CHAPTER 7 – BRANDS
KNOWLEDGE OBJECTIVES
- Understand what a brand is and its importance.
- Explain the functions that brands serve.
- Discuss brand associations.
- Understand branding strategies.
- Understand brand equity.
CHAPTER OUTLINE
- What is a Brand?
- Why Brand?
- What are Brand Associations?
- What are Branding Strategies?
- How is Brand Equity Determined?
- Managerial Recap
7-1. What is a Brand?
This section relates to knowledge objective #1.
This chapter discusses products as brands. Marketers believe that brands have value, above and beyond the benefits of the product itself. A brand is not just a well-known name but also the images that the name invokes. While a brand begins with the name that a company uses to label a specific product, a good brand is a portfolio of qualities associated with that name. The brand associations begin with qualities under the company’s control. Companies also build associations via classical conditioning in consumer learning e.g., a jingle, slogan, spokesperson.
7-1a. Brand Name
A brand is first and foremost a name. Some brand names immediately convey information, e.g., YouTube as the name for user-created entertainment. Other brand names originate as not a far stretch from a benefit they are implying, e.g., Home Depot. Many firm and brand names are merely those of the founder, e.g., Christian Dior.
7-1b. Logos and Color
Regardless of the amount of information inherent in the brand name when it is introduced to the marketplace, brand name meaning is built over time through the firm’s communications to customers. The marketer educates customers about the meaning of the brand as well as its logos and symbols. Just as the brand name engages the customers verbally, the logos and packaging colors engage the customers visually and sensually.
Figure 7.1: Brand Names and Symbols as Logos
The figure shows three logos that combine a brand name with a symbol meant to suggest the brand’s value proposition: MasterCard, Intel, and IKEA.
Figure 7.2: Logo Memes Updating and Morphing
Companies surviving for decades need to adapt their logos. The figure shows the Google logo over time.
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7-2. Why Brand?
This section relates to knowledge objective #2.
For customers:
- Brands convey information to customers. Brand names identify company production and ownership.
- Brand building is based fundamentally on the predictability of the item being purchased. Brands can gain reputations for being bad, but the goal of a marketer is to create a product that is reliable, or predictable in quality.
- When the brand name is an assurance of reliable quality, the customer’s decision making is made easier. There is less perceived risk associated with the choice when the customer knows which brands are good. Risk is a measure of variability. Reliability implies a consistency or predictability in the performance of the product.
- Many brands also serve as status symbols.
For companies:
- Good brands can induce loyalty.
- If customers appreciate the reliability, high quality, and status of a brand, they willingly pay premium prices for it.
- Companies can also use brands, or variants of their brands, to provide different offerings to satisfy different market segments.
The mechanism that gives brands meaning is the set of associations that are linked to the brand in the customer’s mind. These associations are created through a number of sources:
- The company’s advertisements and communications in the marketplace;
- The customer’s own experiences with the brand, company, and competitors’ brands; and
- The stories related about the brand by other customers.
7-3. What are Brand Associations?
This section relates to knowledge objective #3.
The intangible, cognitive, and emotional associations of a brand help the customers connect to it. Marketers talk about a hierarchy of brand associations. At the bottom of a brand value hierarchy are the concrete product attributes such as color. As we travel up the hierarchy, these brand attributes extend to product benefits, which are more intangible than attributes. Emotional benefits are the next level and they are more intangible.
Strategically, the concrete features are easiest to deliver and explain to customers, but they are also relatively easily matched by competitors. The more abstract benefits are values that are more meaningful to customers and easier for a company to claim as a competitive advantage, but they are also more difficult to create.
The key brand association is the extent to which the customer likes or relates to the brand. Brands are expressions of the customer’s ideal self.
Brands can also serve other social functions. Brands can become the focal point of bonding, as in brand “communities,” exemplified by the well-known Harley treks and traditional fan sites.
Figure 7.3: Brand Association Network
The figure shows a brand association network for Louis Vuitton. The nodes in the network include elements such as the brand name, and attributes and abstract benefits about the brand. The links between the nodes indicate the connections. The figure conveys the information that customers store about a brand, and when the brand name is activated, the brand associations are subsequently triggered. The figure indicates that although Louis Vuitton is perceived to be expensive, that attribute is not likely to be one of the first qualities that comes to mind when the brand name is stimulated.
When company advertising emphasizes one benefit, the cognitive map is simple. But the cognitive map starts becoming more complex when the number of benefits advertised increase.
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7-3a. Brand Personalities
Marketers get customers to relate to their brands by creating a brand personality.
Figure 7.4: What Type of Brands Are There?
The figure shows a conceptualization of five different kinds of brands: sincere, competent, exciting, sophisticated, and rugged. The personalities capture information specific to the brand, as well as holistic perceptions about the brand and company position in the marketplace.
If a company’s brand strategy was to attain a certain personality, and customer perceptions concur that the brand has achieved those characterizations, then the branding and marketing efforts succeeded. If the brand manager does not like the brand’s current profile, then new marketing initiatives may be taken to reposition the brand.
Figure 7.5: Types of Brand Experiences
The figure shows that consumers experience brands in an affective way, an intellectual way, and a behavioral way.
7-3b. Brand Communities
Most brands speak of engaging their customers’ hearts and minds, and increasingly marketers are seeing even more extreme attachments. For example, there are brand communities around Apple, Nintendo, and Duck duct tape.
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7-4. What are Branding Strategies?
This section relates to knowledge objective #4.
7-4a. Umbrella Brands vs. House of Brands
A company that attaches the same brand name to all of its products is using an umbrella branding approach. For example, GE puts its brand on appliances and light bulbs.
In contrast, a house of brands approach is one for which the company introduces a new brand name for every major line of product it brings to the marketplace. For example, Procter & Gamble produces some 80 major brands, including Charmin, Crest, and Downy. Each approach has strengths and liabilities.
With an umbrella branding approach, after the company has established the key brand name in the marketplace, subsequent product introductions sharing the same brand name are easier for the customer to understand and accept. On the other hand, it is critical that the majority of the existing brand’s associations be positive, or the new product will be introduced to the market with a perceived handicap.
In contrast, given the nature of the multiple brands’ autonomy in the house of brands approach, the independence between brands assures that any problems with one brand should not negatively affect any of the other brands.
Evidence suggests that the umbrella branding strategy provides stronger financial outcomes to the company than the house of brands. One reason is that certain costs (like advertising costs) are cut. In addition, psychologically, customers seem to build stronger connections to the specific, concrete product.
For umbrella branders, the product-level associations replicate the same name across multiple products; thus, the attitude is reinforced, which in turn enhances brand loyalty.
7-4b. Brand-Extensions and Co-Branding
Brand extensions are a strategic use of a brand’s equity, in which the marketer leverages the brand’s good name to get customers to buy something new. The brand name may be applied within a product line to go for depth—these are called line extensions. Or the brand name may be applied across different kinds of products—these are called product category extensions.
Figure 7.6: Brand Extensions
The figure uses Oscar Meyer to illustrate brand extensions in the direction of breadth (product category) and depth (line). The vertical, or line, extensions provide both simpler and more varieties of the core product. The horizontal, or product category, extensions are successful ventures into other arenas—such as Lunchables.
Sometimes the distinction between a brand and a line extension is not clear. The text uses Hyundai’s Equus as an example to illustrate this.
Co-branding happens when two companies collaborate in a joint venture to create a good or service for the customer. For example, Tevlar fabric is used and touted when selling protective body gear (vests, helmets).
Ingredient branding is the primary form of co-branding in which one of the companies and its product are the primary host, and the other company and its product add value to the host product. For example, Brembo brakes are in Aston Martins, Lamborghinis, Maseratis, and Paganis.
The distinction between co-branding and ingredient branding is one of degree—co-branding implies symmetry between the two providers, whereas for ingredient branding, one brand dominates the other.
When a company is launching a relatively minor change, then co-branding might be fine for the short term, but in the long term, a self-brand is better. When the new product innovation is greater, e.g., involving an altogether new attribute, co-branding is better, because it provides strategic benefits both in the short and long term.
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Anatomy of a Brand Extension: Use this full-page graphic to discuss Disney’s co-branding activities.
7-4c. How are Brands Best Rolled Out Globally?
To be defined as a “global” brand, at least 30% of the brand’s revenues should come from other countries.
Some companies go global with different brand names in different countries, with the motto, “manufacturer globally, brand locally.” Other companies maintain the same brand name in every country they enter.
There appears to be greater advantages to maintaining a single brand name worldwide, if possible. A true global brand carries one brand name and logo anywhere it is offered, and it is available in most markets in the world. These brands seek, achieve, and maintain similar positioning in all their markets.
If a company wishes to serve different kinds of customer segments in different markets, it would opt to use different brand names in those different markets. Brand names that do not translate well should be changed. There may be legal restrictions curtailing certain marketing activities and even brand names that vary with country. In such cases, the brand name also should be changed.
7-4d. Store Brands
The traditional idea behind private labels or store brand is that they’re less expensive and more of a “me too” product offering than an innovative brand. These days, retailers offer premium private labels whose packaging and quality is usually on par with the big national brands. They offer decent quality for lower prices because certain costs are reduced; e.g., they can advertise very inexpensively in local newspaper weekend flyers and radio spots and also easily promote the brands in-store.
All this has given rise to competition between the retailers and manufacturers of premium (real) brands. These manufacturers are launching their second label, priced near the store label to provide an alternative to the price-sensitive customers, rather than losing them to the store brand.
7-5. How is Brand Equity Determined?
This section relates to knowledge objectives #5.
In recent years, the popularity of branding, coupled with factors that have required marketers to be more accountable for their marketing expenditures and programs have resulted in efforts to measure the worth of a brand.
Figure 7.7: Top Brands
The figure lists the top 10 U.S. and top 10 non-U.S. brands as reported annually by Business Week.
The basic idea in brand valuation is to derive measures that translate as best as possible into a financial vocabulary.
Annual reports for public firms, customer surveys, etc., serve as sources for the data required.
One approach is to find out what sort of price premium the brand can demand. A conjoint study can be used for this.
A related approach compares the brand to an unbranded form of the product that is otherwise matched, feature by feature. Preferences and customer choices are measured.
The Interbrand method essentially assesses the value of a firm, subtracts its physical and financial assets, and calls the rest the value of the brand.
Figure 7.8: Brand Valuation
The figure shows the computations required to arrive at the brand valuation in a tabular form.
MANAGERIAL RECAP
Brands are names, logos, colors, and fonts.
- They signal information to the customers.
- They can command higher prices.
- Brand associations are the cognitive and emotional elements that create a brand story.
- Companies can use any number of branding strategies.
- Brand valuation is important for marketers.
SUGGESTED ANSWERS TO MARKETING PLAN QUESTIONS
Encourage students to download an Excel® spreadsheet on the book’s website at www.cengagebrain.com that contains all of these Chapter 17 tables to assist them in developing a marketing plan. A set of marketing plan questions is provided in the Instructor’s Manual as a guide to help students develop a marketing plan as they take the course and work through the chapters. By Chapter 17, all of the pieces will have come together and created a marketing plan if the students work through each section as they study each chapter. The Marketing Plan tear-out reference card in the student edition of MM serves as a chapter guide for the students to know when to fill out each section of the Marketing Plan.
Product: Fill in descriptions here:
Choose high-end quality or basic-quality level: Product 1
Use conjoint on target segments to determine primary attributes/features: Product 2
What are our brand associations, and what do want to trade in/out: Product 3
Where are we in the product life cycle; is it time to jump-start: Product 4
Take a branding perspective and build on the answers you compiled in Chapter 6.
Product: Fill in descriptions here:
Choose high-end quality or basic-quality level: Product 1
Students should now be attempting to move beyond attributes to brand personality. What is it that you want the product to convey as a brand? How do you want potential users to view the brand? What will make this brand stand out (not necessarily be different) from the rest of the products in the category?
Use conjoint on target segments to determine primary attributes/features: Product 2
Consistent with recommendations in Chapter 5 and the question above, students should see that options are available in any given market. For an energy drink, options may be based on flavor, serving size, packaging, and or level of carbonation that can be considered.
What are our brand associations, and what do want to trade in/out: Product 3
Consistent with recommendations in Chapter 5 and the question earlier, have students play the role of researcher and ask non-class students category users to express their feelings when using other products in the category. Look for adjectives and other descriptors. Get students to think if there is potential to create a brand personality around images and feelings that haven’t been expressed.
Where are we in the product life cycle; is it time to jump-start: Product 4
This was most likely addressed earlier. However, now is the time to have students start thinking about the marketing implications for working with products at different stages of the life cycle in regard to pricing, distribution, and communication/promotion.
SUGGESTED ANSWERS TO DISCUSSION QUESTIONS
- What is one of your favorite brands (why)? What is a brand you hate (why)?
Answer:
Brands per se don’t matter—the question is why. What are the brand associations, and where did they come from? From a brand manager’s point of view, how might we change any that are not desirable?
BUSPROG: Reflective Thinking
Tier II: DISC: Promotion
Tier III: MBA: Generative Thinking
Bloom’s: Analysis
Topic: What Are Brand Associations?
Difficulty: Moderate
- Which brand personality best describes you? Your business school? What is it about these images you like? What would you change about these images to make them even more desirable (and how would you do so)?
Answer:
Idiosyncratic answers, but encourage the students to use this as an out-of-the-box exercise in self-assessment. If they find that they’re like a Timex and they want to be like a Rolex, what needs to change?
BUSPROG: Reflective Thinking
Tier II: DISC: Promotion
Tier III: MBA: Generative Thinking
Bloom’s: Analysis
Topic: Brand Personalities
Difficulty: Moderate
- Read the methodology of Interbrand.com for brand valuations. How might you improve their methods and the sorts of measures they use to assess brand equity?
Answer:
The finance students usually have attitudes about this—well, they are quick to criticize Interbrand—but the methods aren’t that different from a corporate valuation. They are slower to offer a counter solution. Tell them that you have a great method up your sleeve that will come later (conjoint).
BUSPROG: Reflective Thinking
Tier II: DISC: Creativity
Tier III: MBA: Generative Thinking
Bloom’s: Analysis
Topic: How Is Brand Equity Determined?
Difficulty: Moderate
VIDEO EXERCISE & DISCUSSION QUESTIONS
Method
Method is a privately owned company engaged in the development and manufacturing of a uniquely branded line of personal care and home care products. Included in the Method brand are four major categories of products: home cleaning products, containing antibacterial cleaners, bathroom cleaners, dish cleaners, and floor cleaners; hands and body products, such as hand sanitizers and body wash; laundry products consisting of detergents, fabric softeners, and dryer cloths; and products for babies and kids, including multipurpose sprays, shampoo, and body wash.[1]
As the founders of Method, Adam Lowry and Eric Ryan call themselves the “proud brainparents” of the company and “the very first people against dirty®.”[2] The Method website does not promote Lowry and Ryan as heroes; rather, the website describes them as SUPER-heroes. In a decidedly irreverent manner, the Method website states: “And like every great superhero, they gained their powers after being exposed to toxic ingredients. Cleaning supplies, to be precise. But rather than turning them green or granting them the ability to talk to fish, Eric and Adam’s toxic exposure gave them something even better. An idea.”[3] And their “idea [was] that business, as the largest and most powerful institution on the planet, had the greatest opportunity to create solutions to our environmental and health crises.”[4]
Lowry says, “Since the dawn of the industrial age, business has traded off people’s health and the state of the planet for growth and profit, but it doesn’t need to be so.”[5] He argues that business can be “the most powerful agent for positive change on the planet provided that business is re-designed and becomes fundamentally and profoundly different.[6] As a company, Method is the embodiment of this spirit.
Lowry continues: “And so we created a different type of company that makes a different kind of product, in a different way. At the core of our business is the Cradle to Cradle design philosophy. This philosophy is pretty simple. It says that it’s OK to use high-tech materials, products, and gadgets that make our lives better ¼[;] we just need to design products so those materials can be infinitely reused. ¼ We want every product to have a past and a future. Like bottles made from old bottles, and non-toxic cleaners that biodegrade instead of toxic chemicals that don’t.”[7] An example of this cradle to cradle design philosophy is that in early 2008 Method became the first company in America to use 100% post-consumer recycled polyethylene terephthalate (PET) resin in manufacturing containers for its household cleaning products.[8]
As a different type of company, that makes a different kind of product, in a different way, Method has created a brand that is notable in several major ways:
- Method’s cleaning products are formulated from naturally derived surfactants that dissolve and remove dirt.
- Method’s cleaning products are safe for both people and pets, posing no risk of harm to either one.
- Method ensures that every product “is a little agent of environmental change, using safe and sustainable materials and manufactured responsibly.”
- Method’s product packaging is recyclable plastic art.
- Method’s products have the fragrance of flowers, fruits, or herbs¾not ammonia or bleach.[9]
In short, Method’s brand might be succinctly captured in the company’s statement: “We’re here to make products that work, for you and for the planet, ones that are as easy on the eyes as they are on the nose.”[10]
“[T]he success of ¼ Method products shows there is a demand for more environmentally friendly offerings. Yet this remains a niche market, and with little price promotion, it fails to attract those shoppers who seek out special offers.”[11] Even though environmentally friendly personal care and home care products may be a niche market, customers who are attracted to “green brands” like Method purchase those products with good reason. As one customer says, “I don’t want to feel like as soon as I put some household cleaner on the surface I’m going to have to stay away from it for a while.”[12]
A key tag line for the Method brand is “people against dirty®”; the essence of “people against dirty®” is captured in 16 rather pithy statements known as “the humanifesto.”[13] A few of these pithy expressions are:
- “[W]e see ingredients that come from plants, not chemical plants, and guinea pigs that are never used as guinea pigs.”
- “[W]e help each and every advocate put their method where their mouth is ¼ and they really could put it where their mouth is, since everything we put inside [M]ethod is safe and non-toxic.”
- “[R]ole models in bottles.”
- “[A]bove all, we believe dirty, in all its slimy, smoggy, toxic, disgusting incarnations is public enemy number one.”[14]
And that is the brief story of SUPER-heroes Adam Lowry and Eric Ryan! “Eric knew people wanted cleaning products they didn’t have to hide under their sinks. And Adam knew how to make them without any dirty ingredients. Their powers combined, they set out to save the world and create an entire line of home care products that were more powerful than a bottle of sodium hypochlorite. Gentler than a thousand puppy licks. Able to detox all homes in a single afternoon.”[15]
Source: This case was written for this textbook by Michael K. McCuddy, The Louis S. and Mary L. Morgal Chair of Christian Business Ethics and Professor of Management, College of Business Administration, Valparaiso University. © 2013 Cengage Learning.
- What are the key product features or qualities that define the Method brand of household cleaning products?
Answer:
The essential defining features or qualities of the Method brand of products are as follows: (a) the products are nontoxic; (b) the products are exceptionally effective in performing cleaning chores; (c) the products make a home feel fresher, more livable, and more beautiful; and (d) the products are packaged extraordinarily attractively.
BUSPROG: Analytic
Tier II: DISC: Product
Tier III: MBA: Knowledge of General Business Functions
Bloom’s: Application
Topic: What Is a Brand?
Difficulty: Easy
- What value accrues to customers who purchase the Method brand of household cleaning products? What value accrues to Method itself?
Answer:
Customers who purchase Method products are able to use nontoxic, high-performing cleaning agents. This creates value for customers who are committed to living a “greener,” more environmentally friendly existence.
Method focused on audience segmentation to cultivate customer brand loyalty across all of the company’s cleaning products. If successful, such audience segmentation will result in increased and consistent demand for products across the entire line. This will benefit Method with growing income and profit streams.
BUSPROG: Analytic
Tier II: DISC: Product
Tier III: MBA: Knowledge of General Business Functions
Bloom’s: Application
Topic: Why Brand?
Difficulty: Easy
- Is Method’s line of household cleaning products a luxury brand? Explain your answer.
Answer:
As the text indicates, a luxury brand can be defined in several different ways including, but not limited to, a higher price than similar products, exclusiveness of the product, uniqueness of the product, quality of the product, hedonic appeal, and expression of a person’s ideal self. Method’s household cleaning products would be considered a luxury brand because they are positioned as premium products that provide an alternative in a market category that is characterized by uninteresting and uninspiring sameness. Thus, Method products are unique in being different, both in packaging and, more importantly, in the use of nontoxic ingredients that also perform well. The quality of Method’s products is another aspect of its characterization as a luxury brand. For those customers who are very environmentally conscious, Method’s products could be conceived as representing an extension of one’s ideal self.
BUSPROG: Analytic
Tier II: DISC: Product
Tier III: MBA: Knowledge of General Business Functions
Bloom’s: Analysis
Topic: What Are Branding Strategies?
Difficulty: Moderate
SUGGESTED ANSWERS TO MINI-CASE: 6MD
- The biotech firm’s customers are the docs who need to be convinced to use this equipment rather than others, and the customers (the calci-treatment could become a “pull” attribute—who knows).
BUSPROG: Analytic
Tier II: DISC: Promotion
Tier III: MBA: Knowledge of Human Behavior and Society
Bloom’s: Application
Topic: Why Brand?
Difficulty: Moderate
- It may be that their benefit will need to be explained—people going in for joint replacements probably are unaware of the fact that (if they live long enough) they likely would need to have the procedure updated down the road. Obviously, 6MD is going to make the point that its implants are long (forever?) lasting.
BUSPROG: Analytic
Tier II: DISC: Customer
Tier III: MBA: Knowledge of Human Behavior and Society
Bloom’s: Application
Topic: Branding Strategies
Difficulty: Moderate
- See above. An analogy might be drawn that, as with car repair, a consumer wants the OEM parts inserted, not some used and inferior parts. The company could also obviously have some fun with alluding to the $6 million-bionic notion, or even a play on the “Intel-inside.” (“I’m six million dollars inside.”)
BUSPROG: Analytic
Tier II: DISC: Promotion
Tier III: MBA: Knowledge of Human Behavior and Society
Bloom’s: Application
Topic: What Are Brand Associations?
Difficulty: Moderate
- It depends on how the calci-treatment could be generalized—to other treatments (e.g., coatings on body parts for transplants that would be less likely to be rejected or less sticky) or, if it’s really only about calcium, maybe there are extensions in the world of dentistry.
BUSPROG: Analytic
Tier II: DISC: Promotion
Tier III: MBA: Generative Thinking
Bloom’s: Application
Topic: Brand Extensions and Co-Branding
Difficulty: Moderate
[1] Anonymous, “Shop Method,” Method website, http://www.methodhome.com/shop (accessed June 30, 2011).
[2] Anonymous, “Our Story,” Method website, http://www.methodhome.com/methodology/our-story (accessed June 30, 2010).
[3] Anonymous, “Our Story,” Method website, http://www.methodhome.com/methodology/our-story (accessed June 30, 2010).
[4] Anonymous, “Behind the Bottle,” Method website, http://www.methodhome.com/behind-the-bottle (accessed June 30, 2011).
[5] Anonymous, “Behind the Bottle,” Method website, http://www.methodhome.com/behind-the-bottle (accessed June 30, 2011).
[6] Anonymous, “Behind the Bottle,” Method website, http://www.methodhome.com/behind-the-bottle (accessed June 30, 2011).
[7] Anonymous, “Behind the Bottle,” Method website, http://www.methodhome.com/behind-the-bottle (accessed June 30, 2011).
[8] Anonymous, “Recycled Plastic Conversion: Method,” Brand Packaging 13(2) (February 2009): 33.
[9] Anonymous, “We Are¼,” Method website, http://www.methodhome.com/methodology/our-story/we-are (accessed June 30, 2011).
[10] Anonymous, “We Are¼,” Method website, http://www.methodhome.com/methodology/our-story/we-are (accessed June 30, 2011).
[11] J. Bainbridge, “Struggling to Keep Its Shine,” Marketing (September 16, 2009): 30–31.
[12] A. Athavaley, “What Do Labels Really Tell You?¾Household Products Start to Come Clean on Ingredients,” The Wall Street Journal (Eastern edition) (April 2, 2009): D1.
[13] Anonymous, “The Humanifesto,” Method website, http://www.methodhome.com/methodology/humanifesto (accessed July 1, 2011).
[14] Anonymous, “The Humanifesto,” Method website, http://www.methodhome.com/methodology/humanifesto (accessed July 1, 2011).
[15] Anonymous, “Our Story,” Method website, http://www.methodhome.com/methodology/our-story (accessed June 30, 2010).