Chapter 2: Customer Based Brand Equity

Part II: Identifying & Establishing Brand

Positioning & Values

Mateeullah Khan

BUITEMS
E-mail: [email protected]

Strategic Brand Management – Building, Measuring, and Managing Brand

Equity 3rd Edition – Kevin Lane Keller
 Objective Outline

• Customer Based Brand Equity

• Making a Strong Brand: Brand knowledge

• Sources of Brand Equity

• Building a Strong Brand

• Creating Customer Value

 Customer-Based Brand Equity
• Customer-Based Brand Equity is defined as “The differential effect that
brand knowledge has on consumer response to the marketing of that
brand.”

• A Brand has positive customer-based brand equity when customers react

more favorably to a product and the way it is marketed when the brand
is identified than when it is not.

• A Brand has negative customer-based brand equity if consumers react

less favorably to marketing of the brand compared with an unnamed or
fictitiously named version of the product.
 Customer-Based Brand Equity
Lets look at the Three ingredients to this definition;

1.Differential Effect:

– First, brand equity arises from differences in consumer response.

– If no difference occur, then the brand-name product can essentially

be classified as a commodity or generic version of the product

2.Brand Knowledge:

– 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.
 Customer-Based Brand Equity
3. Consumer Response to Marketing:

– Third, customers’ differential responses, which make up brand equity are

reflected in perceptions, preferences, and behavior related to all aspects of
brand marketing, including their

• Choice of a brand

• Recall of copy points from an ad

• Response to a sales promotion

• Evaluations of a proposed brand extension

• Also see Figure 2-1 for Marketing Advantages of Strong Brands

Figure 2-1: Marketing Advantages of Strong Brands
 Customer-Based Brand Equity:
Brand Equity As A Bridge
• Brand Equity provides marketers with a vital strategic bridge from their past
to their future.

• Brand as a Reflection of the Past:

– Marketers should consider all the dollars spent on manufacturing and marketing
product each year not so much as “expenses” but as “investment” – investment in
which consumers learned, felt, and experienced about the brand.

• Brands as a Direction for the Future:

– The brand knowledge that marketers create over time dictates appropriate or
inappropriate future directions for the brand.

– Consumers will decide, based on their brand beliefs and attitudes, where they
think brand should go and grant permissions (or not) to any marketing action or
program.

– The True value and future prospects a brand rest with consumers and their
knowledge about the brand.
 Making A Brand Strong: Brand Knowledge
• Brand Knowledge is the key to creating a 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.

• Associative Network Memory Model views memory as consisting of a

network of nodes and connecting links, in which nodes represent stored
information or concepts, and links represent the strength of association
between the information or concepts.

– Any type of information can be stored in the memory network, including

verbal, visual, abstract, or contextual information.

• Using the Associative Network Memory Model, let’s think of brand

knowledge as consisting of a brand node in memory with a variety of
associations linked to it.
 Making A Brand Strong: Brand Knowledge
• Brand Knowledge has Two components; Brand Awareness and Brand Image

• Brand Awareness is related to the strength of the brand node or trace in

memory, which we can measure as the customers’ 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.

• In other words, Brand associations are the other informational nodes linked to the
brand node in the memory and contain the meaning of the brand for consumers.

• Figure 2-3 displays some commonly mentioned associations for Apple computers that
consumers have expressed in the past.
Figure 2-3: Possible Apple Computer Associations
 Sources of Brand Equity
• Customer-based Brand Equity occurs when consumer has a high level of
awareness and familiarity with the brand and hold some strong, favorable,
and unique brand associations in memory.

• So the Two components of Brand Equity are Brand Awareness and Brand
Image;

1. Brand Awareness: It consists of Brand Recognition and Recall;

– Brand Recognition is consumers’ ability to confirm prior exposure to the
brand when given the brand as a cue.
– In other words, when customers goes to store, will they be able to recognize the
brand as one to which they have been exposed?

– Brand Recall: It 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.
For Example; Recall of Hardees Burger will depend on consumers’ ability to retrieve
the brand when they think of the fast-food category or of what they should eat for
lunch, etc.
 Sources of Brand Equity
2. Brand Image: Creating a positive Brand Image takes marketing programs
that link strong, favorable, and unique associations to the brand in memory.

– Consumers can form Brand Associations in a variety of ways other than

marketing activities:
• From direct experience; through information from other commercial
or non-partisan sources such as Consumer Reports or other media
vehicles ; from word of mouth, and by assumptions or influences
consumers make about the brand itself, its name, logo, or identification
with the country, etc.

Marketers should recognize the influence of these other sources of

information by both managing them as well as possible and by adequately
accounting for them in designing communication strategies.
 Sources of Brand Equity:
Advantages of Brand Awareness
There are Three Benefits of creating a high level of Brand Awareness;

1.Learning Advantages:
– Brand Awareness influences the formation and strength of the associations that
make up the brand image

– The first step in building Brand Equity is to register the brand in the minds of
consumers.

– If the right brand elements are chosen, the task becomes easier.

2.Consideration Advantages:
– As suggested earlier, 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 Consideration Set, the handful of brands that receives serious consideration for
purchase.
 Sources of Brand Equity:
Advantages of Brand Awareness
3. Choice Advantages:

– Creating a high level of brand awareness can affect choices among brands in the
consideration set, even if there are essentially no other associations to those
brands.

– E.G., consumers have been shown to adopt a decision rule in some cases to buy
only more familiar, well-established brands.
 Sources of Brand Equity:
Establishing Brand Awareness
• Increasing the familiarity of the brand through repeated exposure (more
effective for brand recognition than 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.

• Repetition increases recognizability, but improving brand recall also requires

linkages in memory to appropriate product categories or other relevant
purchase or consumption cues (effective for brand recall)

– A slogan or jingle creatively pairs the brand and the appropriate cues (and ideally,
the brand positioning as well, helping build a positive brand image).
 Sources of Brand Equity:
Creating a Positive Brand Image
1. 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 associations to any piece of information are its Personal
Relevance and the Consistency with which it is presented over time.

– Consumers form beliefs about brand Attributes and Benefits in different ways, i.e.
through direct experience, word-of-mouth etc.

2. Favorability of Brand Associations:

– To choose which favorable and unique associations to link to the brand, marketers
carefully analyze the consumer and the competition to determine the positioning for
the brand.

– Marketers create favorable brand associations by convincing consumers that the

brand possesses relevant attributes and benefits that satisfy their needs, wants, such
that they form positive overall brand judgments.
 Sources of Brand Equity:
Creating a Positive Brand Image
2. Favorability of Brand Associations: (cont’d)
– Thus, favorable associations for a brand are those associations that are
Desirable to Consumers – convenient, reliable, effective, efficient, colorful
– successfully Delivered by the Product, and conveyed by the supporting
marketing program.

– Desirability depends on three factors; how relevant, how distinctive, and

how believable consumers find brand association.

– Deliverability also depends on three factors; the actual or potential

ability of the product to perform, the current or future prospects of
communicating that performance, and the sustainability of the actual
and communicated performance over time.
 Sources of Brand Equity:
Creating a Positive Brand Image
3. Uniqueness of Brand Association:

– The essence of brand positioning is that the brand has a Sustainable

Competitive Advantage or “Unique Selling Proposition” (USP) 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 implicitly.

– Strong and Unique associations are critical to a brand’s success.

 Building A Strong Brand: The Four Steps of Brand
Building
The Four Steps are as Follows;

1.Ensure Identification of the brand with customers and an association of the

brand in customers’ mind with a specific product class or customer need.

2.Firmly establish the totality of Brand Meaning in the minds of customers by

strategically linking a host of tangible and intangible brand associations with
certain properties.

3.Elicit the proper customer responses to the brand identification and brand
meaning

4.Convert brand response to create an intense, active loyalty relationship

between customers and the brand

•These Four steps represent a set of fundamental questions that customers

invariably ask about brands.
 Building A Strong Brand: The Four Steps of Brand
Building
The Four Questions (with corresponding brand steps) are;

1.Who are you? (Brand Identity)

2.What are you? (Brand Meaning)

3.What about you? What do I think or feel about you? (Brand Response)

4.What about you and me? What kind of association and how much of a
connection would I like to have with you? (Brand Relationship)

•Notice the ordering of the steps in this “branding ladder”, from identity to
meaning to responses to relationships.
Building A Strong Brand: The Four Steps of Brand Building
Brand Building Blocks
• To provide some structure, let us think of establishing Six “Brand Building
Blocks” with customers that we can assemble in a pyramid, with significant
Brand equity only resulting if brands reach the top of the pyramid.

• This Brand Building process is illustrated in Figure 2-5 and 2-6.

Figure 2-5: Customer-Based Brand Equity Pyramid
Figure 2-6: Sub-dimensions of Brand Building
Blocks
 Brand Building Blocks:
1: Brand Salience
• Achieving the right Brand Identity means Brand Salience with Customers.

• Brand Salience measures Awareness of the Brand, E.g., how often and how
easily the brand is evoked under various situations or circumstances.

Breadth and Depth of Brand Awareness:

• The Depth of Brand Awareness measures how likely it is for a Brand Element
to come to mind, and the ease with which it does so.

• The Breadth of Brand Awareness measures the range of purchase and usages
situations in which the Brand Element comes to mind and depends to a large
extent on the organization of Brand and Product Knowledge in memory.
 Brand Building Blocks
1: Brand Salience - Depth and Breadth
To see how this works, consider the breadth and depth of Brand
Awareness for Tropicana Orange Juice;
 Brand Building Blocks
1: Brand Salience: Product Category Structure
• As the Tropicana example suggests , to fully understand Brand Recall, we
need to appreciate Product Category Structure, or how Product Categories
are organized in memory.

• The Beverages market provides a good setting to examine issues in Category

Structure and the effects of Brand Awareness on Brand Equity.

• Figure 2-7 illustrates one hierarchy that might exist in consumer’s minds.
Figure 2-7: Beverage Category Hierarchy
 Brand Building Blocks:
1: Brand Salience - Strategic Implications
• The Product Category Hierarchy shows us not only the Depth of awareness
matters but also the Breadth.

• In other words, the Brand must not only be Top-of-Mind and have sufficient
“Mind Share,” but it must also do so at the Right Times and Places.

• In some cases, the best route for improving sales for a Brand is not improving
consumer attitudes toward the brand but, instead, increasing the Breadth of
Brand Awareness and Situations in which consumers would consider using
the Brand.
 Brand Building Blocks:
2: Brand Performance
• The Product itself is at the heart of Brand Equity, because it is the primary
influence on;
– What consumers experience with a Brand,
– What they hear about a Brand from others, and
– What the firm can tell customers about the brand in their
communications.

• Designing and Delivering a product that fully satisfies consumer needs and
wants is a pre-requisite for successful marketing.

• Brand Performance describes how well the product or service meets

customers’ more Functional Needs.

• Brand Performance transcends the product’s ingredients and features to

include dimensions that differentiate the brand.
 Brand Building Blocks:
2: Brand Performance
• Five important types of attributes and benefits often underlie Brand
Performance,

1. Primary ingredients and supplementary features

2. Product Reliability, Durability, and Serviceability
3. Service effectiveness, efficiency, and empathy
4. Style and design
5. Price
 Brand Building Blocks:
2: Brand Performance
• Reliability measures the consistency of Performance over time and from
purchase to purchase.

• Durability is the expected economic life of the product,

• Serviceability is the ease of repairing the product if needed.

 Brand Building Blocks:
3: Brand Imagery
• The other main type of Brand Meaning is Brand Imagery.

• Brand Imagery depends on the extrinsic properties of the product or service,

including the ways in which the brand attempts to meet customers’
psychological or social needs.

• It is the way people think about brand abstractly, rather than what they think
the Brand actually does.

• Thus, Imagery refers to more intangible aspects of the Brand, and consumers
can form imagery associations directly from their own experiences or
indirectly through advertising or by some other sources of information, etc.
 Brand Building Blocks:
3: Brand Imagery
• Many kinds of intangibles can be linked to a brand, but Four main ones are;

1. User Profiles:
– Demographic and Psychographic characteristics
– Actual or Aspirational
– Group perceptions—popularity
2. Purchase and Usage Situations:
– Type of channel, specific stores, ease of purchase
– Time (day, week, month, year, etc.), location, and context of usage
3. Personality and Values:
– Sincerity, excitement, competence, sophistication, and ruggedness
4. History, Heritage, and Experiences:
– Nostalgia
– Memories
 Brand Building Blocks:
4: Brand Judgments
• Brand Judgments are customers’ personal opinions about and evaluations of
the brand, which consumers form by putting together all the different brand
performance and imagery associations.

• Customers may make all types of judgments with respect to a brand, but
Four types are particularly important: judgments about Quality, Credibility,
Considerations, and Superiority.
 Brand Building Blocks:
4: Brand Judgments
1. Brand Quality: Brand attitudes are consumers’ overall evaluations of a brand and
often form the basis for brand choice.
– Brand Attitudes generally depend on a specific attributes and benefits of the brand.
– Most important attitude relate to the brand’s perceived Quality and Value and
Satisfaction.

2. Brand Credibility: Customers may also form judgments about the company or
organization behind the Brand.

– It describes the extent to which customers see the brand as credible in terms of
Three Dimensions:

1. Perceived Expertise (competent, innovative, and market leader),

2. Trustworthiness (dependable and keeping customer interests in mind), and

3. Likability (fun, interesting, and worth spending time with).

 Brand Building Blocks:
4: Brand Judgments
3. Brand Consideration: Favorable Brand Attitudes and Perceptions of Credibility are
important but not enough if customers don’t actually consider the brand for
purchase.

– Consideration depend in part on how personally Relevant customers find the

brand and is a crucial filter in terms of building brand equity.

– Brand Consideration depends in large part on the extent to which strong and
favorable brand associations can be created as part of the brand image.

4. Brand Superiority: It measures the extent to which customers view the

brand as unique and better than other brands.

– Superiority is absolutely critical to building intense and active relationships with

customers and depend to a great degree on the number and nature of unique
brand associations that make up the brand image.
 Brand Building Blocks:
5: Brand Feelings
• Brand Feelings are customers’ emotional responses and reactions to the
Brand.

• Brand feelings also relate to the social currency evoked by the brand.

• The emotions evoked by a brand can become so strongly associated that they
are accessible during product consumption or use.

• More and more firms are attempting to tap into more consumer emotions
with their brands.

• Figure 2-8 summarizes one point of view with respect to emotional branding.

• Branding Brief 2-1 describes how Hallmark has engendered brand feelings
with consumers.
Figure 2-8: The Ten Commandments of Emotional
Branding
 Brand Building Blocks:
5: Brand Feelings
The following are Six Important types of Brand-Building Feelings;
1.Warmth: Soothing types of feelings and makes consumers feel a sense of calm or
peacefulness. (Hallmark)

2.Fun: Upbeat types of feelings making consumers amused, lighthearted, joyous, playful,
and so on. (Disney)

3.Excitement: Feeling of energized and that consumers are experiencing something

special. (MTV)

4.Security: Brand producing feeling of safety, comfort, and self-assurance. (EFU)

5.Social Approval: Consumer feels that others look favorably on their

appearance, behavior, and so on. (Mercedes)

6.Self-Respect: Brand making consumers feel better about themselves. (Tide)

 Brand Building Blocks:
6: Brand Resonance
• The final step of the model focuses on the ultimate relationship and level of
identification that the customers has with the brand.

• Brand Resonance describes the nature of this relationship and the extent to
which customers feel that they are “in sync” with the brand.

• Examples of brands with high resonance include Harley Davidson, Apple,

Ebay, etc.

• Resonance is characterized in terms of intensity, or depth of the psychological

bond that customers have with the brand, as well as the level of activity
engineered by this loyalty.
 Brand Building Blocks:
6: Brand Resonance
• We can break these two dimensions of Brand Resonance into Four Categories;
1. Behavioral Loyalty:
– Frequency and amount of repeat purchases made by customers.

2. Attitudinal Attachment:
– Love brand (favorite possessions; “a little pleasure”)
– Proud of brand

3. Sense of Community:
– Kinship
– Affiliation

4. Active Engagement:
– Seek information
– Join club
– Visit website, chat rooms
 Brand Building Implications:
• The Customer-based Brand Equity model provides a road map and guidance for
brand building, a yardstick by which brands can assess their progress in their Brand-
Building efforts as well as a guide for marketing research initiatives.

• Figure 2-9 contains a set of candidate measures for the Six Brand-Building Blocks.
(refer to material provided in class)

• The Model also reinforces Five important branding tenets;

1. Customers own brands

2. Don’t take shortcuts with Brands

3. Brands should have a Duality

4. Brands should have Richness

5. Brand Resonance provides important focus

 Creating Customer Value
• Customer-brand relationships are the foundation of brand resonance and
building a strong brand.

• Marketers have recognized the importance of adopting a strong consumer

and customer orientation.

• The customer-based brand equity model certainly puts the notion front
and center.

• Too many firms, however, still find themselves paying the price for lacking
a customer focus.

• Even the biggest firms can stumble. (see example of Volkswagen)

Creating Customer Value
 Branding Brief 2-2: Putting Customers First
Is a Company Consumer-Centric?

1.Is the company looking for ways to take care of you?

2.Does the company know its customers well enough to differentiate between
them?

3.Is someone accountable for customers?

4.Is the company managed for shareholder value?

5.Is the company testing new customer offers and learning from the results?
 Creating Customer Value:
Customer Relationship Management
• Customer-Relationship Marketing (CRM) uses a company’s data systems
and applications to track consumer activity and manage customer
interactions with the company.

• CRM synthesizes all of a company’s customer “touchpoints” – including e-

mail, call centers, retail stores, and sales reps – to support subsequent
customer interactions as well as to inform financial forecasts, product
design, and supply chain management.

• Once CRM system is in place, companies expect to harness the data-mining

power of the system to trim costs or increase profits and make back their
investment.

• CRM can increase value for both company and customer.

• As one marketing executive cautioned, “CRM isn’t a bad idea, but companies
should be sure to take their customers’ point of view into account”
 Creating Customer Value:
Customer Equity
• Customer Equity is defined as “ the sum of Lifetime Values of all Customers”.

• Customer Lifetime Value (CLV) is affected by revenue and by the cost of customer
acquisition, retention, and cross-selling.

• Blattberg and Deighton (1996) offer Eight guidelines as means of maximizing

Customer Equity;
1. Invest in highest-value customers first
2. Transform product management into customer management
3. Consider how add-on sales and cross-selling can increase customer equity
4. Look for ways to reduce acquisition costs
5. Track customer equity gains and losses against marketing programs
6. Relate branding to customer equity
7. Monitor the intrinsic retainability of your customer
8. Consider writing separate marketing plans—or even building two
marketing organizations—for acquisition and retention efforts
 Creating Customer Value:
Customer Equity
• According to Rust, Zeithaml, & Lemon (2004), Customer-Equity is defined as the
“Discounted Lifetime Values of a firm’s customer base” and it is made up of Three
Components and Key Drivers.

1. Value-Equity: Customer’s objective assessment of the utility of a brand based on

perceptions of what is given for what is received.
– Three drives of Value Equity are Quality, Price, and Convenience.

2. Brand Equity: Customer’s subjective and intangible assessment of a Brand, above

and beyond its objectively perceived value.
– Three key drives of Brand Equity are Customer Brand Awareness, Customer
Brand Attitudes, and Customer Perception of Brand Ethics.

3. Relationship Equity: Customer’s tendency to stick with the Brand, above and
beyond the objective and subjective assessments of the brand.
– Four Key Drivers of the Relationship Equity are Loyalty Programs, Special
Recognition and Treatment Programs, Community-Building Programs, and
Knowledge-Building Programs.
 Creating Customer Value:
Relationship of Customer Equity To Brand Equity
• One way to reconcile the points of view is to think of matrix where all the
brands and sub-brands and variants that a company offers are rows, and
all the different customer segments or individuals customers that purchase
those brands are columns (see Figure 2-11)
– Effective Brand and Customer management would necessarily take into
account both the rows and columns to arrive at optimal marketing solutions.

• As they have been developed conceptually and put into practice, the two
perspectives tend to emphasize different aspects (see Figure 2-12)

• The Customer Equity tends to have less perspective about specific activities
beyond general recommendations towards customer acquisition, retention
and cross selling.

• Customer Equity approaches can overlook the “option value” of Brands

and their potential impact on revenues and costs beyond the current
marketing environment.
Figure 2-11: Brand and Customer Management
Figure 2-12: Brand and Customer Management
 Creating Customer Value:
Relationship of Customer Equity To Brand Equity
• Customers drive the success of the Brand, but Brands are necessary
touchpoint that firms have to connect with their customers.

• Customer-based brand equity maintains that brands create value by

eliciting differential customer response to marketing activities.

• The higher price premiums and increased levels of loyalty engendered by

Brands generates incremental cash flows.

• Brand Equity tends to put more emphasis on the “front end” of marketing
programs and then realized value of marketing activities in terms of
revenue
THANKS