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Brand Management

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Brand Management (MKT624)
VU
Lesson 2
INTRODUCTION
The more successful a brand, the higher value it carries and more equity it enjoys. To learn
what is brand equity and how to create it through a brand management process is the objective
of this lecture?
Brand Value and Power
Brands, whether grown organically or through acquisitions, have to generate revenues, profits,
and net earnings to make businesses viable. The ability to generate financial results rests at the
core of brand value and power. It is because of this value and power that brands must be
sustained.
Level of value and power differ for different brands. All brands are intended to become great in
terms of value and power. Some succeed and some do not.
To achieve a high level of value and power, marketing and brand managers have been working
to create home in the minds of their consumers. With the rise in importance of brand
management, they have become more and more convinced that the real value of brand is driven
by how dear consumers keep a particular brand to themselves. The endearment drives value
and value in turn translates into brand power and brand equity.
Before understanding what brand equity is, let's see how varying levels of brand value and
power relate varying levels of market leadership and, hence, brand equity. This implies that
different levels of power offer different levels of brand equity. The more the power, the higher
is the equity and vice versa.
The following pieces of evidence of strong brands were put together by Peter Doyle (1989)
from the largest database of business results in the world ­ Profit Impact of Market Strategy
(PIMS).1
o Brands with a market share of 40% generate 3 times as much ROI as those with
a share of only 10%. A higher share means higher volumes that offer scale
economies and, hence, lower costs. Cost optimization on all fronts lead to better
margins and returns.
o For UK grocery brands, the number 1 brand generates over 6 times the return on
sales of the number 2 brand, while number 3 and 4 are unprofitable. Higher
returns on part of the number 1 brand again owe to lower costs, optimum
outreach, availability and better sales.
o For US consumer goods, the number 1 brand earned a 20% return; the number 2
earned around 5% and the rest lost money for the same reasons as cited above.
o Small brands can be profitable. A strong brand in a niche market earns a higher
return than a strong brand in a big market. An interesting finding, it leads us to
believe that concentration on a niche market keeps all variables of marketing
mix focused, efforts economical, and returns high no matter the volume may
remain small. Managing a strong brand in a huge market, however, demands
spread out efforts, more resources employed, but lower returns no matter the
volume may remain big. Bear in mind that not all markets offer the opportunity
to operate in a niche. Therefore, this finding is not to be misunderstood with not
trying to build your brand in a huge market.
These findings explain why companies want to lead by having strong brands with very high
share of the market. The stronger the brands, the lower the costs, the larger the returns, and
more the power the brands enjoy. Strong brands are assets and enjoy value that far exceeds the
value of those fixed assets that produce them. Brands, therefore, have to be managed like vital
assets.
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Brand Management (MKT624)
VU
Brand Equity
An understanding of the concept of brand equity helps us define the process of brand
management. It, therefore, must be understood before we can put definition in place.
In a business, the owner's equity is the value of owner's holding in the company. And, that is
defined as the difference between what a company owns in assets and what it owes in
liabilities. The larger the ratio of assets to liabilities, the larger is the owner's equity.
Likewise, brand equity is the difference between a brand's assets and brand's liabilities. Brand
assets are a function of reputation, quality, relevance, and loyalty. The concept is well-
illustrated with the help of the attached figure.
Brand liabilities are incurred by brands because of failures and questionable business practices
that may increase costs and liabilities. The larger the ratio of brand assets to brand liabilities,
the greater is the brand equity.2
In other words, if brand management is at the heart of marketing, then brand equity is at the
heart of brand management. With the understanding that we have generated so far, we can now
attempt to put together what brand management process looks like.
Figure 4
Brand management is "the process of naming products, turning products into brands, and
managing brands to fully attain maximum brand equity and a brand's full profit potential." The
following figure explains the process as a step-by-step approach toward managing brands.
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Brand Management (MKT624)
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BRAND MANAGEMENT PROCESS
Figure 5
Step 1
Step 2
Step 3
Step 4
Step 5
Name a
Turn Product
Manage
Generate
Build Brand
Product
into Brand
Brand
Profits
Equity
Name a Product
To make your product distinctive, you have to name it as the first step toward the process.
There are no hard and fast rules for the name.
A new brand should preferably reflect its positioning. Positioning exists in the mind of the
consumer. It is an exercise by the company to offer its product in a way that it occupies a
distinct position in the mind of the consumer.
Al Ries and Jack Trout gave the very concept of positioning. According to them, consumers
have in their mind a ladder of images in relation to different brands.
The best brand occupies the top rung of the ladder, the position. The follower brands occupy
positions at the lower rungs. It should be the priority of any brand manager to have his/her
brand positioned at the top rung. You will find more on positioning in lectures number 16
through 20.
Naming a brand could be the company name, a stand-alone name, or an existing brand name
with well established reputation.
Another view is to name a brand with its future and destiny in sight at the time of its birth.
Future and destiny point toward vision for the brand. You must consider:
·  Is it going to be a regional, national, or international brand?
·  Is it going to represent one category or will have the potential and power to represent
more than one category.
Answers to the above questions will comfortably lead you to go for a name most appropriate
for the brand. There could be different strategies employed for the purpose. You will get
insights into this area in lecture number 28.
Turn Product into Brand
You need to do consistent hard work to give meaning to the product to turn it into a brand. The
underlying aspect of this exercise is differentiation. A brand presents itself in its differentiated
form and features for consumers to acknowledge. Without differentiation a product does not
qualify to be acknowledged as a brand.
If features allow the brand to occupy its intended position in consumer's mind, the product is
deemed turned into a brand.
Manage Brand
The process does not cease upon turning the product into a brand. A perpetual effort is needed
to sustain it. Brands go through the rough and tumble of market dynamics. Competition creates
challenges for your brands all the time. Management must face the challenges and live up to
those by responding professionally, with the help of brand management tools at its disposal.
Management commitment to sustain brands, therefore, is of paramount importance. Brands
must be managed keeping in view their value for the consumer and for the company.
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Brand Management (MKT624)
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There could be a lot of conflicting and opposing views across functional areas while you
manage a brand. All such views must be resolved for convergence onto one point ­ full support
to the brand and brand strategies for achievement of goals. You gain support from all
concerned by creating a brand-based culture within the organization. The objective here is to
involve people from across functional areas in a way that they end up owning the brand-based
decisions. Details of a brand-based culture are discussed in lecture number 41.
Generate Profits and Build Brand Equity
Generating profits and building equity are two steps, but interlocked in terms of their
occurrence. A well managed brand is an assurance of profits. Only profits will lead the
company into a better competitive position and allow for further moves to reach destination as
envisioned by the company. Profits make a brand powerful. Power gives the brand value,
which is translated into financial value, and hence equity.
Glossary of terms
Market share: the percentage of current market demand obtained by a business from the
category.
Reputation: the perception of the target market about the standing of your brand in terms of its
appearance, usefulness, reliability, and durability etc.
Quality: quality as assessed by the market of your brand in terms of how it stands up against
competition.
Relevance: a brand must have meaning for its target market. If it does not belong to the target
market, it will not sell despite being differentiated. A professional camera has no meaning for
an amateur user!
Loyalty: customers are very satisfied, retained and would recommend your brand to others.
Differentiation: distinct features of a product that offer the target market a sustainable
advantage that translates into an important benefit.
Brand management tools: all the elements of brand management that you will study during the
course to leverage your brand.
Brand-based culture: a work culture that is adopted by all concerned within an organization
and the one that is most suitable and conducive for a cohesive team effort. Such a culture
preempts many unnecessary conflicts.
Bibliography:
1. Geoffrey Randall: "Branding ­ A Practical Guide to Planning your Strategy"; Kogan Page
(15-17).
2. Roger J. Best: "Market-Based Management ­ Strategies for Growing Customer Value and
Profitability"; PHI (220-223)
Other suggested readings
Jean-Noel Kapferer: "Strategic Brand Management"; Kogan Page (21-34)
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Table of Contents:
  1. UNDERSTANDING BRANDS – INTRODUCTION:Functions of Brand Management, Sales forecast, Brand plan
  2. INTRODUCTION:Brand Value and Power, Generate Profits and Build Brand Equity
  3. BRAND MANIFESTATIONS/ FUNDAMENTALS:Brand identity, Communication, Differentiation
  4. BRAND MANIFESTATIONS/ FUNDAMENTALS:Layers/levels of brands, Commitment of top management
  5. BRAND CHALLENGES:Consumer Revolt, Media Cost and Fragmentation, Vision
  6. STRATEGIC BRAND MANAGEMENT:Setting Objectives, Crafting a Strategy, The Brand Mission
  7. BRAND VISION:Consensus among management, Vision Statement of a Fast Food Company, Glossary of terms
  8. BUILDING BRAND VISION:Seek senior management’s input, Determine the financial contribution gap
  9. BUILDING BRAND VISION:Collect industry data and create a brand vision starter, BRAND PICTURE,
  10. BRAND PICTURE:Brand Value Pyramid, Importance of being at pinnacle, From pinnacle to bottom
  11. BRAND PERSONA:Need-based segmentation research, Personality traits through research
  12. BRAND CONTRACT:The need to stay contemporary, Summary
  13. BRAND CONTRACT:How to create a brand contract?, Brand contract principles, Understand customers’ perspective
  14. BRAND CONTRACT:Translate into standards, Fulfill Good Promises, Uncover Bad Promises
  15. BRAND BASED CUSTOMER MODEL:Identify your competitors, Compare your brand with competition
  16. BRAND BASED CUSTOMER MODEL:POSITIONING, Product era, Image Era, An important factor
  17. POSITIONING:Strong Positioning, Understanding of components through an example
  18. POSITIONING:Clarity about target market, Clarity about point of difference
  19. POSITIONING – GUIDING PRINCIPLES:Uniqueness, Credibility, Fit
  20. POSITIONING – GUIDING PRINCIPLES:Communicating the actual positioning, Evaluation criteria, Coining the message
  21. BRAND EXTENSION:Leveraging, Leveraging, Line Extension in detail, Positive side of line extension
  22. LINE EXTENSION:Reaction to negative side of extensions, Immediate actions for better managing line extensions
  23. BRAND EXTENSION/ DIVERSIFICATION:Why extend/diversify the brand,
  24. POSITIONING – THE BASE OF EXTENSION:Extending your target market, Consistency with brand vision
  25. DEVELOPING THE MODEL OF BRAND EXTENSION:Limitations, Multi-brand portfolio, The question of portfolio size
  26. BRAND PORTFOLIO:Segment variance, Constraints, Developing the model – multi-brand portfolio
  27. BRAND ARCHITECTURE:Branding strategies, Drawbacks of the product brand strategy, The umbrella brand strategy
  28. BRAND ARCHITECTURE:Source brand strategy, Endorsing brand strategy, What strategy to choose?
  29. CHANNELS OF DISTRIBUTION:Components of channel performance, Value thru product benefits
  30. CREATING VALUE:Value thru cost-efficiency, Members’ relationship with brand, Power defined
  31. CO BRANDING:Bundling, Forms of communications, Advertising and Promotions
  32. CUSTOMER RESPONSE HIERARCHY:Brand-based strategy, Methods of appropriations
  33. ADVERTISING:Developing advertising, Major responsibilities
  34. ADVERTISING:Message Frequency and Customer Awareness, Message Reinforcement
  35. SALES PROMOTIONS:Involvement of sales staff, Effects of promotions, Duration should be short
  36. OTHER COMMUNICATION TOOLS:Public relations, Event marketing, Foundations of one-to-one relationship
  37. PRICING:Strong umbrella lets you charge premium, Factors that drive loyalty
  38. PRICING:Market-based pricing, Cost-based pricing
  39. RETURN ON BRAND INVESTMENT – ROBI:Brand dynamics, On the relevance dimension
  40. BRAND DYNAMICS:On the dimension of knowledge, The importance of measures
  41. BRAND – BASED ORGANIZATION:Benefits, Not just marketing but whole culture, Tools to effective communication
  42. SERVICE BRANDS:The difference, Hard side of service selling, Solutions
  43. BRAND PLANNING:Corporate strategy and brands, Brand chartering, Brand planning process
  44. BRAND PLANNING PROCESS:Driver for change (continued), Brand analysis
  45. BRAND PLAN:Objectives, Need, Source of volume, Media strategy, Management strategy