Brand Equity

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Brand Equity

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Brand Equity

  1. 1. Brand Equity for Strategic Advantage: Consumer Decision Making Professor Chip Besio Southern Methodist University Marketing 3349
  2. 2. Why the Interest in Branding? <ul><li>Brands are assets </li></ul><ul><li>Pressure from Stockholders for performance </li></ul><ul><li>Pressure from competitors </li></ul><ul><ul><li>Most products in a mature marketplace </li></ul></ul><ul><ul><li>Price competition abounds </li></ul></ul>
  3. 3. What is Brand Equity? <ul><li>The “added value” endowed by the brand name </li></ul><ul><li>Key elements: Associations, Awareness, Perceived Quality, Loyalty </li></ul><ul><li>Intangible, but measurable </li></ul>
  4. 4. Benefits of Brand Equity <ul><li>Asset management/leveraging </li></ul><ul><li>Consumer franchise (facilitates loyalty) </li></ul><ul><li>Lower communication costs </li></ul><ul><li>Improved prices/margins/market share </li></ul><ul><li>More power with the trade </li></ul>
  5. 5. More benefits of Brand Equity <ul><li>Barrier to competitive entry </li></ul><ul><li>Effect of financial valuation of the firm </li></ul><ul><li>Value to your Consumer </li></ul><ul><ul><li>Recognition, consistency, confidence, image/status, etc. </li></ul></ul>
  6. 6. Managing Brand Equity <ul><li>It primarily involves managing the consumer’s mind (associations) </li></ul><ul><li>Firm must set objective s for the brand </li></ul><ul><li>Brand equity measurement is a management essential </li></ul><ul><li>Marketing mix elements should be chosen to build, not erode, brand equity </li></ul>
  7. 7. Overview
  8. 8. What does awareness and image buy? <ul><li>Influences how consumers make choices </li></ul><ul><li>By changing how choices are made we can change what is purchased </li></ul>
  9. 9. Overview
  10. 10. Consumers are overloaded . <ul><li>The have a vast array of alternatives </li></ul><ul><li>Each product has many attributes </li></ul><ul><li>Everyone is under time pressure </li></ul>
  11. 11. The average supermarket consumer: <ul><li>Does very little search: Average less than 12 second per item </li></ul><ul><li>42% spent 5 seconds or less </li></ul><ul><li>32% spent between 6 and 15 seconds </li></ul><ul><li>Average number of brands handled: 1.21; 85% touched only one brand </li></ul>Source: Pete Dickson and Stan Sawyer Journal of Marketing
  12. 12. How Do Consumers Cope? <ul><li>Choice has two phases </li></ul><ul><ul><li>Screening: Eliminate Alternatives </li></ul></ul><ul><ul><li>Comparison: A small set of alternatives (2-3) get intense scrutiny </li></ul></ul>
  13. 13. Overview
  14. 14. Screening is important <ul><li>Elimination occurs because: </li></ul><ul><ul><li>The brand lacks a feature (attribute) </li></ul></ul><ul><ul><li>The brand does not meet some cutoff (price?) </li></ul></ul><ul><li>Once eliminated a brand is not reconsidered . </li></ul>
  15. 15. How Does Brand Equity Effect Screening? <ul><li>Awareness: Can I recall this brand? </li></ul>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. 16. How Does Brand Equity Effect Screening? <ul><li>Awareness: Can I recall this brand? </li></ul>More commonly, a harried or uncertain consumer will eliminate brands with which they are unaware.
  17. 17. How Does Brand Equity Effect Screening? <ul><li>Image guides inference about the brand. </li></ul><ul><li>Inference substitutes for search because: </li></ul><ul><ul><li>Search is expensive </li></ul></ul><ul><ul><li>Available information is irrelevant or tough to understand </li></ul></ul>
  18. 18. What are your impressions of this watch?
  19. 19. What are your impressions of this watch?
  20. 20. How Does Brand Equity Affect Screening? A Strategic Advantage <ul><li>Powerful brands can set the agenda: </li></ul><ul><ul><li>Dictate the attributes used for screening </li></ul></ul><ul><li>Examples: </li></ul><ul><ul><li>Volvo and Safety </li></ul></ul><ul><ul><li>Crest with Tartar Control </li></ul></ul><ul><ul><li>American Express Travelers Checks </li></ul></ul>
  21. 21. Screening: Summary <ul><li>Large product classes are screened. </li></ul><ul><li>Elimination = Death </li></ul><ul><li>Brand Equity influences screening </li></ul><ul><ul><li>Recall for the consideration set </li></ul></ul><ul><ul><li>Inferences about product attributes </li></ul></ul><ul><ul><li>Setting the agenda for screening </li></ul></ul>What Attributes are used for screening in your product class?
  22. 22. Overview
  23. 23. Screening simplifies choice, but does not do the whole job. <ul><li>Even when screening consumers seem to examine 2-3 alternatives much more carefully. </li></ul><ul><li>Process involves intense comparisons on a small set of attributes. </li></ul><ul><li>How does this comparison process work? </li></ul>
  24. 24. How does this comparison work? <ul><li>Consumers compare other brands to one brand </li></ul><ul><li>Often that brand serves as the reference brand. </li></ul><ul><li>Key concept: Loss aversion…when compared to the reference brand, losses loom large. </li></ul>
  25. 25. Consumers judge value by… <ul><li>The observed price relative to reference price for the product, and </li></ul><ul><li>The observed price relative to the normal or ‘fair’ price of the product </li></ul><ul><ul><li>Examples: </li></ul></ul><ul><ul><ul><li>Restaurants on Friday nights… </li></ul></ul></ul><ul><ul><ul><li>Super Bowl ticket prices. </li></ul></ul></ul><ul><ul><ul><li>This is Reference Dependence. </li></ul></ul></ul>
  26. 26. Implication <ul><li>If you are the reference brand… </li></ul><ul><ul><li>Improvements on price, quality, etc. help </li></ul></ul><ul><ul><li>But decreases hurt more… </li></ul></ul><ul><li>If you are not the reference brand… </li></ul><ul><ul><li>You are judged relative to the reference brand </li></ul></ul><ul><ul><li>Any way you differ from the reference is your loss </li></ul></ul>
  27. 27. Implication <ul><li>Reference brands have competitive advantages, </li></ul><ul><li>Particularly on features which are the most loss adverse </li></ul><ul><li>Q: What are the reference brands in your product category? </li></ul>
  28. 28. Pricing Implication <ul><li>Price cuts will effect different brands differently </li></ul><ul><li>High quality brands can easily “steal” market share from low quality brands by cutting price. </li></ul><ul><li>But lower quality brands will not steal share from a high quality brands by cutting price </li></ul>Responses to price cuts are asymmetric, high price brands can steal from the poor.
  29. 29. How do you become a reference brand? <ul><li>‘ Strong’ brands with great awareness (T.O.M.) </li></ul><ul><li>First Mover Advantage </li></ul><ul><li>Brand most recently purchased </li></ul><ul><li>Sampling, particularly for higher quality brands </li></ul>
  30. 30. Comparison: Summary <ul><li>Having high brand awareness can make you the reference brand which can be a significant advantage. </li></ul>
  31. 31. Overview
  32. 32. To create value… <ul><li>Brand must support a higher reference price… </li></ul><ul><li>Must maintain this over time, even in the face of stiff competition… </li></ul><ul><li>Applications: </li></ul><ul><ul><li>To raise price… </li></ul></ul><ul><ul><ul><li>New Models </li></ul></ul></ul><ul><ul><ul><li>Price Bundling </li></ul></ul></ul><ul><ul><ul><li>Etc… </li></ul></ul></ul>
  33. 33. What Strategic Element cannot be duplicated? <ul><li>You lower price, they can eventually lower price </li></ul><ul><li>You can add a feature, they can eventually ad that feature </li></ul><ul><li>But… </li></ul><ul><li>They cannot use your brand name!! </li></ul>

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