The New Strategic Brand Management

Highlights

• Finally, A Ehrenberg (1972) has shown through 40 years of panel data analysis that product penetration is correlated with purchase frequency. In other words, big brands have both a high penetration rate and a high purchase frequency per buyer. Growth will necessarily take these two routes, and not only be triggered by customer loyalty.
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• Brand awareness, image, trust and reputation, all painstakingly built up over the years, are the best guarantee of future earnings, thus justifying the prices paid. The value of a brand lies in its capacity to generate such cashflows long term.
• This is what is expressed in the traditional definition of a brand: ‘a brand is a set of mental associations, held by the consumer, which add to the perceived value of a product or service’ (Keller, 1998). These associations should be unique (exclusivity), strong (saliency) and positive (desirable).
• Brand management starts with the product and service as the prime vector of perceived value, while communication is there to structure, to orient tangible perceptions and to add intangible ones.
• For us, in essence, a brand is a name that influences buyers, becoming the purchase criterion.
• Brands must convey certitude, trust and emotion. They are a risk reducer. In fact where there is no risk there is no brand.
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• Brand power to influence buyers relies on representations and relationships. A representation is a system of mental associations.
• Since a brand is a name with the power to influence the market, its power increases as more people know it, are convinced by it, trust it and become advocates.
• These are the key aspects of brand management: defining one’s values; accepting no compromise over these values; thinking long term rather than pursuing short-term profits; and consistency.
• The same brand assets may produce different brand strength over time: this is a result of the amount of competitive or distributive pressure. The same assets can also have no value at all by this definition, if no business will ever succeed in making them deliver profits, through establishing a sufficient market share and price premium.
• At the opposite end of the spectrum there are brands that have an equity far superior to their consumption rate. In Europe, Michelin has a clear edge over rival tyre brands as far as image is concerned. However, image does not transform itself into market share if people like the Michelin brand but deem that the use they make of their cars does not justify buying tyres of such a quality and at such a price.
• Samsung and Sony are equals in terms of former purchases, although this measure favours older brands, longer established in the market. However, Sony still leads in its ability to retain clients and be aspirational for future purchases (33/42 versus 28/42). This demonstrates the value of investing in a brand: although the brand is actually less innovative than it used to be, it retains an inherent desirability.
• Accounting goodwill is the monetary value of the psychological goodwill that the brand has created over time through communication investment and consistent focus on product satisfaction, both of which help build the reputation of the name.
• Brands reduce perceived risk, and exist as soon as there is perceived risk.
• The perceived risk is greater if the unit price is higher or the repercussions of a bad choice are more severe.
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• Beyond trust, brands can also bring excitement, joy, empathy and stimulation. This is their second function: they animate the category. They stimulate. Thus they become exciting and unsubstitutable.
• Awareness carries a reassuring message: although it is measured at the individual level, brand awareness is in fact a collective phenomenon. When a brand is known, each individual knows it is known.
• These authors make the distinction between three types of product characteristics: the qualities which are noticed by contact, before buying; the qualities which are noticed uniquely by experience, thus after buying; credence qualities which cannot be verified even after consumption and which you have to take on trust.
• The brand is a sign (therefore external) whose function is to disclose the hidden qualities of the product which are inaccessible to contact (sight, touch, hearing, smell) and possibly those which are accessible through experience but where the consumer does not want to take the risk of trying the product. Lastly, a brand, when it is well known, adds an aura of make-believe when it is consumed, for example the authentic America and rebellious youth of Levi’s, the rugged masculinity of Marlboro, the English style of Dunhill, the Californian myth of Apple.
• TABLE 1.7   The functions of the brand for the consumer Function Consumer benefit Identification To be clearly seen, to quickly identify the sought-after products, to structure the shelf perception. Practicality To allow savings of time and energy through identical repurchasing and loyalty. Guarantee To be sure of finding the same quality no matter where or when you buy the product or service. Optimization To be sure of buying the best product in its category, the best performer for a particular purpose. Badge To have confirmation of your self-image or the social image that you present to others. Continuity Satisfaction created by a relationship of familiarity and intimacy with the brand that you have been consuming for years. Hedonistic excitement Enchantment linked to the attractiveness of the brand, to its logo, to its communication and its experiential rewards. Ethical Satisfaction linked to the responsible behaviour of the brand in its relationship with society (sustainable development, CSR, employment, citizenship, advertising which doesn’t shock).
• Whenever brands are just trademarks and operate merely as a recognition signal or as a mere guarantee of quality, distributors’ brands can fulfil these functions as well and at a cheaper price.
• Why do financial analysts prefer companies with strong brands? Because they are less risky. Therefore, the brand works in the same way for the financial analyst as for the consumer: the brand removes the risk.
• Chaudhuri’s very relevant research (2002) reminds us that advertising and marketing are the key levers of sales. However, their effects on market share and the ability to charge a premium price (two indicators of brand strength) are not direct but are mediated by brand reputation (or esteem).
• Reputation also adds to the impact of advertising on sales. It is well known from evaluations of past campaigns that the more a brand is known, the more its advertisements are noticed and remembered.
• The brand has the power to mobilize, for it appears as one of the few valuable things that bring pride both inside and outside. As long as the brand keeps its attractiveness, it is motivating to work for it. Everyone needs to keep this attractiveness high to sustain market demand.
• Naturally, a brand draws its strength from the company’s financial and human means, but it derives its energy from its specific niche, vision and ideals.
• The role of the brand name is precisely to protect the innovation: it acts as a mental patent, by becoming the prototype of the new segment it creates – advantage of being a pioneer.
• Unlike advertising, in which the last message seen is often the only one that truly registers and is best recalled, the first actions and message of a brand are the ones bound to leave the deepest impression, thereby structuring long-term perception.
• Ridding itself of atypical, dissonant elements, a brand acts as a selective memory, hence endowing people’s perceptions with an illusion of permanence and coherence.
• In order to build customer loyalty and capitalize on it, brands must stay true to themselves. This is called a return to the future. Back to the DNA.
• Rejuvenating Burberrys or Helena Rubinstein means connecting them to modernity, not mummifying them in deference to a past splendour that we might wish to revive.
• Brands do not legally testify that a product meets a set of characteristics. However, through consistent and repeated experience of these characteristics, a brand becomes synonymous with the latter.
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• Strong brands thus bring about both internal mobilization and external federation.
• This is one of the key roles of brands: to guarantee, to reassure customers about desired benefits which constitute the exclusive strength of the brand, also called its positioning.
• Brand-involved consumers will bargain less. Brand image is directly linked to profitability. In fact, in the Euromonitor car brand tracking study, measuring the image of all automobile brands operating in Europe, it has been said that a positive shift of one unit on the global opinion scale means there is 1 per cent less bargaining by customers.
• In cognitive psychology, the prototype is the instance that summarizes and carries all the meaning of a concept. If one substitutes the word ‘brand’ for the word ‘concept’, it is clear that the first best-seller of a brand carries most of the meaning of the brand. This is why single product brands (such as Coke) cannot extend beyond this product after a while.
• Brand evocations influence buyers if they are: immediately accessible in buyers’ minds (saliency); firmly believed (no doubts and no expectations of variance in the brand delivery); highly valued (they promise benefits with high utility for the targeted consumers); highly differentiated: they are not matched by the competition.
• brand managers must decide what should be the very few kernel values of their brand (also called core values) and exert all their talent and energy to build it consistently through time, products, consumer relationships and care, store and web experience, and pricing.
• The brand kernel values should not be generic of the category unless one creates this category, in which case the brand itself is the prototype of the category (iPhone for smartphones).
• On the one hand, brands guide our perception of products. On the other hand, products send back a signal that brands use to underwrite and build their identity.
• Current corporate accounting, as such, is unfavourable towards brands. Accounting is ruled by the prudence principle: consequently, any outlay for which payback is uncertain is counted as an expense rather than valued as an asset. This is the case of investments made in communications in order to inform the general public about the brand’s identity.
• In order to react against the short-term bias caused by accounting practices and the underestimation of (corporate) value as shown in the balance sheets, some British companies have begun to list their own brands as assets on their balance sheets. This has triggered a discussion on the fundamental validity of accounting practices that emerged in the ‘age of commodities’, when the essential part of capital consisted of real estate and equipment. Today, on the contrary, intangible assets (know-how, patents, reputation) are what make the difference in the long run.
• Breeding many strong brands, l’Oréal allocates its inventions to its various businesses according to brand potency. Innovation is thus first entrusted to prestigious brands sold in selective channels as the products’ high prices will help cancel out the high research cost incurred.
• The brand is not an end in itself. It needs to be managed for what it is – an instrument for company growth and profitability, a business tool.
• The first role of any brand is to reduce perceived risk: the consumer experience must be the same whenever and wherever the product is bought.
• But material differentiation is a never-ending race: competitors copy your best ideas. Attaching the brand to an intangible value adds value and prevents substitutability.
• This is also why brand names should never be descriptive of the product. The first reason is that what is descriptive soon becomes generic, when competitors come into the market with the same product. Second, clients will soon learn what the business is about. Names should better aim at telling an intangible story.
• An essential point to appreciate is that building both the business and the brand image is tied to the active presence on premises. On-premise presence gives status to a drink, and creates consumption habits.
• Premium products are also of very high quality, but are lacking the magic of luxury. This magic is created:
  • Differentiating luxury, fashion and premium through creators with charismatic authority;
  • through networking with transgressive artists;
  • through rituals (yearly defilés);
  • through theatralization of retail seen as a point of aura transmission from creator to consumer;
  • through worshipping heritage and history;
  • through production of excess;
  • through sumptuous communication that builds an extraordinary world.
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• Luxury is creator driven, not consumer oriented. It is not managed at all like normal brands. Classical marketing kills it. Premium products are more traditionally managed, and follow classic marketing principles.
• Reality consumes dreams: the more we buy a luxury brand, the less we dream of it. Hence, somewhat paradoxically, the more a luxury brand gets purchased, the more its aura needs to be permanently recreated.
• ‘One does not invite a thousand guests to watch a procession of dresses which could be seen on a coat hanger or in a show room’
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• In services, it is important to make the intangible tangible – hence the importance of common processes.
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• Choice is always a risk: products increase the range of choice, and thus of perceived risk. Brands make choice easier by reducing the number of alternatives.
• In B2B one does not buy products, but trust. The corporate brand is the source of trust. The product brand is there to claim its uniqueness in delivering delight.
• We must therefore make hypotheses: a well-known brand is not well known by accident. It carries in itself the quasi-certainty – subjective but based on experience – that everything will go well, or better than it otherwise would.
• A market is commoditized when the actors have not worked hard enough on it.
• To recapitulate the paradigm of research into persuasion (Kapferer, 1990), the words ‘made in country X’ act as a sign of specific qualities and faults, but also like any source of communication.
• Too many brand managers have not yet accepted this reality: their brands are in a minority. Their enemy is not the other ‘big’ brand, but the distributor’s much cheaper products, with an increasingly comparable quality level.
• To be a brand is to be a leader, to look far into the client’s future.
• Can the distributor’s brand also innovate? Its business model assumes light marketing – in order to reduce the costs linked to the dozens of product managers – and the fact that it follows quickly in the wake of what is already working, that is the innovations of the successful manufacturers, by copying them to within a few details.
• However, the distribution brand, by the very construction of its economic model, does not seek to innovate: its price is obtained through turning the efforts and investments of the manufacturer’s brand to its advantage, profiting from its strong position in the relationship, which means that the manufacturer needs the store far more than the store needs the manufacturer.
• When the distributor behaves like a true brand, it opts for own brands, and becomes the store of the brand and not the brand of the store. For example, Gap, which was the exclusive seller of Levi’s, began to introduce its DOB, and progressively ceased to sell anything but its own store brand products.
• When asked the classic awareness question (‘What are the yoghurt or bicycle brands that you know, even if only by name?’), consumers name Asda or Decathlon. When asked if they intend to buy them (general client opinion) or buy them again (behavioural loyalty), the scores are just as high.
• repeat purchase results directly from the client’s engagement with the brand and its reductive effect on two key factors of disloyalty (enjoying variety and being sensitive to price).
• Remember that brands exist wherever customers perceive a high risk in purchasing. Conversely, where they see no risk, they are tempted by the distributor’s brand, particularly if they consider that distributor to have a good reputation and an image of quality.
• The salaries in mass distribution are among the lowest in the country: the store owners are rich, but the prospects for salary increases for a cashier over 10 years are minimal, a situation dictated by the price war.
• This second option – increasing the net margin – is a much easier way of increasing ROI: everyone knows how hard it is in a mature market to increase turnover per square metre. This is why all distributors are choosing, or will choose, the distributor’s brand if they wish to make optimal profits.
• The second reason for introducing a distributor’s brand relates to the increase in negotiating power with the manufacturer. Not only does the distributor improve its margins on the DOB, it also receives better margins from makers of national brands, who wish to persuade it not to go further.
• Finally, distributors hope that their distributors’ brands will contribute to increasing loyalty to the store itself.
• Among the reasons for loyalty to a store, the distributor’s brand is almost never cited, except for stores that have developed distributors’ brands with strong added value (Monoprix, Tesco) and have acquired a reputation of their own.
• History shows that there are three stages in the business growth of distributors’ brands: oblative, imitative and identity.
• Conversely, it is known that a factor that does affect the penetration of distributors’ brands is the rate of innovation in a sector (measured by the share of new products in companies’ turnover):
• Garretson’s (2002) and Ajawadi’s (2001) works provide an interesting new path for study: according to these authors, customers who resist distributors’ brands are those who link price with quality. For these people, the price is the measure of the quality.
• Millions of Chinese who could not think of themselves under the cultural revolution are now discovering the pleasure of consumption as a means of existing as a person.
• Brand management pursues an ideal: to make the name become the reference (landmark) of a category or territory it has itself created.
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• Brands are here to make people forget price. This is true of Apple, Louis Vuitton, Nespresso, Krups and Audi, as well as Zara, Bic, easyJet and Wal-Mart.
• All premium brands succeed because they deserve their price. They make the price irrelevant. Certainly, not everybody can afford one (this is called market segmentation), but very few people question the price of Audis. That is the power of the brand.
• The crusaders are those people who naturally identify with the cause or crusade of the brand (this supposes of course that the brand has one). The brand ideals create an immediate resonance among them.
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• On average each US citizen drinks 412 eight-ounce drinks of Coke per year. It was only 275 in 1988. By segmenting the range (diet, low-carb, low-caffeine, zero, etc) Coke has suppressed the barriers to consuming more. It has also extended Coke’s distribution to put it at arm’s reach.
• Values do not exist unless they are activated and today, one would add, unless they are experienced by the clients themselves, fully, at each point of contact, now renamed point of equity building.
• Finally, some brands are more than actors; they are activists: they act as stimulants of the whole category and beyond. They raise debates and stimulate issues. As such they are more than suppliers; they demonstrate energy and concern for the future of the category and the well-being of the end users.
• Marketing shows little interest in the shopper, but talks only of consumers. The two are very different, like two faces of the same coin.
• The fundamental lesson to be learnt here is that the brand is not a self-sufficient asset. By itself, it can do nothing: it is therefore conditional. It only produces its effects in interaction with the business model that supports it.
• If managers think of the brand in a ‘top down’ manner, beginning with its essence and its values, then moving towards the tangible, its concrete activation, consumers proceed in the opposite manner.
• A product is always consumed in a context. The nature of this context affects the degree of satisfaction that the customer reports, through the notion of a ‘rewarding experience’.
• It is therefore possible to plot the extension of the scope of brand management on a two-dimensional matrix (Figure 6.7). The horizontal axis refers to the time perspective of the relationship sought (from immediate transaction to repeat purchase to long-term commitment), while the vertical axis refers to the depth of customer bonding. It has three tiers: product satisfaction, experiential enchantment and aspirational intimacy, or the sharing of deep values. At the intercept, it is possible to position the new tools and behaviours of modern brand management.
• Brand content engages consumers to relate to the brand, because it does not talk about its products, but about a domain of mutual interest between the brand and its public.
• Creative hunches are only useful if they are consistent with the brand’s legitimate territory. Furthermore, though pretest evaluations are needed to verify that the brand’s message is well received, the public should not be allowed to dictate brand language: its style needs to be found within itself.
• Identity draws upon the brand’s roots and heritage – everything that gives it its unique authority and legitimacy within a realm of precise values and benefits. Positioning is competitive: when it comes to brands, customers make a choice, but with products, they make a comparison.
• Remember, products increase customer choice; brands simplify it.
• How is positioning achieved? The standard positioning formula is as follows: For … (definition of targeted consumers) Brand X is … (definition of competitive set and subjective category) Which gives the most … (promise or consumer benefit) Because of … (reason to believe).
• Marlboro presents its smoker as a man – a real man, symbolized by the untamed cowboy of the Wild West. No support is offered for this proposition; no proof is necessary. It is true because the brand says so.
• Major brands are not only driven by a culture but convey their culture. The cultural facet is key to understanding the difference between Nike, Adidas and Reebok. They are engaged in cultural competition.
• A brand is a customer reflection. When asked for their views on certain car brands, people immediately answer in terms of the brand’s perceived client type: that’s a brand for young people! for fathers! for show-offs! for old folks!
• The confusion between reflection and target is quite frequent and causes problems. So many managers continue to require advertising to show the targeted buyers as they really are, ignoring the fact that they do not want to be portrayed as such, but rather as they wish to be – as a result of purchasing a given brand (or shopping at a given retailer’s).
• Finally, a brand speaks to our self-image. If reflection is the target’s outward mirror (they are …), self-image is the target’s own internal mirror (I feel, I am …). Through our attitude towards certain brands, we indeed develop a certain type of inner relationship with ourselves.
• Let us remember that brand charters are management tools: they are necessary for decentralized decision making.
• What do you talk about when you do not just talk about your products? Beyond talking, how do you become useful to your target, or entertaining, or both? This is the challenge of brand content.
• Managers have a tendency to secessionism. While the brand is still being built in people’s minds, those inside the company may be too much in love with sub-brands, that is to say in practice other brands, somehow distant from the parent brand. It is not possible to build a family spirit if all the offspring go their own way.