Marketing Management Chapter 9

Marketing Management:
An Asian Perspective,
6th Edition
Instructor Supplements
Created by Geoffrey da Silva

Creating Brand Equity
3
9 © Pearson Education South Asia Pte Ltd 2013. All rights reserved

Learning Issues for Chapter Nine
1. What is a brand and how does branding work?
2. What is brand equity?
3. How is brand equity built, measured, and managed?
4. What are the important brand architecture decisions in
developing a branding strategy?

The Importance of Building Strong Brands
• One of the most valuable intangible assets of a firm is its
brands, and it is incumbent on marketing to properly manage
their value.
• Building a strong brand is both an art and a science.
• It requires careful planning, a deep long-term commitment,
and creatively designed and executed marketing.
• A strong brand commands intense consumer loyalty—at its
heart is a great product or service.

Strategic Brand Management
• Marketers of successful 21st Century brands must excel at the
strategic brand management process.
• Strategic brand management combines the design and
implementation of marketing activities and programs to build,
measure, and manage brands to maximize their value.

The Strategic Brand Management Process
The strategic brand management process involves four main
steps:
1. Identifying and establishing brand positioning
2. Planning and implementing brand marketing
3. Measuring and interpreting brand performance
4. Growing and sustaining brand value

What is a Brand Equity?
• Perhaps the most distinctive skill of professional marketers is their
ability to create, maintain, enhance, and protect brands.
• The American Marketing Association defines a brand as “a name,
term, sign, symbol, or design, or a combination of them, intended
to identify the goods or services of one seller or group of sellers and
to differentiate them from those of competitors.”
• A brand is thus a product or service whose dimensions
differentiate it in some way from other products or services
designed to satisfy the same need.

Differentiation Created By Brands
• The differences created through branding may be functional,
rational, or tangible-related to the product performance of the
brand.
• They may also be more symbolic, emotional, or intangible-related
to what the brand represents.

The Role of Brands
• Brands identify the source or maker of a product and allow
consumers to assign responsibility for its performance to a
particular manufacturer or distributor.
• Consumers learn about brands through experiences with the
product and its marketing program.

Brands Perform Valuable Functions for the Firm
1. A credible brand signals a certain level of quality so that
satisfied buyers can easily choose the product again.
2. Brand loyalty provides predictability and security of demand for
the firm and creates barriers to entry for other firms.
3. Branding can be a powerful means to secure a competitive
advantage.
4. To firms, brands represent enormously valuable pieces of legal
property that can influence consumer behavior, be bought and
sold, and provide their owner the security of sustained future
revenues.

Challenges of Branding in Asia
Branding has not been a historical imperative for many Asian
businesses. Some possible reasons include:
a. Asian businesses were more involved in performing the
distribution function for the region’s imports and exports.
b. Ideological reasons led countries such as China and Vietnam
to discourage branding in the past.
c. Many companies (e.g., those in Taiwan) have been
successful in contract manufacturing under global brand
names, even though brand name manufacturers can replace
them by shifting to even cheaper sources elsewhere.

Challenges of Branding in Asia
d. Still others benefited as franchisees or as regional joint-venture
partners of Western franchises.
e. Previously protected domestic industries and markets also
meant there was less need to invest in brand building.

China Airlines—Branding Strategy
A branding makeover for China Airlines included making the airline more international and less-
Taiwan or government associated.

Five Challenges for Asian Brands
Kwon Ping Ho, chairman of Banyan Tree Group, outlined five
challenges for Asian brands with global ambitions:
1.Asian companies must overcome inherent parochialism.
2.Asian brands must adopt a corporate culture that sustains a
global perspective.
3.Asian brands must face the challenge of maintaining an Asian
brand identity as they go global.
4.Asian brands must rise above the cheap low-quality image.
5.Asian companies must think like a global company despite
being small.

Branding Strategy for Banyan Tree
Banyan Tree’s brand cuts across cultural barriers. Its brand is distinctive, focusing on the exotic
tropical beach lushness and graciousness of Southeast Asian hospitality; and yet, not culture-specific.

The Scope Of Branding
• How then do you “brand” a
product?
• A brand is a perceptual entity
that is rooted in reality but
reflects the perceptions and
idiosyncrasies of consumers.
• Branding is endowing
products and services with
the power of a brand.

• Branding is all about creating
differences between
products.
• Marketers need to teach
consumers “who” the product
is, “what” the product does,
and “why” consumers should
care.

• Branding involves creating mental structures and helping consumers
organize their knowledge about products and services in a way that clarifies
their decision-making and provides value to the firm.
• For branding strategies to be successful and brand value to be created,
consumers must be convinced there are meaningful differences among
brands in the product or service category.
• Marketers can apply branding virtually anywhere a consumer has a choice.
• A brand can be a product, service, store, person, place, an organization, or
an idea.

Branding of a ‘Place’
Even countries can be branded.
Malaysia is branded as “Truly
Asia.”

Brand Equity
• Brand equity is the added value endowed to products and
services.
• It may be reflected in the way consumers think, feel, and act
with respect to the brand, as well as in the prices, market
share, and profitability the brand commands.

Brand Equity
• Marketers and researchers use various perspectives to study
brand equity.
• Customer-based brand equity is thus the differential effect
brand knowledge has on consumer response to the marketing
of that brand.

Positive and Negative Customer-Based Brand Equity
• A brand has positive customer-based brand equity when
consumers react more favorably to a product and the way it is
marketed when the brand is identified, than when it is not
identified.
• A brand has negative customer-based brand equity if
consumers react less favorably to marketing activity for the
brand under the same circumstances.

Three Ingredients to Customer-Based Brand Equity
1. Brand equity arises from difference in consumer response.
2. Differences in response are a result of consumer’s brand
knowledge. Brand knowledge consists of all thoughts,
feelings, images, experiences, beliefs, and so on that
become associated with the brand.
3. Brand equity is reflected in perceptions, preferences, and
behavior related to all aspects of the marketing of a brand.

Table 9.1: Marketing Advantages of Strong Brands

Challenge for Marketers in Brand Building
• The challenge for marketers is therefore ensuring that
customers have the right type of experiences with products
and services and their marketing programs to create the
desired brand knowledge.
• In an abstract sense, brand equity can be seen as providing
marketers with a vital strategic “bridge” from their past to
their future.

Customer Experiences with Brands
Customer experiences with Apple’s iPod and Creative Tech’s Zen were so vastly different that iPod
has a much larger share despite Creative Tech having the first bite at the MP3 player market.

Challenge for Marketers in Brand Building
• Marketers should also think of the marketing dollars spent on
products and services each year as investments in consumer
brand knowledge.
• The quality of that investment is the critical factor, not
necessarily the quantity (beyond some threshold amount).
It’s actually possible to overspend on brand building, if money
is not spent wisely.

Brand Knowledge
• Brand knowledge dictates appropriate future directions for the
brand. A brand promise is the marketer’s vision of what the
brand must be and do for consumers.
• Consumers will decide, based on what they think and feel
about the brand, where (and how) they believe the brand
should go and grant permission (or not) to any marketing
action or program.

Four Types of Brand Assets for Asian Brands
(Batey)
1. Golden assets—These refer to natural commodities such as
rice, wheat, fruit, tea, fish, cotton, timber, rubber, and
minerals, which are abundant in the region and usually
exported. Yet, no Asian brand with a global standing exists in
this category.
2. Acquired assets—These refer to a branding opportunity on
the back of an identity that enjoys strong credibility. Asia’s
reputation for quality personal services and hospitality is an
area where a global Asian hotel brand can emerge.

Four Types of Brand Assets for Asian Brands
(Batey)
3. Potential assets—These refer to the building of a global
Asian brand from scratch.
4. Combining acquired assets with potential assets—This
hybrid approach may be achievable in the arts and
entertainment industry by leveraging Asia’s extraordinary
history.

Potentials for Global Brands
Chinese brands such as Tiger Balm, Boh Tea, and Jim Thompson Silk can potentially be global
brands.

Marketing Memo
A Checklist for Developing Global Asian Brands

Brand Equity Models
1. BRAND ASSET VALUATOR MODEL
2. BRANDZ MODEL
3. BRAND RESONANCE MODEL

Brand Asset Valuator
• Advertising agency Young and Rubicam (Y&R) developed a
model of brand equity called brand asset valuator (BAV).
• Based on research with almost 800,000 consumers in 51
countries, BAV provides comparative measures of the brand
equity of thousands of brands across hundreds of different
categories.
• There are four key components or pillars of brand equity
according to BAV (see Figure 9.1).

The Four Elements of the BAV Model
1. Energized differentiation measures the degree to which a
brand is seen as different from others.
2. Relevance measures the appropriateness and breadth of a
brand’s appeal.
3. Esteem measures perceptions of quality and loyalty, or how
well the brand is regarded and respected.
4. Knowledge measures how aware and familiar consumers
are with a brand.

Figure 9.1: Brand Asset Valuator Model

Combining the Elements
• Energized Differentiation and Relevance combine to
determine Brand Strength.
• Esteem and Knowledge together create Brand Stature.
• Energized Brand Strength and Brand Stature combined form
the Power Grid, depicting stages in the cycle of brand
development in successive quadrants.
• See Figure 9.2.

Figure 9.2: The Universe of Brand Performance

BRANDZ
• According to this model, brand building involves a sequential
series of steps, with each step contingent upon successfully
accomplishing the previous step.
• See Figure 9.3: Brand Dynamics Pyramid
• Main levels:
– Presence—Do I know about it?
– Relevance—Does it offer me something?
– Performance—Can it deliver?
– Advantage—Does it offer something better than others?
– Bonding—Nothing else beats it.

Figure 9.3: Brand Dynamics Pyramid
Research has shown that bonded consumers build stronger relationships with the brand and spend
more of their category expenditures on the brand than those at lower levels of the pyramid.

Brand Resonance
The brand resonance model views brand building as an
ascending, sequential series of steps, from bottom to top.
1. Ensuring customers identify the brand and associate it with a specific
product class or need.
2. Firmly establishing the brand meaning in customers’ minds by
strategically linking a host of tangible and intangible brand associations.
3. Eliciting the proper customer responses in terms of brand-related
judgment and feelings.
4. Converting customers’ brand response to an intense, active loyalty.

Figure 9.4: Brand Resonance Pyramid

Brand Resonance
The creation of significant brand equity requires reaching the
top or pinnacle of the brand pyramid:
a.Brand salience refers to how often and how easily
consumers think of the brand.
b.Brand performance is how well the product or service meets
customers’ functional needs.
c.Brand imagery describes the extrinsic properties of the
product or service.

Brand Resonance
d. Brand judgments focus on customers’ own personal
opinions and evaluations.
e. Brand feelings are the customers’ emotional responses and
reactions with respect to the brand.
f. Brand resonance refers to the nature of the relationship
customers have with the brand and the extent to which they
feel they’re “in sync” with.

Building Brand Equity
Marketers build brand equity by creating the right brand
knowledge structures with the right consumers. There are
three main sets of brand equity drivers:
a. The initial choice for the brand elements or identities making up
the brand.
b. The product and service and all accompanying marketing
activities and supporting marketing programs.
c. Other associations indirectly transferred to the brand by linking
it to some other entity.

Choosing Brand Elements
• Brand elements are trademarkable devices that identify and
differentiate the brand.
• Marketers should choose brand elements to build as much
brand equity as possible.
• The test is what consumers would think or feel about the
product if the brand element were all they knew.

Brand Elements—Nintendo Wii
The Wii name is suggestive of
two people playing and its
pronunciation implies that the
video game console is for
everyone.

Brand Element Choice Criteria
• There are six criteria for choosing brand elements.
• The first three—memorable, meaningful, and likable—are
“brand building.”
• The latter three—transferable, adaptable, and protectable—
are “defensive” and help leverage and preserve brand
equity against challenges.

The Six Choice Criteria
1. Memorable—How easily is the brand element recalled? How
easily recognized? Is this true at both purchase and
consumption. Moreover, the brand name should also look
distinctive to be memorable in Asia.
2. Meaningful—To what extent is the brand element credible
and suggestive of the corresponding category? Does it
suggest something about a product ingredient or the type of
person who might use the brand?

Memorable: Qoo has a short and cute name that
appeals to Asians.

Meaningful: The Chinese meaning of Nike, Nai Ke,
耐克, resonates with the fighting spirit in sports.

Biotherm highlights its European origin in its
Chinese name (碧欧泉) to compete more effectively
in China.

3. Likeable—How aesthetically appealing do consumers find
the brand element? Is it inherently likeable visually, verbally,
and in other ways?
4. Transferable—Can the brand element be used to introduce
new products in the same or different categories? To what
extent does the brand element add to brand equity across
geographic boundaries and market segments?

5. Adaptable—How adaptable and updatable is the brand
element? As many Asian brands modernize, their elements
need to be adaptable and yet retain the traditional values of
the brand.
6. Protectable—How legally protectable is the brand element?
How competitively protectable? Can it be easily copied? It is
important that names that become synonymous with product
categories—such as Kleenex, Scotch Tape, and Xerox—retain
their trademark rights and not become generic.

Protecting Brand Names
Foreign companies seeking to invest in Asia should thus ensure their brand name and trademark are
registered in the Asian country of interest. For example, Starbucks in China ran into intellectual
property disputes with a local coffee shop in Shanghai, U-Like Coffee.

Implications for Marketers in Asia
• Given the rapid growth of the global marketplace, Asian companies
should choose brand names that work outside the region.
• Just as foreign businesses must be cognizant of Asian aspects of
brand naming, Asian companies should select names that are
meaningful and pronounceable in other languages as they expand
outside the region.
• Otherwise, they will find that they cannot use their names when
they go abroad.
• See Marketing Memo: Brand Naming in China.

Marketing Memo: Brand Naming in China

Challenges of Asian Brands
• Asian companies often face the problem that their domestic
brand is not well known overseas, or their name may be
associated with poor quality or image abroad.
• In addition to building their own names overseas, some Asian
businesses overcome this problem by buying established
foreign businesses and their brand names.
• Mulberry, Crabtree & Evelyn, and Escada—well-known
European brands—are owned by Asian companies.

Mulberry
Asian companies overcome low brand name awareness or inferior image by buying established
foreign businesses. Mulberry, a famous high-end European brand, is owned by a Singaporean
business.
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© Pearson Education South Asia Pte Ltd 2013. All rights reserved

Developing Brand Elements
Brand elements can play a number of brand-building roles.
a. If consumers don’t examine much information in making
product decisions, brand elements should be easy to recall
and inherently descriptive and persuasive.
b. The likability of brand elements may also increase awareness
and associations.

Developing Brand Elements
c. Often, the less concrete brand benefits are, the more
important that brand elements capture intangible
characteristics.
d. Like brand names, slogans are an extremely efficient means
to build brand equity.
– Think of the inherent brand meaning in slogans such as “A Great
Way to Fly” (Singapore Airlines).
c. They can function as useful “hooks” to help consumers
grasp what the brand is and what makes it special.

Hong Kong’s Cathay Pacific has its logo in Chinese
calligraphy because it wants to convey the
intangible benefits of an Asian service.

Designing Holistic Marketing Activities
• Brands are not built by advertising alone.
• Customers come to know a brand through a range of contacts and touch
points:
– Personal observations
– Personal use
– Word of mouth
– Interactions with company personnel
– Online or telephone experiences
– Payment transactions
• A brand contact is any information-bearing experience, whether positive
or negative, a customer or prospect has with the brand, its product
category, or its market.

Designing Holistic Marketing Activities – Integrated
Marketing
• Marketers are creating brand contacts and building brand
equity through new avenues such as clubs and consumer
communities, trade shows, event marketing, sponsorship,
factory visits, public relations and press releases, and social
cause marketing.
• Integrated marketing is about mixing and matching these
marketing activities to maximize their individual and
collective effects.

Designing Holistic Marketing Activities – Integrated
Marketing
• Marketers need a variety of different marketing activities that
consistently reinforce the brand promise.
• We can evaluate integrated marketing activities in terms of
the effectiveness and efficiency with which they affect brand
awareness and create, maintain, or strengthen brand
associations and image.

Internal Branding
• Marketers must “walk the talk” to deliver the brand promise.
• They must adopt an internal perspective to consider what steps
to take to be sure employees and marketing partners appreciate
and understand basic branding notions, and how they can help or
hurt brand equity.
• Internal branding is activities and processes that help to inform and
inspire employees.
• An up-to-date, deep understanding of the brand and its promise by
all employees is critical for service companies and retailers.

Brand Bonding
• Brand bonding occurs when customers experience the company as
delivering on its brand promise.
• All of the customers’ contacts with company employees and company
communications must be positive.
• The brand promise will not be delivered unless everyone in the company
lives the brand.
• One of the most potent influences on brand perception is the experience
customers have with company personnel.
For example, the in-flight service provided by the Singapore Girl is a critical
ingredient of Singapore Airlines’ branding success.

Important Principles of Internal Branding
1. Choose the right moment—Turning points are ideal
opportunities to capture employees’ attention and
imagination. Example: BP – “Beyond Petroleum”.
2. Link internal and external marketing—Internal and external
messages must match.
3. Bring the brand alive for employees—A professional branding
campaign should be based on marketing research and
supervised by the marketing department. Internal
communications should be informative and energizing.

Brand Communities
A brand community is a specialized community of consumers
and employees whose identification and activities focus around
the brand.

Three elements affect brand communities:
1. A “consciousness of kind” or sense of felt connection to the
brand, company, product, or other community members
2. Shared rituals, stories, and traditions that help to convey the
meaning of the community
3. A shared moral responsibility or duty to both the community
as a whole and individual community members

Nike
Nike established a brand community with its Nike+ Web site that allows runners to record and track
their performances and communicate with others around the world.
72

Importance of Brand Communities
• A strong brand community results in a more loyal, committed
customer base.
• Its activities and advocacy can substitute to some degree for
activities the firm would otherwise have to engage in,
creating greater marketing effectiveness and efficiency.
• A brand community can also be a constant source of
inspiration and feedback for product improvement or
innovations.
• See Table 9.2.

Table 9.2: Value Creation Practices (of Brand
Communities)

Building Brand Communities—Avoiding the Myths
• Building a positive, productive brand community requires
careful thought and implementation.
• There are many myths that need to be avoided.
• See Table 9.3.

Table 9.3: The Myths and Realities of Brand
Communities

Leveraging Secondary Associations
• The third and final way to build equity is, in effect, to “borrow
it.”
• That is, create brand equity by linking the brand to other
information in memory that conveys meaning to consumers.
• These “secondary” brand associations can link the brand to
sources.

Secondary Brand Associations
1. The company’s branding strategies
2. Countries or other geographical regions—identification of
product origin
3. Channels of distribution—channel strategy
4. Other brands—ingredient or co-branding
5. Characters—licensing
6. Spokespeople—endorsements
7. Sporting or cultural events—sponsorships
8. Other third party sources—awards or reviews

Figure 9.5: Secondary Sources of Brand Knowledge

Measuring Brand Equity
• An indirect approach—assesses potential sources of brand
equity by identifying and tracking consumer brand knowledge
structures.
• A direct approach—assesses the actual impact of brand
knowledge on consumer response to different aspects of the
marketing.
• The two general approaches are complementary and
marketers can employ both.

Important Factors Marketers Should Know About
Brand Equity
• Fully understand the sources of brand equity and how they
affect outcomes of interest.
• How these sources and outcomes change over time.

Brand Audit and Brand Tracking
• A brand audit is a consumer-focused series of procedures to
assess the health of the brand, uncover its sources of brand
equity, and suggest ways to improve and leverage its equity.
• Brand-tracking studies collect quantitative data from
consumers on a routine basis over time to provide marketers
with consistent, baseline information about how their brands
and marketing programs are performing on key dimensions.

Brand Audit—KFC in China
• A study comparing the brand
image of KFC in China and in
the U.S. showed that young
Chinese consumers tended to
rate KFC more favorably than
their American counterparts.
• KFC was rated better on
providing a healthy, well-balanced
meal; efficient and
courteous staff; and more
attractive advertising.

Brand Value Chain

Brand Valuation
• Brand equity needs to be distinguished from brand valuation,
which involves estimating the total financial value of the
brand.
• Table 9.4 displays the world’s most valuable brands in 2010
according to one ranking.
• “Marketing Insight: What is a Brand Worth?” reviews one
popular valuation approach.

Table 9.4: The World’s 10 Most Valuable Brands

1. Market segmentation—The first step in the Brand
Valuation process is to divide the market(s) in which the
brand is sold into mutually exclusive segments of customers
that help to determine the variances in the brand’s economic
value.
2. Financial analysis—Interbrand assesses purchase price,
volume, and frequency to help calculate accurate forecasts of
future brand sales and revenues.
3. Role of branding—Interbrand next attributes a proportion
of intangible earnings to the brand in each market segment.

4. Brand strength—Interbrand then assesses the brand’s
strength profile to determine the likelihood that the brand
will realize forecast earnings. This step relies on competitive
benchmarking.
5. Brand value calculation—Brand value is the net present
value (NPV) of the forecast brand earnings, discounted by
the brand discount rate. The NPV calculation comprises both
the forecast period and the period beyond, reflecting the
ability of brands to continue generating future earnings.

Managing Brand Equity
Because consumer responses to marketing activity depend on
what they know and remember about a brand, short-term
marketing actions, by changing brand knowledge, necessarily
increase or decrease the long-term success of future marketing
actions.

Brand Reinforcement
• As the company’s major enduring asset, a brand needs to be
carefully managed so that its value does not depreciate.
• Long-lived Asian brands include Mikimoto pearls, Poh Chai
pills, and San Miguel beer.
90
San Miguel Corporation, which
produces the best-selling beer
around the world, was founded in
1890 in the Philippines.

Brand Reinforcement
• As the company’s major enduring asset, a brand needs to be
carefully managed so that its value does not depreciate.
• Marketers can reinforce brand equity by consistently
conveying the brand’s meaning in terms of:
a. What products it represents?
b. What products the brand represents?
c. What core benefits it supplies?
d. What needs it satisfies?
e. How the brand makes products superior?
f. Which strong, favorable, and unique brand associations should
exist in consumers’ minds?

Brand Reinforcement
• Reinforcing brand equity requires that the brand always be
moving forward—in the right direction and with new and
compelling offerings and ways to market them.
• An important part of reinforcing brands is providing consistent
marketing support.
• Consistency does not mean uniformity and no changes: many
tactical changes may be necessary to maintain the strategic
thrust and direction of the brand.

Challenges of Managing Brand Equity for Asian
Companies
• Many Asian companies have mismanaged their brands for a variety
of reasons.
• In the quest for ever-increasing profits, some Asian brands become
distracted and lose focus.
• Their owners venture into unrelated activities for short-term gains
(e.g., property).
• Underinvestment and neglect have also caused many erstwhile
popular Asian brands in such product categories as athletic shoes,
patent medicines, underwear, and cosmetics to fade into oblivion.

Brand Reinforcement
Marketers must recognize the trade-offs between activities
that fortify the brand and reinforce its meaning, such as a well-received
product improvement or a creatively designed ad
campaign, and those that leverage or borrow from existing
brand equity to reap some financial benefit, such as a short-term
promotional discount.

Brand Revitalization
• Changes in consumer tastes and preferences, the emergence
of new competitors or new technology, or any new
development in the marketing environment could potentially
affect the fortunes of a brand.
• In virtually every product category, there are examples of
once prominent and admired brands that have fallen on hard
times or, in some cases, disappeared.

• Nevertheless, a number of these brands have managed to
make impressive comebacks in recent years, as marketers
have breathed new life into their customer franchises.
• Asian brands such as Tiger Balm have seen their brand
fortunes successfully turned around to varying degrees.

• Often, the first thing to do in revitalizing a brand is to
understand what the sources of brand equity were to begin
with.
• Are positive associations losing their strength or uniqueness?
Have negative associations become linked to the brand?
• Then decide whether to retain the same positioning or create
a new one, and if so, which new one.

Brand Revitalization—Eu Yan Sang
The Bak Foong pill still remains
a major stalwart as part of Eu
Yan Sang’s product line,
especially after having
undergone a packaging revamp
to appeal to a more modern
audience.

• Sometimes the actual marketing program is the source of the
problem, because it fails to deliver on the brand promise.
Then a “back to basics” strategy may make sense.
• In other cases, however, the old positioning is just no longer
viable and a reinvention strategy is necessary.
• There is obviously a continuum of revitalization strategies,
with pure “back to basics” at one end, pure “reinvention” at
the other, and many combinations in between.

• The challenge is often to change enough to attract some new
customers but not enough to alienate old customers.
• Brand revitalization of almost any kind starts with the
product.

Brand Revitalization – Crabtree & Evelyn
A rebranding exercise of Malaysian-owned Crabtree & Evelyn saw its packaging and store concept
changed, winning new customers and improving sales.

Devising a Branding Strategy
• A firm’s branding strategy reflects the number and nature of
both common and distinctive brand elements.
• Deciding how to brand new products is especially critical.

Branding Strategy Options
A firm has three main choices:
1. It can develop new brand elements for the new product.
2. It can apply some of its existing brand elements.
3. It can use a combination of new and existing brand
elements.

Branding Strategy
• When a firm uses an established brand to introduce a new
product, it is called a brand extension.
• When marketers combine a new brand with an existing brand,
the brand extension can also be called a sub-brand.
• If the parent brand is already associated with multiple
products through brand extensions, it can be called a master
brand or family brand.

Brand Extensions
Brand extensions fall into two general categories:
1. In a line extension, the parent brand covers a new product
within a product category it currently serves.
2. In a category extension, marketers use the parent brand
to enter a different product category.

Examples of Brand Line Extensions in China
Many companies entering China have adapted to local tastes by
introducing new flavors and new ingredients.
i. Unilever in China has introduced jasmine iced tea; Colgate-
Palmolive came up with jasmine soap.
ii. Procter & Gamble even has jasmine-scented Crest toothpaste.
iii. McDonald’s line of fast-food items includes red bean sundaes.
iv. Pepsi’s Frito-Lay bags Peking duck-flavored potato chips.

Brand Line Extension – Frito-Lay
Frito-Lay extends its potato chip line by introducing flavors that adapt to Asian tastes. Flavors
include Peking duck, kimchi, and chili crab.

Extending the Brand Category
• A brand line consists of all products—original as well as line and
category extensions sold under a particular brand.
• A brand mix (or brand assortment) is the set of all brand lines that
a particular seller makes.
• Many companies are now introducing branded variants that are
specific brand lines supplied to specific retailers or distribution
channels.
• A licensed product is one whose brand name has been licensed to
other manufacturers that actually make the product.

Licensing—Hello Kitty
Hello Kitty has been licensed to
many products including credit
cards, toasters, purses,
confectionery, and UNO card
games.

Branding Decisions
• The first branding strategy is whether to develop a brand
name for a product.
• Today, branding is such as strong force that hardly anything
goes unbranded.
• A commodity is a product presumably so basic that it cannot
be physically differentiated in the minds of consumers.
• Assuming a firm decides to brand its products or services, it
must choose which brand names to use.

Three Alternative Branding Strategies
Three general strategies are popular:
1. Individual or separate family brand names.
2. Corporate or company brand name.
3. Sub-brand name.

Individual or Separate Family Brand Names
• This policy is followed by Procter & Gamble (Head & Shoulders, Pantene,
Rejoice).
• A major advantage of an individual-names strategy is that the company
does not tie its reputation to the products.
• If the product fails or appears to have low quality, the company’s name or
image is not hurt.
• Companies often use different brand names for different quality lines within
the same product class:
i. Singapore Airlines named its regional air carrier SilkAir in part to
protect the equity of the Singapore Airlines brand.
ii. When Toyota introduced high-end luxury cars, it used Lexus.

Branding by Toyota
Except for its Lexus range,
Toyota uses an umbrella
corporate name accompanied
by a subbrand (Toyota Camry,
Toyota Vios, Toyota Altis) to
individualize each model.

Corporate Umbrella or Company Brand Name
• This policy is followed by Hitachi. A blanket family name also has
advantages.
• Development cost is less because there is no need for “name” research or
heavy advertising expenditures to create brand-name recognition.
• Further, sales of the new product are likely to be strong if the
manufacturer’s name is good.
• Moreover, the tendency that Asians like to know who they buy from
supports this approach (as well as the use of corporate names with
individual product names).
• Hence, family and corporate brands are more evident in Asia than in the
West.

Corporate Name with Individual Product Names
• This subbranding or hybrid branding policy is followed by
Sony (Sony Bravia, Sony Walkman, Sony Vaio, Sony
PlayStation), Honda, and Hewlett-Packard.
• The company name legitimizes, and the individual name
individualizes, the new product.

House of Brands versus A Branded House
• The use of individual or separate family brand names has
been referred to as a “house of brands” strategy, whereas the
use of an umbrella corporate or company brand name has
been referred to as a “branded house” strategy.
• These two branding strategies represent two ends of a brand
relationship continuum.
• A subbrand strategy falls somewhere between, depending on
which component of the subbrand receives more emphasis.

Brand Portfolios
• A brand can only be stretched so far, and all the segments the
firm would like to target may not view the same brand
equally favorably.
• Marketers often need multiple brands in order to pursue
these multiple segments.

Brand Portfolios
• Some reasons to introduce multiple brands in a category
include:
i. To increase shelf presence and retailer dependence in the store
ii. To attract consumers seeking variety who may otherwise have
switched to another brand
iii. To increase internal competition within the firm
iv. To yield economies of scale in advertising, sales,
merchandising, and physical distribution

Brand Portfolios
• The brand portfolio is the set of all brands and brand lines a
particular firm offers for sale in a particular category or
market segment.
• The hallmark of an optimal brand portfolio is the ability of
each brand in it to maximize equity in combination with all
the other brands in it.
• In general, the basic principle in designing a brand portfolio is
to maximize market coverage, so that no potential customers
are being ignored.

Brand Portfolios
• Minimize brand overlap so brands are not competing for
customer approval.
• Each brand should be clearly differentiated and appealing to a
sizable enough marketing segment to justify its marketing
and production costs.

Brand Portfolio
• Marketers carefully monitor brand portfolios over time to
identify weak brands and kill unprofitable ones.
• Brand lines with poorly differentiated brands are likely to be
characterized by much cannibalization and require pruning.
• Brands can also play a number of specific roles as part of a
portfolio.

Roles of Brands in a Brand Portfolio
1. Flankers: Flanker or “fighter” brands are positioned with
respect to competitors’ brands so that more important (and
more profitable) flagship brands can retain their desired
positioning.
2. Cash Cows: Some brands may be kept around despite
dwindling sales because they manage to maintain their
profitability with virtually no marketing support.

Roles of Brands in a Brand Portfolio
3. Low-End Entry-Level: The role of a relatively low-priced
brand in the portfolio often may be to attract customers to
the brand franchise.
4. High-End Prestige: The role of a relatively high-priced
brand often is to add prestige and credibility to the entire
portfolio.

Brand Extensions
• Many firms have decided to leverage that asset by introducing a host of
new products under some of its strongest brand names.
• Most new products are in fact line extensions—typically 80 to 90 percent in
any one year.
• Moreover, many of the most successful new products, as rated by various
sources, are extensions (e.g., Microsoft Xbox video game system and Apple
iPad tablet).
• Brand extensions have two main advantages:
i. Facilitate new product acceptance
ii. Provide positive feedback to the parent brand and company

Improved Odds of New-Product Success
Brand extensions improve the odds of new product success in a number of
ways:
• Consumers can make inferences and form expectations as to the likely
composition and performance of a new product based on what they already
know about the parent brand itself.
• Extensions reduce risk.
• Extensions can result in reduced costs of the introductory launch campaign.
• They can avoid the difficulty of coming up with a new name.
• Extensions allow for packaging and labeling efficiencies.

Improved Odds of New-Product Success
• Brand extensions can help clarify the meaning of a brand and
its core brand values or improve consumer perceptions of the
credibility of the company behind the extension.
• Line extensions can renew interest and liking for the brand
and benefit the parent brand by expanding market coverage.
• One benefit of a successful extension is that it may also serve
as the basis for subsequent extensions.

Example of Brand Extension
In an alliance with Essilor, Nikon has extended its expertise in camera lenses to eyewear lenses. It
hopes consumers will infer that its eyewear lenses are as reliable as its camera lenses.

Disadvantage of Brand Extensions
• Line extensions may cause the brand name to be less
strongly identified with any one product.
• Ries and Trout call this the “line-extension trap.”
• Brand dilution occurs when consumers no longer associate a
brand with a specific or highly similar set of products and
start thinking less of the brand.

• If a firm launches extensions consumers deem inappropriate,
they may question the integrity of the brand.
• Different varieties of line extensions may confuse and
perhaps even frustrate consumers.
• Retailers may reject many new products and brands because
they don’t have the shelf or display space for them.

• The worst possible scenario is for an extension not only to
fail, but to harm the parent brand in the process.
• Even if sales of a brand extension are high and meet targets,
it is possible that this revenue will have resulted from
consumers switching to the extension from existing product
offerings of the parent brand—called pre-emptive
cannibalizing.

• Intra-brand shifts in sales may not necessarily be so
undesirable, as they can be thought of as a form of pre-emptive
cannibalization.
• One easily overlooked disadvantage of brand extensions is
that the firm foregoes the chance to create a new brand with
its own unique image and equity.

Success Characteristics
• Marketers must judge each potential brand extension by how
effectively it leverages existing brand equity from the parent
brand, as well as how effectively, in turn, it contributes to the
parent brand’s equity.
• The most important consideration with extensions is that
there is “fit” in the minds of the consumer.
• One major mistake in evaluating extension opportunities is
failing to take all of consumers’ brand knowledge structures
into account.

Key Questions in Evaluating the Success of a Brand
Extension
1. Does the parent brand have strong equity?
2. Is there a strong basis of fit?
3. Will the extension have the optimal points-of-parity and points-of-difference?
4. How can marketing programs enhance extension equity?
5. What implications will the extension have for parent brand equity
and profitability?
6. How should feedback effects best be managed?

Table 9.5: Brand Extendability Score Card

Table 9.6: Research Insights on Brand Extensions

Customer Equity
• Achieving brand equity should be a top priority for any
organization.
• We can relate brand equity to customer equity.
• Brand equity and customer equity both emphasize the
importance of customer loyalty.
• The customer equity perspective focuses on bottom-line
financial value. Its clear benefit is its quantifiable measures of
financial performance.

Customer Equity
• Brand equity emphasizes strategic issues in managing brands
and creating and leveraging brand awareness and image with
customers. It provides much practical guidance for specific
marketing activities.
• Brand equity and customer equity both matter—no brands
without customers, and no customers without brands.

Marketing Memo

Marketing Management Chapter 9

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