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1) Pick a brand and discuss the 7 brand elements and how it does against each. (7 brand elements: memorable, meaningful, likable, differentiated, transferable, adaptable, and protectable) 2) Which of the brand elements do you feel is most important? 3) What brand could you not live without? (strong brand relationship) - why? 4) which brand do you have a casual brand relationship with - why? 5) What elements do you think have made Coke so successful through the years? the attached file is the article can be as reference. 1 Marketing Sunil Gupta, Series Editor READING + VIDEO Brands and Brand Equity ROHIT DESHPANDÉ Harvard Business School ANAT KEINAN 8140 | Revised: December 19, 2019 For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 2 Table of Contents 1 Introduction ............................................................................................................................................ 3 2 Essential Reading .................................................................................................................................. 5 2.1 Strategic Importance and Significance of Branding .....................................................................5 2.2 Strategies and Tactics for Building, Leveraging, and Defending Strong Brands ..................... 13 2.2.1 Creating and Building a Strong Brand .............................................................................. 13 2.2.2 Growing and Maintaining Strong Brands ......................................................................... 24 2.2.3 Managing Declining or Dying Brands ............................................................................... 32 2.3 Challenges in Brand Management ............................................................................................... 35 2.4 Conclusion .................................................................................................................................... 37 3 Supplemental Reading ......................................................................................................................... 38 3.1 Business-to-Business Branding .................................................................................................. 38 3.2 Personal Branding ........................................................................................................................ 39 4 Key Terms ............................................................................................................................................ 43 5 For Further Reading ............................................................................................................................. 44 6 Endnotes .............................................................................................................................................. 45 7 Index ..................................................................................................................................................... 48 This reading contains links to online videos, denoted by the icon above. To access these exercises, you will need a broadband Internet connection. Verify that your browser meets the minimum technical requirements by visiting http://hbsp.harvard.edu/tech-specs. Rohit Deshpandé, Sebastian S. Kresge Professor of Marketing at Harvard Business School, and Anat Keinan, Associate Professor, Marketing, Boston University Questrom School of Business, developed this Core Reading with the assistance of writer Jennifer LaVin. Copyright © 2014, Harvard Business School Publishing Corporation. All rights reserved. 8140 | Core Reading: Brands and Brand Equity For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. http://hbsp.harvard.edu/tech-specs 8140 | Core Reading: Brands and Brand Equity 3 1 INTRODUCTION hen you think about branding, what first comes to mind? Most likely, you picture a logo, a brand name, a symbol, a character, or a tagline associated with a well-known product—the Coca-Cola script, the Apple logo, a Starbucks coffee cup, the Nike swoosh. While these branding elements are important for identifying and differentiating a product or service, they are only part of a company’s overall branding strategy. This reading will explore how a branding strategy is created and, in the process, will illustrate why that strategy is critical to an organization’s overall competitiveness. The term branding originated from the practice of branding cattle with a mark of identification to claim ownership.1 As market economies developed globally, people selling goods began using brands to differentiate their products from the goods made by others, some using signatures and some using more abstract symbols and designs. This branding played an important informational role, by assuring customers of the quality and workmanship of the product based on reputation or previous experience with the manufacturer, reducing the time and effort needed to make purchasing decisions, and reducing the risk in the purchasing choice. Over the past century, brands have become major players in modern society, penetrating all aspects of our lives. While traditional definitions of branding highlight the identification or marketing function of a brand, they sometimes underestimate the critical ways a brand infuses a purchase situation with meaning. To manage brands effectively, we must understand the meaning and utility of brands for consumers, producers, and society. Brands serve multiple purposes for consumers. While some of these purposes are informational and cognitive, brands can also serve psychological, emotional, and ego-expressive needs by acting as symbols that express values and identities. Global brands have become powerful markers to express personalities, status, lifestyles, social class, ideologies, and a variety of other social identities. Manufacturers reap benefits as brands foster increased consumer awareness and emotional W The American Marketing Association defines the word brand as “a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors.” For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 8140 | Core Reading: Brands and Brand Equity 4 engagement, while also commanding premium prices and often reducing marketing costs. Brands have also become necessary tools for creating competitive advantage and barriers to entry for all types of businesses. While the examples presented in this reading primarily focus on physical goods, branding can be applied almost anywhere that a consumer has a purchasing choice: services (FedEx, H&R Block tax services), stores (Nordstrom, Sainsbury’s), a person (Oprah, Lady Gaga), a place (Las Vegas, The Bahamas), an organization (UNICEF, AARP), and even a commodity (the iconic Juan Valdez as the face of Colombian coffee for many decades). Traditionally, branding was understood simply to be how an organization managed a product’s image. Developments such as globalization, advances in technology, and social media, however, have empowered consumers in unexpected ways, opening previously unreachable markets, putting affordable technology into the hands of the masses, and enabling real-time communication on a global scale. For decades, communication had circulated mostly within the borders of countries, helping to build strong national cultures. Toward the end of the twentieth century, much of popular culture became global, prompting consumers to participate in a shared conversation, drawing on shared symbols. One of the key symbols in this conversation has been the global brand.2 As a result of these changing market forces and the emergence of truly global, iconic brands, branding has become one of the most important aspects of business strategy. Brands can outlive their individual products’ life cycles, so brands are often a company’s most valuable asset. In fact, some companies now list their brand values on their balance sheets, and, in recent product and corporate acquisitions, brands accounted for a large percentage of the purchase price. Consider when Tata Motors of India bought Jaguar and Range Rover from the Ford Motor Company. The $2.6 billion purchase price far exceeded the value of the factories, raw materials, and the collective experience of its employees. The remainder was the value of the brands. Likewise, when Kraft Foods purchased Cadbury for $19.5 billion, it didn’t just purchase the chocolate, the factories, and the recipes. Above all, it bought the brand, with its rich history and sterling reputation.3 In this reading, we will examine the fundamentals of building, nurturing, valuing, and protecting brands by answering a variety of questions, including: Why is branding so crucial to an organization’s success? How do organizations create strong, positive brands and calculate their value? How can organizations leverage and defend strong brands? We will begin with an overview of the benefits of branding and how brands create such benefits. Then we will look more closely at how brands are built, leveraged, and defended, as well as at specific challenges organizations face in For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 8140 | Core Reading: Brands and Brand Equity 5 brand management. Finally, the Supplemental Reading will explore two emerging topics in the branding world: business-to-business (B2B) branding and personal branding. 2 ESSENTIAL READING 2.1 Strategic Importance and Significance of Branding From a consumer perspective, good branding gives buyers confidence in their purchase decision, allows for cleaner interpretation and easier processing of information, and ultimately provides higher satisfaction in use. From a corporate perspective, it increases the effectiveness of marketing programs, enhances brand loyalty, allows higher prices and margins, provides greater leverage with distribution channels, and creates a significant competitive advantage.4 How do brands bring such benefits to companies and consumers? The concepts of brand culture, brand equity, and brand value help us understand the business impact of brands. Consider a newly introduced product. It has a name, a trademarked logo, and perhaps other unique design features, but the “brand” itself does not yet exist. Its name, logo, and design are all markers of the brand, but because the product does not yet have a history, these markers are empty. Conversely, famous markers like the bitten Apple, the Starbucks mermaid, the Nike swoosh, and the unique sound of a Harley-Davidson engine are rife with customer experiences, advertisements and corporate sponsorships, product placements, media reviews, social media posts, and word of mouth. Over time, ideas about the product accumulate and fill the brand markers with meaning. This meaning creates a brand culture 5 (see Exhibit 1). For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 8140 | Core Reading: Brands and Brand Equity 6 EXHIBIT 1 Brand Culture Source: Douglas B. Holt, “Brands and Branding,” 503-045, Boston, MA: Harvard Business School, 2003. Copyright © 2003 by the President and Fellows of Harvard College. Reprinted by permission. Brand cultures evolve as various authors create stories that involve the brand. There are four primary types of authors: the firm, which shapes the brand through all of its product-related activities; popular culture, through use in film and television, celebrity endorsements, news events, and even parody; customers, who develop and share their own stories through product interaction; and influencers, or noncustomer opinion leaders. Influencers can be a diverse group who connect with consumers in a variety of contexts; they include experts writing in trade magazine and blog reviews, mavens and connoisseurs sharing opinions during work and social gatherings, and salespeople offering advice and help directly to retail shoppers. Although marketers often think of branding at the individual level, what makes branding so powerful is the collective perceptions of a brand. As all the stories, images, and associations around a brand collide in everyday social life, a common story or consensus view emerges. Soon these stories, images, and associations become so continually reinforced and conventional that they are treated as fact, which creates tangible benefits in the form of significant brand equity and brand value. Brand equity is often described as the set of assets linked to a brand’s name that adds to or subtracts from the value of that product or service. Brand equity can be negative or positive. Negative brand equity causes customers to react less favorably to promotion of a product or service when the brand of that product or service is identified; positive brand equity causes customers to react more favorably to a product or service when the brand is identified. The assets that For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 8140 | Core Reading: Brands and Brand Equity 7 are the component parts of a brand’s equity have been categorized by David Aaker as follows:6 • Brand awareness. Familiarity is the simplest form of brand equity; it gives consumers a feeling of confidence, thus making them more likely to consider the purchase. For example, a typical consumer walking into a grocery shop in a foreign country will likely choose a recognized brand product over entirely unknown brands sitting on the same shelf. • Perceived quality. A known brand often conveys a sense of quality, either good or bad, real or perceived (see the sidebar “The Provenance Paradox”). This perception provides a point of differentiation and positioning, a reason to buy, grounds for higher pricing, increased channel interest, and possible line extensions. • Brand associations. Beyond quality, more subjective and emotional associations are also important components of brand equity. Taken together, our associations with brands help us form a brand personality that suggests situations for which the brand is or is not appropriate. They help us process and retrieve information and create positive and negative attitudes and feelings. Think of a happy childhood memory, perhaps having Quaker oatmeal at a grandparent’s house. Chances are, if given a choice, you would purchase Quaker over an alternative brand because of this pleasant memory. • Brand loyalty. Perhaps the strongest measure of brand equity is loyalty (repeat buying, word of mouth). The benefits of brand loyalty are significant and come in the forms of reduced marketing costs, trade leverage, ability to attract new customers, and time to respond to competitive threats. Just think of iPhone users. Apple has to do very little publicity or advertising. Its loyal customers are known for waiting in annoyingly long lines to access its latest technology. • Other brand assets. Other assets such as patents and trademarks contribute to brand equity, help create barriers to entry, and maintain competitive advantage. For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 8140 | Core Reading: Brands and Brand Equity 8 Creating strong positive brand equity is the goal of brand management. Building an emotional connection between consumers and products is essential to strong brand equity, a process described by two standard branding models: the BrandDynamics Pyramid™ and the Brand Resonance Pyramid. The BrandDynamics Pyramid™ (Exhibit 2), originally developed by Millward Brown, depicts brand building as a series of steps. Starting with presence (i.e., familiarity), a brand strengthens as it moves up to relevance (applicability to the consumer’s needs), performance (belief that the product delivers on its promise), advantage (belief that the product has an emotional or rational advantage over other brands), and finally to bonding (consumers forming rational and emotional attachments to the brand to the exclusion of most others). The Provenance Paradox Having been exposed to many products over time, we, as consumers, naturally associate certain geographies with quality brands and products—France with wine, Italy with sports cars, Switzerland with watches. Conversely, competing brands from other countries, particularly developing markets, are frequently perceived as less authentic or of lower quality. Venezuela’s Chocolates El Rey, for example, processes some of the best cacao beans in the world. The company commands a 30% price premium for its beans, the key raw ingredient in chocolate, which are bought by the great chocolate houses in Switzerland and Belgium for use in branded products that are sometimes priced more expensively than caviar. But El Rey chocolate is relatively hard to find outside its home market, and people aren’t willing to pay a premium price for chocolate from South America when they have been conditioned to believe that great chocolate comes only from Europe. This provenance paradox, or country of origin effect, is a catch-22 that leaves companies like El Rey—and winemaker Concha y Toro in Chile, IT consultancy Infosys in India, and dozens of others—unable to price products in a way that generates the revenue needed to fuel global growth. Source: Rohit Deshpandé, “Why You Aren’t Buying Venezuelan Chocolate,” Harvard Business Review 88, no. 12 (December 2010): 25–27. For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 8140 | Core Reading: Brands and Brand Equity 9 EXHIBIT 2 The BrandDynamics™ Pyramid Source: Originally developed by Millward Brown. Used by permission of the Kantar Media Group. Similarly, the Brand Resonance Pyramid (Exhibit 3), which was developed by Kevin Lane Keller, is a widely accepted model that also views brand building as a series of steps.7 EXHIBIT 3 Brand Resonance Pyramid Source: Kotler, Philip T; Kelle, K, Marketing Management, 14th Ed., © 2012. Reprinted by permission of Pearson Education, Inc., New York, NY. At the lowest level or the base of the pyramid, brand managers must first ensure that customers can identify the brand and associate it with a specific product class or need. This can be measured by how often and easily customers think of a brand under various consumption or purchase situations. Next, the For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 8140 | Core Reading: Brands and Brand Equity 10 product must meet the customer’s functional needs through performance, while also meeting his or her social and psychological needs by linking the product to a host of tangible and intangible brand associations. Moving up, successful products must elicit positive customer responses (subjective opinions and evaluations, and also emotional responses and reactions) with respect to the brand. Finally, achieving “resonance” establishes a product or brand’s relationship with consumers such that they feel a personal connection to the brand. Only when the customer has been successfully steered from identity to meaning to response to relationship, Keller believes, can brand response be converted into the intense and active loyalty that creates significant brand value (see the sidebar “The New Coke Fiasco”). This concept of achieving resonance in branding is also evident in advertising and promotion. As Video 1 demonstrates, Google successfully increased the visibility of its search engine capabilities in its 2010 “Parisian Love” Super Bowl ad, not by mentioning 20 specific product characteristics directly, but by attempting to establish an emotional connection between the product and its consumers. The New Coke Fiasco Coca-Cola is a favorite example of emotional branding. Despite its long history in the United States and its global popularity, the Coca-Cola Company made a bold move in 1985. Believing the Pepsi Challenge results, the company spent more than $4 million on “the biggest taste test ever” and created a new formulation of Coke, with which they were convinced they could soundly beat Pepsi. When New Coke was introduced, there were protests, nearly 8,000 complaint calls per day, organized letter-writing campaigns, and threats of a class action lawsuit. Ten weeks later, the company reintroduced their original formula as Coca-Cola Classic, sending the company’s stock price to a new 12- year high. While market researchers had measured for taste, they had obviously failed to measure the emotional attachment customers had to Coca-Cola. Source: Susan Fournier, “Introducing New Coke,” HBS No. 500-067 (Boston: Harvard Business School Publishing, 1999). For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 8140 | Core Reading: Brands and Brand Equity 11 VIDEO 1 How Google Markets with Emotion Scan this QR code, click the icon, or use this link to access the video: bit.ly/hbsp2uphCxK Brand value is a quantitative measurement of the financial value of a brand. Several leading firms, such as Interbrand, BrandZ, and Brand Finance, have developed models for calculating brand value, and each publishes a comprehensive report on the top brands each year (see Exhibit 4). EXHIBIT 4 Top 10 Global Brand Value Comparisons in 2018 Interbrand BrandZ Brand Finance Value ($ billion) Change Value ($ billion) Change Value ($ billion) Change 1 Apple $214.480 16% Google $302.063 23% Amazon $150.811 42% 2 Google 155.506 10 Apple 300.595 28 Apple 146.311 37 3 Amazon 100.764 56 Amazon 207.594 49 Google 120.911 10 4 Microsoft 69.726 16 Microsoft 200.987 40 Samsung 92.289 39 5 Coca-Cola 57.853 –5 Tencent 178.990 65 Facebook 89.684 45 6 Samsung 43.682 6 Facebook 162.106 25 AT&T 82.422 –5 7 Toyota 40.062 6 Visa 145.611 31 Microsoft 81.163 6 8 Mercedes-Benz 39.385 2 McDonald’s 126.044 29 Verizon 62.826 –5 9 Facebook 32.893 –6 Alibaba 113.401 92 Walmart 61.480 –1 10 McDonald’s 30.280 5 AT&T 106.698 –7 ICBC 59.189 24 Sources: Interbrand “Best Global Brands 2018”; https://www.interbrand.com/best-brands/best-global-brands/2018/ranking/ BrandZ™ Top 100 Most Valuable Global Brands 2018” http://www.millwardbrown.com/brandz/rankings-and-reports/top-global- brands/2018 (http://online.pubhtml5.com/bydd/rxhd/#p=4), and “Brand Finance® “Global 500 2018: The Annual Report on the World’s Most Valuable Brands” https://www.brandfinance.com/knowledge-centre/reports/brand-finance-global-500-2018/ (https://www.brandfinance.com/images/upload/brand_finance_global_500_report_2018_locked_1.pdf ), accessed August 2019. Each firm takes a different approach to brand valuation: • Interbrand’s methodology takes into account the many ways a brand touches and benefits its organization and its stakeholders, from the impact of the brand on employees (e.g., attracting and retaining talent), to driving customer loyalty and appealing to prospects, to meeting investor expectations. There are three key aspects that Interbrand sees contributing to the brand value assessment: (1) the financial performance of the branded products or services, or their “economic profit” to the company; (2) the brand’s role in the consumer’s purchase decision, as measured by Interbrand’s Role of Brand Index (RBI), whose value is derived from primary research, a review of the historical roles of the brand for companies in that industry, or an expert panel assessment; and (3) the strength of the brand, or the ability of the brand to create loyalty relative to direct competitors and to other world-class brands. This is measured on a 0-to-100 scale that is based on ten factors that Interbrand identifies as For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. https://www.kaltura.com/index.php/extwidget/preview/partner_id/506471/uiconf_id/9952721/entry_id/1_v4kbvt8q/embed/auto?&flashvars%5BstreamerType%5D=auto https://www.kaltura.com/index.php/extwidget/preview/partner_id/506471/uiconf_id/9952721/entry_id/1_v4kbvt8q/embed/auto?&flashvars%5BstreamerType%5D=auto https://www.kaltura.com/tiny/xf9qh https://www.interbrand.com/best-brands/best-global-brands/2018/ranking/ http://www.millwardbrown.com/brandz/rankings-and-reports/top-global-brands/2018 http://www.millwardbrown.com/brandz/rankings-and-reports/top-global-brands/2018 http://online.pubhtml5.com/bydd/rxhd/#p=4 https://www.brandfinance.com/knowledge-centre/reports/brand-finance-global-500-2018/ https://www.kaltura.com/index.php/extwidget/preview/partner_id/506471/uiconf_id/9952721/entry_id/1_v4kbvt8q/embed/auto?&flashvars%5BstreamerType%5D=auto 8140 | Core Reading: Brands and Brand Equity 12 elements of a strong brand: clarity, commitment, governance, responsiveness, authenticity, relevance, differentiation, consistency, presence, and engagement. Interbrand also requires brands to be “global, visible, growing, and relatively transparent with financial results,” which, it acknowledges, may exclude some familiar brands from its brand value ratings.8 • BrandZ bases its methodology on two key elements: first, financial value, which calculates the dollar value of the parent company current and future valuation that can be attributed to the brand; and second, “Brand Contribution,” the brand’s contribution to corporate value related to its influence over consumer decisions. The BrandZ™ valuation methodology relies on ongoing quantitative consumer research, covering over 3.7 million consumer interviews and more than 165,000 different brands in over 50 markets. The Brand Contribution value considers the brand’s ability to drive current demand (influencing current consumers to choose it over others, generating volume share), price premium (leading consumers to pay more for the brand over others, generating value share and profit), and future demand and price (influencing consumers’ future purchases or prospects’ first-time purchases, increasing future volume and value). 9 • Brand Finance’s methodology focuses on “the value a company would be willing to pay to license its brand as if it did not own it.” This “royalty relief” approach estimates implied royalties for the brand. Establishing the royalty rate for a brand is done by calculating brand strength on a scale of 0 to 100, according to attributes such as financial value, brand equity, consumer connection to the brand, market share, and profitability, among others. A royalty rate range for the brand is set based on market data and is then applied to the forecast revenue to arrive at a net present value (NPV). The resulting brand value is then converted to a brand rating relative to its competitors on a scale from D to AAA.10 As you can see, each of these models uses both qualitative and quantitative measurements to calculate brand value, resulting in sometimes greatly differing valuations. Nevertheless, senior management frequently uses these tables to judge the relative success of their marketing efforts and to provide external validation for marketing budgets. In practice, this means that brand managers often cite the ranking that rates their own brand the highest (be it Interbrand, BrandZ, or Brand Finance). The firm then works on strategies to further boost its brand’s rankings on the specific dimensions used to compile the chosen ranking methodology. Next we explore how organizations build strong brands. For the exclusive use of L. Du, 2020. This document is authorized for use only by Lingjie Du in Social Media Marketing taught by Ashley Keeney, Northeastern University from Sep 2020 to Dec 2020. 8140 | Core Reading: Brands and Brand Equity 13 2.2 Strategies and Tactics for Building, Leveraging, and Defending Strong Brands Forty percent of all new products fail,11 so developing a rich and detailed early brand strategy is critical. Yet there are no universal rules for designing brand strategies; …