Lecture 8 Building & Positioning Strong Brands

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Lecture 8 Building & Positioning Strong Brands

  1. 1. Lecture 8: Building and Positioning Strong Brands; Prepared by Zaved Mannan 1 | P a g e Lecture 8 Building and positioning strong brands Objectives At the completion of this lecture, you should be able to: • Explain the importance of branding • Understand the key elements in building brand equity • Explain how brand equity can be measured and managed • Develop a branding strategy • Develop and communicate a positioning strategy • Identify various differentiation strategies • Appreciate how positioning and differentiation strategies will change according to the product life cycle • Discuss the possible strategies to be used during each stage of the product life-cycle; and • Explain the concept and stages of market evolution. Commentary Introduction As consumers, we are constantly exposed to multiple brand messages all of which are trying to gain attention. It is a truism but we do very much live in a branded Essential Reading Textbook: Kotler et al (2009), Chapter 10 & 11. Optional Reading 8.1: Bennett, R., & Rundle, T. S. (2005). The brand loyalty life cycle: Implications for marketers. Brand Management, 12(4), 250-263. Optional Reading 8.2: Stevenson, R., & Berkowitz, B. (2004). Video games shun new titles. Financial Review.
  2. 2. Lecture 8: Building and Positioning Strong Brands; Prepared by Zaved Mannan 2 | P a g e world. This lecture introduces you to a key role that marketers have to perform – that to create, maintain, enhance and protect brands. The second part of this lecture extends the discussion of branding to examine how companies position and differentiate their products and services. Branding The term brand has a number of different definitions. Kotler et al. (2009, p. 250) use the American Marketing Association’s commonly accepted definition: “A brand is a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.” However, it is useful to remember that a brand can also represent a liability as a brand is also a collection of perceptions in the minds of consumers that can be both positive and negative. Thus a brand can be seen as: “A set of assets (or liabilities) linked to a brand’s name and symbol that adds to (or subtracts from) the value provided by a product or service” (Aaker, 1991). Why are brands important? Branding is all about creating differences between products. Marketers give a name to the product and adds other brand element to identify it. Marketers teach consumers through branding what the product does and why consumers should care. A brand resides in the minds of consumers. Branding creates mental structures that help consumers organize their knowledge about products in a way that clarifies their decision making and provides value to the firm. Brand differences are often related to attributes or benefits of the product. Some products are differentiated through continuous innovation. For example, Gillette, Merck or 3M. On the other hand, some products creates competitive advantage through non-product-related means by understanding consumers motivations, desires. Therefore marketers create appealing images around their products. For example, Gucci, Channel, Guess, etc. Marketers can apply branding virtually anywhere a consumer has a choice. It is possible to brand a physical good (Maggi Noodles, Lux soap, Pran juice), a service (Eastern bank, Appolo Hospital, united airlines) an organization (UNICEF, REHAB), a store (Agora, Shoppers World, Vasavi or babyshop), a person (Amir khan, Shakib Al
  3. 3. Lecture 8: Building and Positioning Strong Brands; Prepared by Zaved Mannan 3 | P a g e Hasan, Humayun Ahmed), a Place (Koxes Bazar, Shundorbon, Goa or Bangalore) or an idea (Family planning, blood donation, freedom of speech). Brands provide important benefits to both consumers and manufacturers. The following table presents a brief overview of some of the advantages that brands provide the community. Table 8.1: Advantages of brands Consumers Manufacturers 1. Identification of the sources of the product offering and who takes responsibility for it. 1. Means of identification to simplify handling and trace-back. 2. Provides a promise of value. 2. Legal protection for unique features. 3. Reduction of purchase risk. 3. Signal of quality level. 4. Simplifies decision making & reduces search costs 4. Justifies premium pricing 5. Provide a symbol of quality assurance 5. Means of endowing products with unique associations. Source: Modified from Keller 2003, P. 9 Brand Equity As defined by Kotler et al. (2009, p. 252) brand equity is the added value endowed to products and services. This value may be reflected in how consumers think, feel and act with respect to the brand as well as the prices, market share and profitability that the brand commands for the firm, successful high value technology brands include Centrino, Intel inside, iPod and Windows. It is worth noting that these brands have high market shares in their respective markets. There are a number of varied models which attempt to analyse brand equity. We will highlight four models. The Aaker model sees brand equity as a combination of brand awareness, brand loyalty and brand associations. Brand Asset Valuator specified five key components of brand equity: differentiation, energy, relevance, esteem and knowledge. Differentiation, energy and relevance together create brand’s future value. Esteem and knowledge together create Brand Stature (report card on past performance). According to BRANDZ model, brand building follows a sequential series of steps, each contingent upon successfully accomplishing the preceding one (see fig 10.2, Kotler et al (2009), p. 257). ‘Bonded’ customers build stronger relationships with
  4. 4. Lecture 8: Building and Positioning Strong Brands; Prepared by Zaved Mannan 4 | P a g e the brand and spend more on it than lower levels of pyramid. More consumers will be found at the lower levels. The Brand Resonance Model outlines four steps in the brand building process beginning with identify of the brand then moving to establish meaning behind the brand in customers minds, next, eliciting responses and lastly developing relationships with customers. Kotler et al. (2009, pp. 2256-258) provide good coverage of these models. Building Brand Equity Building brand equity requires creating a brand that consumers are sufficiently aware of and with which they have strong, favourable and unique brand associations (Kotler et al. 2009, p. 259-260). Key brand equity drivers include: 1. The initial choices for the brand elements or identities making up the brand. These are symbols, slogans and logos that can be trademarked to identify and differentiate the brand. Kotler et al. (2009) suggest that there are six criteria in choosing brand elements – memorable, meaningful, likeable, transferable, adaptable, and protectable. 2. The way the brand is integrated into the supporting marketing programs. Consumers develop thoughts, feelings, images, experiences and beliefs about a brand through a range of brand contacts (personal use, word of mouth, interactions with company staff and on-line and phone experiences). These experiences can be positive or negative. Thus a challenge for marketers is to ensure that the brand is consistent across all possible brand contact points. This can be difficult t achieve! 3. The associations indirectly transferred to the brand by linking the brand to some other entity. A prime example is labelling that proudly proclaims that the product is Australian made, the inference for consumers is that they are being very patriotic supporting the brand. Measuring Brand Equity To understand the effects of brand management programs, it is important to be able to measure and interpret brand performance. There are two main techniques used to measure brand equity – brand audits and brand tracing studies. Brand audits are in-depth examinations of the health of a brand and can be used to set strategic direction for the brand. Key questions addressed include the following: 1. Are the current sources of brand equity satisfactory? 2. Do certain brand associations need to be strengthened? 3. Does the brand lack uniqueness?
  5. 5. Lecture 8: Building and Positioning Strong Brands; Prepared by Zaved Mannan 5 | P a g e 4. What brand associations exist and what potential challenges exist for brand equity? Tracking studies involve information collected from consumers on a routine basis over time and provide valuable tactical insights into the short-term effectiveness of marketing programs and activities. Managing Brand Equity Effective brand management requires a long term view of marketing decisions. By implication, any changes in the supporting marketing program may adversely affect the success of future marketing programs. Issues that need to be considered include the following: 1. How do we reinforce the brand image and brand identity over time? 2. How can we revitalise brands? 3. How do we develop and implement crisis plans for events that may adversely affect the brand such as poisoning scares, product contamination issues or product recall issues? Devising a Branding Strategy A branding strategy for a firm identifies which brand elements a firm chooses to apply across the various products it sells. In a brand extension, a firm uses an established brand name to introduce a new product. Potential extensions must be judged by how effectively they leverage existing brand equity to a new product, as well as how effectively the extension contributes to the equity of the existing parent brand. However, it is important to realise that firms may need multiple brand to cover different market segments. This raised the issue of how a portfolio of brands should be managed to maximize coverage and minimize overlap. Read Kotler et al. (2009, pp. 270-277). READ Optional Reading 8.1: Bennett, R., & Rundle, T. S. (2005). The brand loyalty life cycle: Implications for marketers. Brand Management, 12(4), 250-263. This paper proposes a brand loyalty life cycle and draws implications for marketers. It suggests that brand managers may need to update their understanding of the nature and role of brand loyalty. In the current era, they believe that brands which emphasises emotional or symbolic benefits (over functional benefits) ate more likely to resonate with modern consumers. They suggest that markets who offer differentiated products and enhance the brand meaning will achieve greater resonance with consumers and greater loyalty.
  6. 6. Lecture 8: Building and Positioning Strong Brands; Prepared by Zaved Mannan 6 | P a g e Developing and Communicating a Positioning Strategy Positioning ‘is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market’ (Kotler et al. 2009, P. 282). Thus positioning involves finding the proper ‘location’ in the minds of a group of consumers or market segment so that they think about a product or service in the desired way. A good brand positioning helps to guide marketing strategy by clarifying the following: 1. What a brand is all about? 2. How it is unique? ( points of difference) 3. How it is similar to competitive brands? (Points of parity) Finally, why consumers should purchase and use the brand? Table 10.1 on p. 283 of Kotler et al. (2009) has a useful example of how three companies define their value propositions (their positioning) given their target customers, product benefits and prices. Product Differentiation Differentiation is defined as: “The art of designing a set of meaningful differences to distinguish the company’s offering from competitor’s offerings.” Products can be differentiated in many ways, as shown in Table 8.2 below: Table 8.2: Product differentiation 1. Features The basic characteristics that supplement the product’s basic function. 2. Performance quality Research suggests that companies with higher quality achieved a better return on investment. 3. Conformance quality Basically, each unit of each product conforms to the same level of quality. There is little or no variations in quality. McDonald’s would generally be example of this. 4. Durability It’s generally accepted that buyers will pay a premium for goods which last longer. 5. Reliability Basically, how reliable is the product? Will it need constant repairs and maintenance? 6. Reparability This ties in with reliability. Obviously an unreliable products may need more repairs. However the key thing here is how ‘pain-free’ it is for the consumer
  7. 7. Lecture 8: Building and Positioning Strong Brands; Prepared by Zaved Mannan 7 | P a g e to have the product repaired. 7. Style It’s an elusive concept, yet it’s something which we intuitively seem to feel. An example would be Porsche. 8. Design Design is the term which probably best captures all of the above. Apple Computers is a prime example of using industrial design to differentiate their products. Service Differentiation We must not forget the importance of services. Service is an essential feature of a company’s offering. Both core and extra services can be a source of differentiation for all types of products. Approaches to service differentiation include: 1. Ordering ease - convenient, easy. 2. Delivery - speed, accuracy, care. 3. Installation - making the product operational 4. Customer training - instruction of proper and effective use. 5. Customer consulting -providing consulting services for customers. 6. Maintenance and repair - keeping products in good working order. 7. Miscellaneous service -developing other ways to ass value. So, for example, a dishwasher manufacturer may produce a product that is similar in design and features to the competitions, but they may set themselves apart by providing better delivery, installation, and /or maintenance services. Personnel Differentiation It’s something of a cliché’, but people do make the difference. Characteristics of better trained personnel include; competence, courtesy, credibility, reliability, responsiveness, communication. There is nothing worse than being served by the receptionist from hell or a Basil Faulty type individual. While this is all what is euphemistically referred to as ‘common sense’ it isn’t that simple to ‘hire the best people’. Channel Differentiation Kotler et al. (2009, p. 298) argue that organizations can also differentiate themselves through the use of their distribution channels. For example, Dell, a leading supplier of PCs, chooses to sell their products mainly over the telephone and Internet.
  8. 8. Lecture 8: Building and Positioning Strong Brands; Prepared by Zaved Mannan 8 | P a g e Image Differentiation Buyers do respond differently to company and brand images. A company creates an identity that aims to identify or position itself or the product. But the consumer develops their own perceptions of the product or company (image) which may not quite what the marketers had intended! Conclusion The development of branding policies is a vital task for marketers. The challenge is how we should best create, nurture, enhance and protect our valuable brands. Product differentiation is a critical means of developing a sustainable competitive advantage. However, companies need to resist the temptation to try and differentiate their products and services on too many attributes at the same time. It is also important to understand that marketers may need to vary the positioning and differentiation strategies as the goods and services move through the various stages of the product life cycle. References Aaker, D. A. (1990). Managing brand equity: Capitalizing on the value of a brand name. New York: Free Press. Keller, K. L. (2003). Building, Measuring and Managing Brand Equity (2nd ed.) Upper Saddle River, NJ: Prentice Hall. Prepared by Zaved Mannan Adjunct Faculty Member University of Liberty Arts Bangladesh.

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