Week 9 - Applied Brand Management

Top of the Pyramid (Rich/HND)

• Untapped segment with very few competitors.

Middle of the Pyramid (Middle Class)

• Highly targeted segment that is often overcrowded with very high competition.

Bottom of the Pyramid (Lower Middle Class/Rural Poor)

• More than 60% of the population.
• Untapped.
• Easy to approach with very low competition.
• Billions of people living on less than $2.50$ a day.

Defining Luxury Brands/Products:

• Luxury goods are goods for which demand increases as income rises, that is, goods that have a high income elasticity of demand (Berry 1994; Kemp 1998; Dijk, 2009).
• Brands whose ratio of functional utility to price is low while the ratio of intangible and situational utility to price is high (Nueno and Quelch 1998: 62).
• Luxury brands are those that have constantly been able to justify a high price, i.e. significantly higher than the price of products with comparable tangible functions (McKinsey 1990).
• Luxury is neither a product, an object, a service nor is it a concept or a lifestyle. It is an identity, a philosophy and a culture (Okonkwo 2009).

Managing Luxury Brands

• Be committed to the brand DNA:
  • Inherited from Founders, not based on research.
  • Unchanging brand code.
• Pursuit of absolute and uncompromising perfection:
  • Ingredients, manufacturing, presentation, service, and relationships.
• Be Creative:
  • Disruptive, break rules, mystical and non-rational.
• Lead the market:
  • Creativity is what is being sold.
  • Surprise the market.
  • Upstream creativity; downstream research.
• Create “masstige” but limit access:
  • Be discriminatory in choosing store location.
  • Say no to licensing.

Marketing Mix Innovation

• Bottom-up approach in product innovation.
• In small quantities.
• Offer payment schemes.
• Consider vendor relationships.

Brand Strategy Innovation

• Brand element consistency.
• Lean positioning.
• Leveraging country of origin brand.

Considerations for Marketing a Brand to Poor Consumers

• References: Prahalad 2005; Viswanathan et al. 2009, 2010.

Brand Architecture

• Brand architecture is an organizing structure of the brand portfolio that specifies brand roles and the nature of relationships between brands.

Managing Brand Portfolio Goal

• Clarify awareness.
• Improve brand image.

Helps With

• What products to introduce.
• What brand element to apply to new and existing products.

Each Brand Should

• Have different positioning.
• Contribute equity.
• Not overlap or harm equity of other brands.
• Add more coverage.

Approaches

• Brand hierarchies.
• Brand architecture spectrum.

Possible Special Roles of Brands in the Portfolio

1. To attract a particular market segment not currently being covered by other brands of the firm.
2. To serve as a flanker and protect flagship brands.
3. To serve as a cash cow and be milked for profits.
4. To serve as a low-end entry-level product to attract new customers to the brand franchise.
5. To serve as a high-end prestige product to add prestige and credibility to the entire brand portfolio.
6. To increase shelf presence and retailer dependence in the store.
7. To attract consumers seeking variety who may otherwise have switched to another brand.
8. To increase internal competition within the firm.
9. To yield economies of scale in advertising, sales, merchandising, and physical distribution. (Keller 2013).

Brand Hierarchies

• Graphical representation of organizing all company’s brands into a connected hierarchy.
• By displaying the number and nature of common and distinctive brand elements across a firm’s products
  • Corporate brand (General Motors).
  • Family brand (Buick).
  • Individual brand (Encore).
  • Modifier (GX).
  • Descriptor (Subcompact SUV).

The Brand Architecture Spectrum

• Basic strategies and sub-strategies including:
  • House of Brands.
  • Endorsed Brands.
  • Subbrands.
  • Branded House.

House of Brands

• “House of brands” - implies that the organization’s products and services bear a wide variety of brand names as opposed to the organization’s brand name.
• The house of brands strategy, however, allows firms to clearly position brands on functional benefits and to dominate niche segments.
• It involves an independent set of stand-alone brands, each maximizing the impact on a market.
• A shadow endorser brand is not connected visibly to the endorsed brand, but many consumers know about the link.

Endorsed Brands

• Endorsed brands are independent brands endorsed by another brand, usually an organizational brand. An endorsement by an established brand provides credibility and substance to the offering and usually plays only a minor driver role.
• Token endorser, usually a master brand involved in several product-market contexts, which is substantially less prominent than the endorsed brand.
• Another endorsement variant is a linked brand name, where a name with common elements creates a family of brands with an implicit or implied endorser.

Sub Branding

• Subbrands are brands connected to a master or parent brand and augment or modify the associations of that master brand.
• The Master Brand as the Driver - is the primary frame of reference, which is stretched by subbrands that add attribute associations, application associations, a signal of breakthrough newness, a brand personality, and even energy.
• The Subbrand as a Co-Driver - When both the master brand and the subbrand have major driver roles it is considered a co-driver situation.

Branded House

• A branded house uses a single master brand to span a set of offerings that operate with only descriptive subbrands.
• In a branded house strategy, a master brand moves from being a primary driver to a dominant driver role across multiple offerings. The subbrand goes from having a modest driver role to being a descriptor with little or no driver role.
• A branded house usually maximizes synergy, as participation in one product market creates associations and visibility that can help in another.

Corporate Branding

• Corporate Image Dimensions
  • Common Product Attributes, Benefits, or Attitudes.
  • People and Relationships.
  • Values and Programs.
  • Corporate Credibility.
• Managing the Corporate Brand
  • Corporate Social Responsibility.
  • Corporate Image Campaigns.
  • Corporate Name Changes.

Brand Architecture Spectrum

• It is a spectrum/continuum:
  • Branded House.
  • House of Brands.
  • Endorser Brands.
  • Sub Branding.

Developing a Brand Architecture Strategy

• Adding to your brand portfolio

Brand Architecture Strategy

• Help brand managers in deciding which products/service to launch and which brand elements to use for both new and existing products
  • STEP1: Define brand potential
    • Consider brand vision, brand boundaries and brand positioning
  • STEP2: Identify brand extension opportunities
    • Line vs category extensions
  • STEP3: Brand new products and services
    • Decide on the branding elements and positioning

Brand Extensions

• Brand extension is a new product introduced under an existing brand name
  • Category extension: New product introductions outside existing categories
  • Line extension: New product introductions within existing categories

Line Extensions

• Adding a new product within the category
  • Line extensions includes:
    • Low-end entry-level product extensions (e.g. iPhone SE)
    • Premium line extensions (e.g. iPhone 13 Pro Max)

Line vs Category Extensions

• Line Extensions
  • Less likely to fail
  • But bigger potential for brand equity damage
• Category Extensions
  • Less likely to succeed
  • But little to no damage to parent brand in existing category
  • But beware of resource drain and loss of focus

Consolidating Brands

• Reducing your brand portfolio

Brand Consolidation

• Less is more now more than ever
• The 80/20 rule does usually apply!
• There are always weaker brands/product lines
• Focus resources on the strongest brands

Brand Consolidation: Considerations

• Make your Brand Architecture an explicit choice
  • Use the Brand architecture spectrum
• Decide on the Brand Portfolio that will form the Architecture
  • Not what brands to kill, what brands to keep
  • Consider Brand Equity, Segments, Profits and Internal Politics
• Work out the best route to get to the final destination
  • Be gentle, but risk the costs and confusion
  • Be brutal, but risk the internal friction

Co-Branding

• Another way to build brand portfolio
• Two or more brands combined into a joint product or marketed together
• Partnership activities to create synergy in marketing and branding
  • Advantages:
    • Borrow needed expertise
    • Leverage equity you don’t have
    • Reduce cost of product introduction
    • Expand brand meaning into related categories
    • Source of additional revenue
  • Disadvantages:
    • Loss of control
    • Risk of brand equity dilution
    • Negative feedback effects
    • Lack of brand focus and clarity
    • Organizational distraction

Guideline for Co-branding

• Both brands should have…
  • Adequate brand awareness
  • Sufficiently strong favorable and unique associations
  • Positive consumer judgments and feelings
  • Potential brand equity
  • A logical fit between brands
• Questions to ask before co-branding
  • What capabilities do we not have?
  • What resource constraints do we face (people, time, money)?
  • What growth goals or revenue needs do we have?
  • Is it a profitable business venture?
  • How does it help to maintain or strengthen brand equity?
  • Is there any possible risk of dilution of brand equity?

Ingredient Branding

• A special case of co-branding
• Aims to create brand equity for materials or components contained within other branded products.
• Ingredient brands often reduce risks and reassure consumers, so they are a signal of quality.
• Ingredient brands try to generate significant awareness and preference for their products
• One product may contain several branded ingredients

Guideline for Ingredient Branding

1. Consumers must know why the ingredient matters
2. They also acknowledge that not all ingredient are the same (Intel vs. AMD)
3. A distinctive symbol or logo must be clearly shown in the host product
4. Finally, a coordinated marketing program must be put into place

What have I told you?

1. Brand architecture concerns how you structure and manage your brand portfolio
2. Your brand architecture should be guided by your branding strategy
3. Brand extensions and co-branding should add to, not mimic or harm your brand equity
4. When managing your brand portfolio, many times, less is more.