MP3: Brand Based Competitive Advantage

What is a brand?

a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers.

What are brand elements

Brand elements are characteristics used to identify a brand, such as name, symbol, package design, and other features that differentiate the brand’s offering and relationship from competitors

What is brand equity?

the set of assets and liabilities linked to a brand, its name, and symbol, which add to or subtract from the value of the firm’s offering and relationships. It exists in the customer’s mind, making it hard to copy and a sustainable barrier to competition

What does the Associative Network Memory Model of Brand Equity describe

It views the mind as a network of nodes (brand awareness) and links (brand image). It explains how brand awareness and brand image influence brand equity.

two key characteristics of a brand

• Brand awareness – customer’s ability to identify a brand

• Brand image – perceptions and associations with the brand

Brand positioning

how and where a firm wants to appear in the customer’s mind, based on brand awareness, image, objectives, relative advantage, and sustainability

3 steps of building brand equity

1. Build a high level of brand awareness → provide an anchor

2. Link the brand name to its points of parity & difference → define relative avt

3. Build a deep emotional connection or “relationship” between brand and targeted customers → generate powerful barriers

Benefits from Brand Equit

1. Sales growth – easier customer acquisition due to trust and reduced risk

2. Profit enhancement – allows price premiums or lower costs

3. Loyalty effects – makes customers more loyal, forming a barrier to entry

The Loyalty Matrix

1. True loyalty – positive feelings, buy

2. Spurious loyalty – indifference, buy

3. Latent loyalty – positive feelings, not buy

4. No loyalty – no positive feeling, not buy

brand architecture

many independent brands → branded house:

house of brands (P&G: Tide, Ariel,…) → endorsed brands (Courtyard by Marriot, Polo by Ralph Lauren) → sub-brands (Apple Watch, Nike AIrMax) → branded house (LG)

House of Brands

• Each brand is distinctly positioned

• Higher advertising and intro costs

• Own brand equity for each product

• More shelf space

Endorsed Brand

• Boosts corporate brand

• Faster market penetration

• Offers quality assurance

• Risk of negative spillover and brand dilution

Sub-brands

• High parent brand visibility

• Stronger spillover effects

• High operational cost

• Vulnerable to crises

Branded House

• Economies of scale

• Lower per-item promotion cost

• Consumers are likely to transfer loyalty

• Easier brand extension

• Efficient means to communicate with public, government and stakeholders

• Limited in unknown categories

Brand Extensions

• Line extensions – same category, new segment

• Category extensions – different product category

• Vertical extension: lower price market

critical for brand extension success

perceived fit between the parent brand’s image and the extension on a dimension that is relevant to the customer.

IMC

multiple communication formats to build brand equity.

• Advertising

• Sales promotion

• PR

• Events/experiential marketing

• Direct/interactive marketing

• WOM

• Personal selling

Why should firms measure brand equity?

• Track effectiveness

• Evaluate marketing ROI

• Monitor brand health after changes

What methods are used for qualitative & quantitative brand equity analysis?

Qualitative Analyses: used in the early stages of a brand audit, → In-depth interviews and focus groups for awareness and associations.

Quantitative analyses: used to identify the causes or drivers of desired outcomes → Measure causes of outcomes like the effect of campaigns

three methods for measuring brand equity

• Social Media – user-generated content & social tags

• Surveys

• Experiments

Most common threat for internal & external validity

Most common threats to internal validity: Failure of randomization (e.g., Facebook ads), Non-compliance with the experimental protocol, Attrition (Participants drop out)

Most common threat to external validity: Non-representative sample, Non-representative program, Hawthorne effect (change in behavior by the subjects because they know they are being observed)

When should you use marketing experiments

• To test if a BOR investment causes customer/firm outcomes

• To select the best investment strategy

3 conditions are needed to establish causality

1. Co-variation – change in variable causes change in outcome

2. Temporal precedence – treatment comes before outcome

3. Elimination of alternatives

causal equation

Yi = β1 Ij + β2 Xi + εi
Where:

• Yi = outcome

• Ij = : 1 if in the treatment group, 0 otherwise.

• β1 = treatment effect

• β2 = Controls for other factors

• εi = error

treatment effect formula for a unit i

Y1i – Y0i (Difference between treated and untreated outcomes)

Stable Unit Value Assumption (SUTVA)

The outcome for unit i is unaffected by the treatment of unit j. No interference across units.

Other Empirical Approaches

Study effect of a blind test (treatment) of branded vs. private label products on future purchases of branded products