Designing a Brand Hierarchy 400 BRANDING BRIEF 11-2: Netflix Branding Stumbles 401 Corporate Branding 408 THE SCIENCE OF BRANDING 11-3: Corporate Brand Personality Corporate Image Dimensions 409 409 BRANDING BRIEF 11-3: Corporate Reputations: The Most Admired U.S. Companies BRANDING BRIEF 11-4: Corporate Innovation at 31M 412 Managing the Corporate Brand 410 414 Brand Architecture Guidelines 421 Review 422 Discussion Questions 423 BRAND FOCUS 11.0: Cause Marketing Notes 426 423 Chapter 12 Introducing and Naming New Products and Brand Extensions Preview 432 New Products and Brand Extensions 432 BRANDING BRIEF 12-1: Growing the McDonald’s Brand Advantages of Extensions 435 Facilitate New-Product Acceptance 436 Provide Feedback Benefits to the Parent Brand 438 434 431 16 CONTENTS Disadvantages of Brand Extensions 441 Can Confuse or Frustrate Consumers 441 Can Encounter Retailer Resistance 442 Can Fail and Hurt Parent Brand Image 442 THE SCIENCE OF BRANDING 12-1: When Is Variety a Bad Thing? Can Succeed but Cannibalize Sales of Parent Brand 444 Can Succeed but Diminish Identification with Any One Category 443 444 BRANDING BRIEF 12-2: Are There Any Boundaries to the Virgin Brand Name? Can Succeed but Hurt the Image of the Parent Brand 446 Can Dilute Brand Meaning 446 Can Cause the Company to Forgo the Chance to Develop a New Brand 446 Understanding How Consumers Evaluate Brand Extensions Managerial Assumptions 448 Brand Extensions and Brand Equity Vertical Brand Extensions 451 447 448 Evaluating Brand Extension Opportunities 452 Define Actual and Desired Consumer Knowledge about the Brand 452 BRANDING BRIEF 12-3: Mambo Extends Its Brand 453 Identify Possible Extension Candidates 454 Evaluate the Potential of the Extension Candidate 454 Design Marketing Programs to Launch Extension 457 Evaluate Extension Success and Effects on Parent Brand Equity 458 Extension Guidelines Based on Academic Research 459 Review 469 Discussion Questions 469 BRAND FOCUS 12.0: Scoring Brand Extensions 470 Notes 471 Chapter 13 Managing Brands Over Time Preview 478 Reinforcing Brands 477 479 Maintaining Brand Consistency 480 THE SCIENCE OF BRANDING 13-1: Brand Flashbacks Protecting Sources of Brand Equity 482 Fortifying versus Leveraging 484 Fine-Tuning the Supporting Marketing Program BRANDING BRIEF 13-1: Revitalizing Brands 490 BRANDING BRIEF 13-2: BRANDING BRIEF 13-3: BRANDING BRIEF 13-4: 482 484 Razor-Sharp Branding at Gillette 487 Remaking Burberry’s Image 492 Harley-Davidson Motor Company 493 A New Morning for Mountain Dew 494 Expanding Brand Awareness 495 Improving Brand Image 497 Adjustments to the Brand Portfolio 499 Migration Strategies 499 Acquiring New Customers 499 Retiring Brands 500 Review 502 Discussion Questions 504 BRAND FOCUS 13.0: Responding to a Brand Crisis Notes 507 504 445 CONTENTS Chapter 14 Managing Brands Over Geographic Boundaries and Market Segments 509 Preview 510 Regional Market Segments 510 Other Demographic and Cultural Segments 511 Rationale for Going International 512 BRANDING BRIEF 14-1: Marketing to African Americans Advantages of Global Marketing Programs 514 513 Economies of Scale in Production and Distribution 514 Lower Marketing Costs 515 Power and Scope 515 Consistency in Brand Image 515 Ability to Leverage Good Ideas Quickly and Efficiently 515 Uniformity of Marketing Practices 515 Disadvantages of Global Marketing Programs 516 Differences in Consumer Needs, Wants, and Usage Patterns for Products 516 Differences in Consumer Response to Branding Elements 516 Differences in Consumer Responses to Marketing Mix Elements 517 Differences in Brand and Product Development and the Competitive Environment Differences in the Legal Environment 518 Differences in Marketing Institutions 518 Differences in Administrative Procedures 518 Global Brand Strategy 518 519 Global Brand Equity 519 Global Brand Positioning 520 Standardization versus Customization Standardization and Customization 521 521 BRANDING BRIEF 14-2: Coca-Cola Becomes the Quintessential Global Brand BRANDING BRIEF 14-3: UPS’s European Express 524 Developing versus Developed Markets 528 Building Global Customer-Based Brand Equity 529 1. Understand Similarities and Differences in the Global Branding Landscape 2. Don’t Take Shortcuts in Brand Building 530 3. Establish Marketing Infrastructure 531 4. Embrace Integrated Marketing Communications 532 5. Cultivate Brand Partnerships 532 6. Balance Standardization and Customization 533 BRANDING BRIEF 14-4: Managing Global Nestlé Brands 7. Balance Global and Local Control 535 8. Establish Operable Guidelines 536 8. Implement a Global Brand Equity Measurement System 10. Leverage Brand Elements 537 529 534 537 THE SCIENCE OF BRANDING 14-1: Brand Recall and Language Review 539 Discussion Questions 541 BRAND FOCUS 14.0: China Global Brand Ambitions 541 Notes 543 538 522 17 18 CONTENTS PART VI Closing Perspectives Chapter 15 Closing Observations 547 547 Preview 548 Strategic Brand Management Guidelines 548 Summary of Customer-Based Brand Equity Framework Tactical Guidelines 550 548 What Makes a Strong Brand? 554 BRANDING BRIEF 15-1: The Brand Report Card Future Brand Priorities 556 555 1. Fully and Accurately Factor the Consumer into the Branding Equation 556 BRANDING BRIEF 15-2: Reinvigorating Branding at Procter & Gamble 2. Go Beyond Product Performance and Rational Benefits 560 3. Make the Whole of the Marketing Program Greater Than the Sum of the Parts 561 4. Understand Where You Can Take a Brand (and How) 563 5. Do the “Right Thing” with Brands 565 6. Take a Big Picture View of Branding Effects. Know What Is Working (and Why) 566 Finding the Branding Sweet Spot 566 Review 567 Discussion Questions 568 BRAND FOCUS 15.0: Special Applications Notes 573 Epilogue 575 Index 577 568 558 Prologue: Branding Is Not Rocket Science Although the challenges in branding can be immense and difficult, branding is not necessarily rocket science. I should know. I am not a rocket scientist—but my dad was. He was a physicist in the Air Force for 20 years, working on various rocket fuels. Always interested in what I did, he once asked what the book was all about. I explained the concept of brand equity and how the book addressed how to build, measure, and manage it. He listened, paused, and remarked, “That’s very interesting but, uh, that’s not exactly rocket science.” He’s right. Branding is not rocket science. In fact, it is an art and a science. There’s always a creativity and originality component involved with marketing. Even if someone were to follow all the guidelines in this book—and all the guidelines were properly specified—the success or failure of a brand strategy would still depend largely on how, exactly, this strategy would be implemented. Nevertheless, good marketing is all about improving the odds for success. My hope is that this book adds to the scientific aspect of branding, illuminating the subject and providing guidance to those who make brand-related decisions. 19 This page intentionally left blank Preface Let me answer a few questions as to what this book is about, how it’s different from other books about branding, what’s new with this fourth edition, who should read it, how it’s organized, and how you can get the most out of it. WHAT IS THE BOOK ABOUT? This book deals with brands—why they are important, what they represent to consumers, and what firms should do to manage them properly. As many business executives correctly recognize, perhaps one of the most valuable assets a firm has are the brands it has invested in and developed over time. Although competitors can often duplicate manufacturing processes and factory designs, it’s not so easy to reproduce strongly held beliefs and attitudes established in the minds of consumers. The difficulty and expense of introducing new products, however, puts more pressure than ever on firms to skillfully launch their new products as well as manage their existing brands. Although brands may represent invaluable intangible assets, creating and nurturing a strong brand poses considerable challenges. Fortunately, the concept of brand equity—the main focus of this book—can provide marketers with valuable perspective and a common denominator to interpret the potential effects and trade-offs of various strategies and tactics for their brands. Think of brand equity as the marketing effects uniquely attributable to the brand. In a practical sense, brand equity is the added value a product accrues as a result of past investments in the marketing activity for the brand. It’s the bridge between what happened to the brand in the past and what should happen to it in the future. The chief purpose of this book is to provide a comprehensive and up-to-date treatment of the subjects of brands, brand equity, and strategic brand management—the design and implementation of marketing programs and activities to build, measure, and manage brand equity. One of the book’s important goals is to provide managers with concepts and techniques to improve the longterm profitability of their brand strategies. We’ll incorporate current thinking and developments on these topics from both academics and industry participants, and combine a comprehensive theoretical foundation with enough practical insights to assist managers in their day-to-day and long-term brand decisions. And we’ll draw on illustrative examples and case studies of brands marketed in the United States and all over the world. Specifically, we’ll provide insights into how to create profitable brand strategies by building, measuring, and managing brand equity. We address three important questions: 1. How can we create brand equity? 2. How can we measure brand equity? 3. How can we sustain brand equity to expand business opportunities? Readers will learn: • The role of brands, the concept of brand equity, and the advantages of creating strong brands • The three main ways to build brand equity by properly choosing brand elements, designing marketing programs and activities, and leveraging secondary associations • Different approaches to measuring brand equity, and how to implement a brand equity measurement system • Alternative branding strategies and how to design a brand architecture strategy and devise brand hierarchies and brand portfolios 21 22 PREFACE • The role of corporate brands, family brands, individual brands, modifiers, and how to combine them into sub-brands • How to adjust branding strategies over time and across geographic boundaries to maximize brand equity WHAT’S DIFFERENT ABOUT THIS BOOK? My objective in writing this book was to satisfy three key criteria by which any marketing text should be judged: • Depth: The material in the book had to be presented in the context of conceptual frameworks that were comprehensive, internally consistent and cohesive, and well grounded in the academic and practitioner literature. • Breadth: The book had to cover all those topics that practicing managers and students of brand management found intriguing and/or important. • Relevance: Finally, the book had to be well grounded in practice and easily related to past and present marketing activities, events, and case studies. Although a number of excellent books have been written about brands, no book has really maximized those three dimensions to the greatest possible extent. This book sets out to fill that gap by accomplishing three things. First, we develop our main framework that provides a definition of brand equity, identifies sources and outcomes of brand equity, and provides tactical guidelines about how to build, measure, and manage brand equity. Recognizing the general importance of consumers and customers to marketing—understanding and satisfying their needs and wants—this broad framework approaches branding from the perspective of the consumer; it is called customer-based brand equity. We then introduce a number of more specific frameworks to provide more detailed guidance. Second, besides these broad, fundamentally important branding topics, for completeness, numerous Science of Branding boxes provide in-depth treatment of cutting-edge ideas and concepts, and each chapter contains a Brand Focus appendix that delves into detail on specific, related branding topics, such as brand audits, legal issues, brand crises, and private labels. Finally, to maximize relevance, numerous in-text examples illuminate the discussion of virtually every topic, and a series of Branding Brief boxes provide more in-depth examinations of selected topics or brands. Thus, this book can help readers understand the important issues in planning and evaluating brand strategies, as well as providing appropriate concepts, theories, and other tools to make better branding decisions. We identify successful and unsuccessful brand marketers—and why they have been so—to offer readers a greater appreciation of the range of issues in branding, as well as a means to organize their own thoughts about those issues. WHO SHOULD READ THE BOOK? A wide range of people can benefit from reading this book: • Students interested in increasing both their understanding of basic branding principles and their exposure to classic and contemporary branding applications and case studies • Managers and analysts concerned with the effects of their day-to-day marketing decisions on brand performance • Senior executives concerned with the longer-term prosperity of their brand franchises and product or service portfolios • All marketers interested in new ideas with implications for marketing strategies and tactics The perspective we adopt is relevant to any type of organization (public or private, large or small), and the examples cover a wide range of industries and geographies. To illuminate branding concepts across different settings, we review specific applications to online, industrial, high-tech, service, retailer, and small business in Chapters 1 and 15. PREFACE HOW IS THE BOOK ORGANIZED? The book is divided into six major parts, adhering to the “three-exposure opportunity” approach to learning new material. Part I introduces branding concepts; Parts II, III, IV, and V provide all the specific details of those concepts; and Part VI summarizes and applies the concepts in various contexts. The specific chapters for each part and their contents are as follows. Part I sets the stage by providing the “big picture” of what strategic brand management is all about and provides a blueprint for the rest of the book. The goal is to provide a sense for the content and context of strategic brand management by identifying key branding decisions and suggesting some of the important considerations for those decisions. Specifically, Chapter 1 introduces some basic notions about brands, and the role they’ve played and continue to play in marketing strategies. It defines what a brand is, why brands matter, and how anything can be branded, and provides an overview of the strategic brand management process. Part II addresses the topic of brand equity and introduces three models critical for brand planning. Chapter 2 introduces the concept of customer-based brand equity, outlines the customer-based brand equity framework, and provides detailed guidelines for the critically important topic of brand positioning. Chapter 3 describes the brand resonance and brand value chain models that assist marketers in developing profitable marketing programs for their brand and creating much customer loyalty. Part III examines the three major ways to build customer-based brand equity, taking a single product–single brand perspective. Chapter 4 addresses the first way to build customer-based brand equity and how to choose brand elements (brand names, logos, symbols, slogans), and the role they play in contributing to brand equity. Chapters 5 and 6 outline the second way to build brand equity and how to optimize the marketing mix to create customer-based brand equity. Chapter 5 covers product, pricing, and distribution strategies; Chapter 6 is devoted to creating integrated marketing communication programs to build brand equity. Although most readers are probably familiar with these “4 P’s” of marketing, it’s illuminating to consider them from the standpoint of brand equity and the effects of brand knowledge on consumer response to marketing mix activity and vice versa. Finally, Chapter 7 examines the third major way to build brand equity—by leveraging secondary associations from other entities like a company, geographical region, person, or other brand. Part IV looks at how to measure customer-based brand equity. These chapters take a detailed look at what consumers know about brands, what marketers want them to know, and how marketers can develop measurement procedures to assess how well they’re doing. Chapter 8 provides a big-picture perspective of these topics, specifically examining how to develop and implement an efficient and effective brand equity measurement system. Chapter 9 examines approaches to measuring customers’ brand knowledge structures, in order to identify and quantify potential sources of brand equity. Chapter 10 looks at measuring potential outcomes of brand equity in terms of the major benefits a firm accrues from these sources of brand equity as well as how to measure the overall value of a brand. Part V addresses how to manage brand equity, taking a broader, multiple product–multiple brand perspective as well as a longer-term, multiple-market view of brands. Chapter 11 considers issues related to brand architecture strategies—which brand elements a firm chooses to apply across its various products—and how to maximize brand equity across all the different brands and products that a firm might sell. It also describes two important tools to help formulate branding strategies—brand portfolios and the brand hierarchies. Chapter 12 outlines the pros and cons of brand extensions and develops guidelines for introducing and naming new products and brand extensions. Chapter 13 considers how to reinforce, revitalize, and retire brands, examining a number of specific topics in managing brands over time. Chapter 14 examines the implications of differences in consumer behavior and different types of market segments for managing brand equity. We pay particular attention to international issues and global branding strategies. Finally, Part VI considers some implications and applications of the customer-based brand equity framework. Chapter 15 highlights managerial guidelines and key themes that emerged in earlier chapters of the book. This chapter also summarizes success factors for branding and applies the customer-based brand equity framework to address specific strategic brand management issues for different types of products (online, industrial goods, high-tech products, services, retailers, and small businesses). 23 24 PREFACE REVISION STRATEGY FOR FOURTH EDITION The overarching goal of the revision of Strategic Brand Management was to preserve the aspects of the text that worked well, but to improve it as much as possible by updating and adding new material as needed. We deliberately avoided change for change’s sake. Our driving concern was to create the best possible textbook for readers willing to invest their time and energy at mastering the subject of branding. We retained the customer-based brand equity framework that was the centerpiece of the third edition, and the three dimensions of depth, breadth, and relevance. Given all the academic research progress that has been made in recent years, however, as well as all the new market developments and events, the book required—and got—some important updates. 1. New and updated Branding Briefs and in-text examples: Many new Branding Briefs and numerous in-text examples have been added. The goal was to blend classic and contemporary examples, so many still-relevant and illuminating examples remain. 2. Additional academic references: As noted, the branding area continues to receive concerted academic research attention. Accordingly, each chapter incorporates new references and sources for additional study. 3. Tighter chapters: Chapters have been trimmed and large boxed material carefully screened to provide a snappier, more concise read. 4. Stronger visuals: The text includes numerous engaging photos and graphics. These visuals highlight many of the important and interesting concepts and examples from the chapters. 5. Updated and new original cases: To provide broader, more relevant coverage, new cases have been added to the Best Practices in Branding casebook including PRODUCT (RED), King Arthur Flour, and Target. Each of the remaining cases has been significantly updated. All of the cases are considerably shorter and tighter. Collectively, these cases provide insights into the thinking and activities of some of the world’s best marketers while also highlighting the many challenges they still face. In terms of content, the book continues to incorporate material to address the changing technological, cultural, global, and economic environment that brands face. Some of the specific new topics reviewed in depth in the fourth edition include: • Marketing in a recession • Luxury branding • Brand personas • Shopper marketing • Social currency • Brand extension scorecard • Brand flashbacks • Brand communities • Brand characters • Brand makeovers • Person branding • Brand potential • Culture and branding • Future brand priorities Some of the many brands and companies receiving greater attention include: • Converse • Etisalat • W Hotels • HBO • Tupperware • Groupon • Louis Vuitton • Netflix • Uniqlo • Boloco • L’Oréal • Michelin • MTV • Macy’s • Johnnie Walker • Lions Gate • Gannett • Subway • M&M’s • Hyundai • Tough Mudder • Liz Claiborne • Prada • TOMS • Chobani • Kindle • Coldplay • Febreze • Oreo • DHL PREFACE Some of the more major chapter changes from the third edition include the following: • Chapters 2 and 3 have been reorganized and updated to show how the brand positioning, brand resonance, and brand value chain models are linked, providing a comprehensive set of tools to help readers understand how brand equity can be created and tracked. • Chapter 6 has been reorganized and updated around four major marketing communication options: (1) Advertising and promotion; (2) Interactive marketing; (3) Events and experiences; and (4) Mobile marketing. Guidelines and examples are provided for each of the four options. Special attention is paid to the role of social media. • Chapters 9 and 10 have been updated to include much new material on industry models of brand equity and financial and valuation perspectives on branding. • Chapters 11 and 12 have been reorganized and updated to provide an in-depth three-step model of how to develop a brand architecture strategy. As part of these changes, a detailed brand extension scorecard is presented. • Chapter 14 has been updated to include much new material on developing markets. • Chapter 15 has been updated to include much new material on future brand priorities. HOW CAN YOU GET THE MOST OUT OF THE BOOK? Branding is a fascinating topic that receives much attention in the popular press. The ideas presented in the book will help you interpret current branding developments. One good way to better understand branding and the customer-based brand equity framework is to apply the concepts and ideas presented in the book to current events, or to any of the more detailed branding issues or case studies presented in the Branding Briefs. The Discussion Questions at the end of the chapters often ask you to pick a brand and apply one or more concepts from that chapter. Focusing on one brand across all the questions—perhaps as part of a class project—permits some cumulative and integrated learning and is an excellent way to become more comfortable with and fluent in the material in the book. This book truly belongs to you, the reader. Like most marketing, branding doesn’t offer “right” or “wrong” answers, and you should question things you don’t understand or don’t believe. The book is designed to facilitate your understanding of strategic brand management and present some “best practice” guidelines. At the end of the day, however, what you get out of it will be what you put into it, and how you blend the ideas contained in these pages with what you already know or believe. FACULTY RESOURCES Instructors can access a variety of print, media, and presentation resources through www .pearsonglobaleditions.com/keller. 25 Acknowledgments I have been gratified by the acceptance of the first three editions of Strategic Brand Management. It has been translated and adapted in numerous languages and countries, adopted by many top universities, and used by scores of marketing executives around the world. The success of the text is in large part due to the help and support of others whom I would like to acknowledge and thank. The Pearson team on the fourth edition was a huge help in the revision—many thanks to Stephanie Wall, Erin Gardner, Kierra Bloom, Ann Pulido, and Stacy Greene. Elisa Adams superbly edited the text with a very keen and helpful eye. Keri Miksza tracked down permissions and provided an impressive array of ads and photos from which to choose. Katie Dougherty, Duncan Hall, and Alex Tarnoff offered much research assistance and support for the text. Lowey Sichol has joined me as co-author of the Best Practices in Branding casebook and has applied her marketing experience and wisdom to craft a set of informative, intriguing cases. John Lin has been a steady long-time contributor about what is happening in the tech world. Alison Pearson provided her usual superb administrative assistance in a number of areas. I have learned much about branding in my work with industry participants, who have unique perspectives on what is working and not working (and why) in the marketplace. Our discussions have enriched my appreciation for the challenges in building, measuring, and managing brand equity and the factors affecting the success and failure of brand strategies. I have benefited from the wisdom of my colleagues at the institutions where I have held academic positions: Dartmouth College, Duke University, the University of California at Berkeley, Stanford University, the Australian Graduate School of Management, and the University of North Carolina at Chapel Hill. Over the years, the doctoral students I advised have helped in my branding pursuits in a variety of useful ways, including Sheri Bridges, Christie Brown, Jennifer Aaker, Meg Campbell, and Sanjay Sood. I have also learned much from my research partners and from the marketing field as a whole that has recognized the importance of branding in their research studies and programs. Their work provides much insight and inspiration. Finally, special thanks go to my wife, Punam Anand Keller, and two daughters, Carolyn and Allison, for their never-ending patience, understanding, and support. Pearson would like to thank and acknowledge the following people for their work on the Global Edition: Contributors Dr. Chris Baumann, Department of Marketing & Management, Macquarie University, Australia. Visiting Professor, Seoul National University, South Korea, and Aarhus University, Denmark. Dr. Colin Campbell, Department of Marketing, Kent State University, USA. Dr. Mike Cheong, School of Business Management, Nanyang Polytechnic, Singapore. Prof. Wujin Chu, Associate Dean MBA Programs and Professor of Marketing, Seoul National University, South Korea. Dr. Noha El-Bassiouny, Department of Marketing, the German University in Cairo, Egypt. Dr. Noor Hasmini Abd Ghani, School of Business Management, College of Business, Universiti Utara Malaysia, Malaysia. 26 ACKNOWLEDGMENTS Prof. Dr. Michael A. Grund, Head of Center for Marketing, HWZ University of Applied Sciences in Business Administration Zurich, Switzerland. Phillip Morgan, UTS Business School, University of Technology, Sydney, Australia. Arabella Pasquette, Freelance Lecturer and Consultant, Singapore and UK. Alicia Perkins, Department of Marketing, University of Newcastle, Australia. Professor Michael Jay Polonsky, School of Management and Marketing, Deakin University, Australia. Reviewers Dr. Nalia Aaijaz, PhD, University Malaysia Kelantan, Malaysia. Dr. Yoosuf A Cader, Zayed University, Abu Dhabi, United Arab Emirates. Dr. E. Constantinides, School of Management and Governance, University of Twente, The Netherlands. Dr. Dalia Abdelrahman Farrag, The Arab Academy for Science, Technology & Maritime Transport, Egypt. Susan Scoffield, Senior Lecturer in Marketing, Department of Business & Management, Manchester Metropolitan University, UK. Dr. Margaret NF Tang, The School of Business, Macao Polytechnic Institute, China. Venkata Yanamandram, School of Management & Marketing, University of Wollongong, Australia. Graham Robert Young, University of Southern Queensland, Australia. 27 About the Author 28 Kevin Lane Keller is the E. B. Osborn Professor of Marketing at the Tuck School of Business at Dartmouth College. Professor Keller has degrees from Cornell, Carnegie-Mellon, and Duke universities. At Dartmouth, he teaches MBA courses on marketing management and strategic brand management and lectures in executive programs on those topics. Previously, Professor Keller was on the faculty at Stanford University, where he also served as the head of the marketing group. Additionally, he has been on the faculty at the University of California at Berkeley and the University of North Carolina at Chapel Hill, been a visiting professor at Duke University and the Australian Graduate School of Management, and has two years of industry experience as Marketing Consultant for Bank of America. Professor Keller’s general area of expertise lies in marketing strategy and planning, and branding. His specific research interest is in how understanding theories and concepts related to consumer behavior can improve marketing and branding strategies. His research has been published in three of the major marketing journals—the Journal of Marketing, the Journal of Marketing Research, and the Journal of Consumer Research. He also has served on the Editorial Review Boards of those journals. With over 90 published papers, his research has been widely cited and has received numerous awards. Actively involved with industry, he has worked on a host of different types of marketing projects. He has served as a consultant and advisor to marketers for some of the world’s most successful brands, including Accenture, American Express, Disney, Ford, Intel, Levi Strauss, Procter & Gamble, and Samsung. Additional brand consulting activities have been with other top companies such as Allstate, Beiersdorf (Nivea), BlueCross BlueShield, Campbell, Colgate, Eli Lilly, ExxonMobil, General Mills, GfK, Goodyear, Hasbro, Intuit, Johnson & Johnson, Kodak, L.L. Bean, Mayo Clinic, MTV, Nordstrom, Ocean Spray, Red Hat, SAB Miller, Shell Oil, Starbucks, Unilever, and Young & Rubicam. He has also served as an academic trustee for the Marketing Science Institute. A popular and highly sought-after speaker, he has made speeches and conducted marketing seminars to top executives in a variety of forums. Some of his senior management and marketing training clients include such diverse business organizations as Cisco, Coca-Cola, Deutsche Telekom, GE, Google, IBM, Macy’s, Microsoft, Nestlé, Novartis, Pepsico, and Wyeth. He has lectured all over the world, from Seoul to Johannesburg, from Sydney to Stockholm, and from Sao Paulo to Mumbai. He has served as keynote speaker at conferences with hundreds to thousands of participants. Professor Keller is currently conducting a variety of studies that address strategies to build, measure, and manage brand equity. In addition to Strategic Brand Management, in its 3rd edition, which has been heralded as the “bible of branding,” he is also the co-author with Philip Kotler of the all-time best-selling introductory marketing textbook, Marketing Management, now in its 14th edition. An avid sports, music, and film enthusiast, in his so-called spare time, he has helped to manage and market, as well as serve as executive producer, for one of Australia’s great rock and roll treasures, The Church, as well as American power-pop legends Tommy Keene and Dwight Twilley. Additionally, he is the Principal Investor and Marketing Advisor for Second Motion Records. He also serves on the Board of Directors for The Doug Flutie, Jr. Foundation for Autism and the Montshire Museum of Science. Professor Keller lives in Etna, NH with his wife, Punam (also a Tuck marketing professor), and his two daughters, Carolyn and Allison. PA R T I OPENING PERSPECTIVES 1 Brands and Brand Management 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 maintaining 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 functions 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 historical 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 something 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 distinguishes 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 assign 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 Redenbacher popcorn; names based on places, like Sante Fe cologne, Chevrolet Tahoe SUV, and CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 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 supermarket; 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 features. This is basically a stripped-down, no-frills version of the product that adequately performs 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 services that distinguish the product from competitors. 5. The potential product level includes all the augmentations and transformations that a product 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 factories 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 differentiate 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 department 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 Association, 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, 31 32 PART I • OPENING PERSPECTIVES due, in part, to continual innovation. Steady investments in research and development have produced 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 example, 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 nationally, 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 findings from this research clearly indicated that consumers “overwhelmingly” 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 CocaCola, negative. In Seattle, retired real estate investor Gay Mullins founded the “Old Cola Drinkers of America” and set up a hotline for angry consumers. A Beverly Hills wine merchant bought 500 cases of “Vintage Coke” and sold them at a premium. Meanwhile, back at Coca-Cola headquarters, roughly 1,500 calls a day and literally truckloads of mail poured in, virtually all condemning the company’s actions. Finally, after several months of slumping sales, Coca-Cola announced that the old formulation would return as “Coca-Cola Classic” and join “New” Coke in the marketplace (see the accompanying photo). The New Coke debacle taught Coca-Cola a very important, albeit painful and public, lesson about its brand. Coke clearly is not just seen as a beverage or thirst-quenching refreshment by consumers. Rather, it seems to be viewed as more of an American icon, and much of its appeal lies not only in its ingredients but also in what it represents in terms of Americana, nostalgia, and its heritage and relationship with consumers. Coke’s brand image certainly has emotional components, and consumers have a great deal of strong feelings for the brand. The epic failure of New Coke taught Coca-Cola a valuable lesson about branding. Source: Al Freni/Time & Life Pictures/Getty Images Although Coca-Cola made a number of other mistakes in introducing New Coke (both its advertising and its packaging probably failed to clearly differentiate the brand and communicate its sweeter quality), its biggest slip was losing sight of what the brand meant to consumers in its totality. The psychological response to a brand can be as important as the physiological response to the product. At the same time, American consumers also learned a lesson—just how much the Coke brand really meant to them. As a result of Coke’s marketing fiasco, it is doubtful that either side will take the other for granted from now on. Sources: Patricia Winters, “For New Coke, ‘What Price Success?’” Advertising Age, 20 March 1989, S1–S2; Jeremiah McWilliams, “Twenty-Five Years Since Coca-Cola’s Big Blunder,” Atlanta Business News, 26 April 2010; Abbey Klaassen, “New Coke: One of Marketing’s 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’ understanding 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 the room, and completely energy self-sufficient. FIGURE 1-1 Examples of Different Product Levels 1. Apple 2. Amazon 3. Facebook 4. General Electric 5. Google 6. Groupon 7. Intel 8. Microsoft 9. Twitter 10. Zynga FIGURE 1-2 Ten Firms Rated Highly on Innovation Sources: Based on “The 50 Most Innovative Companies,” Bloomberg BusinessWeek, 25 April 2010; “The World’s Most Innovative Companies,” Forbes, 4 March 2011; “The World’s 50 Most Innovative Companies,” Fast Company, March 2011; “The 50 Most Innovative Companies 2011,” 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 important 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 products 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 relationship 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, allowing consumers to project their self-image. Certain brands are associated with certain types of people 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 understanding 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 FIGURE 1-3 Roles That Brands Play 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 Source of financial returns CHAPTER 1 • BRANDS AND BRAND MANAGEMENT Brands can also play a significant role in signaling certain product characteristics to consumers. 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 sturdiness, 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 experience 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 satisfactory 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 experiences. Thus, brands can be a very important risk-handling device, especially in business-tobusiness settings where risks can sometimes have quite profound implications. In summary, to consumers, the special meaning that brands take on can change their perceptions and experiences with a product. The identical product may be evaluated differently depending 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 organize 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; manufacturing 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 associations 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 provides 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 35 36 PART I • OPENING PERSPECTIVES Brand FIGURE 1-4 Brand Value as a Percentage of Market Capitalization (2010) Sources: Based on Interbrand. “Best Global Brands 2010.” Yahoo! Finance, February, 2011. 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% Intel 32,015 119,130 27% Nokia 29,495 33,640 88% Disney 28,731 81,590 35% Hewlett-Packard 26,867 105,120 26% 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 consumers 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 participant 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,” installing 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 applications 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 products, 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 bestknown 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 recognizing 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 physically differentiated from competitors in the minds of consumers. Over the years, a number of products that at one time were seen as essentially commodities have become highly differentiated as strong brands have emerged in the category. Some notable examples are coffee (Maxwell House), bath soap (Ivory), flour (Gold Medal), beer (Budweiser), salt (Morton), oatmeal (Quaker), pickles (Vlasic), bananas (Chiquita), chickens (Perdue), pineapples (Dole), and even water (Perrier). These products became branded in various ways. The key success factor in each case, however, was that consumers became convinced that all the product offerings in the category were not the same and that meaningful differences existed. In some instances, such as with produce, marketers convinced consumers that a product was not a commodity and could actually vary appreciably in quality. In these cases, the brand was seen as ensuring uniformly high quality in the product category on which consumers could depend. In other cases, like Perrier bottled mineral water, because product differences were virtually nonexistent, brands have been created by image or other non-product-related considerations. One of the best examples of branding a commodity in this fashion is diamonds. De Beers Group added the phrase “A Diamond Is Forever” as the tagline in its ongoing ad campaign in 1948. The diamond supplier, which was founded in 1888 and sells about 60 percent of the world’s rough diamonds, wanted to attach more emotion and symbolic meaning to the purchase of diamond jewelry. “A Diamond Is Forever” became one of the most recognized slogans in advertising and helped fuel a diamond jewelry industry that’s now worth nearly $25 billion per year in the United States alone. After years of successful campaigns that helped generate buzz for the overall diamond industry, De Beers began to focus on its proprietary brands. Its 2009 campaign highlighted its new Everlon line. Partly in reaction to the recession, De Beers’s marketing also began to focus on the long-term value and staying power of diamonds; new campaigns included the slogans “Fewer Better Things” and “Here Today, Here Tomorrow.” Sources: Theodore Levitt, “Marketing Success Through Differentiation— of Anything,” Harvard Business Review (January–February 1980): 83–91; Sandra O’Loughlin, “Sparkler on the Other Hand,” Brandweek, 19 April 2004; Blythe Yee, “Ads Remind Women They Have Two Hands,” Wall Street Journal, 14 August 2003; Lauren Weber, “De Beers to Open First U.S. Retail Store,” Newsday, 22 June 2005; “De Beers Will Double Ad Spending,” MediaPost, 17 November 2008. opportunities and more profitable relationships. A strong brand can provide valuable reassurance 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 wellinformed and professional that brands don’t matter. Savvy business marketers reject that reasoning 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 particularly 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 competition. It communicated the change in strategy to 50,000 of its employees and then formally launched it to CHAPTER 1 • BRANDS AND BRAND MANAGEMENT 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 longer 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 advantage 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 39 40 PART I • OPENING PERSPECTIVES THE SCIENCE OF BRANDING 1-1 Understanding Business-to-Business Branding B ecause business-to-business purchase decisions are complex and often high risk, branding plays an important role in B2B markets. Six specific guidelines—developed in greater detail in later chapters—can be defined for marketers of B2B brands. 1. Ensure the entire organization understands and supports branding and brand management. Employees at all levels and in all departments must have a complete, up-to-date understanding of the vision for the brand and their role in supporting it. A particularly crucial area is the sales force; personal selling is often the profit driver of a business-to-business organization. The sales force must be properly aligned so that the department can more effectively leverage and reinforce the brand promise. If branding is done right, the sales force can ensure that target customers recognize the brand’s benefits sufficiently to pay a price commensurate with the brand’s potential value. 2. Adopt a corporate branding strategy if possible and create a well-defined brand hierarchy. Because of the breadth and complexity of the product or service mix, companies selling business-to-business are more likely to emphasize corporate brands (such as Hewlett-Packard, ABB, or BASF). Ideally, they will also create straightforward sub-brands that combine the corporate brand name with descriptive product modifiers, such as with EMC or GE. If a company has a distinctive line of business, however, a more clearly differentiated sub-brand may need to be developed, like Praxair’s Medipure brand of medical oxygen, DuPont’s Teflon coating, and Intel’s Centrino mobile technology. 3. Frame value perceptions. Given the highly competitive nature of business-to-business markets, marketers must 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 its best foot forward.” Framing can be as simple as making sure customers realize all the benefits or cost savings offered by the brand, or becoming more active in shaping how customers view the economics of purchasing, owning, using and disposing of the brand in a different way. Framing requires understanding how customers currently think of brands and choose among products and services, and then determining how they should ideally think and choose. 4. Link relevant non-product-related brand associations. In a business-to-business setting, a brand may be differentiated on the basis of factors beyond product performance, such as having superior customer service or well-respected customers or clients. Other relevant brand imagery might relate to the size or type of firm. For example, Microsoft and Oracle might be seen as “aggressive” companies, whereas 3M and Apple might be seen as “innovative.” Imagery may also be a function of the other organizations to which the firm sells. For example, customers may believe that a company with many customers is established and a market leader. 5. Find relevant emotional associations for the brand. B2B marketers too often overlook the power of emotions in their branding. Emotional associations related to a sense of security, social or peer approval, and selfrespect can also be linked to the brand and serve as key sources of brand equity. That is, reducing risk to improve customers’ sense of security can be a powerful driver of many decisions and thus an important source of brand equity; being seen as someone who works with other top firms may inspire peer approval and personal recognition within the organization; and, beyond respect and admiration from others, a business decision-maker may just feel more satisfied by working with top organizations and brands. 6. Segment customers carefully both within and across companies. Finally, in a business-to-business setting, different customer segments may exist both within and across organizations. Within organizations, different people may assume the various roles in the purchase decision process: Initiator, user, influencer, decider, approver, buyer and gatekeeper. Across organizations, businesses can vary according to industry and company size, technologies used and other capabilities, purchasing policies, and even risk and loyalty profiles. Brand building must take these different segmentation perspectives in mind in building tailored marketing programs. Sources: James C. Anderson and James A. Narus, Business Market Management: Understanding, Creating, and Delivering Value, 3rd ed. (Upper Saddle River, NJ: Prentice Hall, 2009); Kevin Lane Keller and Frederick E. Webster, Jr., “A Roadmap for Branding in Industrial Markets,” Journal of Brand Management, 11 (May 2004): 388–40; Philip Kotler and Waldemar Pfoertsch, B2B Brand Management (Berlin-Heidelberg, Germany: Springer, 2006); Kevin Lane Keller, “Building a Strong Business-to-Business Brand,” in Business-to-Business Brand Management: Theory, Research, and Executive Case Study Exercises, in Advances in Business Marketing & Purchasing series, Volume 15, ed. Arch Woodside (Bingley, UK: Emerald Group Publishing Limited, 2009), 11-31; Kevin Lane Keller and Philip Kotler, “Branding in Business-to-Business Firms,” in Business to Business Marketing Handbook, eds. Gary L. Lilien and Rajdeep Grewal (Northampton, MA: Edward Elgar 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 budgets 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 provides 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 that managers for high-tech companies can use to improve their company’s brand strategy. 1. It is important to have a brand strategy that provides a roadmap for the future. Technology companies too often rely on the faulty assumption that the best product based on the best technology will sell itself. As the market failure of the Sony Betamax illustrates, the company with the best technology does not always win. 2. Understand your brand hierarchy and manage it appropriately over time. A strong corporate brand is vital in the technology industry to provide stability and help establish a presence on Wall Street. Since product innovations provide the growth drivers for technology companies, however, brand equity is sometimes built in the product name to the detriment of corporate brand equity. 3. Know who your customer is and build an appropriate brand strategy. Many technology companies understand that when corporate customers purchase business-tobusiness products or services, they are typically committing to a long-term relationship. For this reason, it is advisable for technology companies to establish a strong corporate brand that will endure over time. 4. Realize that building brand equity and selling products are two different exercises. Too often, the emphasis on developing products leads to an overemphasis on branding them. When a company applies distinct brand names to too many products in rapid succession, the brand portfolio becomes cluttered and consumers may lose perspective on the brand hierarchy. Rather than branding each new innovation separately, a better approach is to plan for future innovations by developing an extendable branding strategy. 5. Brands are owned by customers, not engineers. In many high-tech firms, CEOs work their way up the ladder through the engineering divisions. Although engineers have an intimate knowledge of products and technology, they may lack the big-picture brand view. Compounding this problem is the fact that technology companies typically spend less on consumer research compared with other types of companies. As a result of these factors, tech companies often do not invest in building strong brands. 6. Brand strategies need to account for the attributes of the CEO and adjust accordingly. Many of the world’s top technology companies have highly visible CEOs, especially compared with other industries. Some notable high-tech CEOs with prominent public personas include Oracle’s Larry Ellison, Cisco’s John Chambers, Dell’s Michael Dell, and (until 2011), Apple’s Steve Jobs. In each case, the CEO’s identity and persona are inextricably woven into the fabric of the brand. 7. Brand building on a small budget necessitates leveraging every possible positive association. Technology companies typically prioritize their marketing mix as follows (in order from most important to least important): industry analyst relations, public relations, trade shows, seminars, direct mail, and advertising. Often, direct mail and advertising are discretionary items in a company’s marketing budget and may in fact receive no outlay. 8. Technology categories are created by customers and external forces, not by companies themselves. In their quest for product differentiation, new technology companies have a tendency to reinvent the wheel and claim they have created a new category. Yet only two groups can truly create categories: analysts and customers. For this reason, it is important for technology companies to manage their relationships with analysts in order to attract consumers. 9. The rapidly changing environment demands that you stay in tune with your internal and external environment. The rapid pace of innovation in the technology sector dictates that marketers closely observe the market conditions in which their brands do business. Trends in brand strategy change almost as rapidly as the technology. 10. Invest the time to understand the technology and value proposition and do not be afraid to ask questions. It is important for technology marketers to ask questions in order to educate themselves and build credibility with the company’s engineering corps and with customers. To build trust among engineers and customers, marketers must strive to learn as much as they can about the technology. Sources: Patrick Tickle, Kevin Lane Keller, and Keith Richey, “Branding in High-Technology Markets,” Market Leader 22 (Autumn 2003): 21–26; Jakki Mohr, Sanjit Sengupta, and Stanley Slater, Marketing of High-Technology Products and Innovations, 3rd ed. (Upper Saddle River, NJ: Pearson Prentice Hall, 2010); Eloise Coupey, Digital Business: Concepts and Strategies, 2nd ed. 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