Brand equity

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Brand equity

  1. 1. Difference Between Product and Brand 1.Product is made in 1. A brand is bought a factory 2. A product can be copied. 3. A product can be quickly outdated. by the customer . 2. A brand is unique. 3. A successful brand is timeless
  2. 2. BRAND EQUITY BRAND EQUITY : is a set of brand assets and liabilities linked to a brand , its name and symbol , that add to or subtract from the value provided by a product or service to a firm and /or to that firm’s customers. For assets or liabilities to underlie brand equity they must be linked to the name and/or symbol of the brand.
  3. 3. BRAND EQUITY The assets and liabilities on which brand equity is based can be grouped into 5 categories 1) Brand Loyalty 2) Name awareness 3) Perceived quality 4)Brand associations in addition to perceived quality 5)other proprietary assets : patents, trademarks,channel relationship etc.
  4. 4. BRAND EQUITY Name Awareness Brand Loyalty Brand Equity Provides value to customer by enhancing customer’s •Interpretation /Processing of information. •Confidence in the purchase decision. •Use satisfaction/delight Perceived quality Brand Associations Other proprietary brand assets Provides value to firm by enhancing:•Efficiency and effectiveness of marketing programs •Prices/Margins •Brand Extensions •Trade Leverage •Competitive advantage
  5. 5. What is the value of a brand Price premium generated by the name: Impact of the name on customer preference Replacement value of the brand Stock price earning power of a brand
  6. 6. Replacement value of the brand Replacement cost: cost of establishing a comparable name and business . It is estimated that it costs $50 -100 million to develop and launch a new consumer product and chances of success is around 12-15%.. Thus on an average a firm will have to make 6 products costing $ 300 million (taking the lower estimate)to ensure atleast one winner. A firm thus should be willing to pay $ 300 million to an established brand in the category of interest.
  7. 7. Brand value based on stock price movements Stock market adjusts the price of a firm to reflect future prospects of its brands. 1) Find market value of firm --> function of stock price and number of shares 2) Find the replacement cost of tangible assets (plant, machinery, inventories, cash) 3) Subtract 2 from 1 4)The balance intangible assets is distribute into three components : value of brand equity , value of nonbrand factors (R&D, PATENTS) and value of industry factors (regulation and concentration) 5) Brand equity is presumed to be a function of age of the brand, entry of the brand in the market (older brand has more equity), cumulative advertising (advertising creates equity) and the current share of industry advertising (current advertising share is related to positioning advantages).
  8. 8. Perceived quality : What drives perceived quality? What is important to the customer What signals quality Is perceived quality valued- or is the market moving towards a commodity business Are prices and margins wear away How do competitors stack up with respect to perceived quality. Other brand assets: Is there a patent or trademark that is important? Are there channel relationships that provide barriers to competitors? Are sustainable competitive advantages attached tot he brand name that are not reflected in the other four equity dimensions?
  9. 9. Brand Associations : What mental image does the brand stimulate/evoke? Is that image a competitive advantage Is there a slogan/ punch line /tagline /symbol that is a differentiating asset? How are the brand/competitors positioned. Evaluate each position with respect to its value/relevance to consumers and how protected /vulnerable it is to competitors.Which position is the most valuable and protected What does the brand mean? What are its strongest associations?
  10. 10. P& G- Believers in Brand Management In 1879 , Harley Procter named his soap “IVORY” The soap was promoted as “99 44/100 % pure” and that it floated. The floatation property was created by production mistake which fed air into the soap mixture. Ivory was a remarkable product in a time when most soaps were yellow or brown , irrated skin. Also during those times the floatation value had practical value for those who were frustrated trying to find their soap in water. Well positioned soap----> pure, mild and floated. The claims of purity and mildness were supported by white color, name Ivory, the twin slogans and association with babies. In 1941 , Lever Brothers launched “Swan “ to challenge “Ivory”, but as there was no product difference , the brand failed.
  11. 11. P& G’S Product Portfolio - launched from 1940-1980 Tide- Detergent Prell - Shampoo Joy - dishwashing detergent Crest - Toothpaste Secret - cream deo Jif - peanut spread Ivory - Liquid soap Pampers - disposable diapers Folgers - coffee Scope - Mouthwash Bounty - paper towels Pringles- potato chips Bounce - fabric softeners Duncan Hines - cookies
  12. 12. A striking aspect of P& G has been its willingness to develop competing brands (multi brand concept) in order to serve new segments , even if new brands threaten existing brands. P&G has 10 brands in laundry detergent category which reach a variety of segment s and has given P&G a 40%+ market share . 1) Ivory Snow : “ ninety-nine and forty-four onehundredths percent pure,’, the mild gentle soap for diapers and baby clothes” 2) Tide--- For extra-tough family laundry jobs-”Tide’s in , dirt’s out”
  13. 13. Cheer -works in cold, warm or hot water- “ All temperature Cheer” Gain- detergent with fragrance - “ Bursting with freshness”. Bold 3 - includes fabric softener -” Cleans , softens and controls static Dash- concentrated power, less suds to avoid clogging washing machines Dreft- with “Borax, nature’s natural sweetener “ for baby’s clothes Oxydol:- contains bleach-for sparkling whites -with color safe bleach. Era- concentrated liquid detergent-with proteins to clean stains Solo- heavy duty with fabric softener
  14. 14. Brand Loyalty Brand Loyalty pyramid Committed buyer Likes the brand, considers brand as a friend Satisfied buyer with switching costs Habitual buyer- no reason to change Switchers /price sensitive- indifferent- no brand loyalty
  15. 15. Measuring Brand Loyalty Behavior Measures: Repurchase rates: What % of Maruti Zen owners purchase Zen on their next purchase % of Purchases: of the last five purchases made by a customer, what % went to each brand purchased? Number of Brands Purchased: What % of coffee buyers bought only a single brand?, two brands? Switching costs: If it is expensive or risky for a firm or consumer to change suppliers, then the brand loyalty is on the higher side. E.g : Investment in computer system or software like SAP
  16. 16. Strategic value of Brand Loyalty Reduced Marketing Costs: It is much less costly to retain customers then to attract new one ( COST RATIO IS 1:4) Trade leverage: Strong pull (brand loyalty) from consumers will ensure preferred shelf space because stores know that customers will have such brands on their shopping list. Attracting new customers: Time to respond to competitive threats:If a competitor develops a superior product , a loyal following will allow the firm time needed for the product improvements to be matched and neutralized.
  17. 17. Creating & Maintaining Brand Loyalty Treat the customer Right Stay close to customer Measure/Manage Customer Satisfaction Create switching cost Provide extras
  18. 18. Creating & Maintaining Brand Loyalty Measure / Manage Customer Satisfaction : Regular surveys of customer satisfaction are useful in understanding how customers feel and it also helps in adjusting product and services. Domino’s Pizza conducts weekly phone surveys of customers measuring dimensions like response time, lumpiness of dough, freshness of pepperoni and attitude of delivery people. A bonus pool is distributed based upon these measures. Create Switching costs: Reward loyalty directly. For e.g The airlines frequent flyers program .
  19. 19. Brand Awareness Ability of a potential buyer to recognize or recall that a brand is a member of a certain product category. Top of Mind Brand recall Brand Recognition Unaware of brand The awareness Pyramid
  20. 20. Brand awareness creates value in the followingg ways : 1) Anchor to which other associations can be attached : for e.g McDonalds:Golden arches, clean/efficient, kids , fun etc. 2) Familiarity/Liking: recognition provides the brand with familiarity and people like the familiar. 3)Substance /commitment: The firm has been in business for a long time. The firm is widely distributed and the brand is successful. 4) Brands to consider ----- it enters the evoked or consideration set.
  21. 21. How to achieve Awareness Be different , Memorable: Involve a slogan or jingle: e.g Lifebuoy hai jahan , tandorosti hai wahan. Symbol exposure: colonel sanders --KFC, golden archesMcdonalds---> symbol should closely associate with the brand. Publicity--- advertisement. Event Sponsorship --- Femina Miss India, Manikchand Filmfare awards. Consider brand Extensions : one way to gain brand recall is to put the name on other products.
  22. 22. Perceived Quality Defn : customer’s perception of the overall quality or superiority of a product or service with respect to its intended purpose, relative to alternatives.
  23. 23. Perceived Quality Quality dimensions : 1) Performance : How well does a washing machine wash clothes---> primary operating characteristics of service 2) Features: secondary elements like on/off timer in washing machine etc. 3) Conformance with specifications: --- absence of defects----trouble free . 4) Reliability--- will the vacuum cleaner work the same way each time it is used. 5) Durability: How long will the washing machine last 6) Serviceability: is the service system efficient , competent and convenient. 7) Fit and finish:- does the product look and feel like a quality product.
  24. 24. Perceived Quality Research has shown that in many product classes a key dimension which is visible can be pivotable in affecting perceptions. 1) Stereo Speakers: larger size means better sound 2) Tomato ketchup-- thickness means quality. 3) Supermarkets--- fresh products means overall quality. 4) cars: a solid door-closure sound implies good workmanship and a solid safe body. 5) lawn mover-- noise signals quality

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