Difference Between Product and Brand

1.Product is made in 1. A brand is bought

a factory by the customer .

2. A product can be 2. A brand is unique.

copied.

3. A product can be quickly 3. A successful brand is outdated. timeless

BRAND EQUITY BRAND EQUITY : is a set of brand assets and

liabilities linked to a brand , its name and symbol , that add to or subtract from the value provided by a product or service to a firm and /or to that firm’s customers.

For assets or liabilities to underlie brand equity they must be linked to the name and/or symbol of the brand.

BRAND EQUITY

The assets and liabilities on which brand equity is based can be grouped into 5 categories

1) Brand Loyalty2) Name awareness3) Perceived quality4)Brand associations in addition

to perceived quality5)other proprietary assets :

patents, trademarks,channel relationship etc.

BRAND EQUITY

Brand EquityProvides value to firm byenhancing:-•Efficiency and effectiveness•of marketing programs•Prices/Margins•Brand Extensions•Trade Leverage•Competitive advantage

Provides value to customer by enhancing customer’s

•Interpretation /Processing of information.

•Confidence in the purchase decision.

•Use satisfaction/delight

Brand Loyalty

Name Awareness Perceived qualityBrand Associations

Other proprietarybrand assets

What is the value of a brand

Price premium generated by the name: Impact of the name on customer preference Replacement value of the brand Stock price earning power of a brand

Replacement value of the brand

Replacement cost: cost of establishing a comparable name and business .

It is estimated that it costs $50 -100 million to develop and launch a new consumer product and chances of success is around 12-15%..

Thus on an average a firm will have to make 6 products costing $ 300 million (taking the lower estimate)to ensure atleast one winner.

A firm thus should be willing to pay $ 300 million to an established brand in the category of interest.

Brand value based on stock price movements

Stock market adjusts the price of a firm to reflect future prospects of its brands.

1) Find market value of firm --> function of stock price and number of shares

2) Find the replacement cost of tangible assets (plant, machinery, inventories, cash)

3) Subtract 2 from 1 4)The balance intangible assets is apportioned into three components : value

of brand equity , value of nonbrand factors (R&D, PATENTS)and value of industry factors (regulation and concentration)

5) Brand equity is presumed to be a function of age of the brand, entry of the brand in the market (older brand has more equity), cumulative advertising (advertising creates equity) and the current share of industry advertising (current advertising share is related to positioning advantages).

Brand value based on Future Earnings

Find the discounted present value of future earnings attributable to brand -equity assets.

Approach No.1 :-- discount the profit stream that is projected

Approach No. 2 : when brand profit plan is not available , estimate current earnings and apply an earnings multiplier.

If the current earnings are not representative because they reflect an up or down cycle , then average of the past few years is more appropriate.

The multiplier range could be 7 to 12 or 15 to 25 depending on the industry.

The actual multiplier is a function of the competitive advantage of the brand.

The estimate is based on weighted average of appraisal of the brand on the 5 dimensions of brand equity. Appraising Brand Assets

1) brand Loyalty :a) What are the market

shares and sales trends b) What are brand-loyalty levels by segment c) Are customers satisfied/delighted ? D) are they dissatisfied? What is the reason/extent of dissatisfaction

2) Awareness : a) Brand awareness level exists as compared to that of competitors? B) What are the trends

c) Is the brand being considered?

Perceived quality : What drives perceived quality? What

is important to the customer What signals quality Is perceived quality valued- or is the market moving towards a commodity business Are prices and margins eroding How do competitors stack up with respect to perceived quality.

Other brand assets: Is there a patent or trademark that is important?Are there channel relationships that provide barriers to competitors?Are sustainable competitive advantages attached tot he brand name

that are not reflected in the other four equity dimensions?

Brand Associations : What mental image does the brand stimulate/evoke?

Is that image a competitive advantageIs there a slogan/ punch line /tagline

/symbol that is a differentiating asset? How are the brand/competitors positioned. Evaluate each position with respect to its

value/relevance to consumers and how protected /vulnerable it is to competitors.Which position is the most valuable and protected

What does the brand mean?What are its strongest

associations?

P& G- Believers in Brand Management

In 1879 , Harley Procter named his soap “IVORY” The soap was promoted as “99 44/100 % pure” and that it floated. The floatation property was created by production mistake which fed air

into the soap mixture. Ivory was a remarkable product in a time when most soaps were yellow or

brown , irrated skin. Also during those times the floatation value had practical value for those

who were frustrated trying to find their soap in water. Well positioned soap----> pure, mild and floated. The claims of purity and mildness were supported by white color, name

Ivory, the twin slogans and association with babies. In 1941 , Lever Brothers launched “Swan “ to challenge “Ivory”, but as

there was no product difference , the brand failed.

P& G’S Product Portfolio - launched from 1940-1980 Tide- Detergent Prell - Shampoo Joy - dishwashing detergent Crest - Toothpaste Secret - cream deo Jif - peanut spread Ivory - Liquid soap Pampers - disposable diapers Folgers - coffee Scope - Mouthwash Bounty - paper towels Pringles- potato chips Bounce - fabric softeners Duncan Hines - cookies

A striking aspect of P& G has been its willingness to develop competing brands (multi brand concept) in order to serve new segments , even if new brands threaten existing brands.

P&G has 10 brands in laundry detergent category which reach a variety of segment s and has given P&G a 40%+ market share .

1) Ivory Snow : “ ninety-nine and forty-four one-hundredths percent pure,’, the mild gentle soap for diapers and baby clothes”

2) Tide--- For extra-tough family laundry jobs-”Tide’s in , dirt’s out”

Cheer -works in cold, warm or hot water- “ All temperature Cheer” Gain- detergent with fragrance - “ Bursting with freshness”. Bold 3 - includes fabric softener -” Cleans , softens and controls static Dash- concentrated power, less suds to avoid clogging washing

machines Dreft- with “Borax, nature’s natural sweetener “ for baby’s clothes Oxydol:- contains bleach-for sparkling whites -with color safe bleach. Era- concentrated liquid detergent-with proteins to clean stains Solo- heavy duty with fabric softener

Brand Loyalty

Brand Loyalty pyramid

Committedbuyer

Likes the brand, considersbrand as a friend

Satisfied buyer with switching costs

Habitual buyer- no reason to change

Switchers /price sensitive- indifferent- no brand loyalty

Measuring Brand Loyalty

Behavior Measures: Repurchase rates: What % of Maruti Zen owners purchase Zen on their next purchase

% of Purchases: of the last five purchases made by a customer, what % went to each brand purchased?

Number of Brands Purchased: What % of coffee buyers bought only a single brand?, two brands?

Switching costs: If it is expensive or risky for a firm or consumer to change suppliers, then the brand loyalty is on the higher side. E.g : Investment in computer system or software like SAP

Strategic value of Brand Loyalty

Reduced Marketing Costs: It is much less costly to retain customers then to attract new one ( COST RATIO IS 1:4)

Trade leverage: Strong pull (brand loyalty) from consumers will ensure preferred shelf space because stores know that customers will have such brands on their shopping list.

Attracting new customers: Time to respond to competitive threats:If a competitor

develops a superior product , a loyal following will allow the firm time needed for the product improvements to be matched and neutralized.

Creating & Maintaining Brand Loyalty

Treat the customer Right Stay close to customer Measure/Manage Customer Satisfaction Create switching cost Provide extras

Creating & Maintaining Brand Loyalty

Measure / Manage Customer Satisfaction : Regular surveys of customer satisfaction are useful in understanding how customers feel and it also helps in adjusting product and services. Domino’s Pizza conducts weekly phone surveys of customers measuring dimensions like response time, lumpiness of dough, freshness of pepperoni and attitude of delivery people.

A bonus pool is distributed based upon these measures.

Create Switching costs: Reward loyalty directly. For e.g The airlines frequent flyers program .

Brand Awareness

Ability of a potential buyer to recognize or recall that a brand is a member of a certain product category.

Unaware of brand

Brand Recognition

Brand recall

Top ofMind

The awareness Pyramid

Brand awareness creates value in the following\g ways :1) Anchor to

which other associations can be attached : for e.g McDonalds:- Golden arches, clean/efficient, kids , fun etc.

2) Familiarity/Liking: recognition provides the brand with familiarity and people like the familiar. 3)Substance /commitment:

The firm has been in business for a long time. The firm is widely distributed and the brand is successful.

4) Brands to consider ----- it enters the evoked or consideration set.

How to achieve Awareness

Be different , Memorable: Involve a slogan or jingle: e.g Lifebuoy hai jahan , tandorosti hai

wahan. Symbol exposure: colonel sanders --KFC, golden arches-

Mcdonalds---> symbol should closely associate with the brand. Publicity--- advertisement. Event Sponsorship --- Femina Miss India, Manikchand Filmfare

awards. Consider brand Extensions : one way to gain brand recall is to

put the name on other products.

Perceived Quality

Defn : customer’s perception of the overall quality or superiority of a product or service with respect to its intended purpose, relative to alternatives.

Perceived Quality Quality dimensions :

1) Performance : How well does a washing machine wash clothes---> primary operating characteristics of service

2) Features: secondary elements like on/off timer in washing machine etc.

3) Conformance with specifications: --- absence of defects----- trouble free .

4) Reliability--- will the vacuum cleaner work the same way each time it is used.

5) Durability: How long will the washing machine last6) Serviceability: is the service system efficient , competent and

convenient.7) Fit and finish:- does the product look and feel like a quality

product.

Perceived Quality

Research has shown that in many product classes a key dimension which is visible can be pivotable in affecting perceptions.

1) Stereo Speakers: larger size means better sound 2) Tomato ketchup-- thickness means quality. 3) Supermarkets--- fresh products means overall quality.

4) cars: a solid door-closure sound implies good workmanship and a solid safe body.

5) lawn mover-- noise signals quality