Brand Management and Innovation

1. Brand Management and Innovation Week Commencing 20/2/06

2. Learning Objectives After this session you should be aware of the following: Assessment for this module Essential reading for this module The modern definition of a brand The ‘brand onion’ Common myths about brand management Brand equity Classical conditioning learning theory Preparation for the next class

3. Assessment for this module Attendance : 10% Mid-term exam : 20% Homework : 30% Final exam : 40%

4. Your Teacher Mike Bastin B.Sc, M.Sc , MBA 8 years Marketing Management experience: HSBC, British Gas … 8 years U.K university lecturing First taught Marketing in China 7 years ago Now teach at Beijing university, Fudan and Nanjing Also teach Marketing at universities in U.S,India Have my own Brand Management training and consultancy company, clients include: Holiday Inn, Maersk Sealand , Just-It Manufacturing….

5. Essential Reading Creating Powerful Brands (2nd edition) by de Chernatony and McDonald Excellent , practical text U.K authors U.K/European examples, case studies etc

6. What is a brand ? A brand is a name, term, sign, symbol or design or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of the competition (AMA) The key to creating a brand is to chose a name, logo, symbol, package design ?

7. Examples of brands ? FMCG, the traditional area for brands Service brands …..AMEX, Air China Business to business brands … Professional Services brands ….McKinsey Entertainment brands ….Real Madrid Not-for-profit brands ….BBC

8. Brands versus Products: the ‘brand onion’ 1. The core benefit 2. The generic product 3. The expected product 4. The augmented product 5. The potential product

9. Brand Onion Example: Air Conditioner 1. Core benefit: Cooling, comfort 2. Generic product: Sufficient cooling capability 3. Expected product: At least two cooling speeds, removable air filter, vent for exhausting air 4. Augmented product: one year parts and labour warranty on the entire unit, electronic touch pad controls, display to show indoor and outdoor temperatures 5. Potential product: Silent operation, energy self-sufficient

10. Brand Management: common myths Confusion with product management Confusion with advertising Confusion with customer service Confusion with selling

11. Brands as risk reducers Functional risk; reliable, eg Sony Physical risk; safe, eg Volvo Financial risk; good value for money, eg Lenovo Social risk; no embarrassment from being seen with the brand, eg QQ ? Psychological risk; the brand improves the consumer’s mental well being, eg BBC ?

12. The World’s Strongest Brands (2001, $bn) 1. Coca Cola (68.95) 2. Microsoft (65.07) 3. IBM (52.75) 4. GE (42.4) 5. Nokia (35.04) 6. Intel (34.67) 7. Disney (32.59) 8. Ford (30.09) 9. McDonald’s (25.29) 10. AT&T (22.83)

13. What is Brand Equity ? Brand equity is a set of assets (and liabilities) linked to a brand’s name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and/or that firm’s customers (Aaker, D. 1996) Major asset categories are: Brand name awareness, Brand loyalty, Perceived quality, Brand associations

14. Brand Equity (Aaker, D. 1996) 1. Loyalty: repeat purchase, satisfaction 2. Perceived quality and leadership: relative to other brands 3. Associations and Differentiation: perceived as good value, brand has a good personality, brand’s organisation is trustworthy, brand is different from other brands 4. Awareness: brand awareness high ? 5. Market Behaviour: brand’s market share, distribution penetration, price relative to others

15. Brand Associations: Classical Conditioning Unconditioned stimulus Unconditioned response Conditioned stimulus: the brand Conditioned response

16. Brand Associations: Classical Conditioning Extinction: lack of association between CS and UCS Stimulus generalisation: tendency of similar stimuli to a CS to evoke similar responses Stimulus discrimination: stimulus similar to a CS is not followed by a UCS

17. Brand Selection Automotive sector Luxury products Information Technology Food and drinks industry Retail sector Sports and entertainments industry Health and beauty products Household products Travel and transportation

18. Homework for next class Using the course book and other sources provide a brief description of the following as well as an example: Brand extension Co-branding Ingredient branding Family branding

19. Useful Branding Web Sites www.Interbrand.com (World’s leading Brand Management consultancy) www.Brandchannel.com (maintained by Interbrand) www.Brandrepublic.com (maintained by the publisher Haymarket who also publish Marketing magazine and Marketing Week) www.fairtradefederation.com

20. More branding myths ‘branding is to do with naming products’ E.g Consignia ‘branding is about getting the right promotion with the name prominently displayed’ E.g John Smith’s beer ‘branding is about getting the design right’ E.g Dyson washing machines

21. An Integrated Marketing Mix All elements of the mix communicate (not just the brand name and advertising) Brands represent the result of a successfully coordinated marketing mix, using every element to maximum effect Exercise: price and distribution communication examples ?Exercise: price and distribution communication examples ?

22. The Origins of Brand Equity 1985, Reckitt&Colman bought Airwick Industries and valued Airwick at £127m because of Airwick’s brand names 1988, Rank Hovis McDougal valued their brands at £678 1988, Netsle bought Rowntree by paying £2.5bn when Rowntree’s net assets were worth £300m. Rowntrees brands included: KitKat, Polo, Quality Street, After Eight Mints

23. The Origins of Brand Equity Financial value of the FUTURE income of brands, also known as GOODWILL Ultimately it is the user or consumer of the brand who determines the brand’s equity, hence the term: customer-based brand equity, used to distinguish between financial brand valuation

24. Key Success Factors 1. Clear profile of the brand’s target market: demographic, psychographic, geographic, behaviouristic 2. Clear statement of intended brand values: rational and emotional 3. Commitment to equipping the brand with sufficient resources to succeed and continuous innovation: eg, Nescafe, Gillettte Write on board variables for each market segmentation basesWrite on board variables for each market segmentation bases

25. Target Market Profile: Consumer Markets Demographic: Age range, Sex, Family size, Family life cycle, Income , Occupation, Education, Nationality, Social class Psychographic: Personality type (fun, young, serious, quiet, shy, energetic, ambitious, , anxious, calm,authoritarian) Geographic: Country, region, city, climate Behaviouristic: Light, medium, heavy users

26. Target Market Profile: Business Markets Demographic: Industry type, Company size, Location Purchasing criteria: Focus on customers seeking: quality ? Service ? Price ? Customer capabilities: Focus on customers needing many services or few services ? Customer usage: Focus on heavy, medium or light users ?

27. Possible brand values: Consumer Markets Psychographic values: Cheerful, clean, helpful, honest, independent, exciting, intellectual, loving, responsible, ambitious, freedom, pleasure, polite, fun, happy, peaceful, passionate, energetic, fast, slow, elitist, security, harmony, social recognition, indulgence Demographic values: old/young, mature, family size , income group, occupation type Geographic values: country association, city, region Exercise: which brand values are rational and which are emotional ? Describing a brand is the same as describing a personExercise: which brand values are rational and which are emotional ? Describing a brand is the same as describing a person

28. Possible brand values: Business Markets(Intel, A.C Nielson) Tangible brand values: product quality, product flexibility, service delivery (speed, flexibility) service support (product advice), company financial stability, years of experience, global coverage Intangible brand values: product innovation, ease of ordering, reliable delivery, emergency response, company reputation

29. Haagens Dazs target market Demographic profile Age range: 18-35 Sex: Unisex Family size: Singles or married no children (Double Income No Kids, DINKys) Education: University-educated Occupation: Professionals Income: Medium to higher income levels

30. Haagen Dazs target market Psycographic profile Independent, fun-loving, ambitious, indulgent, sensual

31. Haagen Daz target market Geographic profile: city dwellers (urbanites) Behaviouristic: light users/consumers

32. Haagen Dazs brand values Rational values Taste flavours Emotional values Indulgent, fun, sensual, exciting, ….erotic Country association: Holland (Amsterdam), fun, lively, indulgent, erotic Young adult brand

33. Assignment 1: Brand Values 1. Select a well known brand item, ie a specific brand model. 2. Using your knowledge of the brand as well as some market research, provide a profile of the brand’s target market. 3. Using your knowledge as well as some market research, provide a description of the brand’s values. 4. Provide some recommendations to improve the brand’s overall value as perceived by the target market (ie improvements in brand equity) This is a group assignment (4-6 people). The final, written report should be no longer than 2000 words. Hand in date: week 8.