Brands Are Tools That Managers Use - Essay Example

Brands are tools that managers use to reduce the uncertainty about product performance. Brand s are assets that communicate quality and evoke specific structures associated with the brand (Srinivasan & Till, 2002). Brands help to differentiate a product from its competitors and this product differentiation occurs at the attribute level. Brand equity provides value to manufacturers, retailers and consumers. The manufacturers are the brand owners and the brand provides them with the differential competitive advantage that permits premium pricing (Srinivasan & Till, 2002). It strengthens the retail distribution and it benefits the retailers in building strong store traffic and enhances the store image. However, over enthusiasm and wrong decisions can prove to be fatal to the brand and may fail to attract the customers. Brands are assets that are difficult to develop, maintain, and adapt. A brand goes beyond the name or a logo or a slogan. It is the customers’ perception of the stimulus when the brand is presented (Berry & Lampo, 2004). Brands are a manufacturer’s promise of quality to consumers. Brands function as insurance policies against the monetary and social/psychological losses facing the consumers when they purchase a product (DelVecchio, 2000). A brand is supposed to reduce risk and enhance the confidence of the consumer when he purchases a product. A consumer believes that when a company has undertaken to invest in a brand, the product would not be of inferior quality. Since they lack personal experience with the product, they go by the reputation of the brand name. It provides the customers with both observable and unobservable product attributes, reduces their anxiety and simplifies the shopping process (Srinivasan & Till, 2002). Brands names affect consumers’ perception about the product attributes in different ways. Brands reduce the perceived risks and the search cost for the consumers (Kayman & Arasli, 2007). When discussing about corporate brands, Aaker (2004), contends that brand plays the role of an endorser as in the case of Courtyard (by Marriott), MSN (by Microsoft), or Lion King (by Disney). The brand adds credibility to the products that reassures the buyer, especially when a new technology is involved. Corporate brands communicate the service quality as in the case of the Starwood brand which endorses several hotel chains – Westin, Sheraton, and St. Regis. In the hospitality industry brand owners can charge a premium price over rivals, they can maintain market share over rivals and retain customer by building brand loyalty which in turn reduces the marketing costs (Kayman & Arasli, 2007). Brands with higher guest satisfaction levels also achieve higher revenues per guest room, higher growth rates than brands with lower levels of satisfaction. Any product may have one, two or all three attributes namely, search attributes, experience attributes and credence attributes. Search attributes precede the purchase and helps the customer in selecting the product and the experience attributes can be verified only after using the product. Credence attributes are difficult to verify even after use. Branded products influence a customer on all of these attributes but in the search process the importance of brand name in reduced as the customer can undertake visual inspection of the quality (Srinivasan & Till, 2002). Research suggests that national-brand products are perceived as higher quality than generic products. Hence the brand equity does give credence to the product and influence the customer. Credence attributes are difficult to understand but this offers the national brands a point of differentiation. Brands give a favourable rating to the product, increase market share and advertising efficiencies (DelVecchio, 2000). Consumers are known to use their past experiences with the product for evaluating the new product offering. If the past experience has been positive, the brand owners benefit as it saves them the cost of new product introduction. However, the company stands to lose if the past experience of the customers has not been pleasant (Vaidyanathan & Aggarwal, 2000). It could then affect the new product introduction hence brand extensions have to be carefully pursued. This is especially true when a national brand extension is provided to a private label. This influences the consumers’ perception of both the products – the private label as well as the national brand. If an established and a reputed brand owner lends its brand extension to a lesser known or a new product, it runs the risk of losing its reputation if the new product is not accepted in the market. In line extensions, existing brand name is used for introducing new products in the same category. They are less risky than brand extensions. Nestle had bought Rowntree along with the right to sell KitKat, which was the most popular British candy. Nestle even introduced this in the emerging markets of India, China and Eastern Europe. While it stuck to the popular flavours most of the time, it did launch small quantities in different flavours. They launched several other products with brand extensions such as KitKat Chunky and KitKat Kubes. These were aimed at the younger generation and the sales initially did pick up but within 3 years both these brand extensions were struggling (Ball, 2006). DelVecchio (2000) contends that as products are added to the brand the brand’s strength is compromised as extension strategy leads to the dilution of the brand. This is because brands have a core identity in the minds of the consumers. As the number of products affiliated to the brand increases, the consumers’ perceptions have to incorporate the new product offerings. When this does not happen the brand suffers. The KitKat brand suffered due to brand dilution which was revealed through a feedback mechanism. The consumers stated that they do not mind trying the different flavours or a change but they could not find the classic KitKat amidst the new varieties. To save the brand name the company has to invest in advertising and promotions and to support 20 different brands Nestle had to compromise on product quality. Brand owners suffer due to dilution and a wrong judgment. The KitKat instance is against the theory that consumers would be more favourably inclined towards brands that are associated with a wide variety of products (DelVecchio, 2000). Another practice is to enter into ingredient branding where the national brand just lends its product to be sold along with the private brand product and under that private brand label. In this case, according to Vaidyanathan and Aggarwal (2000), the private label stands to benefit through this. However, should the private label brand fail to capture the market, it might adversely affect the national brand for tying up with such labels. It can also lead to brand dilution if excessive tie ups are undertaken with private labels but repeated exposure can also reinforce the brand name. A national brand has to be cautious not to extend its brand to unrelated product categories as it could influence the consumers’ perception of the brand. Private brand labels are usually associated with low quality and suffer from an inferior brand image. This requires heavy investments in promotion and advertising but by using strong brand ingredients they can benefit by exploiting the brand equity, the goodwill and the brand association with the national brand. This is an example of concept-combination theory when an ingredient brand combines with a generic brand. This theory suggests that there can only be a positive transfer of effect from the ingredient brand to the generic brand but no negative impact can be transferred from the generic to the ingredient brand (Vaidyanathan & Aggarwal, 2000). The national or the ingredient brand benefits by instant increase of sales through such an alliance. Ingredient branding also affects the attitudes towards both the alliance product as well as the national brand. Under the attitude accessibility theory attitudes towards the national brand influences positively the attitude towards the alliance product. Research also suggests that the association with a private label can actually enhance the value perceptions of a national brand. Hence both the established brand and the private labels stand to gain. Brands play a vital role for brand owners, which is why strong brands maintain their positioning. When the Mini brand in the auto industry was taken over by BMW from the Rover Group, BMW strived to maintain the brand positing as before despite BMW’s parent brand image being distinctly different (Simms & Trott, 2007). The repositioning has worked at the functional level. The symbolic elements of the Mini brand that synchronize with the stakeholder perceptions have not changed as maintaining the symbolism was vital. It is not more a cheap car for every man and woman but it is a cool car for those who can afford to spend. People still want to own a Mini which demonstrates that the brand owners – BMW – have persuaded their customers to see a very different car in the same way. A brand is an accumulation of associations and the parent brand influences the consumers’ reaction to brand extensions. Brand trust and brand effect are the key elements in evaluating consumers’ brand attitude and its effect on brand extensions. Building consumers’ trust is essential and brand owners must induce special affect in building consumer dependence on the brand (Wu & Yen, 2007). Brand extensions succeed when consumers perceive the parent brand as trustworthy. Neutrogena first developed consumer trust towards the brand before it extended its brand from soap to shampoos and other products. Brands have different brads – narrow or broad and the success of brand extensions differs on this also. When corporations work on a narrow brand, the parent brand association must be very strong as in the case of Porsche. They had a high quality sporting image and they extended the brand only towards products of similar categories such as tires (complementary product), motorcycles (substitute), and ski boats (transfer). Even those operating a broad brand, the parent brand trust and association is essential for the success of the extensions. Brands like Toshiba have a high level of trust and it can produce high quality products with a high chance of success. However, Cadbury’s is considered a strong brand operating on a broad brand for chocolates and candy but when it went into mainstream food items like mashed potatoes and dried milk, brand dilution took place. Its strength was reduced when it extended its brand away from the main product category (Leong, Ang & Liau, 1997). Sometimes strong brands owners suffer just because they were strong. Brand Britain has taken decades to build a strong reputation but it took merely days to bring brand down when British Airways ground staff held the airlines to ransom (Brand Strategy, 2003). The BA brand would not suffer because the airlines would compensate the passengers, apologize publicly and get back their image but Brand Britain would bear the brunt for decades. These disgruntled passengers have become negative brand ambassadors for Britain. The next time they need to decide on where to holiday or which country to invest in, this experience will influence their decision. Brand equity plays a vital role in the consumers’ decision making process. 2. Strong brands create shareholder value and changing technology, shift in consumer demands and media fragmentation lat emphasis on creating strong brands rather than focusing on longstanding brands (Court, Forsyth, Kelly & Loch, n.d.). Strength of brand depends upon the speed with which they are built. Big brands may not be as secure but challenger brands have more oppurtunities as the consumer power has increased. Being a challenger has certain advantages because the brand does not carry the burden of history (Brand Strategy, 2007). Big brands like BA, British Telecom and British gas have become complacent while the challenger brands like Apple and Virgin have been found to be innovative in establishing their brand name. Consumers today cannot be talked into something and hence being big is no more an advantage; being innovative and arrogant is. Consumers want value and Marks & Spencer appears to be a company that delivers for its audience. Branding plays a very important role and is the differentiating factor. Hence to build a strong brand a positive consumer feeling is essential. They need to communicate their innovative capabilities to the consumers and the established brands have to appear powerful. Too much of communication does not mean a strong brand. It is thoughtful communication that matters and not the frequency and volume of communication. A strong brand does not emerge by enforcing or stressing on product features and quality. This leaves little room for differentiation from competitors. Today there is a very marginal difference in product quality of two manufacturers and hence adding product features would fail to attract consumers’ attention (Court, Forsyth, Kelly & Loch, n.d.). With the constantly changing consumer needs and shift in technologies, the consumers’ experience with the brand has also enhanced. Consumers are looking for process benefits and relationship benefits. They want to explore new ways of research and buying and they also want to maintain an ongoing contact with the marketer. These require that the brand fulfills the consumers’ expectations. Hence the new brand builders are exploiting this knowledge about consumers to bring about differentiation in their brand personalities. Thus the first step in building a strong brand is to understand what the consumer wants. Marketers are using technology to keep in constant touch with the consumers as a way of enhancing the brand image. It is no more about the product or advertising but the total customer experience that matters. This can reinforce the brand image and make the brand stronger and built faster. The number of customer touchpoints has increased phenomenally over the years as consumers today use their own social networking, join online focus groups or blogs to extract information. Hence successful brands have to exceed customer expectations. For instance, Progressive Insurance provides the customers an inspiring and distinctive experience by arriving at the accident scene to provide guidance and reassurance to the customer. The organization has to move from a brand management approach to brand stewardship which reviews and refines the brand strategy from time to time. There has to be a close tie between the corporate strategy and the brand. A strong brand requires breadth and focus, Brand exposure increases awareness and this can be done through strong affiliations with equally strong brands. Customers have to be surrounded with brand messages and today this is possible with viral and internet marketing. Brands must be able to consistently deliver distinctive customer experience. Hertz, for instance has understood the attributes and the touchpoints that matter the most to the customers. It has identified the gaps and closed the gaps to enhance the customer experiences. Its brand performance is linked to its brand message ‘Hertz Exactly’ which communicates to the business traveler that Hertz can reduce the emotional anxiety. Thus the importance and value of brands is undisputed – for the customer as well as for the brand owners. As far as a consumer is concerned a brand reduces the risk and cost of search for a product. It enhances the confidence of the consumer, reduces their anxiety but the brand must be able to consistently deliver promise to the consumer. In case the brand invests in extensions without careful insight it stands to lose the trust and loyalty of the customer. Brands go in for ingredient branding or line extensions but these are not always the right strategy for the company. Today consumers are well informed and have several touchpoints to extract information. Hence brand extensions and brand equity have to be thoughtfully planned. Brand owners benefit through increased market share, reduced advertising spending but brand positioning has to be maintained. Trying to extend the brand to too many products even it is in the same category can result in diluting and weakening the brand as in the case of Nestle. Today it is no more about big brands or long standing brands but what is required is a strong brand. To build a strong brand requires identification of the customer needs, providing distinctive customer experience, trying to have as many touchpoints as possible, using technology to keep in touch with the customers, associating the brand with the corporate strategy and having affiliations with equally strong brands. 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