BeFi Web Seminar for May 30, 2007

Building Strong Brands

by Sanjay SoodUniversity of California, Los Angeles

© B

eFi F

orum

200

7

Building Strong Brands

79: Percentage of Americans age 18 and older whocan identify Nike’s“Just Do It” slogan

47: Percentage who can identify the right to life, liberty,and the pursuit of happiness as set forth in theDeclaration of Independence

-- Southwest Airlines Spirit Magazine

Agenda

Conceptualizing brand equity

Understanding brand equity

Branding ROI

I. Conceptualizing Brand Equity

What is Brand Equity?

Firm level Product level Customer level

Source: Interbrand/Business Week

Brand Equity: Firm level

Brand 2006 Value

($billions)

1. Coca-Cola $67.0

2. Microsoft $59.9

3. IBM $56.2

4. GE $48.9

5. Intel $32.3

11. Citigroup $21.4

Brand as part of capitalization

Source: Interbrand

Brand Equity: Product level

How much would you be willing to pay in fees toinvest in a mutual fund with the following features:

Morningstar 5 star rating$2500 minimum investmentLarge Cap growth fundNo check writing

Academic Research: Brands are knowledgestructures in memory– Derived from psychological research on

associative network models of memory– People learn about brands over time– These well learned knowledge structures

reflect how customers perceive the brand

Brand Equity: Customer level

LiteBud Pabst

CoorsColt 45 Guinness

Taste Test: Brand names not given

Source: Keller (1998) Strategic Brand Management

Consumer Perceptions:On taste alone, brands arevery similar except Guinness

The Power of Brand Equity

Source: Keller (1998) Strategic Brand Management

Guinness

Bud

PabstColt 45

Lite

Taste Test: Brand names given

Consumer Reality:Brands create expectationsthat help to shape theexperience

The Power of Brand Equity

Brands go beyond the product

ProductTangibleCan be copiedCan be outdatedInvolves transactions

BrandIntangible: lives in customer’s mindUniquePotentially timelessForms basis of connections

Consumer is aware of the brand

Consumer holds some strong, favorable, andunique brand associations in memory

Brands can be conceptualized as knowledgestructures in memory that reflect howconsumers think about the brand:– attributes– benefits– image/experience

Determinants of Customer-BasedBrand Equity

Analyzing the Brand - I

Brand Awareness– Recall

• e.g., first brand that comes to mind for a category– Recognition:

• e.g., rate your familiarity with each brand in category X

Brand Image– Attributes– Benefits– Non-product associations: Image/Personality/Experience

Analyzing the Brand - II

Points of Parity– Category

– Competitive

Points of Difference– Strong

– Favorable

– Unique

Bubbles

Next Generation POD

Thirst Quenching

Britney Spears

Cola POP

Brand Knowledge Structures

Pepsi

Factors that favor brand impact Many products and services are similar

across companies Consumers are not experts So many choice options exist, consumers

must simplify decision process in someway

Does branding matter in financialservices?

Branding still evolving in financialservices

0 brands in the BW top 10 2 in the top 20 (Citi, AMEX) Many brands compete on similar dimensions:

– Expertise– Trust– Experience

Major challenge

Managing points of parity vs. points of difference What is the point of difference for your brand?

– Is it unique to your brand?– Is it relevant?– Is it consistently and clearly articulated in the marketing

programs?– Does it capture the heart and mind?

Credit cards have created very strong brands with verydifferent positionings:

American Express positioned on status with a strongheritage of celebrity usage and global reach

Visa combined convenience and luxury with the verysuccessful “It’s everywhere you want to be”

Mastercard’s research revealed a new positioining:Focus on everyday items that make life special

Strong brand example:Mastercard

http://marketing

“Priceless” has aired in 99 countriesin 46 languages

U.S.Latin America

ArgentinaBermudaBoliviaBrazilChile

ColombiaCosta Rica

CurasaoDominican Republic

El SalvadorEcuador

GuatemalaHaiti

HondurasJamaicaMexico

NicaraguaPanama

PeruPuerto Rico

UruguayVenezuela

Asia PacificAustralia

Hong KongIndonesia

IndiaJapan

MalaysiaNew Zealand

SingaporeTaiwan

South KoreaPhilippines

Thailand

ME/A

AlgeriaBahrainEgyptJordanIsrael

KuwaitLebanonMorocco

MozambiquePalestine

OmanQatar

South AfricaBotswanaSwaziland

MozambiqueZimbabwe

ZambiaNamibiaMalawi

Saudi ArabiaTunisiaU.A.E.Yemen

Canada

EuropeAlbaniaArmeniaAustria

AzerbaijanBelgiumBosnia

BulgariaCzech Rep.

CroatiaDenmarkEstoniaFranceFinlandGeorgiaGermanyGreece

HungaryIcelandIreland

Italy

LatviaLithuania

MacedoniaMoldova

NetherlandsNorwayPoland

PortugalRomaniaRussia

SlovakiaSlovenia

SpainSwitzerland

TurkeyUK

UkraineYugoslavia

http://marketing

Creating the brand positioning

TV drives the strategy, but many elements complement

PR Promotions Sponsorships Partner Co-Branding Cause Related

Promotion:NY Restaurants

JAPAN—World Cup Tactical print

Rickshaws inUnited Kingdom

UK - Tactical print

Airport IconographyJapan/Korea

Nakata BillboardJapan

“Swap” TVCGlobal

Sponsorship:World Cup Soccer

Partner Co-branding:Blockbuster

CauseMarketing

II. Understanding brand meaning

Steps in brand building

Brand Meaning Brand Positioning Brand Mantra

KnowledgeStructures

Brand Values

Identify POPs/PODsFrames of Reference

Emotional modifierDescriptive modifier

Brand Functions

Survey research + Projective Techniques Develop a collage of pictures that

represents your thoughts and feelingsabout these brands:– Coke and Pepsi– Nokia and Kyocera

Understanding Brand Meaning

Classic

American

Trendy

Young

III. Branding ROI

Customer equity refers to the value of customers tothe brand

Not all customers are equally valuable

In fact, some customers should be fired!

ROI proxy:Growing customer and brand equity

M = Margin per orderAC = Customer acquisitionc = Customer retention costr = Retention rate

1

M cLTV AC

r i

!= !

! +

Measuring customer equityLifetime Value of a Customer

36

Customer profitability over time

Source: Frederick Reichheld (1996), The Loyalty Effect, HBS Press.

37

What Drives Firm Value?

0.1

0.9

1.1

4.9

0 2 4 6

Acquisition

Cost

Discount

Rate

Margin

Retention

Rate

1% improvement in ...

… creates % improvement in

firm value of

Source: Gupta, Sunil, Don Lehmann and Jennifer Stuart (2004), “Valuing Customers,”Journal of Marketing Research, February, 7-18.

•Attracting the right customers

•Reducing acquisition costs

•Increasing retention rates

Branding can help grow customerequity

RESONANCE

SALIENCE

JUDGMENTS FEELINGS

PERFORMANCE IMAGERY

4. RELATIONSHIPS = What about you & me?

3. RESPONSE =What about you?

2. MEANING =What are you?

1. IDENTITY =Who are you?

Brand Building Blocks

ShareholderValue

ProductMarket

Performance

CustomerMindset

MarketingProgram

- Product- Communications- Trade- Other

- Awareness- Associations- Attitudes- Attachment- Activity

- Price premiums- Price elasticities- Cost savings- Expansion success- Market share- Profitability

- Stock price- P/E ratio- Enterprise value- Market capitalization

Brand Value Chain

Summary on Branding

Develop a great product or service– provide superior delivery of desired benefits

Determine desired positioning and other meanings– Create a brand identity and select positioning statement– Develop the “added value” to a product

Communicate the brand identity to target customers– Select brand elements– Communicate brand associations with a consistent voice

through the marketing mix– Leverage secondary associations

P R E S E N T E D B Y

Shlomo BenartziCo-Founder, BeFiAssociate Professor Co-chair of theBehavioral Decision Making GroupThe Anderson School at UCLA

Warren CormierCo-Founder, BeFiPresident, Boston Research Group

© B

eFi F

orum

200

7