Customer Based Brand Equity

and Brand Positioning.

Chapter 2:
Branding Strategy
 Learning Objectives

 Define customer-based brand equity.

 Outline the sources and outcomes of customer based brand equity.
 Identify the four components of brand positioning.
 Describe the guidelines in developing a good brand positioning.
 Explain brand mantra and how it should be developed.
 Successful Brand Building Models

1. Brand positioning model describes how to establish competitive

advantages in the minds of customers in the marketplace;
2. Brand resonance model describes how to take these competitive
advantages and create intense, active loyalty relationships with
customers for brands; and
3. Brand value chain model describes how to trace the value
creation process to better understand the financial impact of
marketing expenditures and investments to create loyal customers
and strong brands.
 Positioning

 Positioning requires defining our desired or ideal brand knowledge structures and
establishing points-of-parity and points-of-difference to establish the right brand
identity and brand image.
 Unique, meaningful points-of-difference (PODs) provide a competitive advantage
and the “reason why” consumers should buy the brand.
 some brand associations can be roughly as favourable as those of competing
brands, so they function as points-of parity (POPs) in consumers’ minds—and
negate potential points-of-difference for competitors. In other words, these
associations are designed to provide “no reason why not” for consumers to choose
the brand.
 Brand Marketing

What makes a brand strong?

 How do you build a strong brand?
What do different brands mean to consumers?
How does the brand knowledge of consumers
affect their response to marketing activity?
Defining Customer-Based Brand Equity

 The CBBE concept approaches brand equity from the

perspective of the consumer— whether the consumer is an
individual or an organization or an existing or prospective
customer. Understanding the needs and wants of consumers
and organizations and devising products and programs to
satisfy them are at the heart of successful marketing.
 CBBE Concept

 The basic premise of the CBBE concept is that the power of a brand lies in what
customers have learned, felt, seen, and heard about the brand as a result of their
experiences over time.
 In other words, the power of a brand lies in what resides in the minds and hearts of
customers.
 The challenge for marketers in building a strong brand is ensuring that customers
have the right type of experiences with products and services and their
accompanying marketing programs so that the desired thoughts, feelings, images,
beliefs, perceptions, opinions, and experiences become linked to the brand.
 Formal Defination of CBBE

 Formally definition of customer-based brand equity is the differential effect that brand knowledge has on
consumer response to the marketing of that brand.
 First, brand equity arises from differences in consumer response. If no differences occur, then the
brand-name product can essentially be classified as a commodity or a generic version of the
product. Competition, most likely, would then just be based on price.
 Second, these differences in response are a result of consumers’ knowledge about the brand, that
is, what they have learned, felt, seen, and heard about the brand as a result of their experiences
over time. Thus, although strongly influenced by the marketing activity of the firm, brand equity
ultimately depends on what resides in the minds and hearts of consumers.
 Third, customers’ differential responses, which make up brand equity, are reflected in perceptions,
preferences, and behavior related to all aspects of brand marketing, for example, including choice
of a brand,
 Positive and Negative

 A brand has positive customer-based brand equity when consumers react

more favourably to a product and the way it is marketed when the brand is
identified than when it is not (say, when the product is attributed to a
fictitious name or is unnamed). Thus, customers might be more accepting of
a new brand extension for a brand with positive customer-based brand
equity, less sensitive to price increases and withdrawal of advertising
support, or more willing to seek the brand in a new distribution channel.
 A brand has negative customer-based brand equity if consumers react less
favourably to marketing activity for the brand compared with an unnamed or
fictitiously named version of the product.
 Benefits to CBBE

 Improved perceptions of product performance

 Greater loyalty
 Less vulnerability to competitive marketing actions
 Less vulnerability to marketing crises
 Larger margins
 More inelastic consumer response to price
 Increases More elastic consumer response to price decreases
 Greater trade cooperation and support
 Increased marketing communication effectiveness
 Possible licensing opportunities
 Additional brand extension opportunities
“Consumers may be willing to pay more
for the exact same television set if the
right brand name is on it.”
 Brand Equity as a Bridge

 According to the customer-based brand equity concept, consumer knowledge drives the
differences that manifest themselves in terms of brand equity. This realization has important
managerial implications.
 Brand equity provides marketers with a vital strategic bridge from their past to their future.
 Brands as a Reflection of the Past. Marketers should consider all the dollars spent on
manufacturing and marketing products each year not so much as “expenses” but as
“investments” in what consumers saw, heard, learned, felt, and experienced about the brand.
 The quality of the investment in brand building is the most critical factor, not the quantity
beyond some minimal threshold amount. In fact, it is possible to “overspend” on brand building
if money is not being spent wisely.
 Brands as a Direction for the Future.

 The brand knowledge that marketers create over time dictates appropriate and
inappropriate future directions for the brand. Consumers will decide, based on
their brand knowledge, where they think the brand should go and grant
permission (or not) to any marketing action or program. Thus, at the end of the
day, the true value and future prospects of a brand rest with consumers and their
knowledge about the brand.
 DISCOVERY CHANNEL

 The Discovery Channel was launched with the motto “Explore Your World”
and well-defined brand values of adventure, exploration, science, and
curiosity. After a detour to reality programming featuring crime and
forensics shows and biker and car content, the channel returned to its
mission of producing high-quality work that the company could be proud of
and that was beneficial for people.
 Brand Knowledge

 Brand knowledge is the key to creating brand equity, because it creates

the differential effect that drives brand equity. What marketers need,
then, is an insightful way to represent how brand knowledge exists in
consumer memory.
 Brand Knowledge Model

 Associative network memory model views memory as a network

of nodes and connecting links, in which nodes represent stored
information or concepts, and links represent the strength of
association between the nodes. Any type of information—whether
it’s verbal, abstract, or contextual—can be stored in the memory
network.
 Brand Knowledge Components

 Brand awareness is related to the strength of the brand node or trace in memory, which
we can measure as the consumer’s ability to identify the brand under different
conditions.
 Brand image is consumers’ perceptions about a brand, as reflected by the brand
associations held in consumer memory.10 In other words, brand associations are the
other informational nodes linked to the brand node in memory and contain the meaning
of the brand for consumers
 For example, if someone asked you what came to mind when you thought of Apple
computers, what would you say? You might reply with associations such as “well-
designed,” “easy to use,” “leading-edge technology,”
 Brand Knowledge Components

 Brand awareness is related to the strength of the brand node or trace in memory, which
we can measure as the consumer’s ability to identify the brand under different
conditions.
 Brand image is consumers’ perceptions about a brand, as reflected by the brand
associations held in consumer memory.10 In other words, brand associations are the
other informational nodes linked to the brand node in memory and contain the meaning
of the brand for consumers
 For example, if someone asked you what came to mind when you thought of Apple
computers, what would you say? You might reply with associations such as “well-
designed,” “easy to use,” “leading-edge technology,”
Apple Positioning
 Sources of Brand Equity

 Customer-based brand equity occurs when the consumer has a high level of awareness
and familiarity with the brand and holds some strong, favourable, and unique brand
associations in memory.
 In some cases, brand awareness alone is enough to create favourable consumer response;
for example, in low-involvement decisions when consumers are willing to base their
choices on mere familiarity.
 In most other cases, however, the strength, favourability, and uniqueness of brand
associations play a critical role in determining the differential response that makes up
brand equity.
 Brand Awareness

 Brand recognition is consumers’ ability to confirm prior exposure to the brand when
given the brand as a cue. In other words, when they go to the store, will they be able to
recognize the brand as one to which they have already been exposed?
 • Brand recall is consumers’ ability to retrieve the brand from memory when given the
product category, the needs fulfilled by the category, or a purchase or usage situation as a
cue. In other words, consumers’ recall of Kellogg’s Corn Flakes will depend on their
ability to retrieve the brand when they think of the cereal category or of what they should
eat for breakfast or a snack, whether at the store when making a purchase or at home
when deciding what to eat.
 Advantages of Brand Awareness.

 Learning Advantages: Brand awareness influences the formation and strength of the associations
that make up the brand image. To create a brand image, marketers must first establish a brand
node in memory, the nature of which affects how easily the consumer learns and stores additional
brand associations.
 Consideration Advantages: Consumers must consider the brand whenever they are making a
purchase for which it could be acceptable or fulfilling a need it could satisfy. Raising brand
awareness increases the likelihood that the brand will be a member of the consideration set, the
handful of brands that receive serious consideration for purchase.
 Choice Advantages: The third advantage of creating a high level of brand awareness is that it can
affect choices among brands in the consideration set, even if there are essentially no other
associations to those brands.
 Consumer Purchase

 Consumer purchase motivation: Although products and brands may be critically

important to marketers, choosing a brand in many categories is not a life-or-death
decision for most consumers. A lack of perceived differences among brands in a category
is likely to leave consumers unmotivated about the choice process.
 Consumer purchase ability: Consumers in some product categories just do not have the
necessary knowledge or experience to judge product quality even if they so desired The
reality is that product quality is often highly ambiguous and difficult to judge without a
great deal of prior experience and expertise.
 Establishing Brand Awareness.

 How do you create brand awareness? In the abstract, creating brand awareness means increasing
the familiarity of the brand through repeated exposure, although this is generally more effective
for brand recognition than for brand recall. That is, the more a consumer “experiences” the brand
by seeing it, hearing it, or thinking about it, the more likely he or she is to strongly register the
brand in memory.
 Anything that causes consumers to experience one of a brand’s element—its name, symbol, logo,
character, packaging, or slogan, including advertising and promotion, sponsorship and event
marketing, publicity and public relations, and outdoor advertising—can increase familiarity and
awareness of that brand element. And the more elements marketers can reinforce, usually the
better.
 ALLY FINANCIAL

 Ally has evolved its advertising and communications from creating brand awareness to
building brand image.
 In re-branding GMAC Financial as Ally Financial, the firm initially ran a campaign
featuring a smarmy man, who represented the typical bank, being mean to unsuspecting,
trusting children, who represented typical bank customers. After about a year, the firm
switched to a new campaign profiling the “wacky ways” customers showed how much
they loved their bank.
 Brand Image

 Brand associations may be either brand attributes or benefits. Brand attributes are those
descriptive features that characterize a product or service. Brand benefits are the
personal value and meaning that consumers attach to the product or service attributes.
 Consumers can form brand associations in a variety of ways other than marketing
activities: from direct experience; online surfing; through information from other
commercial or nonpartisan sources such as Consumer Reports or other media vehicles;
from word of mouth; and by assumptions or inferences consumers make about the brand
itself, its name, logo, or identification with a company, country, channel of distribution,
or person, place, or event.
 The Body Shop

 The Body Shop successfully created a global brand image without using conventional
advertising. Its strong associations to personal care and environmental concern occurred
through its products (natural ingredients only, never tested on animals), packaging
(simple, refillable, recyclable), merchandising (detailed point-of-sale posters, brochures,
and displays), staff (encouraged to be enthusiastic and informative concerning
environmental issues), sourcing policies (using small local producers from around the
world), social action program (requiring each franchisee to run a local community
program), and public relations programs and activities (taking visible and sometimes
outspoken stands on various issues).
 Strength of Brand Associations.
 The more deeply a person thinks about product information and relates it to existing brand
knowledge, the stronger the resulting brand associations will be.
 Two factors that strengthen association to any piece of information are its personal relevance and
the consistency with which it is presented over time. The particular associations we recall and
their salience will depend not only on the strength of association, but also on the retrieval cues
present and the context in which we consider the brand.
 Company-influenced sources of information, such as advertising, are often likely to create the
weakest associations and thus may be the most easily changed.
 To overcome this hurdle, marketing communication programs use creative communications that
cause consumers to elaborate on brand-related information and relate it appropriately to existing
knowledge.
 Favourability of Brand Associations.

 Marketers create favourable brand associations by convincing consumers that the

brand possesses relevant attributes and benefits that satisfy their needs and wants,
such that they form positive overall brand judgments.
 Consumers will not hold all brand associations to be equally important, nor will
they view them all favorably or value them all equally across different purchase or
consumption situations.
 Brand associations may be situation or context-dependent and vary according to
what consumers want to achieve in that purchase or consumption decision.
 Uniqueness of Brand Associations

 The essence of brand positioning is that the brand has a sustainable competitive
advantage or “unique selling proposition” that gives consumers a compelling
reason why they should buy it.
 Marketers can make this unique difference explicit through direct comparisons
with competitors, or they may highlight it implicitly. They may base it on
performance-related or non-performance-related attributes or benefits.
 A product or service category can also share a set of associations that include
specific beliefs about any member in the category, as well as overall attitudes
toward all members in the category.
 Identifying and Establishing Brand
Positioning.
 Brand Concept
 Brand positioning:
 Deciding on a positioning requires determining a frame of reference marketers need to
know
 (1) who the target consumer is,
 (2) who the main competitors are,
 (3) how the brand is similar to these competitors,
 (4) how the brand is different from them.
 Target Market

 Identifying the consumer target is important because different consumers may have
different brand knowledge structures and thus different perceptions and preferences for
the brand
 Market is the set of all actual and potential buyers who have sufficient interest in,
income for, and access to a product. Market segmentation divides the market into distinct
groups of homogeneous consumers who have similar needs and consumer behavior, and
who thus require similar marketing mixes. Market segmentation requires making trade-
offs between costs and benefits.
 Four main segments:

 1. The Sensory Segment: Seeking flavour and product appearance

 2. The Sociable: Seeking brightness of teeth
 3. The Worriers: Seeking decay prevention
 4. The Independent Segment: Seeking low price.
 Consumer Segmentation
Bases
 Behavioural  Demographic
 User status  Income
 Usage rate  Age
 Usage occasion  Sex
 Brand loyalty  Race
 Benefits sought
 Family
 Geographic
 Psychographic Values, opinions, and
 International
attitudes Activities and lifestyle  Regional
Hypothetical Examples
of Funnel Stages and
Transitions
Guide for Segmentation and Target Market

 Identifiability: Can we easily identify the segment?

 Size: Is there adequate sales potential in the segment?
 Accessibility: Are specialized distribution outlets and
communication media available to reach the segment?
 Responsiveness: How favorably will the segment respond to a
tailored marketing program?
 Nature of Competition

 At least implicitly, deciding to target a certain type of consumer often defines the
nature of competition, because other firms have also decided to target that segment in
the past or plan to do so in the future, or because consumers in that segment already
may look to other brands in their purchase decisions.
 Competition takes place on other bases, of course, such as channels of distribution.
 Competitive analysis considers a whole host of factors—including the resources,
capabilities, and likely intentions of various other firms—in order for marketers to
choose markets where consumers can be profitably served.
 Indirect Competition
 Unfortunately, many firms narrowly define competition and fail to recognize the most compelling
threats and opportunities
 Research on noncomparable alternatives suggests that even if a brand does not face direct competition
in its product category, and thus does not share performancerelated attributes with other brands, it can
still share more abstract associations and face indirect competition in a more broadly defined product
category
 Competition often occurs at the benefit level rather than the attribute level. Thus, a luxury good with a
strong hedonic benefit like stereo equipment may compete as much with a vacation as with other
durable goods like furniture. A maker of educational software products may be implicitly competing
with all other forms of education and entertainment, such as books, videos, television, and magazines
 Branding principles are now being used to market a number of different categories as a whole.
 Multiple Frames of Reference.

 It is not uncommon for a brand to identify more than one frame of reference.
This may be the result of broader category competition or the intended future
growth of a brand, or it can occur when the same function can be performed by
different types of products. For example, Canon EOS Rebel digital cameras
compete with digital cameras from Nikon, Kodak, and others, but also with
photo-taking cell phones.
 Starbucks Distinct Sets of Competitors,

1. Quick-serve restaurants and convenience shops (McDonald’s and Dunkin’

Donuts). Intended PODs might be quality, image, experience, and variety;
intended POPs might be convenience and value.
2. Supermarket brands for home consumption (Nescafé and Folger’s). Intended
PODs might be quality, image, experience, variety, and freshness; intended
POPs might be convenience and value.
3. Local cafés. Intended PODs might be convenience and service quality;
intended POPs might be quality, variety, price, and community.
 Points-of-Difference

 Points-of-difference (PODs) are formally defined as attributes or

benefits that consumers strongly associate with a brand, positively
evaluate, and believe that they could not find to the same extent with
a competitive brand.
 Consumers’ actual brand choices often depend on the perceived
uniqueness of brand associations.
 IKEA

 Swedish retailer Ikea took a luxury product

 Home furnishings and furniture
 Made it a reasonably priced alternative for the mass market. Ikea supports its
low prices by having customers serve themselves and deliver and assemble
their own purchases.
 Ikea
also gains a point-of-difference through its product offerings. As one
commentator noted, “Ikea built their reputation on the notion that Sweden
produces good, safe, well-built things for the masses. They have some of the
most innovative designs at the lowest cost out there.
 Points of Parity
 Points-of-parity associations (POPs), on the other hand, are not necessarily unique to the brand but
may in fact be shared with other brands..
 Category points-of-parity represent necessary—but not necessarily sufficient—conditions for brand
choice. They exist minimally at the generic product level and are most likely at the expected product
level. For Example Bank
 Competitive points-of-parity are those associations designed to negate competitors’ pointsof-difference.
In other words, if a brand can “break even” in those areas where its competitors are trying to find an
advantage and can achieve its own advantages in some other areas, the brand should be in a strong—and
perhaps unbeatable competitive position.
 Correlational points-of-parity are those potentially negative associations that arise from the existence
of other, more positive associations for the brand. One challenge for marketers is that many of the
attributes or benefits that make up their POPs or PODs are inversely related. In other words, in the minds
of consumers, if your brand is good at one thing, it can’t be seen as also good on something else.
Examples of Negatively
Correlated Attributes
and Benefits