Thus, the key to creating a brand, according to the AMA definition, is to be able to choose a name, logo, symbol, package design, or other characteristic that identifies a product and distinguishes it from others. These different components of a brand that identify and differentiate it are brand elements. We’ll see in Chapter 4 that brand elements come in many different forms.

For example, consider the variety of brand name strategies. Some companies, like General Electric and Samsung, use their names for essentially all their products. Other manufacturers assign new products individual brand names that are unrelated to the company name, like Procter & Gamble’s Tide, Pampers, and Pantene product brands. Retailers create their own brands based on their store name or some other means; for example, Macy’s has its own Alfani, INC, Charter Club, and Club Room brands.

Brand names themselves come in many different forms.3 There are brand names based on people’s names, like Estée Lauder cosmetics, Porsche automobiles, and Orville Redenbacher popcorn; names based on places, like Sante Fe cologne, Chevrolet Tahoe SUV, and British Airways; and names based on animals or birds, like Mustang automobiles, Dove soap, and Greyhound buses. In the category of “other,” we find Apple computers, Shell gasoline, and Carnation evaporated milk.

Some brand names use words with inherent product meaning, like Lean Cuisine, Ocean Spray 100% Juice Blends, and Ticketron, or suggesting important attributes or benefits, like DieHard auto batteries, Mop & Glo floor cleaner, and Beautyrest mattresses. Other names are made up and include prefixes and suffixes that sound scientific, natural, or prestigious, like Lexus automobiles, Pentium microprocessors, and Visteon auto supplies.

Not just names but other brand elements like logos and symbols also can be based on people, places, things, and abstract images. In creating a brand, marketers have many choices about the number and nature of the brand elements they use to identify their products.

How do we contrast a brand and a product? A product is anything we can offer to a market for attention, acquisition, use, or consumption that might satisfy a need or want. Thus, a product may be a physical good like a cereal, tennis racquet, or automobile; a service such as an airline, bank, or insurance company; a retail outlet like a department store, specialty store, or supermarket; a person such as a political figure, entertainer, or professional athlete; an organization like a nonprofit, trade organization, or arts group; a place including a city, state, or country; or even an idea like a political or social cause. This very broad definition of product is the one we adopt in the book . We’ll discuss the role of brands in some of these different categories in more detail later in this chapter and in Chapter 15.

We can define five levels of meaning for a product:4

1. The core benefit level is the fundamental need or want that consumers satisfy by consuming the product or service.

2. The generic product level is a basic version of the product containing only those attributes or characteristics absolutely necessary for its functioning but with no distinguishing features. This is basically a stripped-down, no-frills version of the product that adequately performs the product function.

3. The expected product level is a set of attributes or characteristics that buyers normally expect and agree to when they purchase a product.

4. The augmented product level includes additional product attributes, benefits, or related services that distinguish the product from competitors.

5. The potential product level includes all the augmentations and transformations that a product might ultimately undergo in the future.

Figure 1-1 illustrates these different levels in the context of an air conditioner. In many markets most competition takes place at the product augmentation level, because most firms can successfully build satisfactory products at the expected product level. Harvard’s Ted Levitt argued that “the new competition is not between what companies produce in their factories but between what they add to their factory output in the form of packaging, services, advertising, customer advice, financing, delivery arrangements, warehousing, and other things that people value.”5

A brand is therefore more than a product, because it can have dimensions that differentiate it in some way from other products designed to satisfy the same need. These differences may be rational and tangible—related to product performance of the brand—or more symbolic, emotional, and intangible—related to what the brand represents.

Extending our previous example, a branded product may be a physical good like Kellogg’s Corn Flakes cereal, Prince tennis racquets, or Ford Mustang automobiles; a service such as Delta Airlines, Bank of America, or Allstate insurance; a store like Bloomingdale’s department store, Body Shop specialty store, or Safeway supermarket; a person such as Warren Buffett, Mariah Carey, or George Clooney; a place like the city of London, state of California, or country of Australia; an organization such as the Red Cross, American Automobile Association, or the Rolling Stones; or an idea like corporate responsibility, free trade, or freedom of speech.

Some brands create competitive advantages with product performance. For example, brands such as Gillette, Merck, and others have been leaders in their product categories for decades, due, in part, to continual innovation. Steady investments in research and development have produced leading-edge products, and sophisticated mass marketing practices have ensured rapid adoption of new technologies in the consumer market. A number of media organizations rank firms on their ability to innovate. Figure 1-2 lists 10 innovative companies that showed up on many of those lists in 2011.

Other brands create competitive advantages through non-product-related means. For example, Coca-Cola, Chanel No. 5, and others have been leaders in their product categories for decades by understanding consumer motivations and desires and creating relevant and appealing images surrounding their products. Often these intangible image associations may be the only way to distinguish different brands in a product category.

Brands, especially strong ones, carry a number of different types of associations, and marketers must account for all of them in making marketing decisions. The marketers behind some brands have learned this lesson the hard way. Branding Brief 1-1 describes the problems

Coca-Cola encountered in the introduction of “New Coke” when it failed to account for all the different aspects of the Coca-Cola brand image.

Not only are there many different types of associations to link to the brand, but there are many different means to create them—the entire marketing program can contribute to consumers’ understanding of the brand and how they value it as well as other factors outside the control of the marketer.

By creating perceived differences among products through branding and by developing a loyal consumer franchise, marketers create value that can translate to financial profits for the firm. The reality is that the most valuable assets many firms have may not be tangible ones, such as plants, equipment, and real estate, but intangible assets such as management skills, marketing, financial and operations expertise, and, most important, the brands themselves. This value was recognized

by John Stuart, CEO of Quaker Oats from 1922 to 1956, who famously said, “If this company were to split up I would give you the property, plant and equipment and I would take the brands and the trademarks and I would fare better than you.”6 Let’s see why brands are so valuable.

As with the term product, this book uses the term consumer broadly to encompass all types of customers, including individuals as well as organizations. To consumers, brands provide important functions. Brands identify the source or maker of a product and allow consumers to assign responsibility to a particular manufacturer or distributor. Most important, brands take on special meaning to consumers. Because of past experiences with the product and its marketing program over the years, consumers find out which brands satisfy their needs and which ones do not. As a result, brands provide a shorthand device or means of simplification for their product decisions.7

If consumers recognize a brand and have some knowledge about it, then they do not have to engage in a lot of additional thought or processing of information to make a product decision. Thus, from an economic perspective, brands allow consumers to lower the search costs for products both internally (in terms of how much they have to think) and externally (in terms of how much they have to look around). Based on what they already know about the brand—its quality, product characteristics, and so forth—consumers can make assumptions and form reasonable expectations about what they may not know about the brand.

The meaning imbued in brands can be quite profound, allowing us to think of the relationship between a brand and the consumer as a type of bond or pact. Consumers offer their trust and loyalty with the implicit understanding that the brand will behave in certain ways and provide them utility through consistent product performance and appropriate pricing, promotion, and distribution programs and actions. To the extent that consumers realize advantages and benefits from purchasing the brand, and as long as they derive satisfaction from product consumption, they are likely to continue to buy it.

These benefits may not be purely functional in nature. Brands can serve as symbolic devices, allowing consumers to project their self-image. Certain brands are associated with certain types of people and thus reflect different values or traits. Consuming such products is a means by which consumers can communicate to others—or even to themselves—the type of person they are or would like to be.8

Some branding experts believe that for some people, certain brands even play a religious role of sorts and substitute for religious practices and help reinforce self-worth.9 The cultural influence of brands is profound and much interest has been generated in recent years in understanding the interplay between consumer culture and brands.10

Brands can also play a significant role in signaling certain product characteristics to consumers. Researchers have classified products and their associated attributes or benefits into three major categories: search goods, experience goods, and credence goods.11

• For search goods like grocery produce, consumers can evaluate product attributes like sturdiness, size, color, style, design, weight, and ingredient composition by visual inspection.

• For experience goods like automobile tires, consumers cannot assess product attributes like durability, service quality, safety, and ease of handling or use so easily by inspection, and actual product trial and experience is necessary.

• For credence goods like insurance coverage, consumers may rarely learn product attributes.

Given the difficulty of assessing and interpreting product attributes and benefits for experience and credence goods, brands may be particularly important signals of quality and other characteristics to consumers for these types of products.12

Brands can reduce the risks in product decisions. Consumers may perceive many different types of risks in buying and consuming a product:13

• Functional risk: The product does not perform up to expectations.

• Physical risk: The product poses a threat to the physical well-being or health of the user or others.

• Financial risk: The product is not worth the price paid.

• Social risk: The product results in embarrassment from others.

• Psychological risk: The product affects the mental well-being of the user.

• Time risk: The failure of the product results in an opportunity cost of finding another satisfactory product.

Consumers can certainly handle these risks in a number of ways, but one way is obviously to buy well-known brands, especially those with which consumers have had favorable past experiences. Thus, brands can be a very important risk-handling device, especially in business-to-business settings where risks can sometimes have quite profound implications.

In summary, to consumers, the special meaning that brands take on can change their perceptions and experiences with a product. The identical product may be evaluated differently depending on the brand identification or attribution it carries. Brands take on unique, personal meanings to consumers that facilitate their day-to-day activities and enrich their lives. As consumers’ lives become more complicated, rushed, and time starved, the ability of a brand to simplify decision making and reduce risk is invaluable.

Brands also provide a number of valuable functions to their firms.14 Fundamentally, they serve an identification purpose, to simplify product handling or tracing. Operationally, brands help organize inventory and accounting records. A brand also offers the firm legal protection for unique features or aspects of the product. A brand can retain intellectual property rights, giving legal title to the brand owner.15 The brand name can be protected through registered trademarks; manufacturing processes can be protected through patents; and packaging can be protected through copyrights and designs. These intellectual property rights ensure that the firm can safely invest in the brand and reap the benefits of a valuable asset.

We’ve seen that these investments in the brand can endow a product with unique associations and meanings that differentiate it from other products. Brands can signal a certain level of quality so that satisfied buyers can easily choose the product again.16 This brand loyalty provides predictability and security of demand for the firm and creates barriers of entry that make it difficult for other firms to enter the market.

Although manufacturing processes and product designs may be easily duplicated, lasting impressions in the minds of individuals and organizations from years of marketing activity and product experience may not be so easily reproduced. One advantage that brands such as Colgate toothpaste, Cheerios cereal, and Levi’s jeans have is that consumers have literally grown up with them. In this sense, branding can be seen as a powerful means to secure a competitive advantage.

In short, to firms, brands represent enormously valuable pieces of legal property, capable of influencing consumer behavior, being bought and sold, and providing the security of sustained future revenues.17 For these reasons, huge sums, often representing large multiples of a brand’s earnings, have been paid for brands in mergers or acquisitions, starting with the boom years of

the mid-1980s. The merger and acquisition frenzy during this time led Wall Street financiers to seek out undervalued companies from which to make investment or takeover profits. One of the primary undervalued assets of such firms was their brands, given that they were off-balance-sheet items. Implicit in Wall Street’s interest was a belief that strong brands result in better earnings and profit performance for firms, which, in turn, creates greater value for shareholders.

The price premium paid for many companies is clearly justified by the opportunity to earn and sustain extra profits from their brands, as well as by the tremendous difficulty and expense of creating similar brands from scratch. For a typical fast-moving consumer goods company, net tangible assets may be as little as 10 percent of the total value (see Figure 1-4). Most of the value lies in intangible assets and goodwill, and as much as 70 percent of intangible assets can be supplied by brands.

Physical goods are what are traditionally associated with brands and include many of the best-known and highly regarded consumer products, like Mercedes-Benz, Nescafé, and Sony. More and more companies selling industrial products or durable goods to other companies are recognizing the benefits of developing strong brands. Brands have begun to emerge among certain types of physical goods that never supported brands before. Let us consider the role of branding in industrial “business-to-business” products and technologically intensive “high-tech” products.

High-tech Products

Many technology companies have struggled with branding. Managed by technologists, these firms often lack any kind of brand strategy and sometimes see branding as simply naming their products. In many of their markets, however, financial success is no longer driven by product innovation alone, or by the latest and greatest product specifications and features. Marketing skills are playing an increasingly important role in the adoption and success of high-tech products.

Intuit

Intuit has introduced several highly successful software packages. In discussing the origins of his company, Intuit’s founder Scott Cook comments: “We started with the belief that it is a consumer market, not a technology market. We’d run it like Procter & Gamble.” Applying classic package-goods marketing techniques, Intuit first conducted extensive research with consumers and then designed a product to satisfy the unmet needs and wants of the market. Because research revealed that most consumers did not like doing financial management and found it a necessary evil, Intuit designed the Quicken personal-finance software to offer two key benefits—ease of use and speed—that were not then offered by other products in the market.

Through the years, Intuit has been expanding its services and products as well as its customer base, acquiring Mint.com, a free personal money management site, in 2009 for $170 million. In 2010, Intuit focused on its TurboTax tax software, creating a campaign—with a fully coordinated digital component—that kicked off tax season alongside the Super Bowl. Intuit has extended its consumer-centric strategy by expanding into social media. With TurboTax, the company has created the “Friends Like You” program, which allows users of the software to share reviews via social networking sites. With its QuickBooks business accounting software, the company has created a community where its diehard fans can pose questions to each other and exchange helpful tips.21

The speed and brevity of technology product life cycles create unique branding challenges. Trust is critical, and customers often buy into companies as much as products. Marketing budgets may be small, although high-tech firms’ adoption of classic consumer marketing techniques has increased expenditures on marketing communications. The Science of Branding 1-2 provides a set of guidelines for marketing managers at high-tech companies.

Although strong service brands like American Express, British Airways, Ritz-Carlton, Merrill Lynch, and Federal Express have existed for years, the pervasiveness of service branding and its sophistication have accelerated in the past decade.

Professional Services

Professional services firm such as Accenture (consulting), Goldman Sachs (investment banking), Ernst & Young (accounting), and Baker Botts (law) offer specialized expertise and support to other businesses and organizations. Professional services branding is an interesting combination of B2B branding and traditional consumer services branding.

Corporate credibility is key in terms of expertise, trustworthiness, and likability. Variability is more of an issue with professional services because it is harder to standardize the services of a consulting firm than those of a typical consumer services firm (like Mayflower movers or Orkin pest control). Long-term relationships are crucial too; losing one customer can be disastrous if it is a big enough account.

One big difference in professional services is that individual employees have a lot more of their own equity in the firm and are often brands in their own right! The challenge is therefore to ensure that their words and actions help build the corporate brand and not just their

own. Ensuring that the organization retain at least some of the equity that employees (especially senior ones) build is thus crucial in case any of them leave.

Referrals and testimonials can be powerful when the services offered are highly intangible and subjective. Emotions also play a big role in terms of sense of security and social approval. Switching costs can be significant and pose barriers to entry for competitors, but clients do have the opportunity to bargain and will often do so to acquire more customized solutions.

To retailers and other channel members distributing products, brands provide a number of important functions. Brands can generate consumer interest, patronage, and loyalty in a store, as consumers learn to expect certain brands and products. To the extent “you are what you sell,” brands help retailers create an image and establish positioning. Retailers can also create their own brand image by attaching unique associations to the quality of their service, their product assortment and merchandising, and their pricing and credit policy. Finally, the appeal and attraction of brands, whether manufacturers’ brands or the retailers’ own brands, can yield higher price margins, increased sales volumes, and greater profits.

Retailers can introduce their own brands by using their store name, creating new names, or some combination of the two. Many distributors, especially in Europe, have actually introduced their own brands, which they sell in addition to—or sometimes even instead of—manufacturers’ brands. Products bearing these store brands or private label brands offer another way for retailers to increase customer loyalty and generate higher margins and profits.

By mid-July 2009, private labels accounted for 17 percent of grocery purchases in food, drug, and mass merchandisers in North America.22 In Britain, five or six grocery chains selling their own brands account for roughly half the country’s food and packaged-goods sales, led by Sainsbury and Tesco. Another top British retailer, Marks & Spencer, sells only its own-brand goods, under the label of St. Michael. Several U.S. retailers also emphasize their own brands. (Chapter 5 considers store brands and private labels in greater detail.)

The Internet has transformed retailing in recent years as retailers have adopted a “bricks and clicks” approach to their business or, in many cases, become pure-play online retailers, operating only on the Web. Regardless of the exact form, to be competitive online, many retailers have had to improve their online service by making customer service agents available in real time, shipping products promptly, providing tracking updates, and adopting liberal return policies.

Some of the strongest brands in recent years have been born online. Google, Facebook, and Twitter are three notable examples. That wasn’t always the case. At the onset of the Internet, many online marketers made serious—and sometimes fatal—mistakes. Some oversimplified the branding process, equating flashy or unusual advertising with building a brand. Although such marketing efforts sometimes caught consumers’ attention, more often than not they failed to create awareness of what products or services the brand represented, why those products or services were unique or different, and most important, why consumers should visit their Web site.

Online marketers now realize the realities of brand building. First, as for any brand, it is critical to create unique aspects of the brand on some dimension that is important to consumers, such as convenience, price, or variety. At the same time, the brand needs to perform satisfactorily in other areas, such as customer service, credibility, and personality. For instance, customers increasingly began to demand higher levels of service both during and after their Web site visits.

Successful online brands have been well positioned and have found unique ways to satisfy consumers’ unmet needs. By offering unique features and services to consumers, the best online brands are able to avoid extensive advertising or lavish marketing campaigns, relying more on word-of-mouth and publicity.

• Hulu enables consumers to watch videos of their past and present favorite TV programs at their own convenience.

• Pandora allows customers to customize online radio stations with bands and genres they enjoy, while learning about other music they might also like.

• Online encyclopedia Wikipedia provides consumers with extensive, constantly updated, user-generated information about practically everything.

Google is perhaps the classic example of how to build a successful online brand.

Google

Founded in 1998 by two Stanford University Ph.D. students, Google takes its name from a play on the word googol—the number 1 followed by 100 zeroes—a reference to the huge amount of data online. Google’s stated mission is “To organize the world’s information and make it universally accessible and useful.” The company has become the market leader in the search engine industry through its business focus and constant innovation. Its home page focuses on searches but also allows users to employ many other Google services. By focusing on plain text, avoiding pop-up ads, and using sophisticated search algorithms, Google provides fast and reliable service. Google’s revenue traditionally was driven by search ads, text-based boxes that advertisers pay for only when users click on them. Increasingly, Google is seeking additional sources of revenue from new services and acquisitions.23

Online brands also learned the importance of off-line activities to draw customers to Web sites. Home page Web addresses, or URLs, began to appear on all collateral and marketing material. Partnerships became critical as online brands developed networks of online partners and links. They also began to target specific customer groups—often geographically widely dispersed—for which the brand could offer unique value propositions. As we will describe more in Chapter 6, Web site designs have finally begun to maximize the benefits of interactivity, customization, and timeliness and the advantages of being able to inform, persuade, and sell all at the same time.

When the product category is people or organizations, the naming aspect of branding, at least, is generally straightforward. These often have well-defined images that are easily understood and liked (or disliked) by others. That’s particularly true for public figures such as politicians, entertainers, and professional athletes. All these compete in some sense for public approval and acceptance, and all benefit from conveying a strong and desirable image.

Rachael Ray

Rachael Ray’s brand is an accessible one. Her “can-do” personality aligns well with her no-fuss cooking approach, and her likeability led her to be named one of Forbes magazine’s “Ten Most Trusted Celebrities” and one of Time magazine’s “100 Most Influential People in 2006.” Ray’s magazine—launched in 2005—has a circulation of 1.8 million. Her brand, which started with her Food Network show, has been expanded to include product endorsements (such as Dunkin’ Donuts and Kraft’s Nabisco) and cookbooks. In 2010, Ray launched her own iPod app that includes recipes, cooking tips, and a function that helps food shoppers calculate ingredients and amounts. Ray’s initial success was built around her ability to recognize consumer needs in the culinary market; specifically, she identified that consumers need recipes and cooking tools to teach them how to cook quickly and easily. Ray herself has identified her talent as being “good at trying to understand what [my] customer wants and needs, and giving it to them.”24

That’s not to say that only the well-known or famous can be thought of as a brand. Certainly, one key for a successful career in almost any area is that co-workers, superiors, or even important people outside your company or organization know who you are and recognize your skills, talents, attitude, and so forth. By building up a name and reputation in a business context, you are essentially creating your own brand.25 The right awareness and image can be invaluable in shaping the way people treat you and interpret your words, actions, and deeds.26

Similarly, organizations often take on meanings through their programs, activities, and products. Nonprofit organizations such as the Sierra Club, the American Red Cross, and Amnesty International have increasingly emphasized marketing. The children’s advocate nonprofit UNICEF has initiated a number of marketing activities and programs through the years.

UNICEF

UNICEF launched its “Tap Project” campaign in 2007, which asked diners to pay $1 for a glass of New York City tap water in restaurants, with the funds going to support the organization’s clean water programs. That was the first time UNICEF had run a consumer campaign in over 50 years. The UNICEF logo was featured on the Barcelona soccer team’s jersey from 2006 to 2011 under an arrangement in which the team donated $2 million annually to the organization. UNICEF launched another consumer campaign in the UK in February 2010. This five-year “Put it Right” campaign features celebrity ambassadors for the organization and aims to protect the rights of children. One of UNICEF’s most successful corporate relationships has been with IKEA. The partnership, which also emphasizes children’s rights, was established in 2000 and encompasses direct donations from IKEA and an annual toy campaign, the sales from which directly benefit UNICEF programs.27

A special case of marketing people and organizations as brands exists in the sports, arts, and entertainment industries. Sports marketing has become highly sophisticated in recent years, employing traditional packaged-goods techniques. No longer content to allow win–loss records to dictate attendance levels and financial fortunes, many sports teams are marketing themselves through a creative combination of advertising, promotions, sponsorship, direct mail, digital, and other forms of communication. By building awareness, image, and loyalty, these sports franchises are able to meet ticket sales targets regardless of what their team’s actual performance might turn out to be. Brand symbols and logos in particular have become an important financial contributor to professional sports through licensing agreements.

Branding plays an especially valuable function in the arts and entertainment industries that bring us movies, television, music, and books. These offerings are good examples of experience goods: prospective buyers cannot judge quality by inspection and must use cues such as the particular people involved, the concept or rationale behind the project, and word-of-mouth and critical reviews.

Think of a movie as a product whose “ingredients” are the plot, actors, and director.28 Certain movie franchises such as Spider Man, James Bond, and Twilight have established themselves as strong brands by combining all these ingredients into a formula that appeals to consumers and allows the studios to release sequels (essentially brand extensions) that rely on the title’s initial popularity. For years, some of the most valuable movie franchises have featured recurring characters or ongoing stories, and many successful recent films have been sequels. Their success is due to the fact that moviegoers know from the title and the actors, producers, directors, and other contributors that they can expect a certain experience— a classic application of branding.

Harry Potter

With its ability to transcend its original format—books—the Harry Potter film series has been likened to the Star Wars franchise. All seven of the popular novels have been turned into blockbuster movies, generating over $7.7 billion worldwide by the end of 2011. In the first year it launched Harry Potter toys, Mattel saw $160 million in sales. And in 2010, Universal Studios opened a Florida theme park based on the Harry Potter stories. The Harry Potter empire has been praised for its attention to core marketing techniques—a good product, emotional involvement of its consumers, word-of-mouth promotion, “tease” marketing, and brand consistency. Several estimates have pegged the Harry Potter brand to be worth $15 billion, which, beyond the movies and the books, included more than $1 billion in DVD sales, nearly $12 million in licensing, and $13 million in music sales related to the films.29

A strong brand is valuable in the entertainment industry because of the fervent feelings that names generate as a result of pleasurable past experiences. A new album release from Neil Finn would probably not cause much of a ripple in the marketplace, even if it were marketed as coming from a founding member of the band Crowded House. If it were to actually be released and marketed under the Crowded House name, however, greater media attention and higher sales would be virtually guaranteed.

Increased mobility of both people and businesses and growth in the tourism industry have contributed to the rise of place marketing. Cities, states, regions, and countries are now actively promoted through advertising, direct mail, and other communication tools. These campaigns aim to create awareness and a favorable image of a location that will entice temporary visits or permanent moves from individuals and businesses alike. Although the brand name is usually preordained by the name of the location, there are a number of different considerations in building a place brand, some of which are considered in Branding Brief 1-3.

Finally, numerous ideas and causes have been branded, especially by nonprofit organizations. They may be captured in a phrase or slogan and even be represented by a symbol, such as AIDS ribbons. By making ideas and causes more visible and concrete, branding can provide much value. As Chapter 11 describes, cause marketing increasingly relies on sophisticated marketing practices to inform or persuade consumers about the issues surrounding a cause.

Increasingly, consumers and businesses have become more experienced with marketing, more knowledgeable about how it works, and more demanding. A well-developed media market pays increased attention to companies’ marketing actions and motivations. Consumer information and support exists in the form of consumer guides (Consumer Reports), Web sites (Epinions.com), influential blogs, and so on.

One of the key challenges in today’s marketing environment is the vast number of sources of information consumers may consult. Figure 1-10 displays some of the ways teenage girls collect information. For these and other reasons, many believe that it is more difficult to persuade consumers with traditional communications than it used to be. An empowered consumer may play a more active role in a brand’s fortune, as has been the case with Converse.

Converse

CMO Geoff Cottrill maintains that an important priority at Converse is “to shut up and listen.” With a small budget, marketing for the brand has focused on digital and social media. The Web site is chock full of consumer-generated content. On Facebook, the brand went from 6 to 9 million fans as consumers chose to take pictures of their shoes, draw on them, and post about them. Cottrill notes that although there are places where the company tells stories about its shoes—in stores and on the Web site—“for the most part we let the conversation go … it’s those creative people that are really pushing the brand.” The brand has also functioned as a curator of sorts for new music, art, and entertainment. Converse has built a studio called Rubber Tracks in New York City to support new, emerging bands by allowing them to record there for free.33

A severe recession that commenced in 2008 threatened the fortunes of many brands. One research study of consumers at the end of 2009 found the following sobering facts:34

• 18 percent of consumers reported that they had bought lower-priced brands of consumer packaged goods in the past two years.

• 46 percent of the switchers to less expensive products said “they found better performance than they expected,” with the vast majority saying performance was actually much better than expected.

• 34 percent of the switchers said “they no longer preferred higher-priced products.”

As the economy appeared to move out of the recession, the question was whether attitudes and behaviors that did change would revert back to their pre-recession norms. Regardless, there will always be economic cycles and ups and downs, and The Science of Branding 1-4 offers some guidelines for marketing brands during economic downturns.

Another important change in the branding environment is the proliferation of new brands and products, in part spurred by the rise in line and brand extensions. As a result, a brand name may now be identified with a number of different products with varying degrees of similarity. Marketers of brands such as Coke, Nivea, Dove, and Virgin have added a host of new products under their brand umbrellas in recent years. There are few single (or “mono”) product brands around, which complicates the decisions that marketers have to make.

With so many brands engaged in expansion, channels of distribution have become clogged, and many brand battles are waged just to get products on the shelf. The average supermarket now holds 30,000 different brands, three times the number 30 years ago.35

Another important change in the marketing environment is the erosion or fragmentation of traditional advertising media and the emergence of interactive and nontraditional media, promotion, and other communication alternatives. For several reasons related to media cost, clutter, and fragmentation—as outlined in Chapter 6— marketers have become disenchanted with traditional advertising media, especially network television.

Thus the percentage of the communication budget devoted to advertising has shrunk over the years. In its place, marketers are spending more on nontraditional forms of communication and on new and emerging forms of communication such as interactive digital media; sports and event sponsorship; in-store advertising; mini-billboards in transit vehicles, parking meters, and other locations; and product placement in movies.

Consider how Procter & Gamble (P&G) has dramatically changed its marketing communications in recent years. The one-time queen of daytime TV soap operas—the company produced the shows and ran ads during the broadcasts—P&G has dramatically overhauled the way it markets its brands. It no longer airs any soap operas and puts more emphasis on social media instead. The company sells Pampers diapers on Facebook, offers an iPhone application for Always feminine products that allows women to track menstrual cycles and ask questions, and uses social media to sell its traditionally male-targeted Old Spice personal care products.36

One reason marketers have been forced to use so many financial incentives or discounts is that the marketplace has become more competitive. Both demand-side and supply-side factors have contributed to the increase in competitive intensity. On the demand side, consumption for many products and services has flattened and hit the maturity stage, or even the decline stage, of the product life cycle. As a result, marketers can achieve sales growth for brands only by taking away competitors’ market share. On the supply side, new competitors have emerged due to a number of factors, such as the following:

• Globalization: Although firms have embraced globalization as a means to open new markets and potential sources of revenue, it has also increased the number of competitors in existing markets, threatening current sources of revenue.

• Low-priced competitors: Market penetration by generics, private labels, and low-priced “clones” imitating product leaders has increased on a worldwide-basis. Retailers have gained power and often dictate what happens within the store. Their chief marketing weapon is price, and they have introduced and pushed their own brands and demanded greater compensation from trade promotions to stock and display national brands.

• Brand extensions: We’ve noted that many companies have taken their existing brands and launched products with the same name into new categories. Many of these brands provide formidable opposition to market leaders.

• Deregulation: Certain industries like telecommunications, financial services, health care, and transportation have become deregulated, leading to increased competition from outside traditionally defined product-market boundaries.

At the same time that competition is increasing, the cost of introducing a new product or supporting an existing product has increased rapidly, making it difficult to match the investment and level of support that brands were able to receive in previous years. In 2008, about 123,000 new consumer products were introduced in the United States, but with a failure rate estimated at over 90 percent. Given the millions of dollars spent on developing and marketing a new product, the total failure cost was conservatively estimated by one group to exceed billions of dollars.38

Finally, marketers often find themselves responsible for meeting ambitious short-term profit targets because of financial market pressures and senior management imperatives. Stock analysts value strong and consistent earnings reports as an indication of the long-term financial health of a firm. As a result, marketing managers may find themselves in the dilemma of having to make decisions with short-term benefits but long-term costs (such as cutting advertising expenditures). Moreover, many of these same managers have experienced rapid job turnover and promotions and may not anticipate being in their current positions for very long. One study found that the average tenure of a CMO is about three and a half years, suggesting they have little time to make an impact.39 These different organizational pressures may encourage quick-fix solutions with perhaps adverse long-run consequences.

The strategic brand management process starts with a clear understanding of what the brand is to represent and how it should be positioned with respect to competitors.42 Brand planning, as described in Chapters 2 and 3, uses the following three interlocking models.

• The brand positioning model describes how to guide integrated marketing to maximize competitive advantages.

• The brand resonance model describes how to create intense, activity loyalty relationships with customers.

• The brand value chain is a means to trace the value creation process for brands, to better understand the financial impact of brand marketing expenditures and investments.

As Chapter 2 outlines, building brand equity requires properly positioning the brand in the minds of customers and achieving as much brand resonance as possible. In general, this knowledge-building process will depend on three factors:

1. The initial choices of the brand elements making up the brand and how they are mixed and matched;

   

2. The marketing activities and supporting marketing programs and the way the brand is integrated into them; and

3. Other associations indirectly transferred to or leveraged by the brand as a result of linking it to some other entity (such as the company, country of origin, channel of distribution, or another brand).

Some important considerations of each of these three factors are as follows.

To manage their brands profitably, managers must successfully design and implement a brand equity measurement system. A brand equity measurement system is a set of research procedures designed to provide timely, accurate, and actionable information for marketers so that they can make the best possible tactical decisions in the short run and the best strategic decisions in the long run. As described in Chapter 8, implementing such a system involves three key steps—conducting brand audits, designing brand tracking studies, and establishing a brand equity management system.

The task of determining or evaluating a brand’s positioning often benefits from a brand audit. A brand audit is a comprehensive examination of a brand to assess its health, uncover its sources of equity, and suggest ways to improve and leverage that equity. A brand audit requires understanding sources of brand equity from the perspective of both the firm and the consumer.

Once marketers have determined the brand positioning strategy, they are ready to put into place the actual marketing program to create, strengthen, or maintain brand associations. Brand tracking studies collect information from consumers on a routine basis over time, typically through quantitative measures of brand performance on a number of key dimensions marketers can identify in the brand audit or other means.Chapters 9 and 10 describe a number of measures to operationalize it.

A brand equity management system is a set of organizational processes designed to improve the understanding and use of the brand equity concept within a firm. Three major steps help implement a brand equity management system: creating brand equity charters, assembling brand equity reports, and defining brand equity responsibilities.

Maintaining and expanding on brand equity can be quite challenging. Brand equity management activities take a broader and more diverse perspective of the brand’s equity—understanding how branding strategies should reflect corporate concerns and be adjusted, if at all, over time or over geographical boundaries or multiple market segments.