Chapter 9: Creating brand equity

A brand is ‘a name, sign, term, symbol, or design, or combination of them, with the intention to identify the services
or goods of one seller of group of sellers and to differentiate them from those of competitors’.

Branding is endowing services and products with the power of a brand.

Brand equity is the added value endowed on services and products. It can be reflected in the way consumers feel
about a brand.

Customer-based brand equity: the effect that brand knowledge has on consumer behavior and attitude to the
marketing of that brand.

Brand knowledge: consists of all the feelings, thoughts, experiences, images, beliefs etc that become associated with
the brand.

Building brand equity depends on three main factors:

1. The initial choices for the brand identities or elements making up the brand.
2. The way the brand is integrated into the supporting marketing program.
3. The associations indirectly transferred to the brand by linking the brand to some other entity.

A brand audit: assesses the health of the brand and assesses the sources of brand equity and suggests ways to
improve its brand equity.

Brand valuation: should not be mistaken for brand equity. Brand valuation is the estimated financial value of the
brand.

Companies must always keep track of shifts and changes in the environment that can cause a brand to lose
popularity or marketshare. If a firm wants to revitalize a brand it should first begin with going back to the sources of
brand equity from the beginning of the brand.

When a firm introduces a new product it has three main choices:

1. It can apply some of its existing brand elements.

2. It can develop new brand elements for the new product.
3. It can use a combination of new and existing brand elements.

When an organization uses an established brand to introduce a new product the product is called a brand extension.

A sub brand: a combination of a new brand with an existing brand.

The parent brand: the existing brand that ’gives birth’ to a brand extension.

In a line extension the parent brand covers a new product within a product category it currently serves.

In a category extension the parent brand is used to enter a different product category from the one it currently
serves.

A brand line consists of all of the products that are sold under a particular brand.
A brand mix: is the set of all brand lines that a particular firm makes available to buyers.

A licensed product: one whose brand name has been licensed to other manufacturers that actually make the
product.

Advantages of brand extensions: they can enhance the acceptance of the new product by customers; they can
provide positive feedback to the parent brand and company.

Disadvantage of brand extension: because of line extensions the strength of the brand name can decrease and get
less strongly identified to one product.

This is called brand dilution.

Brands can play a number of different roles within a brand portfolio. Each brand must have a well-defined position
in the portfolio.

Cash cows: low growth opportunities but they still are profitable enough for management to keep around.

Flankers: are positioned with respect to the competitors brands so that more important ‘flagship’ brands can retain
their desired position.

Low-end entry level: relatively low-priced brand in the portfolio often may be to attract customers to other (more
expensive) brands.

High-end prestige: relatively high priced brand to add prestige to the entire portfolio.

Customer equity: the sum of lifetime values of all customers

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Chapter 10: Crafting the brand positioning

Positioning: designing the company’s offering and image in order to occupy a distinctive place in the minds of the
target market.

Category membership: the products or sets of products with which a brand competes and which function as close
substitutes.

Points-of-difference (POD’s): attributes or benefits can help consumers strongly associate with a brand, especially
when they believe they cannot find this in a competitive brand.

Points-of-parity (POP’s): attributes shared with other brands.

Category point-of-parity associations are associations consumers view as being necessary to a credible product
offering within a certain category. Competitive point-of-parity associations are those associations designed to negate
competitors points-of-difference.

Dimensions through which a company can differentiate its market offering to gain a strong competitive advantage:

Service Differentiation – Service differentiators: ordering ease, delivery, installation, customer training, customer
consulting, maintenance and repair, and miscellaneous services (e.g. product warranty/maintenance contract).
Product Differentiation – Products can be differentiated in many ways: Form, Features, Conformance quality
(degree to which all the produced units are identical and meet the promised specifications), Performance quality,
Reliability, Durability, Reparability, Style, Design.

Channel Differentiation – Refers differentiating in ways of design of distribution channels’ coverage, expertise,
and performance.

Personnel Differentiation – Gaining a competitive advantage through better-trained people; whose characteristics
are: competence, reliability, courtesy, responsiveness, credibility, and communication.

Image Differentiation

Image – the way the public perceives the company or its products.

Identity – comprises the way that a company aims to identify or position itself or its product.

Image and identity can be differentiated through using symbols, colours, slogans, generate image through their
physical plant space, special attributes, engaging in events and sponsorships, and using multiple image-building
techniques.

Product Life-Cycle Marketing Strategies

Because the product, market, and competitors change over time, firm’s positioning and differentiation strategy
should change as well.

Stages of the Product life cycle: introduction, growth, maturity, decline > bell shaped.

Other products, those without bell shaped PLC, exhibit alternative patterns:

growth-slump-maturity pattern – e.g. Kitchen knives, purchased a lot until reaching a petrified level, later
sustained by late adopters.

Cycle-Recycle pattern – e.g. drugs temporarily promoted that remain on the market.

Style – a basic and distinctive mode of expression appearing in a field of human endeavour.

Scalloped Patter – e.g. Velcro

Fads – temporary fashions, that come on strong, then decline quickly.

Fashion – a currently accepted or popular style in a given field.

Introduction Stage

 Tendencies: Costs: high; Prices high, highest promotional expenditures, focus on high-earners.
 The time of entering a market is important: too early is risky but can be highly rewarding. Most studies
indicate that the market pioneer gains the most advantage.

Pioneer advantage (Golder and Tellis): inventor (first in developing the patents), product pioneer (being first to
develop the product), market pioneer (selling first in new product category).
Growth Stage

Tendencies: prices: remain unchanged or slightly fall, sales rise faster than promotional expenditures, profits
increase, costs fall faster than price declines.

 By spending money on product promotion, improvement, and distribution, the firm can capture a dominant
position.
 To strengthen competitive position the firm should engage in market expansion strategies:

- lower prices, attract next layer of price sensitive buyers.

- enter new market segments

- add new models and flanker products

- improve product quality and add new product features and improved styling.

- increase distribution coverage, enter new distribution channels

- shifts from product awareness advertising to product-preference adv.

Maturity Stage

 Stages of the Maturity stage– Tendencies: Growth – Declining sales growth, no new distribution channels.
Stable – Sales flatten (market saturation).
Decaying maturity – Absolute level of sales starts to decline, customers switch
 Intensified competition leads to companies that are:
 niching: reactions: advertising, promotion, increase R&D budgets.

- or market leaders: low cost, high volume

Market modification – and attempt to expand the market for its mature brand using:

Volume = Number of Brand Users X Usage rate per user

To expand number of brand users:

 Enter new market segments

 Convert non users
 Win competitors’ customers
 To increase volume (usage rate):
 Use more of the product on each occasion.
 Use the product in new ways.
 Use the product on more occasions.

Product modification – Attempting to stimulate sales by modifying the product’s characteristics through feature
improvement, style improvement (e.g. new car models), or quality improvement.

Marketing-mix modification – Attempting to stimulate sales by modifying other marketing mix elements:
distribution, prices, sales promotion, advertising, personal selling, services.
Decline Stage

A firms’ task is to identify the truly weak products; to develop a strategy for each one; and finally to phase out weak
products in a way that minimizes the hardship to company profits, employees, and customers.

Harvesting – calls for gradually decreasing a product or business’s costs while trying to maintain its sales. This is
done by cutting R&D costs and plant and equipment investment, and reducing product quality, sales force size,
marginal services, and advertising expenditures.

Divesting – deciding to stop producing a product. Possibilities include selling the product, liquidating slowly or
quickly.

Market Evolution

In order to have a more market-oriented picture, one should follow the evolution of the market to focus also on what
is happening to the overall market.

When making decisions, strategies considered include single-niche strategy, multiple-niche strategy, or a mass-
market strategy.

i. Emergence

 Diffused Preference market – Buyer preferences scatter evenly.

 Emergence begins when launching the product after the strategy is chosen for designing an optimal product
for the market.

ii. Growth

 Growth stage happens when second firms start to enter the market.

iii. Maturity

 The maturity stage is entered when competitors cover and serve all the major market segments.
 Market fragmentation - when the market splits into multiple finer segments as market growth slows down.
 Market consolidation – Caused by the emergence of a new attribute that has a strong appeal.

iv. Decline – Demand for the product begins to decrease.

Four ways of dealing with attribute anticipation and discovering: Attribute Competition

1. Customer-survey process: Discover customers’ desired benefits, and costs of developing each new
attribute.
2. An intuitive process: goes without using much marketing research.
3. A dialectical process: unidirectional movement
4. A needs-hierarchy process – Maslows Theory (see chapter 7).

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Chapter 11: Dealing with competition

Competitive Forces
Porter’s 5 Competitive Forces: (1) threat of intense segment competition, (2) threat of new entrants, (3) threat of
substitute products, (4) threat of buyers’ growing bargaining power, (5) threat of supplier’s growing bargaining
power.

Identifying Competitors

A company is more likely to be hurt by an emerging competitor than a current competitor. E.g. Barnes & Noble 
amazon.com

Competition can be seen from different perspectives:

a. Industries – Competitors are characterized by similarities in:

(1) Degree of differentiation and number of sellers .

(leads to: pure monopoly, oligopoly, monopolistic competition, pure competition)

(2) Mobility, entry, and exit barriers (high capital requirements, economies of scale, patents, creditors, government
restrictions, high vertical integration…).

(3) Cost Structure.

(4) Degree of Vertical Integration.

(5) Degree of Globalization - local vs. global industries.

b. Market – Competitors are firms that satisfy the same customer need. This view specifies both an indirect and a
direct view on competitors, and therefore has a broader range.

Analyzing Competitors

It is not enough to only identify competitors, companies must also understand their:

Strategies: by identifying their strategic group (determined by levels of quality and vertical integration, firms
following same strategy in a given target market).

Objectives: these could be to increase market share, maximize profits, cash flow, service leadership, or
technological leadership. Expansion plans are also important to monitor.

Strengths and Weaknesses

Competitive positions: favorable, tenable, dominant, strong, weak, or nonviable. Monitor share of market, share of
mind (most recognizable), and share of heart (preferred company) variables of competitor companies. The goal is to
make stead gains in mind share and heart share for gains in market share and profitability.

Reaction Patterns: these may depend on the industry.

Designing the Competitive Intelligence System

 Actionable recommendations for decision making arising from a systematic process, involving
gathering,planning, analysing and disseminating information on the external environment (about potential
 competitors), for opportunities or developments that have the potential to affect a company or country’s
competitive situation
 Leads to easier formulation of competitive strategies.

The information gathered through the competitive intelligence system allows for the creation of better strategies.

In order to identify a company’s strengths and weaknesses relative to competitors, companies engage in Customer
Value Analysis

 Where customer Value = Customer Benefits – Customer Costs

 Where customer costs = price, acquisition costs, usage costs, maintenance costs, ownership costs, disposal
costs.
 Where customer benefits include service benefits, product benefits, personnel benefits, and image benefits.

They should also recognize the importance of competing in all different classes of competitors for their strategy:
Strong vs. weak, close vs. distant, good vs. bad.

Designing Competitive Strategies

Market-leader strategies – Firms with largest market share. They must:

1. Expand the Total Market

The dominant company will get the most gains and benefits through: finding new users, promoting new uses,
convincing people to use more per use.

Searching for new users:

Market-penetration strategy; (those who might but not (yet) use the product),

new-market segment strategy, (those who have never used it);

geographical-expansion strategy, (those who live elsewhere).

2. Defend Market Share

Through continuous innovation (– low costs, developing new product and customer services, distribution
effectiveness.), increases in competitive strength and value to customer, defensive strategies which include:

 Position Defence – building on superior (and impregnable) brand power.

 Flank Defence -
 Preemptive Defence – anticipating and acting before the competitor.
 Counteroffensive Defences -
 Mobile Defence – stretching over new territories, through market broadness (focus shift from product to
generic need) and market diversification into unrelated industries.
 Contraction Defence – giving up weaker territories and reassigning resources to stronger territories.

3. Expand Market Share

 Increasing your market share does not necessarily lead to increased profits.
 Beware:
 1. of the possibility of provoking anti-trust action
2. of economic costs involved.
3. not to pursue the wrong marketing-mix strategy (e.g. lowering prices too much)

Runner-up firms can use market follower or market challenger (attacking) strategies:

Market-challenger strategies, firms must:

1. Decide on a strategic objective, and on who to attack  should they attack the market leader, firms of an
equal size, or small local and regional firms?

2. Choose a general attack strategy:

a. Frontal attack – Match/ Copy opponent’s product, advertising, price, and distribution.

b. Flank attack – find gaps and fill them; Strategic Dimensions: geographic (entering cities where opponent is weak),
and/or segmental (serve uncovered market needs)

c. Encirclement attack – Quickly try to conquer a part of enemy’s territory

d. Bypass attack – Ignore leader’s market position. Develop brands in related markets, attack undeveloped or
undefended territories, leapfrog current technology.

e. Guerilla attack – By launching small, intermittent hit-and-run attacks to destabilize and harass the leader. These
attacks include price cuts, intense promotional blitzes, and occasional legal actions.

3. Develop more specific strategies and combine – lower priced goods, price discounts, product proliferation
(larger product variety for more choice), offering prestige goods, product innovation, improved services, distribution
innovation, manufacturing cost reduction, intensive advertising promotion.

Market-follower strategies

Each follower tries to deliver distinctive advantages to its target market--location, services, financing.

Four broad follower strategies:

 Counterfeiter (which is illegal, e.g. through black market)

 Cloner e.g. the IBM PC clones
 Imitator e.g. car manufacturers imitate the style of eachother
 Adapter e.g. many Japanese firms are excellent adapters initially before developing into challengers and
eventually leaders

Market-niches strategies

 Smaller firms can avoid competing with larger firms by targeting smaller markets or niches that are of little
or no interest to the larger firms.
 Nichers roles are to create niches, expand the niches and protect them e.g. Nike constantly created new
niches--cycling, walking, hiking, cheerleading, etc.
 Businesses that address the needs of niche markets are profitable because they know the target-customers
very well, charging a substantial price over cost. E.g. Logitech’s mice for computers.
  Specialization is important, in for e.g.: end-user, vertical-level, customer-size, specific-customer,
geographic, product or product-line, product-feature, job-shop, quality-price, service, and channel
specialization are all possible roles of nichers.
 What is the major risk faced by nichers? The market may be attacked by larger firms once they notice the
niches are successful
 Multiple-niching – strengths in two or more niches, to avoid the problems of a weakened niche.

Balancing Customer and Competitor Orientations

A balance between being competitor-centred and customer-centred is important.

“Competitor centred companies”:

 moves are determined based on competitor’s actions.

 fighter orientation is developed.

“Customer-centred companies”:

 promises to deliver long run profits.

 it’s easier to identify opportunities.