Brand Equity As A Strategic Advantage

Professor Chip Besio

Southern Methodist University

Marketing 5341

Why the Interest in Branding?

Brands are assets Pressure from Stockholders for

performance Pressure from competitors

– Most products in a mature marketplace– Price competition abounds

What is Brand Equity?

The “added value” endowed by the brand name

Key elements: Associations, Awareness, Perceived Quality, Loyalty

Intangible, but measurable

Benefits of Brand Equity

Asset management/leveraging Consumer franchise (facilitates loyalty) Lower communication costs Improved prices/margins/market share More power with the trade

More benefits of Brand Equity

Barrier to competitive entry Effect on financial valuation of the firm Value to your Consumer

– Recognition, consistency, confidence, image/status, etc.

Managing Brand Equity

It primarily involves managing the consumer’s mind (associations)

Firm must set objectives for the brand Brand equity measurement is a

management essential Marketing mix elements should be chosen

to build, not erode, brand equity

How do you build Brand Equity? Making consumers aware of your

brand Focusing on the Image your brand

portrays Benefiting from comparison by

consumers

What does awareness and image buy? Influences how consumers make

choices By changing how choices are made

we can change what is purchased Consumers must first be aware

before they can compare.

Brand Equity The value your customers perceive to be uniquely

associated with your brand

= AwarenessAwareness + AssociationsAssociations AwarenessAwareness

– Recall

– Recognition AssociationsAssociations

– Perceived Quality

– Image

Brand Awareness

A brand that is not considered cannot be chosen

A customer cannot consider a brand unless they are aware of it

I don’t know who you are.I don’t know your company.I don’t know your company’s product.I don’t know what your company stands for.I don’t know your company’s customers.I don’t know your company’s record.I don’t know your company’s reputation.Now--what was it you wanted to sell me?

MORAL: Sales start before your salesman calls--with business publication advertising.

Brand AwarenessRECOGNITION

Brand AwarenessRECOGNITION

Increases likelihood of consideration at the point of purchase

Enhances the salesperson’s initial contact (industrial)

Enhances in-store promotional efforts

Increases attention and comprehension of advertising

Brand AwarenessRECOGNITION

Brand AwarenessRECOGNITION

Free publicity in the Wall Street Journal

How does this comparison work?

Consumers compare other brands to one brand

Often that brand serves as the reference brand.

Key concept: Loss aversion…when compared to the reference brand, losses may loom large.

Consumers judge value by… The observed price relative to

reference price for the product, and The observed price relative to the

normal or ‘fair’ price of the product– Examples:

• Restaurants on Friday nights…• Super Bowl ticket prices.

This is Reference Dependence.

Implication

If you are the reference brand…– Improvements on price, quality, etc. help– But decreases hurt more…

If you are not the reference brand…– You are judged relative to the reference

brand– Any way you differ from the reference is

your loss

Implication

Reference brands have competitive advantages,

Q: What are the reference brands in your product category?

Pricing Implication

Price cuts will effect different brands differently

High quality brands can easily “steal” market share from low quality brands by cutting price.

But lower quality brands will not steal share from a high quality brands by cutting price

Responses to price cuts are asymmetric, high price brands can steal from the poor.

How do you become a reference brand?

‘Strong’ brands that have great awareness (T.O.M.)

First Mover Advantage Brand most recently purchased Sampling, particularly for higher

quality brands

Comparison: Summary

Having high brand awareness can make you the reference brand which can be a significant advantage.

To create value…

Brand must support a higher reference price…

Must maintain this over time, even in the face of stiff competition…

Applications:– To raise price…

• New Models• Price Bundling• Etc…

What Strategic Element cannot be duplicated?

You lower price, they can eventually lower price

You can add a feature, they can eventually ad that feature

But…

They cannot use your brand name!!