Royal Institute of Technology (KTH)

Student: Vivian van der BurgtCourse name: Brand, trends and traditionsCourse code: ME2026Teacher: Henrik Uggla

Managing brand equity – David A. Aaker

In the book “Managing brand equity” (David A. Aaker). Aaker shows how brand equity does provide value. Brand equity is a set of brand assets and liabilities linked to a brand (name and symbol) that adds value to a product, the firm or the firm’s customers. These assets can be grouped into five categories: 1. Brand loyalty, 2. Brand awareness, 3. Perceived quality, 4. Brand associations, 5. Other proprietary brand assets – patents, trademarks, channel relationships, etc.

Brand loyalty is often the core of the brand’s equity. Brand loyalty is a measure of the attachment that a customer has to a brand. There are several levels of loyalty: Switchers (price sensitive), Satisfied habitual buyer (no reason to change), satisfied buyer with switching costs, likes the brand (consider it a friend), and a committed buyer. Brand loyalty is qualitatively different from the other assets of brand equity because it is more closely to the use experience. Brand loyalty can’t exist without prior purchase and use experience. In contrast, awareness, associations and perceived quality are characteristics of brands that a person can have when he didn’t have use experience with the brand. Brand loyalty is treated with benign neglect: it is taken for granted when the interest is in short term sales rather than in building and maintaining equity.

You can measure brand loyalty by determine actual purchase patterns or measure satisfaction or liking of the brand. Overall liking can be scaled in a variety of ways, such as: Liking, respect, friendship or trust.

Different values you get out of brand loyalty: reduced marketing costs, trade leverage, attracting new customers, time to respond to competitive threats.

To create brand loyalty you need to treat the customer right, stay close to the customer, measure/manage customer satisfaction, create switching costs, and provide extras. Growing by attracting new customers, while neglecting the existing ones, is a mistake. New customers will appear influenced by existing customers. You have to have an increase in the switching costs of those existing satisfied customers.

Brand awarenessBrand awareness is the ability of a potential buyer to recognize or recall that a brand is a member or a certain product category. The link to the product is very important. There are four different levels of brand awareness: unaware of brand, brand recognition (given set of brands how many they know), brand recall (name a brand in a product class), top of mind (first named brand).

Values of brand awareness: anchor to which other associations can be attached, familiarity, signal of commitment, brand to be considered. Brand recall can affect choice but without liking the brand. People usually will also recall brands they dislike. Brand awareness affects purchase decisions.

To achieve brand awareness you have to be different, involve a slogan, symbol that is closely linked to the brand, publicity, consider brand extensions, using cues such as packaging, and retaining a strong top-of-the-mind awareness you have to give the customer an extra bonus.

Perceived qualityPerceived quality can be defined as the customer’s perception of the overall quality of a product or service with respect to its intended purpose. Perceived quality is a perception by customers. It differs from satisfaction. A customer can be satisfied because he or she had low expectations about the performance. High perceived quality is not consistent with low expectations.

Perceived quality generates value in several ways: reason-to-buy, differentiate, price premium, channel member interest, brand extensions. Customers often will lack the motivation to obtain and sort out the information that might lead to an objective determination of quality in a product. So, perceived quality in name, slogan, and advertisement is very useful.

Perceived quality affects price. Higher perceived quality allows a business to charge a higher price. To get high perceived quality is to have a good product with good features, performance, reliability, durability etc. Further, you have to convince customers that the quality is high. Quality wins from costs. You cannot convince people that the quality is high when it is not (can you? People usually lack motivation to sort out information about the product). A quality goal that is too general won’t attract customers, but don’t set your quality goal too high like ‘no surprises’ (zero-defect is unattainable). Further, advertising, the brand name, or the price can influence perceived quality. Price is found to be as nearly as strong as the brand name for quality. Product classes that are difficult to evaluate are more likely to have price as a quality cue.

Brand associationsA brand association is anything linked in memory to a brand. A brand image is a set of associations. Ways in which associations create value to the firm and its customers are: helping to process/retrieve information, differentiating the brand, generating reason-to-buy, creating positive attitudes, and providing a basis for extensions. Involve product attributes or customer benefits will provide a reason-to-buy. Linking a celebrity to a brand is useful.

Important brand associations are product attributes, intangibles, customer benefits, relative price, use, celebrity person, life style personality, product class, competitors and country geographic area. Product attributes are important, such as Volvo has attributes as durability and safety. People do not always make decisions based upon a particular specification. So positioning based upon a specification is vulnerable; a competitor might easily be a bit ‘faster’.

When associating a brand by the concept of a reward to the user is a positive activity. So, psychological benefit can be a powerful type of association, and it will be more effective if it is accompanied by a rational benefit. When a brand has a very strong association, it will limit the ability of a brand to extend.

Positioning close to a competitor is useful because first, the competitor may have a good image which can be used as a bridge to communicate another image and second, it is not important that customers know how good you are, it is just important that they believe you are better than a given competitor. Products that are difficult to evaluate, such as liquor, often will use a close competitor.

Measuring brand associations, and what a brand means to people, can be done by indirect approaches, word associations, picture interpretation, brand as a person questions, brand as an animal, look at the use experience, look at the decision process of buying, describing the brand user, how brands are perceived, and personal values that drives choices.

Selecting, creating and maintaining brand associationswhich associations you should choose are depending on different things. Choosing the right associations is most relevant in the context of a new product or service. First you have to analyze yourself: don’t try to be something you’re not. Know your competitors and be different in one association from your competitor. One role of association it to provide a reason-to-buy.

Further associations can be created by advertising, providing use experience, or associate feelings with advertising: being elegant, prestige, successful, being someone, excitement and warmth. This type of advertising (which creates associations that change the use experience) called transformational advertising. Further promotions, discounts, perceived quality can help. People lack the interest to process factual information of a product. So you have to build signals that allow the creation of perceptions without factual information.

Maintaining the associations is just about being consistent, stick with the same advertisement if it works, have a brand equity managers who measures brand equity.

The name, symbol and sloganThe name is the basic core indicator of the brand, the basis for both awareness and communication efforts. It can generate associations which serve to describe the brand. To create a name it is useful to know which words and phrases will describe the associations of the brand. Different methods are: combining words into phrases (Video Express), generating parts of words and combining them (Rentivideo), considering symbols for each (Popcorn Video), using rhymes (Groovy movie), using humor (cecil B. Video). Further a powerful source of a name or slogan is a metaphor. A metaphor is a way to communicate very compactly a complex idea. Morphenes can also be used. Morphenes are a set of word fragments capable of stimulating mental images even though they have no meaning by themselves. Another theory to choose a name is to choose a name with no associations. This name can then be imbued with meaning through advertising, packaging, or product refinement. Good names are when a name is different or unusual, meaningful, have some emotions, or when it is just simple. When a name becomes more descriptive of the product class, it will be more difficult to expand the brand to other products (brand extension). Be consistent with the name and do not change it suddenly. A symbol can be the central element of brand equity, with a firm can be different from others. A symbol can communicate associations, and it is important that people like the symbol and recognize it easily.

Slogans can reinforce the positioning strategy. A slogan has far fewer legal and other limitations than a name or symbol has.

Brand extensionsBrand extensions, the use of a brand name established in one product class to enter another product class, have been the core of strategic growth for a variety of firms. But, a wrong extension decision can be strategically damaging. The brand extension has to fit with the associations of the core brand. A brand name attached to a new product reduces the risk for a prospective buyer. It means that the firm is established, is likely to be around to support the product, and is unlikely to promote a flawed product. An extension can also provide name recognition and associations to new segments. To develop a brand extension involves three steps: (1) identifying brand associations, (2) identifying products linked to those associations and (3) selecting the best candidates from that product list. If a brand extension fails, the risk of a brand extension can be reduced if the brand name is not linked too closely with the new product.