To Be CoveredProven brand strategies for increasing stockprice and profitabilityEffective brand strategies for dot-comcompanies
What is a Brand?A trademark: a brandname and logoA TrustmarkMost simply, a promiseto the customerPerceptual – exists inthe minds & hearts ofyour customers,employees, andsuppliers
What is a Brand?The proprietary visual,rational, emotional andcultural image surroundinga company, organization,product,or person
The Purpose of a BrandAssumes a quality product and marketingDIFFERENTIATEProvides springboard for new products andacquisitionsEnduring profitable growthIncreased perceived value = premium pricing
SodaCoca Cola $2.59Safeway Select $1.59Price difference $1.00
When You go to a Restaurant….Guest:“Can I have a Coke?Server:“You bet. Is a SafewaySelect OK with you?”
The Purpose of a BrandP/E RatiosStock PriceStockOptionsBrand Equity
Brand Strategy & Stock Price“The big thing is that brand equity and thestrategies to build it matter. Brand strategydoes influence the financial performance ofany company.”Robert Jacobson, leading brand researcher & chairmanof University of Washington Marketing DepartmentResearch shows that improvements in brand strategyprograms produce positive stock market returnSee Morgan Stanley reports on www.brand.com
Elements of Brand StrategyThe major elements for measuring and building brandequity:Brand identity: brand name, brand associations, messages,images, symbolismBrand name awarenessPerceived qualityBrand extension potentialBrand loyalty/switchingProprietary brand assets (trademarks, patents, etc.)A brand strategy is a plan to measurably improveeach element of brand equity
Customer-Based BrandIdentity & Stock PriceThe entry point for all brand strategy activitiesis brand identity developmentYou have to know the most compellingcategory descriptor, purchase factors/sellingmessages, organizational values, etc., andthen link the brand identity to operations
In 1995, Sun Microsystems was seen as amanufacturer of technical workstations and wanted toreposition itself as a maker of computers and serversfor corporationsBrand-Solutions conducted research to identify thetop purchase factors for business servers,benchmark Sun’s brand equity, and to select the bestbrand nameIn April, 1997, Sun Ultra Enterprise Servers wereintroduced using the brand name and brand identityBrand-Solutions recommended
After the introduction, all analysts issued“Buy” recommendations and Morgan Stanleypredicted the stock would climb to $70. Intwo weeks, the stock went from $47 to $67.Sun’s success in repositioning itself isconfirmed in the headline of an article in theAugust 19, 1997, Wall Street Journal: “SunMicrosystems Goes on a Roll, AstonishingMany: Computer Maker Reinvents Itself,Stressing Servers for Big Corporations.”
When Do You Sell?The King of GigabitEthernet reckons hemissed out on a$3 billion IPO by sellingPacket Engines too earlyKeep an eye out for Bernard’s newest company,World Wide Packets! (www.worldwidepackets.com)Bernard Daines
Simon: The BrandSimon – The leading developer and managerof shopping malls in the US.1999 – Not known by shopping centershoppers. No mall management categoryexisted.3/1/99 – Branding campaign begins – “Simon.Simply the best shopping there is.™”Brand strategies are based on a carefully-researched, shopper-based brand identity.
1/1/2000 – 53% of shoppers recognize andunderstand the Simon Brand.Simon “owns” the mall category.Annual sales/sq.ft. of $377 vs. industryaverage of $340.“Simon has been able to use its brandingconcept to drive revenues and improveoperating margins.” – Robert L. Levy, Sr.Real Estate AnalystSimon: The Brand
Brand Extension & Stock PriceBrand Extension Examples:The Gap → Baby Gap + Gap Maternity + Gap KidsNokia: mobile phones → IP networkingPurpose of Brand ExtensionsLaunching new brands is expensiveGood trademarks may be hard to findStrong competition for distributionGain quick acceptance of new productsDanger: If you introduce a defective product or aproduct that is too far afield from the productcategory, you can risk failure
Brand Extension & Stock Price(High Brand Awareness + Positive Brand Attitude) +Brand Extension = 2% to 9% Stock Price IncreaseConsumers value new products with well-established brandnames because they quickly convey the brand’s attributesand reinforce a sense of trust. Brand extensions save thecompany marketing costs and generate higher revenuesmore quickly than new brands.Extensions of brand with very low brand awareness andesteem also provide a positive return because they havehigh upside potential and little downside risk.Vicki Lan and Robert Jacobson, “Stock Market Reactions to BrandExtension Announcements: The Effects of Brand Attitude and Familiarity,”Journal of Marketing, January, 1995.
Announcements of AdvertisingSlogans & Ad Changes and Stock PriceOn average, 1% increase in market cap afterannouncementResulted in an expected increase in firm’sannual profit of $6-8 millionConclusion: Publicize ad changes carefullyand appropriatelyLynette Knowles Mathur and Ike Mathur, Journalof Advertising Research, Jan/Feb 1995
Increased PerceivedQuality & Stock PriceQuality is a function of trust and customersatisfaction with the brandIncreased perceived quality = increase instock return“Quality” brand building for 34 major UScorporations did pay off where it really counts– for the shareholderDavid A. Aaker and Robert Jacobson, “The Financial InformationContent of Perceived Quality,” Journal of Marketing Research, May1994.
New Company Brand Name& Stock PriceIn most cases, name changes signal improvedprofit performance and increase stock price(+.44%).A change in company brand name says to themarket, “We have changed our company (i.e., brandstrategy, management, organization, productofferings) and those changes are for the better.”Both cosmetic name changes (e.g., Paine Webber toPaine Webber Group) and radical name changes(e.g., Consolidated Foods to Sara Lee) signal achange in the firm’s activities.Dan Horsky and Patrick Swyngedouw, “Does it Pay to Change YourCompany’s Name? A Stock Market Perspective,” Marketing Science,Fall, 1987.
Brand Attitude, ROE & Stock PriceBrand attitude = % positive company opinionminus % negative opinionIn high-tech markets, change in brandattitude helps predict future businessperformance and leads accounting ROE,by 1-2 quartersROE, in turn, influences stock return/priceDavid A. Aaker and Robert Jacobson, “The Value Relevance of BrandAttitude in High-Technology Markets,” April 2000 article to appear infuture issue of The Journal of Marketing Research.
Brand Attitude, ROE & Stock PriceDrivers of Brand AttitudeVisible, dramatic new products increase brandattitudeProduct problems decrease brand attitudeCompetitor actions: e.g., aggressive comparisonadvertisingHighly visible changes in top management (CEO)Legal actions & lawsuitsNote: Major advertising initiatives are not linked tosubstantial movement in brand attitude.David A. Aaker and Robert Jacobson, “The Value Relevance of BrandAttitude in High-Technology Markets,” April 2000 article to appear infuture issue of The Journal of Marketing Research.
Sears Builds Brand Equity from theInside-OutEmployee satisfaction and attitudes about their job and the companypredictEmployee behavior in front of customerpredictsLikelihood of customer satisfaction, retention and recommendationpredictsSuperior financial performance and revenue growth“Bringing Sears Into The New World,” Fortune Magazine, October 13. 1997.
Lessons in Dot-com BrandBuildingHow Amazon.com built a corporate reputationand a strong on-line presence on theInternet…(And why barnesandnoble.com and CDNowdid not)Violina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:Lessons from Amazon.com and its Competitors,” revised September 1999.
Brand Equity & ReputationBrand EquityThe added value provided to a product orcompany by its brand identityThe set of associations and behaviors thatincrease or decrease the value of the brandcompared to its asset value aloneReputationThe general estimation in which a person is heldby the publicThe state or situation of being held in high esteem
How Amazon.com Built a CorporateReputation and a Strong On-line Presenceon the Internet…Corporate reputation or “brand equity” is one of thefew resources that provides a firm with sustainablecompetitive advantage.Reputation is an asset to be created, nurtured and exploited.Reputation building – a flow of orchestrated strategic actionsand signals interpretable in the market placeReputational stock = ƒ(media visibility + positive mediamentions)On the Internet, reputation:Is of greater importance in purchasing decisions than directcomparisons of competitive productsIs a mechanism for generating salesAmazon did many more strategic actions and moreactions earlier than bn.com and CDNowViolina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:Lessons from Amazon.com and its Competitors,” University of WashingtonBusiness School, Revised September 1999.
Internet Reputation & Brand-Equity-Building StrategiesCreate balanced symbolic communications –diverse, yet consistent. Balance novelty andfamiliarity.Amazon.com – a metaphorical link to Earth’slargest riverDot-com name = Internet-basedA compelling story – not limited to one productcategory“Store” symbolism – e.g., shopping cartAds use physical symbols to represent the hugesize of product selectionViolina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:Lessons from Amazon.com and its Competitors,” University of WashingtonBusiness School, Revised September 1999.
Internet Reputation & Brand-Equity-Building StrategiesTake Competitive ActionsUse symbolic counter-moves and signals tocompetitive actions (e.g., match Barnes & Nobleprice cuts) by attacking, defending anddisseminating knowledgeRedefine the industry paradigm: Barnes & Noble’smotto of “The world’s biggest bookstore” vs.Amazon.com positioning itself as “The Earth’slargest bookstore.”Violina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:Lessons from Amazon.com and its Competitors,” University of WashingtonBusiness School, Revised September 1999.
Internet Reputation & Brand-Equity-Building StrategiesBuild close and communal relationships andparticipate in networks that increase reach andleverage reputationMany personalized, one-on-one messages and services –automated, free-of-chargeGrassroots associates programProactive Investor Relations communicationsBorrow reputation from VC firm – Kleiner, Perkins, Caufield& ByersInvite customers to talk with one anotherKnow customer preferencesProvide many opportunities for interaction, conversation andsociabilityViolina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:Lessons from Amazon.com and its Competitors,” University of WashingtonBusiness School, Revised September 1999.
An Inductive Model Of Reputation BuildingOn The Internet Through Strategic Actionsdiversity and consistency of symbolsreputational stockbalance of novelty and familiaritypositioningredefining industry paradigmclose relationshipsaggregation of traffic and informationreputation borrowing and lendingstoryadvertisinglawsuitscapacity expansionpersonalizationcommunityparticipation in networkssymbolic actionscompetitive actionsrelational actionsnamingretail facadeprice cuttingViolina R. Rindova and Suvesh Kotha, “Building Reputation on the Internet:Lessons from Amazon.com and its Competitors,” University of WashingtonBusiness School, Revised September 1999.
Reputation & Internet SuccessReputation/Brand Equity building activitiesare one of the key determinants ofcompetitive success for Internet firms“Reputation Building and Firm Performance: An Empirical Analysis of theTop-50 Pure Internet Firms,” Suresh Kotha, Shivaram Rajgopal and ViolinaRindova, University of Washington Business School, November 1999.
Reputation & Internet SuccessMarketing Investments in ReputationCreate brand awareness & signal your truecharacter as a quality producerAdvertisingCustomer serviceAffiliate programsThe more an Internet firm invests in reputation bycommitting resources to marketing andadvertising, the higher will be its market valueThe impact lasts for two – three quarters.Therefore, continuity is important.“Reputation Building and Firm Performance: An Empirical Analysis of theTop-50 Pure Internet Firms,” Suresh Kotha, Shivaram Rajgopal and ViolinaRindova, University of Washington Business School, November 1999.
Reputation & Internet SuccessBorrow reputation from VC firm reputation toincrease market value & sales growthMedia Exposure/“Buzz”Major newspaper/magazine press → releasesarticles → higher market value & sales growthImpacts last for one quarter and are more short-lived than marketing investments“Reputation Building and Firm Performance: An Empirical Analysis of theTop-50 Pure Internet Firms,” Suresh Kotha, Shivaram Rajgopal and ViolinaRindova, University of Washington Business School, November 1999.
Brand Strategy Secrets forIncreasing Stock PriceCarefully research, define & execute on yourcompany & product brand identities.Know the top-ranked reasons buyerspurchase your brand. Internal opinionsusually don’t match what customers actuallywant.Link the brand to operations.Track the level of brand awareness &positive/negative esteem to predict futurebusiness performance.
Brand Strategy Secrets forIncreasing Stock PriceTrack employee and customer satisfaction toproduce superior financial performance.Avoid “brand-name-itus.” Centrally managenew brand name and brand extensiondecisions.Develop & execute on-going programs forraising perceived quality to earn theassociated increase in stock return.Publicize brand strategy news within theinvestment community.
Thank You!Good luck with your brand strategy programs!
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