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  • 1. Brand Equity for Strategic Advantage: Consumer Decision Making
  • 2. Why the Interest in Branding?
    • Brands are assets
    • Pressure from Stockholders for performance
    • Pressure from competitors
      • Most products in a mature marketplace
      • Price competition abounds
  • 3. What is Brand Equity?
    • The “added value” endowed by the brand name
    • Key elements: Associations, Awareness, Perceived Quality, Loyalty
    • Intangible, but measurable
  • 4. Benefits of Brand Equity
    • Asset management/leveraging
    • Consumer franchise (facilitates loyalty)
    • Lower communication costs
    • Improved prices/margins/market share
    • More power with the trade
  • 5. More benefits of Brand Equity
    • Barrier to competitive entry
    • Effect of financial valuation of the firm
    • Value to your Consumer
      • Recognition, consistency, confidence, image/status, etc.
  • 6. Managing Brand Equity
    • It primarily involves managing the consumer’s mind (associations)
    • Firm must set objective s for the brand
    • Brand equity measurement is a management essential
    • Marketing mix elements should be chosen to build, not erode, brand equity
  • 7. Overview
  • 8. What does awareness and image buy?
    • Influences how consumers make choices
    • By changing how choices are made we can change what is purchased
  • 9. Overview
  • 10. Consumers are overloaded .
    • They have a vast array of alternatives
    • Each product has many attributes
    • Everyone is under time pressure
  • 11. The average supermarket consumer:
    • Does very little search: Average less than 12 second per item
    • 42% spent 5 seconds or less
    • 32% spent between 6 and 15 seconds
    • Average number of brands handled: 1.21; 85% touched only one brand
    Source: Pete Dickson and Stan Sawyer Journal of Marketing
  • 12. How Do Consumers Cope?
    • Choice has two phases
      • Screening: Eliminate Alternatives
      • Comparison: A small set of alternatives (2-3) get intense scrutiny
  • 13. Overview
  • 14. Screening is important
    • Elimination occurs because:
      • The brand lacks a feature (attribute)
      • The brand does not meet some cutoff (price?)
    • Once eliminated a brand is not reconsidered .
  • 15. How Does Brand Equity Effect Screening?
    • Awareness: Can I recall this brand?
    Imagine that your sewer is backing up, and you are about to leave town on a business trip. Who do you call? (Services rarely purchased must have high Top-of-Mind)
  • 16. How Does Brand Equity Effect Screening?
    • Awareness: Can I recall this brand?
    More commonly, a harried or uncertain consumer will eliminate brands with which they are unaware.
  • 17. How Does Brand Equity Effect Screening?
    • Image guides inference about the brand.
    • Inference substitutes for search because:
      • Search is expensive
      • Available information is irrelevant or tough to understand
  • 18. What are your impressions of this watch?
  • 19. What are your impressions of this watch?
  • 20. How Does Brand Equity Affect Screening? A Strategic Advantage
    • Powerful brands can set the agenda:
      • Dictate the attributes used for screening
    • Examples:
      • Volvo and Safety
      • Crest with Tartar Control
      • American Express Travelers Checks
  • 21. Screening: Summary
    • Large product classes are screened.
    • Elimination = Death
    • Brand Equity influences screening
      • Recall for the consideration set
      • Inferences about product attributes
      • Setting the agenda for screening
    What Attributes are used for screening in your product class?
  • 22. Overview
  • 23. Screening simplifies choice, but does not do the whole job.
    • Even when screening consumers seem to examine 2-3 alternatives much more carefully.
    • Process involves intense comparisons on a small set of attributes.
    • How does this comparison process work?
  • 24. How does this comparison work?
    • Consumers compare other brands to one brand
    • Often that brand serves as the reference brand.
    • Key concept: Loss aversion…when compared to the reference brand, losses loom large.
  • 25. Consumers judge value by…
    • The observed price relative to reference price for the product, and
    • The observed price relative to the normal or ‘fair’ price of the product
      • Examples:
        • Restaurants on Friday nights…
        • Super Bowl ticket prices.
        • This is Reference Dependence.
  • 26. Implication
    • If you are the reference brand…
      • Improvements on price, quality, etc. help
      • But decreases hurt more…
    • If you are not the reference brand…
      • You are judged relative to the reference brand
      • Any way you differ from the reference is your loss
  • 27. Implication
    • Reference brands have competitive advantages,
    • Particularly on features which are the most loss adverse
    • Q: What are the reference brands in your product category?
  • 28. Pricing Implication
    • Price cuts will effect different brands differently
    • High quality brands can easily “steal” market share from low quality brands by cutting price.
    • But lower quality brands will not steal share from a high quality brands by cutting price
    Responses to price cuts are asymmetric, high price brands can steal from the poor.
  • 29. How do you become a reference brand?
    • ‘ Strong’ brands with great awareness (T.O.M.)
    • First Mover Advantage
    • Brand most recently purchased
    • Sampling, particularly for higher quality brands
  • 30. Comparison: Summary
    • Having high brand awareness can make you the reference brand which can be a significant advantage.
  • 31. Overview
  • 32. To create value…
    • Brand must support a higher reference price…
    • Must maintain this over time, even in the face of stiff competition…
    • Applications:
      • To raise price…
        • New Models
        • Price Bundling
        • Etc…
  • 33. What Strategic Element cannot be duplicated?
    • You lower price, they can eventually lower price
    • You can add a feature, they can eventually ad that feature
    • But…
    • They cannot use your brand name!!