Brand Management

▪ A trademark is a sign used to identify goods/services.

▪ It identifies one seller’s goods or services as distinct from those of other sellers.

▪ A trademark can be protected by registration (e.g., EU trademark)

• Word mark (consists exclusively of words / numbers etc.) i.e. Adidas (word)

• Figurative mark (Adidas logo)

• position mark (consists of the specific way in which the mark is placed or affixed to the product) i.e. stripes on adidas shoes

• shape mark (consists / extends to a three-dimensional shape incl. containters, packing i.e. toblerone)

• colour single mark (trademark is the single colour)

• sound mark

Trademarks must be distinctive and must not describe what is sold

• distinctive: consumers should be able to recognized your sign for what is it

• trade mark should not monopolise a sign that merely describes the goods / services

EUIPO examines whether any absolute grounds for refusal apply

▪ Firms might lose the right to use the trademark if consumers employ the brand name as the product category label. This is called “genericide”.

▪ Examples: Aspirin (in the US), escalator, linoleum, trampoline, walkman (in Austria)

▪ Ways to protect the brand against genericide o Emphasizing trademark status o Use category advertising (e.g., for diamonds by De Beers)

• Typically refer to earlier trademarks (rule of priority)

• Owner of an earlier trademark can oppose the registration of later EUTM applications

• ▪  Double identity

  o EUTM application is identical (1) with an earlier trademark (i.e., sign identity) and (2) the goods/services are identical with the earlier trademark’s goods/services (goods/services identity)

  o Legal finding: Comparison of the two conflicting signs and their goods/services

•  Likelihood of confusion

  o People directly confuse the trademarks (i.e., mistake the one for the other)

  o People make a connection between the trademarks, i.e., assume that the goods/services are from the same or economically linked undertakings

• Potential relative grounds for refusal are brought forward from other trademark owners in the form of oppositions

“Unauthorized use of an identical brand name or brand elements on products/ services in the same category to falsely claim affiliation with that brand or capitalize on its equity.”

Share of all threats 38.7

“The practice of manufacturing, importing/ exporting, distributing, selling or otherwise dealing in goods ... under a trademark that is identical to or indistinguishable from a registered trademark, without the approval or oversight of the registered trademark owner” (Dhaliwal 2016, p. 4243).”

Share of all threats: 31.1%

“Using a confusingly similar brand name, package (trade dress), logo, or slogan on a product or service in the same industry.”

▪ Customer-centered definition

The associations that consumers have with an entity that can be managed professionally (e.g., a product, service, person, name, term, design, symbol, or any other feature).

▪ A brand resides in consumers’ minds (what they have heard and learned about it) and hearts (what they feel).

▪ Brands identify the products/services of one seller and ... ▪ ... differentiate them from products/services of competitors.

Product: Anything that can be offered to a market and that satisfies a certain need

▪ Brand: Creates competitive advantage by differentiating a product from competing products that satisfy the same need

▪ The added value that the brand endows to a product (based on past marketing activities for that brand)

▪ Competitive advantage can be related to product performance or to non-product related means (i.e., image associations surrounding the product)

▪ Reduction of consumption risk o Assessing product quality in advance is error-prone if experience and credence

attributes (rather than search attributes) are involved, which results in consumption risk o Brands can function as proxies of product quality and thus reduce risk

▪ Reduction of search costs o Considering all consumption alternatives for a specific need causes prohibitive search costs for consumers o Brands can provide guidance and thus reduce the set of alternatives considered relevant, which limits search costs

▪ Serving as a symbolic device

—> Brands can represent intrinsic or extrinsic values (e.g., self-expression or prestige)

—> Brands help consumers to communicate their self-concept (the person he or she is or would like to be, i.e., actual or ideal self) and differentiate themselves from other people

• Reduction of consumption risk —> brands can function as proxies of product quality

• Reduction of search costs —> brands can provide guidance and thus reduce the set of alternatives considered relevant which limits search costs

• Serving as a symbolic device —> brands can represent instrinstic or extrinsic values (e.g. self-expression, prestige); can help costumers to communicate their self-concept (the person he or she is or would like to be, i.e. actual or ideal self) and differentiate themselves from other people

• Acceleration of cash flows through brands

  ▪ Faster response to marketing efforts: Brands increase the responsiveness of the market to marketing activities, e.g.,

  o Earlier new product trials o Earlier referrals

  ▪ The sooner/faster cash flows are generated, the higher is their net present value

• increasing the level of cash flows through brands

• reduction in risk through brands

o a price premium: Identical product can be sold for a higher price to consumers

o a sales premium: Identical product can be sold more often to consumers

▪ Sales premium dominant If low price is part of the brand’s identity and a core (functional) brand benefit (e.g., discount brands)

▪ Price premium dominant

If high price is part of the brand’s identity and the brand’s high price is linked to strong psychological and/or social benefits (premium/luxury brands)

▪ Balancing price and sales premium If brand is positioned as being of higher quality, but price is not a

core brand attribute

▪ Price premium: Identical product can be sold for a higher price to consumers

▪  Sales premium: Identical product can be sold more often to consumers

• Lowering costs: Strong brands have a customer base that is more responsive to advertising and promotions and that might be less service-intensive (e.g., lower complaints)

•  Brand extensions and co-branding:

  o Brand extensions use the company’s accumulated investments in the brand; cash flows from the brand’s other products serve as “bond” for the extension’s quality

  o Easier access to cooperative ventures

→ Strong brands decrease both types of firm-level risk, leading to a lower discount factor i

• They facilitate repeat purchase behavior and brand loyalty and thereby reduce the volatility of cash flows

• Cash flow from satisfied and loyal customers is less susceptible to competitive actions; e.g., higher quality perceptions are associated with lower price sensitivity (secures future cash flows)

• * Brands serve as elementary security for debt holders in case of a firm’s financial distress or even bankruptcy

• Credit rating (= indicator of cash flow vulnerability)

  ▪ debt-holder risk, determines the firm’s ability to service its existing debt

  ▪ Ordinal measure ranging from 2 (AAA rating) to 27 (for a D)

  ▪ Measure is reversed by subtracting it from 27, i.e., a higher number corresponds to a better credit rating.

• Variability of future cash flows

  ▪ Equity-holder risk, measured by the standard deviation of stock returns

  ▪ Systematic risk: variability in stock returns common to the entire market (market fluctuations)

  ▪ Unsystematic risk: variability in stock returns that is driven by firm-specific actions and shocks (not by movements in the market as a whole)

Implicit to the idea of brand management is the assumption that brands are highly relevant to consumers when making a purchase decision. But is this always true?

▪ As brand building requires considerable investments, managers need to know how relevant brand-building activities are for a company’s success.

Brand relevance in category (BRiC): Overall role brands play in customers’ decision making in a specific category.

Category-level measure, not brand-level measure, i.e., it does not vary across brands but only across categories.

▪ Unlike a brand-level measure, BRiC can be measured before a brand has been introduced into a market: Prelaunch diagnostic indicator

—> Brand equity is the differential effect that the knowledge about a brand has on customers’ attitudes and behaviors towards the branded product.

▪ The added value that the brand endows to a product based on past marketing activities for that brand.

What associations came to your mind very quickly/first? Link them directly to Milka.

→ What other associations came to your mind while thinking about these “first-order” associations? Write them down as well and link them to the corresponding “first-order” associations.

→ How strongly are the associations connected to Milka or to each other? The stronger the connection is, the thicker the line should be.

Memory consists of a network of nodes (= stored information or concepts) and connecting links (= strength of association between the nodes)

—> Brand-related information is stored in consumers’ long-term memory where it is organized as an associative network

• consistingof a set of nodes(i.e.,storedinformationorconcepts)

  o that are connected by links that vary in strength

Networks need to be activated

oActivation happens when one or more nodes of the network are triggered by external or internal sources and then spreads from this node to other linked nodes

oThe spreading process is determined by the strength and number of network linkages

• Brand awareness

• brand image

  
  

—> ability to identify the brand

• Existence of the “brand node”

• Likelihood and ease with which a brand name will come to mind

= Perceptions about the brand that are reflected by the brand associations in consumer memory

• Totality of network: brand node, attribute nodes, and all links

• Brand associations contain the meaning of the brand

.. refers to the set of associations linked to the brand that consumers hold in memory.

▪ These associations constitute the meaning of the brand for consumers. ▪ Any potential encounter with a brand — if marketing-initiated or not — has the

opportunity to build or change brand associations.

—> Brand recognition:

Brand recognition is the degree to which consumers can confirm prior exposure to the brand when provided with a brand element (e.g., name, logo, slogan, jingle) as a sensory cue.

—> Brand Recall: is the degree to which consumers can retrieve the brand from memory without a brand cue when given

• the product category

• the perceived needs,

• or a purchase or usage situation.

▪ Learning advantage

• first step in creating CBBE is to create a brand node in consumer memory

• nature of that node affects how easily brand associations are learned and stored

▪ Consideration advantage

• Degree of brand awareness influences the brand’s likelihood of being a member of the consumer’s evoked set and thus

• can influence purchase decisions

▪ Choice advantage

• Brand awareness can affect decisions about brands even if no other brand associations exist (e.g., in low-involvement decisions)

• In such a low-involvement context, consumers often rely on heuristics to buy a familiar, well-established brands

1. When a consumer decides to purchase a soft drink, they may have a consideration set that includes Coca Cola along with other soft drinks like Pepsi, Sprite, and Fanta

2. Using the conjunctive rule, the consumer may eliminate soft drinks that do not meet a minimum level of performance on all important attributes like taste, price, and availability, leaving Coca Cola as a possible choice

3. Using the disjunctive rule, the consumer may select Coca Cola if it meets a high level of performance on any one attribute, such as having a good taste or being widely available

4. Using the lexicographic rule, the consumer may rank the attributes in order of importance and select Coca Cola if it performs the best on the most important attribute, such as having a good taste, even if it is not the best on other attributes.

5. External factors like Coca Cola's marketing and advertising may also influence the consumer's decision-making process.

1. Explains how consumers make choices using a set of decision rules or heuristics

2. Consumers have a "consideration set" or a set of options they consider when making a purchase decision

3. Using the conjunctive rule, consumers eliminate options that do not meet a minimum level of performance on all important attributes, leaving only options that meet all criteria

4. Using the disjunctive rule, consumers select an option if it meets a high level of performance on any one attribute, regardless of its performance on other attributes

5. Using the lexicographic rule, consumers rank the attributes in order of importance and select the option that performs the best on the most important attribute, even if it is not the best on other attributes

6. Consumers may also use other decision rules like the elimination-by-aspects rule or the satisficing rule to make choices

7. External factors like marketing, advertising, and brand recognition can influence the consumer's decision-making process

8. The set theory provides a framework for understanding how consumers use decision rules and heuristics to make choices in a complex and often overwhelming marketplace.

• Brand attributes —> Features that characterize the brand and are related to the brand’s performance (i.e., concrete, product-related associations —> Volvo Truck) and/or appearance (i.e., abstract and imagery-related associations—> i.e. iPhone)

• Brand benefits: The personal value that a consumer associates with a brand and its usage:

  —> Functional brand benefits: benefits which are of a utilitarian or practical kind i.e. Klenex

  —> Experiential brand benefits: satisfy more self-oriented, experiential and/or enjoyment-related needs, such as sensory pleasure or cognitive stimulation, i.e., what it feels like to use the brand

  —> Symbolic brand benefits: relate to needs for social approval and self-expression, i.e., benefits which influence consumers’ social status and social bonds between consumers

• Favorability (valence dimension) —> positive, negative, or neutral thoughts/feelings about the brand

• Uniqueness (distinctiveness dimension)—> How many associations are shared with competing brands? Relates to the USP of the brand Which compelling reason is offered for buying that particular brand?

• But: Shared associations are required to transport category membership

• Strength (intensity dimension) —> Depends on how a piece of information enters consumer’s memory (i.e., how deeply a consumer thinks about the information) —> How the information is maintained as part of the brand’s image (storage, i.e., how strongly it is related to existing brand knowledge)

• Brands created by a company through its own research and development efforts

• Developed entirely in-house, with the company investing resources in activities like market research, product development, and marketing

• Examples include Apple's iPhone and Nike's Air Jordan sneakers

• In contrast to acquired or licensed brands, which are acquired by a company through a purchase or licensing agreement

• Under generally accepted accounting principles (GAAP), internally generated brands are not permitted to be capitalized

• Expenses associated with developing an internally generated brand are typically treated as expenses on the income statement as incurred

• This treatment can have a significant impact on a company's financial performance and earnings, particularly for companies that invest heavily in research and development to create new brands.

▪ Nonmonetary brand equity (customer-based brand equity): Analyzing brand awareness and brand image (i.e., brand value drivers)

▪ Monetary brand equity (brand value): Measuring future earnings that are attributable to the brand (i.e., brand earnings) and discounting them to get a net present value:

o Future brand revenues* – future brand investments o Considering the state of the brand today (e.g., its current products offered,

markets served, its current customer base etc.)

o Considering brand strategic options, such as potential new products, and/or markets

• Heuristic based approaches

• Analogies, e.g., royalty rate approach

• Direct estimation of the “added value” provided by a brand

  —> Price premium approach

  —> Unit sales premium approach

  —> Revenue premium approach

▪ Indirect estimation: Historic costs / past investments in the brand

—> Can serve as a reference point

—> But conceptual problems: Costs of creating a brand do not represent the brand’s current value

▪ Indirect estimation: Market value-based approaches

—> Starting point: Market value of the company

—> Brand value = residual after subtracting tangible and other non-brand intangible assets from market value of the firm (e.g., Simon & Sullivan 1993)

• Net present value-based approaches: E.g., explicit forecasting (market experts, econometric methods, etc.)

Heuristic-based approaches

• Brand relevance

  —> Heuristic 1: Brand relevance in category close to 100% ➔ No isolation is necessary (i.e., earnings equal brand earnings)

  —> Heuristic 2: Brand relevance in category in % × Revenues* × average profit margin in category = brand earnings

  
  

• Brand strength (CBBE)

  —> Heuristic 3: Weighting with relative brand strength (measured via brand valuedrivers), e.g., Interbrand Best Global Brands approach

▪ Basic notion of the approach o The brand owner licenses the brand to another company which has to pay a royalty rate for using the brand

—> Resulting royalty stream is an approximation of those earnings that are attributable to the brand

—> Brand value is reflected in the discounted future royalty stream

—> Also referred to as “royalty relief” approach, as owning the brand “relieves” from paying a royalty rate for using

▪  Necessary information: Revenue (net price × volume), royalty rate, discount rate

▪  Establishing the royalty rate: ▪ Determine the range of royalty rates within the industry

▪ High (low) brand strength results in royalty rate at the upper (lower) end of this range

▪  Brand earnings (“isolation”): Revenue × royalty rate

▪  Brand value: Determine the future revenue stream, apply the royalty rate, and discount the estimated future royalty stream (net present value)

“How much would your pay for…?

Difference between brand product vs non-brand product

i.e. Aspirin non-descript med

Definition: Difference in revenue (net price × volume) between a branded product and the corresponding unbranded product (e.g., a weak private label).

▪ Brand equity is an intangible asset that has a fair price at the capital market; therefore brand equity becomes a part of the financial market value of a firm

▪ Decomposition of financial market value of a firm

—> Tangible assets (“physical” replacement value of the firm’s tangible assets) o Intangible brand equity o Other intangible assets

▪ Use of stock market and balance sheet data for separating tangible and intangible firm value (Tobin’s q)

▪ Regression of the intangible firm value on proxy variables of brand equity

▪ The digital transformation offers a host of new ways for consumers to

• communicate with each other and with brands, exchange information about brands

• gather and exchange information about brands and products

• obtain and consume them

▪ Consumers have extensive options for being active and becoming engaged -> Digital (social) media has led to an “empowerment” of the consumer which makes them an active participant in the brand management process

•  In other words, consumers co-create brands

•  Marketers need to manage this co-creation process to engage consumers in brand conversations that create strong, favorable and unique brand associations

• —> But: Viewing a video on YouTube or clicking the “Like” button does not necessarily lead to an increased brand engagement or more favorable attitudes toward the brand

“In the era of new media, managing customer relationships is like playing pinball – companies serve up a ‘‘marketing ball’’ (brands and brand-building messages) into a cacophonous environment, which is then diverted and often accelerated by new media ‘‘bumpers,’’ which change the offering’s course in chaotic ways. After the marketing ball is in play, marketing managers continue to guide it with agile use of the ‘‘flippers,’’ but the ball does not always go where it is intended to and the slightest miscue can be amplified into a catastrophic crisis.”

—> messages picked up by consumers, adapted and changed -> “pinball effect”

Social media firestorm = “sudden occurrence of many, predominantly negative social media expressions against a brand” (Hansen et al. 2018, p. 557)

Harms brand perceptions in the short and in the long run, particularly if

• initiated by vivid trigger (e.g., a video in the first tweet)

• linked to product/service or social failure o large volume of social media messages

• the firestorm lasts longer

= “a unique set of brand associations that the brand strategist aspires to create or maintain. These associations represent what the brand stands for and imply a promise to customers from the organization members” (Aaker 1996, p. 68)

—> brand identity = “DNA” of a brand

▪ The brand identity reflects the target position of a brand as developed by the firm and thus provides the basis for brand positioning (what should the brand stand for?). —> firm POV

▪ The brand image reflects the actual position as perceived by the customers (what does the brand stand for?) —> consumer POV

• Brand positioning communicates the intended brand identity to consumers

• Brand positioning “is the act of designing the company’s offering and image to occupy a distinctive place in the mind of the target market” (Kotler & Keller 2006, p. 310) —> create a unique competititve advantage

• The resulting brand image is a means to check whether the brand positioning reflects the desired brand identity

For deciding on a brand’s positioning, managers need to know

1. Who the target market is.

2. Who the main competitors of the brand are.

3. How the brand is similar to these main competitors.

4. How the brand is different from these main competitors.

—> Key question for positioning: What are the ideal points-of-parity and points-of- difference brand associations vis-à-vis the competition?

▪ Consumers differ in their perceptions, attitudes, behaviors and thus in their brand preferences

▪ A market segmentation is helpful to divide consumers in homogenous groups with similar needs and

behaviors

▪ The decision on who to target implies more or less automatically the nature of the competition

Points-of-parity are associations that are not necessarily unique to the brand, rather they may be shared with other brands

—> Such shared associations can help to establish category/segment membership

—> Being “good enough” on certain dimensions; unless these points-of-parity associations are achieved, other associations may not even matter.

—> points a brand must meet bc competitors meets those

▪ A brand must provide compelling and credible reasons for choosing it over competitor brands(USP)

o favorable attributes or benefits o consumers strongly associate with a brand o and for which they believe that competitor brands do not offer these attributes/benefits to the same extent

▪ Distinguish the brand from competitor brands with respect to salient associations

—> create the competitive advantage

▪ To serve as a point of difference the brand attribute or benefit must be desirable and deliverable.

▪ Desirability criteria (consumer perspective)

• Consumers must find the brand attribute or benefit relevant

• Consumers must find the brand attribute or benefit distinctive (i.e., no other brand offers it to the same extent) and superior

• Consumers must find the brand attribute or benefit believable

Deliverability criteria (firm perspective)

• Feasibility (company’s ability to supply the attribute or benefit underlying the POD)

• Communicability (company’s ability to provide support for the POD claim)

• Sustainability (i.e., competitors should not be able to immediately copycat the attribute or benefit)

▪ Two important factors for choosing a brand positioning are

• Consumers’ cognitive involvement

• Consumers’ emotional involvement

▪ The higher the cognitive involvement, the more is the consumer willing to actively search and process information regarding the product/brand

▪ The higher the emotional involvement, the more is the consumer interested in the brand’s personality

—> Non-product-related attributes/ benefits, brand personality oriented

• i.e. Nivea

—> low cognitive involvment —> brand personality related information / highly emotional content + imagery

—> Brand awareness

• built up brand awareness

i.e. Chiquita

—> Product-related attributes/benefits

i.e. Dell

• consumers are interested in specification of a product

  —> communicate product-related information

—> Mixed

product-related information & emotional

i.e. Mercedes

▪ Brand elements are trademarkable devices that serve to identify the brand and differentiate it

▪ Brand elements aim at enhancing brand awareness and facilitating a strong, favorable, and unique brand image

▪ Brands often employ a broad range of brand elements

Brand elements facilitate

(a) building brand equity of new brands and

(b) leveraging and maintaining brand equity of existing brands

• Memorability (to facilitate brand recall/recognition)

• Meaningfulness (to convey information about the function of the product or about particular attributes/benefits of the brand)

• Likability (in visual, verbal, or other ways)

• Transferability (e.g., to new categories or new (geographic) markets/languages)

• Adaptability over time (to update it, e.g., in order to remain contemporary)

• A brand name is the foundation of a brand’s image; one of if not the most important brand element

• It captures the central theme of the branded product(s) or its (their) key associations in a very compact manner

• The brand name is also the most difficult brand element for managers to change,because it is closely tied to the product in consumers’ minds

  
  

• key identifying brand element is gone; loose recall-and-recognition in the market

• might loose brand trust

—> change branding names needs to be accompanied by a strong communication / heavily advertised, support consumers to transfer associations

i.e. Breeze : two step transition

▪ Simplicity and ease of spelling reduce processing efforts and facilitate recall

▪ Meaningful and familiar brand names lead to higher recall —> tap into existing knowledges structures

▪ On the other hand, to facilitate recognition, brand names should be unique and distinct

▪ More complex brand names are more easily recognized because it is easier for consumers to discriminate them

▪ Distinctive words: unusual combinations of words, completely made-up words, seldomly used or being atypical for the product category, unusual or incorrect spelling

—> trade off between brand recall - brand recognition

—> Basis idea: the mere sound of a word conveys meaning and thus may automatically and unconsciously influence consumers’ perceptions of product attributes and their brand evaluation.

▪ Sound of a brand name can convey product-related information, e.g., its size, speed, strength, weight etc.

▪ Specific forms of sound symbolism are not language specific => valuable for naming internationally sold products

Size symbolism through the use of vowels

-> Front vowels communicate smaller size

-> Back vowels communicate larger size

o Yorkston & Menon (2001): Attributes of a fictitious automobile brand (e.g., leg room, trunk space) rated as larger if the brand used the phonetic /ä/ sound (e.g., Bromley) than when it used the phonetic /i/ sound (e.g., Brimley)

Other meanings also exist with front/back vowels: Light-dark, hard-soft, thin-thick, weak-strong, light-heavy, fast-slow, cold-war

Through sound repetition (e.g., rhyme), when speaking the brand name aloud, consumers will perceive positive affect, which will in turn influence consumption decisions

—> When brand names contain phonetic sound repetition, they may benefit from radio advertising, television advertising, and public announcements rather than print advertising.

—> Marketing managers would benefit from encouraging both salespeople and consumers to say aloud brand names that contain phonetic sound repetition.

▪ People often see faces or parts of faces (e.g., eyes, mouth) on products or, more generally, on inanimate objects

▪ .... and attribute humanlike characteristics and behavior to these objects

• Associations that are connected to other entities can be linked to the focal brand

• Associations of the focal brand can be transferred to other entities

▪ Linking the brand to the country or geographic region from which the brand originates

▪ To benefit from the country’s image and known expertise in a specific product category

▪ Some countries even use advertising campaigns and have developed labels to build a certain image and promote their products

Endorsers

▪ Use of well-known people to promote a brand

▪ Transfer of meaning from celebrity to brand

▪ Some selection criteria

—> High level of visibility and useful associations

—> Reasonable fit between endorser and product

—> Credibility (i.e., expertise, trustworthiness) and likability

▪ Potential risks o Too many endorsements may result in loss of

credibility

—> Celebrities may distract attention from the brand (“vampire effect”)

Events

• Transfer of associations from a sponsored event to the brand

• Can increase brand awareness and add new brand associations

• Can enhance the strength, favorability and uniqueness of existing associations

• Can create vivid brand experiences (which result in strong brand associations) and underline a brand’s positioning

Causes

• Collaboration between company and non- profit organization for mutual benefits

• Brand sales are linked to a charitable or other public/social cause (e.g., company donates certain percentage of the brand’s revenues)

• Enhancement of brand image in terms of attributes (e.g., user imagery, such as kind and generous), feelings towards the brand (e.g., social approval), or experiential benefits (e.g., through a sense of community)

▪ Linking the brand to a third-party source to facilitate quality perceptions

▪ Third-party sources, such as consumer reports and professional critics often are especially credible sources

▪ Use of an established brand name to launch a new product.

▪ The idea is that consumers use their brand knowledge about the parent brand when evaluating the new product

Consumers use their brand knowledge about the parent brand when evaluating the new product

—> This way, the extension product can capitalize on the parent‘s brand equity

▪ However, the extension product itself can also contribute to the brand equity of the parent brand

• Allow for image spillover from the parent brand to the extension product & reduce risk perceived by consumers

• Permit consumer variety seeking (line extensions) & address new consumer segments

• Positive feedback effects on the parent bran

• Extending brands is a way to reduce risks of introducing new products

• Save costs and time for market introduction / avoid costs of developing a new brand

• Facilitate access to retailers (higher probability of gaining distribution)

• Confuse or frustrate customers

• Can dilute parent brand image and identification with any one product category (reducing brand awareness)

• Cannibalization effects within the parent brand’s product portfolio

• May hurt parent brand image (negative effects on all products)

• Encounter retailer resistance

• Parent brand (PB) —> Parent brand characteristicsE.g., the strength of the parent brand

• Relationship between the PB and BE e.g. fit

• Brand Extentsion

  • Brand extension’s product category characteristics E.g., the risk that is associated with buying unknown brands in the product category

  • Brand extension’s marketing context E.g., its marketing support

—> Fit generally refers to some sort of relationship between the parent brand and the extension product

• The idea is that consumers build categorical knowledge about brands which they use for structuring and interpreting their (purchase) environment

• ▪ People tend to evaluate a new stimulus (e.g., extension product) by trying to classify it as a member of an existing mental category (e.g., parent brand)

  ▪ If an extension is perceived as being closely related to the parent brand category, the transfer of brand knowledge from the parent brand to the extension should be facilitated

• Product-feature fit —> Refers to shared

  • Physical product characteristics (e.g., round shape)

  • Product usage (e.g., wear on wrist, accessory to outfit)

  • Product functions (e.g., keeps time)

• brand-concept fit —> Refers to the coherence of brand-unique abstract meanings:

  • Functional brand concept (Timex: durable, reliable, utilitarian etc.) versus

  • Prestige brand concept (Rolex: status symbol, luxury, wealth etc.)

—> This is in line with research by Aaker and Keller (1990), which offers a first indication that concrete attribute associations may be transferred less broadly than more abstract attribute associations

▪ Extensions can mainly be distinguished by

• the category of the extension (line vs. category extensions)

• the origin of the extension (internal vs. external)

• the direction of the extension (horizontal vs. vertical)

▪ Research has shown that these different types can have differential effects on brand extension success (and on the parent brand)

▪ Line extension: The parent brand is used for a new product in the same product category

▪ Category extension: The parent brand is used for a new product in a different product category

▪ Some researchers further split category extensions into o Franchise extensions: Extension is a product in a

new category but in the same industry o Concept extensions: Extension is a product in a

new category and a different industry

▪ Licensing creates a contractual arrangement whereby

• a firm (the licensee) can use the name/logo/character of another brand (with the brand owner being called the licensor)

• to market its own products

• for a certain fee (royalty rate) (→ remember “royalty relief” [Chapter 2])

▪ As licensing is an “easy way” for growth, it has gained in popularity and become big business in recent years

▪ The Walt Disney Company (Disney Consumer Products, Games and Publishing), for example, is repeatedly ranked as the world’s largest licensor and reported a total of $56 billion in retail sales (licensed merchandise) in 2021.

Risks associated with excessive licensing are

• an overexposure of the brand and

• a loss of control over the expected quality of the branded products which could damage the brand’s image

▪ Horizontal: Offering greater variety at the same quality level

▪ Vertical: Offering a new product at a higher or lower quality level compared with the original product

•  Offering greater variety at the same quality level exerts positive effects (e.g., on

  perceived brand expertise; Berger Berger, Draganska & Simonson 2007)

•  What about vertical extensions?

• General wisdom: offering higher-quality extensions links the brand to better products and should thus improve consumers’ brand evaluations, whereas the opposite should hold true for lower-quality extensions

• Heath, DelVecchio & McCarthy (2011) analyze vertical extensions for middle-quality brands and their extensions

• Their findings show a robust asymmetry: higher-quality extensions enhance consumers’ brand evaluations more than lower-quality extensions damage them

1. Quality association and variety effects

• ▪  Higher-quality extensions produce positive quality-association and positive variety effects that jointly improve brand evaluation.

• ▪  Lower-quality extensions trigger two opposing effects o Negative quality-association effects are tempered by positive variety effects (in general,

  consumers prefer broader product lines). o Opposing effects yield more neutral brand evaluation results.

Extension relevance to brand evaluation: Best-of-brand processing

1. ▪  Higher-quality extensions should be more relevant to consumers’ brand evaluations than lower-quality extensions.

2. ▪  A higher-quality extension increases the brand’s highest quality level and thus signals greater brand expertise, which should improve brand evaluations.

3. ▪  A lower-quality extension leaves the brand’s highest quality level unchanged: it signals no change in brand expertise and should thus affect brand evaluations less.

The influence of a brand extension on the parent brand is called backward spillover effect (sometimes also referred to as feedback effect)

Successful extensions can enhance parent brand beliefs and increase sales, unsuccessful extensions can dilute parent brand beliefs and decrease sales (e.g., Ahluwalia & Gürhan-Canli 2000; Swaminathan, Fox & Reddy 2001)

▪ Balachander & Ghose (2003) as well as Erdem & Sun (2002) further find that marketing support for an extension can positively influence parent brand sales

▪ Keller & Aaker (1992) show that

• a high quality parent brand is less affected by a successful extension while

• an average quality parent brand is more prone to profit from a successful extension

▪ Fit between the extension product and the parent brand (e.g., Ahluwalia & Gürhan-Canli 2000)

• For unsuccessful extensions, a high level of fit increases dilution effects

• For successful extensions, a low level of fit increases enhancement effects

• Why? Diagnosticity of negative/positive information differs between close and far extensions

Brand alliances can be described as involving a “short- or long-term association or combination of two or more individual brands ... These brands or products can be represented physically ... or symbolically ...”

▪ Create compelling points-of-difference or points-of-parity

• borrow needed expertise

• leverage equity the focal brand does not have

▪ Positive backward spillover effects from the co-branded product

▪ Source of additional revenue: Access to new consumers and channels

▪ Reduced costs of product introduction

▪ b1 and b2 should be positive, b1 > b2

• Accessibility of brand knowledge is higher for more familiar brand A → image spillover to alliance product should be stronger

• Brand A is more diagnostic, i.e., it is more relevant in forming an attitude toward the alliance product, as the more familiar/ stronger brand might have more power (it determines the alliance product’s configuration)

  
  

• ▪ b3 and b4 should be positive, b4 > b3 o

  • Brand B is less familiar, i.e., its knowledge structure is weaker/less accessible and thus less stable

    than A’s knowledge structure

  • For less familiar brand, additional consumption experience is more diagnostic, because consumers do not know much about the brand → Information from the alliance product is perceived to be more relevant to the attitude toward brand B

▪ Loss of control

▪ Negative (forward or backward) spillover

effects

▪ Brand equity dilution

Two general types that are usually distinguished are

• co-branding —> (Horizontal) co-branding refers to the combination of brands within the same stage of the value chain

• ingredient branding —>r efers to the combination of brands from different stages of the value chain (also called vertical co-branding)

• Thus, an ingredient brand cannot be consumed without a host product and is therefore necessarily contained within other branded products

• The aim is to create enough awareness and preference for the ingredient brand (IB), such that consumers will not buy a host brand that does not contain the IB

• For the host brand, a branded ingredient can function as a signal of quality that might reflect on the host and increase demand by consumers

▪ The brand architecture refers to the structure of the company’s entire brand portfolio

▪ It defines the roles of the brands within the portfolio and their interrelationships

▪ A coherent brand architecture

• communicatessimilaritiesanddifferencesbetweenbrands/products

• manages the strength and direction of spillover effects ,i.e.,brand equity transfer within the portfolio

1. Single branding strategy (house of brands)

2. Corporate branding strategy (single-umbrella branding, branded house)

3. Family branding strategy (multiple-umbrella branding, product line branding)

▪ Each product is sold using a separate brand

▪ Focus is on the single product but not on the company

▪ Suitable if heterogeneous products for different groups of customers should be offered (different positionings

o More freedom in positioning the product/brand

o Possibility to precisely profile the individual brands (product benefits = brand benefits) and target a specific customer segment

o Reduces the risk of dilution effects

o Creating a new brand / building brand equity is extremely expensive

o Building strong brands takes very long

▪ All products of the company (or business units) are offered under the same brand

▪ Focus is on the company, not on the single product

▪ Suitable if the product range is too large to feasibly pursue a single branding strategy or if the individual products are essentially equally positioned

• All products benefit from investments in the brand

• Using a known brand speeds up the introduction of new products

• Opportunity of positive feedback effects

o Differences between the products can dilute a clear brand positioning

o Repositioning of individual products is problematic

o Risk of negative feedback effects (brand portfolio contamination)

▪ Corporate brands are not only directed at the consumer, but also address, for example, employees, suppliers, and shareholders

▪ Family branding is a combination of:

• at least two umbrella brands or

• at least one umbrella brand in combination with at least one single brand

▪ For specific product groups, an integrative brand name is used

▪ Compromise between single branding and corporate branding

i.e. Beiersdorf: Nivea, tesa, hansaplast

Strong corporate brands can take advantage of, for example

• easier attracting and keeping customers

• easier attracting and keeping high potential employees

• profit from better conditions when financing new projects

• Overall brand architecture results from combining these options: it defines the relationships between brands and products that are part of the company’s portfolio

•  Different tools exist to characterize a company’s brand architecture

• One way of (graphically) portraying a company’s brand architecture is the ‘Hierarchy of Brands’

  • Shows the number and nature of common (existing) and distinctive (new) brandelements across the firm’s products

  • Describes which new and existing brand elements are used and how they are combined to brand a product

  • Thus, it reveals the ordering of the brand elements

•  Key decision: Which levels of the brand hierarchy to use?

Developing brands at higher levels allows to communicate common or shared information and provides synergy across the company’s operations

Developing brands at lower levels allows to communicate the product’s uniqueness

Number of levels: The principle of simplicity

• Each successive level enables the company to communicate additional and specific information about the products

• Company needs to decide about the “right” amount of common and distinct branding information to the consumer

• Optimal number of levels depends on the complexity of the product and thus on the combination of shared and unique brand associations that should be linked to any one product.

o Addresses how much emphasis each level should receive at the expense of the corporate

brand

o The more prominent a brand element/level (e.g., corporate or family or product brand), the more it will influence consumers’ perceptions

• Branded house: Dominance of corporate brand

• Sub-brands: Modification of corporate brand via sub-brands

• Endorsed brandsS:upport of individual brand by the corporate brand

• House of brands: Dominance of individual product-level brands

The brand relationship spectrum is one way to illustrate the prominence of different brand levels

—> decreasing of negative feedback decreases also spillover effects

Corporate brand dominance (CBD)= Level of visibility of the corporate brand in product communications

▪ High level of CBD requires to build and manage more abstract types of associations that can encompass a wider range of products

▪ Level of CBD thus determines the degree to which associations with a company’s overall image, credibility, and corporate social responsibility influence product attitudes

▪ Companies have started to put more emphasis on the corporate brand in recent years

Corporate branding in comparsion other (house-of-brands, mixed branding) has a positive effect

▪ Managing the retailer as a corporate brand.

▪ Managing the retailer’s stores as store brands.

▪ Retailer offers national brands —> other brands i.e. Zewa, pringles

▪ Retailers offer private labels -> owned and offered by the retailer

—> need to cooperate of brands - retailers

—> competition, esp. retailers offer increasingly private label products

• Image

• Assortment, choice

• Innovation,

• Growth

• Consumer knowledge

• Distribution

• Selling power

• promotion

• Growth

• Shopper knowledge -> national brands lacks this

▪ Brands that are owned and sold by the retailer

▪ Private labels are distributed by a specific retailer and are thus only available at the stores/chains of this retailer

▪ Having started as very cheap alternatives, private labels are now available in different price-quality tiers

▪ Especially private labels in the middle and high price-quality tier are often marked by the retailer’s store brand name, e.g., Real Quality, Rewe Beste Wahl, Rewe Feine Welt

• Private-label share increases when economy suffers and shrinks when economy flourishes

• Switch to private labels is stronger and faster than the switch back to national brands

• Some consumers keep buying private labels after recessions are over

• Intensifying marketing expenses is a way for national brands to weaken detrimental effects

• However, mostly national brands cut advertising during recessions, while retailers increase it for their private labels

• Explicit link / store-banner branding : Use of store brand to mark the private label, e.g., Tesco, EDEKA

• sub-brands / endrosed brands : Use of a modification of the store brand to mark the private label, e.g., REWE Feine Welt, EDEKA Genussmomente

• No link / stand-alone branding : No visible association between store brand and private label, e.g., ja! (REWE), Gut & Günstig (EDEKA)

Non-monetary benefits:

▪ To differentiate from other retailers and increase store brand loyalty

▪ To benefit from positive image spillover effects from the PL to the

store/corporate brand

▪ To optimize the retailer’s assortment

Monetary benefits

▪ To increase store brand loyalty

▪ To increase negotiating power against national brand manufacturers → higher retail margins on national brands; bit more independence

▪ To increase margins

low price positioning retailer -> attracts price sensitive consumers -> private labels are important (money saving) -> consequently become more store loyal

—> relationship is stronger/positive for price senesitive consumers

—> switching from one private label to another private label is less risky

—> private labels help to increase store loyalty

▪ Major retailers/wholesalers who run manufacturing plants to produce their private label products.

▪ Dedicated private label manufacturers: Small and medium size companies that focus exclusively on producing private label products (often specialised in particular product lines).

▪ Dual manufacturers: Large companies who produce their own brands, but also private label products.

Consumers’ perceptions of private label products in the past

• Large price gap between private labels and national brands

• Lower quality

• Poor packaging

• No direct advertising support

Consumers’ perceptions of private label products today

• Attractive packaging (similar to national brands)

• Increasing advertising/communication support

• Increasing quality level (i.e., decrease in quality gap)

   Private labels remain a lower-priced alternative, but introduction of different price-quality tiers including premium private label products

  
  

  → Consumers’ willingness to pay a price premium for national brands decreases

▪ Invest in product quality

▪ Secure distinctive packaging (take actions against trademark and packaging infringements)

▪ Invest in advertising and innovation activities (especially in recessions when NBs are particularly under pressure)

▪ Avoid price promotions (shift resources from price promotions to advertising)

But: Marketing factors are less effective in PL maturity than in PL development countries

▪ Counter consumers’ beliefs that NB manufacturers produce PLs (do not engage in PL production or stop PL production)

▪ Increase perceived difficulty of producing the product category (point out the knowledge needed to produce high quality products in the category)

▪ Purpose (Knowles et al. 2022, p. 36):

• A company’s role in the economy and society beyond profit making

• A multidimensional construct, with the three dimensions competence (“the function that our product serves”), culture (“the intent with which we run our business”), and cause (“the social good to which we aspire”)

▪ Corporate social responsibility (CSR): “Company actions that advance social good beyond that which is required by law” (Kang et al. 2016, p. 59)

Increasing focus on something related on purpse

Addresses potential negative impacts on society or the environment via changes to business practices

Example: Beverage brand reducing the number of new plastic bottles in production by using 100% recycled plastic

Effect of CSR actions: Increased sales

Addresses potential negative impacts on society or the environment “indirectly” without changes to business practices

Example: Beverage brand donating money to a program against plastic pollution in the oceans

Effect of CSR actions: increased sales

Does not address potential negative impacts on society or the environment; prosocial acts unrelated to negative externalities, e.g., philanthropic efforts

Example: Beverage brand donating money to a literacy program

effects of CSR actions: Decreased sales

▪ Brands who engage in corrective or compensating actions (i.e., brands who “clean up their own mess”) are seen as more sincere than brands who engage in cultivating goodwill CSR.

▪ Cultivating goodwill could be perceived as an insincere approach to CSR (an attempt to “checking a box”) that does not acknowledge a firm’s negative externalities.

example: Starbucks

▪ Transferred to the Starbucks example:

o Brand misalignment (strong disconnect between brand image and campaign), lack of authenticity

o People felt that internal actions (“cleaning up own mess”) would have been far more appropriate than a campaign attempting to spark external conversations in Starbucks stores

o As a result, people perceived the campaign as an attempt to cashing in a serious social issue.

▪ Brands should strive to “clean up their own mess” before engaging in philanthropy that may otherwise be seen as insincere efforts aimed solely at garnering consumer goodwill.

▪ Managers should reconsider engaging in CSR actions that cannot be clearly linked to reducing the brand’s harm on society or the environment.

▪ Business, consumer, social and environmental interests can align when businesses reduce their adverse impact for global betterment.

-> ▪ Well-being refers to “the balance point between an individual’s resource pool and the challenges faced”

• Resources: psychological, social, physical

• challenges: psychological, social, physical

▪ Dual forces of digitization and globalization make consumers’ work and lives more virtual, fast-paced and mobile.

▪ Global disruptive events like COVID-19 shake their foundation

▪ Current market trends suggest that many consumers seek to go back to the local, personal, and traditional

▪ They seek to connect to place, people, and past via products

• ▪  Consumers’ need to experience feelings of groundedness provides an overarching explanation for these marketplace phenomena.

• ▪  Products can metaphorically connect individuals to place, people, and past, and thereby ...

• ▪  ... elicit feelings of groundedness by “rooting” individuals in their physical, social, and historic sphere.

• ▪  Groundedness: The feeling of being emotionally rooted/ securely anchored

  “I feel deep-rooted and firmly anchored,” “I feel well- grounded” etc.

▪ Products’ ability to connect consumers to place, people, and past, and thus make them feel grounded, makes these products more attractive to consumers (e.g., in terms of choice, purchase intent, and willingness-to-pay).

▪ Consumers reported a 60% increase in WTP for indie soaps (i.e., “small and independent craft business”) vs. industrial soaps (i.e., “industrially produced at scale in a large factory”).

▪ Groundedness has important positive psychological downstream effects: Feeling grounded makes consumers feel happier and increases their sense of strength and stability.

▪ Using local (vs. nonlocal) apples for making a pie made participants feel more grounded, and in turn, stronger, safer, more stable, and better able to withstand adversity.

▪ Marketers can design a product’s marketing mix in a way that helps make consumers feel more grounded.

▪ Use marketing mix elements that connect consumers to places, people, and past:

• Product origin information (e.g., local origin)

• Channels of distribution (e.g., farmers market)

• Brand narrative (e.g., indie brand narrative)

• Product design (e.g., more traditional instead of modern design)

▪ Marketers can also target specific consumer segments with a particularly high need for groundedness, such as consumer who:

• Perform a lot of computer work at their desk

• Are more affected by large global trends (e.g., digitization, urbanization) and disruptive life events (e.g., COVID-19 pandemic)

• Live in big cities o Have high socio-economic status (i.e., whose more basic needs are satisfied)

▪ Rather vague definition: “Brand superiority and corresponding scale within its category or industry”

▪ More precise definition (based on consumer survey [n = 45]): “Subjective perception of a brand’s dominance related to category market share”

▪ Brand leaders have been found to be more influential (both within markets and culturally) = brand agency

▪ Key proposition: Affiliation with brand leaders (i.e., brands that are perceived to have high agency) serves as a cue for individuals’ belief in their own possession of agency and this restores control

Improvised Marketing Interventions (IMIs):

Social media actions that are composed and executed in real-time, proximal to an external event

▪ Virality: Marketing communication which prompt social media users to pass it on to others at no cost to the advertiser

▪ Study 1 finds that immediately after OreoDunk IMI, there is a rise in virality (number of retweets) for Oreo

▪ Quick wit drives virality because

• both humor and timeliness attract attention,

• attention initiates further conversation,

• sharing humorous and unexpected content makes social media users look good to other users.

▪ Quick wit increases stock price because

• investors believe that an IMI’s virality itself will increase consumers’ brand attitudes,

• it signals that the company is confident enough about its own brand reputation

• and its employees’ judgment to empower them to create IMIs

▪ Managers should consider not only what they say, but, even more importantly, how and when they say it using social media to successfully cut through the clutter

▪ Such characteristics of IMIs influence not only perceptual metrics like virality but also objective metrics (a firm’s stock returns).

• ▪  IMIs with high humor and high unanticipation can generate USD 5.1 million on average in market capitalization

• ▪  IMIs with high humor and high timeliness can generate USD 3.1 million on average in market capitalization