Brand Value Chain

Keller and Lehmann (2001) provide a broad, integrative perspective on measuring brand equity that encompasses much of the above discussion. The brand value chain is a structured approach to assessing the sources and outcome of brand equity and the manner by which marketing activities create brand value. The brand value chain assumes that the value of a brand ultimately resides with customers.

1. Marketing Program Investment – The brand value creation process begins with marketing activity by the firm which influences customers in a way to affect how the brand performs in the marketplace and thus how it is valued by the financial community.

Any marketing program investment that potentially can be attributed to brand value development, either intentional or not, falls into this category.

2. Customer Mindset – The marketing activity associated with the program then impacts the “customer mindset” with respect to the brand – what they know, think, and feel about the brand. The customer mindset includes everything that exists in the minds of customers with respect to a brand – thoughts, feelings, experiences, images, perceptions, beliefs, attitudes, etc. – as outlined above in terms of sources of brand equity.

Customer mindset and knowledge can be largely captured by five dimension that have emerged from prior research that for a hierarchy or chain, from bottom to top as follows:

1) Brand Awareness, i.e., the extent and ease to which customers recall and recognized the brand and can identify the products and services with which it is associated.

2) Brand Association, i.e., the strength, favorability, and uniqueness of perceived attributes and benefits for the brand, encompassing tangible and intangible product or service considerations.

3) Brand Attitudes, i.e., overall evaluations of the brand in terms of its quality and the satisfaction it generates.

4) Brand Attachment, i.e., how loyal the customers feel towards the brand.

5) Brand Activity, i.e., the extent to which customers purchase and use the brand, top to others about the brand, sick out brand information, promotions, and events, and so on.

3. Market Performance – The customers mindset affects how customers react or respond in the market place in a verity of ways. Six key outcomes of that response are as follows.

The first two dimensions relate to price premium and price elasticity’s. A third dimension is market share, which majors the success of the marketing program to drive brand sales. Brand value is created with higher market shares, greater price premium, and more elastic responses to price decreases and in elastic responses to price increases. The forth dimension is brand expansion, the success of brand in supporting line and brand extensions and new product launches into related categories. The fifth dimension is cost structure or, more specifically, savings in terms of the ability to reduce marketing program expenditures because of the prevailing customer mindset.

4. Shareholder Value – Based on all available current and forecasted information about a brand as well as many other considerations, the financial marketplace then formulates opinions and makes various assignments that have very direct financial implications for the brand value. Three particularly important indicators are :

1)               the stock price,

2)               the price/ earnings multiple,

3)               overall market capitalization for the firm.

Factors to be considered for Brand Extension

Tauber (1986) identified three factors for successful brand extension to new categories.

1. Competitive Leverage – The new product should be comparable with a superior to other competing products in the category. (Palmolive toilet soaps did not offer anything new to consumers.)
2. Benefit Transfer – Consumers want a new Product to offer the same benefit offered by the parent brand. (The extension of Boost energy drink to Boost energy biscuits is a good example of benefit transfer. However, the extension of Horlicks to biscuits did not have the same effect. Horlicks should have,perhaps, moved to Horlicks milk biscuits and highlighted the ‘milk’ concept.)
3. Perceptual Fit – The consumer must perceive the new product to be consistent with the parent brand. (Nirma bath soap does not offer a perceptual fit with Nirma washing powder.)

Ries and Trout (1981) express their apprehensions about the brand extension strategy. According to them, a brand name is like a rubber band. It will starch, but not beyond certain point. Furthermore, the more you starch a brand name, the weaker it becomes (just the opposite of what one might expect).

Following guidelines can be used to decide when to use a family brand name and when not to.

1. Expected Volume – Potential winners should not bear the family name; small volume product should.
2. Competition – In a vacuum, the brand should not bear the family name. In a crowded field, it should.
3. Advertising support – A big budget brand should not bear the family name. A small budget brand should.
4. Significance – Breakthrough products should not bear the family name. Commodity products such as chemical should.
5. Distribution – Off-the-shelf item should not bear the family name. Item sold by sales representative should.

Consumers perceive brands to be in three categories: premium, popular and economy. A premium brand can be extended to another premium product category, or to a popular one. But a popular brand cannot be extended to a premium product category (Xavier 1992). Nirma is a popular brand name, and Nirma Chemical’s effort to promote a premium toilet soap under the Nirma name has not been very successful. Surf is a premium brand and we have to wait and watch whether its extension, as Surf Ultra, into a super premium category will work. In the mind of many housewives Surf is a bulky packet of 500g sold at Rs.20. Now, suddenly, if half the quantity of Surf is to cost double the price, then it is likely to cause disharmony in the consumers’ minds.

Measuring Source of Brand Equity

Most evaluations of Brand Equity involve utility estimation. Specifically, we attempt to measure the value (utility) of a product’s features and price level and also measure the overall utility of a product when including brand name. The difference between total utility and utility of the product features is the value of the brand.

According to a customer-based brand equity perspective, the indirect approach to measuring brand equity attempts to assess potential sources for brand equity by measuring consumer mindset or brand knowledge.

The indirect approach is useful in identifying what aspects of the brand what aspect of the brand knowledge may potentially cause the differential response that creates brand equity in the marketplace. Because any one measure typically only captures one particular aspect of brand knowledge, multiple measures need not to be employed to account for the multi-dimensional nature of brand knowledge:

Brand awareness can be accessed through a variety of aided and unaided memory measures that can be applied to test brand recall and recognition; brand image can be assessed through a variety of qualitative and quantitative techniques. We next review several these various approaches.

I. Qualitative Research Techniques – There are many different ways to uncover and characterize the types of associations linked to the brand. Qualitative research techniques are often employed to identify possible brand associations and sources of brand equity. Qualitative research techniques are relatively unstructured measurement approaches whereby range possible consumer responses are permitted.

Consider the following three qualitative research techniques that can be employed to identify source of brand equity.

1. Free Association – The simplest and often most powerful way to profile brand association

involves free association tasks whereby subjects are asked what comes to mind when they think of the brand without any more specific probe or cue than perhaps the associated product category (e.g. “what does the Relox name mean to you?” or “Tell me what comes to mind when you think of Rolex watches.”)

2. Projective Technique – Uncovering the sources of brand equity requires that consumers’ brand knowledge structures be profiled as accurately and completely as possible. Unfortunately, under certain situations, consumers may feel that it would be socially unacceptable or undesirable to express their true feelings.

Projective techniques are diagnostic tools to uncover the true opinions and feelings of consumers when they are unwilling or otherwise unable to express themselves on these matters.

3. Ethnographic and Observational Approaches – Fresh data can be gathered by directly observing relative actors and settings. Consumers can be unobtrusively observed as they shop or as they consume products to capture every shade of their behavior. Marketers such as Procter & Gamble seek consumers’ permission to spend time with them in their homes to see how they actually use and experience products.

II. Quantitative Research technique – Although quantitative measures are useful to identify and characterize the range of possible associations to a brand, more quantitative portrait of the brand often is also desirable to permit more confident and defensible strategic and tactical recommendations.

Quantitative research typically rings out some type of verbal responses from consumers, quantitative research typically employees various types of scale questions so that numerical representations and summaries can be made.

Quantitative measures are often the primary ingredient tracking studies that monitor brand knowledge structures of consumers overtime.

1. Awareness – Brand awareness is related to the strength of a brand in memory, as reflected by consumers’ ability to identify various brand elements (i.e., the brand name, logo, symbol, character, packaging, and slogan) under different conditions.

2. Recognition – In short recognition processes require that consumers be able to discriminate a stimulus – a word, object, image, etc. – as something they have previously seen. Brand recognition relates to consumers’ ability to identify the brand under a variety of circumstances and can involve identification of any of the brand elements.

3. Recall – Brand recall relates to consumers’ ability to identify the brand under a variety of circumstances. With brand recall, consumers must retrieve the actual brand element from memory when given some related probe or cue. Thus brand recall is a more demanding memory task than brand recognition because consumers are not just given a brand element and asked to identify or discriminate it as one they had or had not already seen.

4. Image – Brand Awareness is an important first step in building brand equity, but usually not sufficient. For most customers in most situations, other considerations, such as the meaning or image of the brand, also come into play. One vitally important aspect of the brand is its image, as reflected by the associations that consumers hold toward the brand. Brand associations come in many different forms and can be classified along many different dimensions.

Extension Guidelines Based on Academic Research

Successful brand extensions occur when the parent brand seen as having favorable associations and there is a perception of fit between the parent brand and the extension product. To better understand the process by which consumers evaluate a brand extension, many academic researchers have adopted a “categorization” perspective.

1. High-quality brand stretch farther than average-quality brand, although both types of brand have boundaries.
2. A brand that is seen as prototypical of a product category can be difficult to extend outside the category.
3. Concrete attribute associations tend to be more difficult to extend than abstract benefit associations.
4. Consumers may transfer associations that are positive in the original product class but become negative in the extension context.
5. Consumers may infer negative association about an extension, perhaps even based on other inferred positive associations.
6. Successful brand extensions occur when the parent brand is seen as having favorable associations and there is a perception of fit between the parent brand and the extension product.
7. A successful extension can not only contribute the parent brand image but also enable a brand to be extended even farther.
8. An successful extension hurts the parent brand only when there is a strong basis of fit between the two.
9. An unsuccessful extension does not prevent a firm from backtracking and introducing a more similar extension.
10. Vertical extensions can be difficult and often require sub-branding strategies.
11. The most effective advertising strategy for an extension is one that emphasizes information about the extension.
12. There are many bases of fit: product-related attributes and benefits as well as non-product-related attributes and benefits related to common usage situations or user types.
13. Depending on consumer knowledge of the product categories, perceptions of fit may be based on technical or manufacturing commonalities or more surface consideration such as necessary or situational complementarities.
14. It can be difficult to extend into a product class that is seen as easy to make.

Evaluating Brand Extension Opportunities

Define Actual and desired Consumer knowledge about the Brand

It is critical to fully understand the depth and breadth of awareness of the parent brand and the strength, favorability, and uniqueness of its associations. Moreover, before any extension decision are contemplated, it is important that the desired knowledge structures have been fully articulated.

Identify Possible Extension Candidates

Consumer factors when identifying potential brand extensions, marketers should consider parent brand association – especially as they related to the brand positioning and core benefits – and product categories that might seem to fit with that brand image in the minds of consumers.

Evaluate the Potential of the Extension Candidate

In forecasting the success of the proposed brand extension, it is necessary to assess – through judgment and research – the likely hood that the extension would realize the advantages and avoid the disadvantages of brand extension.

Design Marketing Program to Launch Extension

Too often extension are used as a shortcut means of introducing a new product, and insufficient attention is paid to developing a branding and marketing strategy that will maximize the equity of the brand extension as well as enhance the equity of the parent brand.

Evaluate Extension Success and Effects of Parent Brand Equity

The final step in evaluating brand extension opportunities involves assessing the extent to which an extension is able to achieve its own equity as well as contribute to the equity of the parent brand. A number of decisions have to be made concerning the introduction of a brand extension, and a number of factors will affect the brand’s success.

Disadvantages of Brand Extension

Brand extension as a strategy has its limitations. The name IBM is associated with computers. Tomorrow, if IBM were to sell ice-creams, concept might not appeal to consumers. Pond’s tried to introduce Pond’s toothpaste. In a blind test conducted people were not able to differentiate between Pond’s toothpaste and Colgate toothpaste.

However, when the Pond’s name was printed on the toothpaste, along with the graphics found on Pond’s Dreamflower lalc, people did not like it. Pond’s, to many people, is a face cream which has some thing to do with fragrance and freshness and is used for external application. On the another hand, the main attribute of a toothpaste is taste, and this mismatch between taste and fragrance created a dissonance in the minds of the consumer, who rejected the toothpaste.

It is further interesting to note that Pond’s toilet soap was excepted by the consumer; the end benefits of freshness and fragrance of Pond’s body talc could be easily transferred to a toilet soap with the same name. In comparison, Dettol is struggling to get away from the ‘cut and care’ image of its antiseptic lotion, to promote its ‘ 100% bath soap.’

Can Succeed but Diminish Identification with Any One Category

One risk of linking multiple products to a single brand is that the brand may not be strongly identified with any one product. Thus, brand extension may obscure the identification of the brand with the original categories, reducing brand awareness.

Can Succeed but Hurt the Image of the Parent Brand

If the brand extension has attribute or benefit associations that are seen as consistent or perhaps even as conflicting with the corresponding association for the parent brand, consumers may change their perceptions of the parent brand as a result.

Can Fall and Hurt Parent Brand Image

The worst possible scenario with an extension is that not only does it fail, but it also harms the parent brand image some how in the process. Unfortunately, these negative feedback effects can something happen.

Can Succeed but Cannibalize Sales of Parent Brand

Even if sales of a brand extension are high and meet targets, it is possible that this revenue may have merely resulted from consumer switching to the extension from existing product offerings of the parent brand – in effect cannibalizing the parent brand by decreasing its sales. Line extension are often designed to established points of parity with current offerings competing in the parent brand category, as well as to create additional points of difference in another areas.

Can Cause the Company Forgo the Chance to Develop a New Brand

One easily overlooked disadvantage to brand extension is that by introducing a new product as a brand extension, the company forgoes the chance to create a new brand with its own unique image and equity.

Can Dilute Brand Meaning

The potential drawbacks from a lack of identification with any one category and a weakened image may be especially evident with high-quality or prestige brand.

Can Confused or Frustrate Consumer

The different varieties of line extension may confuse and perhaps even frustrate consumer as to which version of the product is the “right one” for them. As a result they may reject new extensions for tried and true favorites or all-purpose versions that claim to supersede more specialized product versions.

Can Encounter Retailer Resistance

On average the number of consumer packaged–goods stock-keeping units (SKUs) Grew 16 percent each year from 1985 to 1992, whereas retail shelf expanded only 1.5 percent each year during the same period. Many brands now come in a multitude of different forms.

Advantages of Brand Extension

Allow for Packaging and Labeling Efficiencies

Similar or virtually identical packages and labels for extension can result in lower production costs and, if coordinated properly, more prominence in the retail store by creating a “billboard” effect.

Enhance the Parent Brand Image

According to the customer-based brand equity model, one desirable outcome of a successful brand extension is that it may enhance the parent brand image by strengthening an existing brand association, improving the favorability of an existing brand association, adding a new brand association, or a combination of these.

Bring new customers into the Brand Franchise and Increase Market Coverage

Line extension can benefit the parent brand by expanding brand coverage, for example, by offering a product benefit whose lack may have heretofore prevented consumer from trying the brand.

Revitalize the Brand

Sometimes brand extension can be means to renew interest and liking for the brand.

Permit Subsequent Extensions

One benefit of a successful extension is that it may serve as the basis for subsequent extension.

Permit Consumer Variety-Seeking

By offering consumers a portfolio of brand variants within a product category, consumers who need a change – because of boredom, satiation, or whatever – can switch to a different product type if they so desire without having to leave the brand family.

Provide Feedback Benefits to the parent brand

Besides facilitating acceptance of new products, brand extension can also provide positive feedback to the parent brand in a number of ways, as described in the following subsection.

Clarify Brand Meaning

Extension can help to clarify the meaning of a brand to consumer and define the kids of markets in which it competes.

Facilitate New Product Acceptance

The high failure rate of new products is well documented. Marketing analysts estimate that perhaps only 2 of 10 new products will be successful, or maybe even as few as 1 of 10. As noted previously, new products can fail for a number of reasons.

1. The market was too small (insufficient demand for type of product).
2. The product was a poor match for the company.
3. The product was justified on inadequate or inaccurate marketing research, or the company ignored research results.
4. The company was too early or too late in researching the market (failure to capitalize on its marketing window).
5. The product provided insufficient return on investment (poor profit margins and high costs).
6. The product was not new or different (a poor idea that really offered nothing new).
7. The product did not go hand in hand with familiarity.
8. Credibility was not conformed on delivery.
9. Consumer could not recognize the product.

Brand extension can certainly suffer from some of the same shortcomings face by any new product. Nevertheless, a new product introduced as a brand extension may be more likely to succeed, at least to some degree, because it offers the advantages described in the following subsection.

Improve Brand Image

One of the advantages of a well-known and well-liked brand is that consumers form expectations over time concerning its performance. Similarly, with a brand extension, consumers can make inferences and form expectations as to the likely composition and performance of a new product based on what they already know about the brand itself and the extent to which they feel this information is relevant to the new product.

Reduce Risk Perceived by Customers

One research study examining factors affecting new product acceptance found that the most important factor for predicting initial trial of a new product was a extent to which a known family brand was involved.

Increase the Portability of Gaining Distribution and Trial

Because of the potentially increased consumer demand resulting from introducing a new product as an extension, it may be easier to convince retailers to stock and promote a brand extension.

Increase Efficiency of Promotional Expenditure

From a marketing communication perspective, one obvious advantage of introducing a new product as a brand extension is that the introductory campaign does not have to create awareness of both the brand and the new product but instead can concentrate on only the new product itself.

Reduce Costs of Introductory and Follow-up Marketing Program

Because of these push and pull consideration in distribution and promotion. Moreover, other efficiencies can result after the launch.

Avoid Cost of Developing a New Brand

Developing new brand elements is an art and science. To conduct the necessary consumer research and employ skilled person to design high-quality brand names, logos, symbols, packages, characters, and slogans can be quite expensive, and there is no assurance of success.

Brand Extension

Introduction

A brand name is generally associated with a single product. However, there can be exception too. A brand name may be extended to related or unrelated products. Brand extension occurs in the following cases.

1. When individual or family brand is extended to unrelated products, e.g. the extension of the Enfield brand name from motorcycle to television and gensets.
2. When individual brands are extended to create a family brand, e.g. the extension of the Pond’s brand name from the dream flower talc to the sandal talc.
3. When related products are added to an existing family brand, e.g. Amul’s addition of the chocolate line.

There are a number of brand extensions being attempted by companies. Often, a line extension involves a different flavor or ingredient, or a different form or application of a brand. Some example of line extensions are close-toothpaste in three colors (blue, green, red), Cinthol toilet soap in four variants (original, new, lime and colonge), Horlicks (beverage) in three versions (regular, junior and chocolate), Robin Blue fabric whitener in two forms (liquid and powder), and Cherry Blossom shoo polish in two forms (paste and liquid).

When a firm introduces a new product, it has three main choices as to how to brand it:

1. It can develop a new brand, individually chosen for new product.
2. It can apply, in some way, one of its existing brands.
3. It can use a combination of new brand with an existing brand.

A brand extension is when a firm uses an established brand name to introduce a new product, when a new brand is combined with an existing brand, the brand extension can also be called a sub-brand. An existing brand that gives birth to a brand extension is referred to as the parent brand. The parent brand is already associated with multiple products through brand extension, then it may also be called a family brand.

Brand extension is broadly classified into two general categories:

• Line Extension: The parent brand is use to brand a new product that targets a new market segment with the product category currently served by the parent brand. A line extension often involves a different flavor or ingredient variety, a different form or size, or a different application for the brand (e.g., Head & Shoulders dry scalp shampoo).
• Category extension: The parent brand is used to enter a different product category from that currently served by the parent brand (e.g., Swiss Army Watches).

Most new products are line extension – typically 80% to 90% in any one year. Moreover, many of the most successful new products, as rated by various sources, are extension (e.g., Microsoft Xbox videogame system, Apple I-pod digital music player, and BMW mini automobile). Nevertheless, many new products are introduced each year as new brands.

Brand extension can come in all forms. One well-known branding expert, Edward Tabular, identifying the following seven general strategies for establishing a category – or what he calls a franchise – extension:

1. 1. Introduce products that reflect the brand’s distinctive benefit, attribute, or feature.
2. 2. Introduce the same product in a different form.
3. 3. Introduce products that contain the brand’s distinctive taste, ingredient, or component.
4. 4. Introduce companion products for the brand.
5. 5. Introduce products relevant to the consumer franchise of the brand.
6. 6. Introduce product that capitalize on the firm’s perceived expertise.
7. Introduce product that capitalize on the distinctive image or prestige of the brand.

Brand Recall

Brand recall relates to consumers ability to identify the brand under a variety of circumstances. With brand recall, consumers must retrieve the actual brand element from memory when given some related probe and cue.

Thus, brand recall is more demanding memory task than brand recognition because consumers are not just given a brand element and asked to identify or discriminate it as one they had not already seen.

Different measures of brand recall are possible depending on the type of cues provided to consumers. Unaided recall on the basis of “all brands” provided as a cue is likely to identify only the very strongest brand. Aided recall uses various types of cues to help consumer recall.

One possible sequence of aided recall might use progressively narrowly defined cues—such as product class, product category, and product type labels—to provide insight into the organisation of consumers’ brand knowledge structure. For example, if recall of the Porsche 944–– a high performance German sports car–– in non-German market was of interest, the recall probes could begin with “all cars” and move to more and more narrowly defined categories such as “sports cars,” “foreign cars,” or even “high performance German sports cars.”

Other types of cues may be employed to measure brand recall. For example, consumers could be probed on the basis of products attribute (e.g., “when you think of chocolate, which brand come to mind?”) or usage goals (e.g., “if were thinking of having healthy snakes, which brand come to mind?”). often, to capture the brand recall, it may be important to examine the context of the purchase decision or consumption usage situation.

The more that brand have strong associations to this consideration, the more likely it is that they will be recalled when they are given those situational cues. Combined, measures of recall based on product attribute or category cues as well as situational or usage cues given an indication of breadth of recall.

Besides being judged as correctly recalled, Brand recall can be further distinguished according to order, as well as latency or speed of recall. In many cases, people will recognize a brand when it is show to them and will recall it if they are given a sufficient number of cues.

Thus, potential recallability is high. The bigger issue is the salience of the brand –– do consumers think of the brand under the right circumstances, when they could be either buying or using the product? How quickly do they think of the brand? It is automatically or easily recalled? Is it the first brand recall?

Measuring Sources of Brand Equity – Capturing Consumer Mindset

Marketers always want know whether perceived image of the buyer and perceived image of the marketer is in the same direction. They also want to make it sure that ultimately marketing activities achieve the program objective, which may be creating awareness, changing attitude, elicit response which may also be bringing sales.

To a great extent, market performance is based on consumer mindset; it becomes crucial for the success of a brand to know the consumer’s approach towards the brand. So, effective brand management requires through understanding of consumer behaviour. It guides about why particular brand has been selected and how to extent this selection – in terms of creating and nurturing brand loyalty and also in terms of brand name or form extension. Consumer mindset can be know by

1.Quantitative Research

2.Qualitative Research

• Measuring outcome of brand equity – Capturing market performance

• Various methods can be identified to examine consumer attitudes and behaviour toward a brand to directly estimate the benefits arising from having a high level of awareness and favorable associations.

• Comparative Approaches-

1. Brand based comparative approaches guide about the changes in an element of a brand or marketing activity and its impact on the target brand versus competitor’s existing or fictitious brand. Two separate set of consumers / respondents are used for this purpose.
2. Marketing based comparative approaches guides about changes in different elements of a brand or marketing activity for the target brand or comparative brands. The testing is done on same set of respondents.

• Valuation Approach-

It attempts to place overall value on the brand in financial terms. There are various methods and measure to determine brand equity across the products.