borders) and factors related to profitability (brand loyalty, pre- mium pricing, lower price elasticity, lower advertising/sales ra- tios, and trade leverage).60
This appendix considers in detail some of the benefits to the firm of having brands with a high level of awareness and a posi- tive brand image.61
Greater Loyalty and Less Vulnerability to Competitive Marketing Actions and Crises
Research shows that different types of brand associations—if favorable—can affect consumer product evaluations, perceptions of quality, and purchase rates.62 This influence may be especially apparent with difficult-to-assess “experience” goods63 and as the uniqueness of brand associations increases.64 In addition, famil- iarity with a brand has been shown to increase consumer confi- dence, attitude toward the brand, and purchase intention,65 and to mitigate the negative impact of a poor trial experience.66
For these and other reasons, one characteristic of brands with a great deal of equity is that consumers feel great loyalty to them. Some top brands have been market leaders for years de- spite significant changes in both consumer attitudes and com- petitive activity over time. Through it all, consumers have valued these brands enough to stick with them and reject the overtures of competitors, creating a steady stream of revenues for the firm. Research also shows that brands with large market shares are more likely to have more loyal customers than brands with small market shares, a phenomenon called double jeopardy.67 One study found that brand equity was strongly correlated (.75) with subsequent market share and profitability.68
A brand with a positive brand image also is more likely to successfully weather a brand crisis or downturn in the brand’s fortunes.69 Perhaps the most compelling example is Johnson
& Johnson’s (J&J) Tylenol brand. Brand Focus 11.0 describes how J&J contended with a tragic product-tampering episode in the early 1980s. Despite seeing its market share drop from 37 percent to almost zero overnight and fearing Tylenol would be written off as a brand with no future, J&J was able to regain virtually all lost market share for the brand through its skillful handling of the crisis and a good deal of brand equity.
The lesson is that effective handling of a marketing crisis requires swift and sincere action, an immediate admission that something has gone wrong, and assurance that an effective remedy will be put in place. The greater the brand equity, the more likely that these statements will be credible enough to keep customers understanding and patient as the firm sets out to solve the crisis. Without some underlying brand equity, how- ever, even the best-laid plans for recovery may fall short with a suspicious or uninformed public.70 Finally, even absent a crisis, a strong brand offers protection in a marketing downturn or when the brand’s fortunes fall.
Larger Margins
Brands with positive customer-based brand equity can com- mand a price premium.71 Moreover, consumers should also have a fairly inelastic response to price increases and elastic responses to price decreases or discounts for the brand over time.72 Consistent with this reasoning, research has shown that consumers loyal to a brand are less likely to switch in the face of price increases and more likely to increase the quantity of the brand purchased in the face of price decreases.73 In a com- petitive sense, brand leaders draw a disproportionate amount of share from smaller-share competitors.74 At the same time,
market leaders are relatively immune to price competition from these small-share brands.75
In a classic early study, Intelliquest explored the role of brand name and price in the decision purchase of business computer buyers.76 Survey respondents were asked, “What is the incremental dollar value you would be willing to pay over a
‘no-name’ clone computer brand?” IBM commanded the great- est price premium, followed by Compaq and Hewlett-Packard.
Some brands had negative brand equity; they actually received negative numbers. Clearly, according to this study, brands had specific meaning in the personal computer market that consum- ers valued and were willing to pay for.
Greater Trade Cooperation and Support
Wholesalers, retailers, and other middlemen in the distribution channel play an important role in the selling of many products.
Their activities can thus facilitate or inhibit the success of the brand. If a brand has a positive image, retailers and other mid- dlemen are more likely to respond to the wishes of consumers and actively promote and sell the brand.77 Channel members are also less likely to require any marketing push from the man- ufacturer and will be more receptive to manufacturers’ sugges- tions to stock, reorder, and display the brand,78 as well as to pass through trade promotions, demand smaller slotting allow- ances, give more favorable shelf space or position, and so on.
Given that many consumer decisions are made in the store, the possibility of additional marketing push by retailers is important.
Increased Marketing Communication Effectiveness
A host of advertising and communication benefits may result from creating awareness of and a positive image for a brand.
One well-established view of consumer response to marketing communications is the hierarchy of effects models. These mod- els assume that consumers move through a series of stages or mental states on the basis of marketing communications—for example, exposure to, attention to, comprehension of, yield- ing to, retention of, and behaving on the basis of a marketing communication.
A brand with a great deal of equity already has created some knowledge structures in consumers’ minds, increasing the likelihood that consumers will pass through various stages of the hierarchy. For example, consider the effects of a positive brand image on the persuasive ability of advertising: Consumers may be more likely to notice an ad, may more easily learn about the brand and form favorable opinions, and may retain and act on these beliefs over time.
Familiar, well-liked brands are less susceptible to “interfer- ence” and confusion from competitive ads,79 are more respon- sive to creative strategies such as humor appeals,80 and are less vulnerable to negative reactions due to concentrated repetition schedules.81 In addition, panel diary members who were highly loyal to a brand increased purchases when advertising for the brand increased.82 Other advantages associated with more ad- vertising include increased likelihood of being the focus of at- tention and increased “brand interest.”83
Because strong brand associations exist, lower levels of rep- etition may be necessary. For example, in a classic study of ad- vertising weights, Anheuser-Busch ran a carefully conducted field experiment in which it varied the amount of Budweiser advertising shown to consumers in different matched test mar- kets.84 Seven different advertising expenditure levels were tested,
representing increases and decreases from the previous advertis- ing expenditure levels: minus 100 percent (no advertising), mi- nus 50 percent, 0 percent (same level), plus 50 percent, plus 100 percent (double the level of advertising), plus 150 percent, and plus 200 percent. These expenditure levels were run for one year and revealed that the “no advertising” level resulted in the same amount of sales as the current program. In fact, the 50 percent cut in advertising expenditures actually resulted in an increase in sales, consistent with the notion that strong brands such as Bud- weiser do not require the same advertising levels, at least over a short period of time, as a less well-known or well-liked brand.85
Similarly, because of existing brand knowledge structures, consumers may be more likely to notice sales promotions, direct mail offerings, or other sales-oriented marketing communica- tions and respond favorably. For example, several studies have shown that promotion effectiveness is asymmetric in favor of a higher-quality brand.86
Possible Licensing and Brand Extension Opportunities
A strong brand often has associations that may be desirable in other product categories. To capitalize on this value, as dis- cussed in Chapter 7, a firm may choose to license its name, logo, or other trademark item to another company for use on its products and merchandise. The rationale for the licensee (the company obtaining the rights to use the trademark) is that con- sumers will pay more for a product because of the recognition and image lent by the trademark. One marketing research study showed that consumers would pay $60 for cookware licensed under the Julia Child name as opposed to only $40 for identical cookware bearing the Sears name.87
As will be outlined in Chapter 11, a brand extension occurs when a firm uses an established brand name to enter a new market. A line extension uses a current brand name to enter a
new market segment in the existing product class, say with new varieties, new flavors, or new sizes.
Academic research has shown that well-known and well- regarded brands can extend more successfully and into more di- verse categories than other brands.88 In addition, the amount of brand equity has been shown to be correlated with the highest- or lowest-quality member in the product line for vertical product extensions.89 Research has also shown that positive symbolic as- sociations may be the basis of these evaluations, even if overall brand attitude itself is not necessarily high.90
Brands with varied product category associations through past extensions have been shown to be especially extendable.91 As a result, introductory marketing programs for extensions from an established brand may be more efficient than others.92 Several studies have indicated that extension activity has aided (or at least did not dilute) brand equity for the parent brand. For instance, brand extensions strengthened parent brand associa- tions, and “flagship brands” were highly resistant to dilution or other potential negative effects caused by negative experiences with an extension.93 Research has also found evidence of an ownership effect, whereby current owners generally had more favorable responses to brand line extensions.94 Finally, exten- sions of brands that have both high familiarity and positive at- titudes have been shown to receive higher initial stock market reactions than other brands.95
Other Benefits
Brands with positive customer-based brand equity may provide other advantages to the firm not directly related to the prod- ucts themselves, such as helping the firm to attract or motivate better employees, generate greater interest from investors, and garner more support from shareholders.96 In terms of the latter, several research studies have shown that brand equity can be directly related to corporate stock price.97
Notes
1. Kevin Lane Keller, “Conceptualizing, Measuring, and Managing Customer-Based Brand Equity,” Journal of Marketing (January 1993): 1–29.
2. Much of this chapter is based on Kevin Lane Keller, Brian Sternthal, and Alice Tybout, “Three Questions You Need to Ask About Your Brand,” Harvard Busi- ness Review 80, no. 9 (September 2002): 80–89.
3. Norman Berry, “Revitalizing Brands,” Journal of Con- sumer Marketing 5, no. 3 (1988): 15–20.
4. Elaine Wong, “Top 10 Most Popular Campaigns of 2009,” Brandweek, 30 December 2009; Stuart Elliott,
“The Vocabulary of Snacking, Lightly Sweetened,”
New York Times, 3 March 2009; Michael Bush, “As 2011 Super Bowl Faded, Doritos and Snickers Proved Lasting Winners,” Advertising Age, 16 February 2011.
5. “Discovery Channel Looks to Bring New Energy, Focus to Brand Identity,” Art & Business in Mo- tion, www.dennytu.wordpress.com, 26 August 2011;
Dan Butcher, “Discovery Channel Launches Cross-
Network Ad Campaign with Microsoft,” Mobile Mar- keter, 26 April 2009; www.dsc.discovery.com.
6. Richard Jones, “Finding Sources of Brand Value:
Developing a Stakeholder Model of Brand Equity,”
Journal of Brand Management, 13, no. 1 (October 2005): 10–32.
7. John R. Anderson, The Architecture of Cognition (Cambridge, MA: Harvard University Press, 1983);
Robert S. Wyer, Jr. and Thomas K. Srull, “Person Memory and Judgment,” Psychological Review 96, no. 1 (1989): 58–83.
8. John R. Rossiter and Larry Percy, Advertising and Pro- motion Management (New York: McGraw-Hill, 1987).
9. Burleigh B. Gardner and Sidney J. Levy, “The Prod- uct and the Brand,” Harvard Business Review (March–
April 1955): 33–39.
10. H. Herzog, “Behavioral Science Concepts for Analyz- ing the Consumer,” in Marketing and the Behavioral Sciences, ed. Perry Bliss (Boston: Allyn & Bacon, 1963), 76–86; Joseph W. Newman, “New Insight, New
Progress for Marketing,” Harvard Business Review (November–December, 1957): 95–102.
11. Jim Joseph, “How Do I Love Thee, Apple? Let Me Count the Ways,” Brandweek, 24 May 2010; Michael Learmonth, “Can the Apple Brand Survive With- out Steve Jobs?,” Advertising Age, 14 January 2009;
Miguel Helft and Ashlee Vance, “Apple Passes Mi- crosoft as No. 1 in Tech,” New York Times, 26 May 2010.
12. James R. Bettman, An Information Processing Theory of Consumer Choice (Reading, MA: Addison-Wesley, 1979); Rossiter and Percy, Advertising and Promotion Management.
13. William Baker, J. Wesley Hutchinson, Danny Moore, and Prakash Nedungadi, “Brand Familiarity and Ad- vertising: Effects on the Evoked Set and Brand Pref- erence,” in Advances in Consumer Research, Vol. 13, ed. Richard J. Lutz (Provo, UT: Association for Con- sumer Research, 1986), 637–642; Prakash Nedungadi,
“Recall and Consumer Consideration Sets: Influenc- ing Choice without Altering Brand Evaluations,”
Journal of Consumer Research 17 (December 1990):
263–276.
14. For seminal supporting memory research, see Henry L.
Roediger, “Inhibition in Recall from Cuing with Re- call Targets,” Journal of Verbal Learning and Verbal Behavior 12 (1973): 644–657; and Raymond S. Nick- erson, “Retrieval Inhibition from Part-Set Cuing: A Persisting Enigma in Memory Research,”Memory and Cognition 12 (November 1984): 531–552.
15. Rashmi Adaval, “How Good Gets Better and Bad Gets Worse: Understanding the Impact of Affect on Evalu- ations of Known Brands,”Journal of Consumer Re- search 30 (December 2003): 352–367.
16. Jacob Jacoby, George J. Syzabillo, and Jacqeline Busato-Schach, “Information Acquisition Behavior in Brand Choice Situations,”Journal of Consumer Re- search 3 (1977): 209–216; Ted Roselius, “Consumer Ranking of Risk Reduction Methods,” Journal of Mar- keting 35 (January 1977): 56–61.
17. James R. Bettman and C. Whan Park, “Effects of Prior Knowledge and Experience and Phase of the Choice Process on Consumer Decision Processes: A Protocol Analysis,” Journal of Consumer Research 7 (Decem- ber 1980): 234–248; Wayne D. Hoyer and Steven P.
Brown, “Effects of Brand Awareness on Choice for a Common, Repeat-Purchase Product,” Journal of Con- sumer Research 17 (September 1990): 141–148; C. W.
Park and V. Parker Lessig, “Familiarity and Its Impact on Consumer Biases and Heuristics,”Journal of Con- sumer Research 8 (September 1981): 223–230.
18. Richard E. Petty and John T. Cacioppo, Attitudes and Persuasion: Classic and Contemporary Approaches.
(Boulder, CO: Westview, 1996).
19. “Gannett Launches Branding, Ad Campaign,” The Clarion-Ledger, 7 March 2011; Nat Worden, “Gannett Reaches Out With a New Slogan,” Wall Street Journal, 7 March 2011; “Gannett Launches New
‘It’s All Within Reach’ National Brand Campaign,”
Business Wire, 7 March 2011; “First Mover: Maryam Banikarim,” Adweek, 19 September 2011.
20. https://www.frenzhotel.com.my.
21. Stuart Elliott, “Body Shop Begins a Campaign Against Sex Trafficking,” New York Times, 17 March 2010;
Elaine Wong, “The Body Shop Finds New Ways to Beauty,” Brandweek, 26 August 2008.
22. Heather Landi, “When Life Gives You Lemons,”
Beverage World, November 2010, 18–22.
23. George S. Day, Allan D. Shocker, and Rajendra K.
Srivastava, “Customer-Oriented Approaches to Identi- fying Products-Markets,”Journal of Marketing 43 (Fall 1979): 8–19.
24. K. E. Miller and J. L. Ginter, “An Investigation of Situ- ational Variation in Brand Choice Behavior and At- titude,” Journal of Marketing Research 16 (February 1979): 111–123.
25. David A. Aaker, “Positioning Your Brand,” Business Horizons 25 (May/June 1982): 56–62; Al Ries and Jack Trout, Positioning: The Battle for Your Mind (New York: McGraw-Hill, 1979); Yoram Wind, Prod- uct Policy: Concepts, Methods, and Strategy (Reading, MA: Addison-Wesley, 1982).
26. Dipankar Chakravarti, Deborah J. MacInnis, and Kent Nakamoto, “Product Category Perceptions, Elaborative Processing and Brand Name Extension Strategies,” in Advances in Consumer Research 17, eds. M. Goldberg, G. Gorn, and R. Pollay (Ann Arbor, MI: Association for Consumer Research, 1990): 910–916; Mita Sujan and James R. Bettman, “The Effects of Brand Positioning Strategies on Consumers’ Brand and Category Percep- tions: Some Insights from Schema Research,” Journal of Marketing Research 26 (November 1989): 454–467.
27. Joel B. Cohen and Kanul Basu, “Alternative Models of Categorization: Towards a Contingent Processing Framework,” Journal of Consumer Research 13 (March 1987): 455–472; Prakash Nedungadi and J. Wesley Hutchinson, “The Prototypicality of Brands: Relation- ships with Brand Awareness, Preference, and Usage,”
in Advances in Consumer Research, Vol. 12, eds.
Elizabeth C. Hirschman and Morris B. Holbrook (Provo, UT: Association for Consumer Research, 1985), 489–
503; Eleanor Rosch and Carolyn B. Mervis, “Family Resemblance: Studies in the Internal Structure of Categories,” Cognitive Psychology 7 (October 1975):
573–605; James Ward and Barbara Loken, “The Quint- essential Snack Food: Measurement of Prototypes,” in Advances in Consumer Research, Vol. 13, ed. Richard J.
Lutz (Provo, UT: Association for Consumer Research, 1986), 126–131.
28. Nedungadi and Hutchinson, “The Prototypicality of Brands”; Ward and Loken, “The Quintessential Snack Food.”
29. Phillip Kotler and Kevin Lane Keller, Marketing Man- agement, 14th ed. (Upper Saddle River, NJ: Prentice Hall, 2012).
30. Russell I. Haley, “Benefit Segmentation: A Decision- Oriented Research Tool,” Journal of Marketing 32 (July 1968): 30–35.
31. Also, it may be the case that the actual demographic specifications given do not fully reflect consumers’
underlying perceptions. For example, when the Ford Mustang was introduced, the intended market segment was much younger than the ages of the customers who actually bought the car. Evidently, these consumers felt or wanted to feel younger psychologically than they really were.
32. Jerry Shereshewsky, “Why Baby Boomers Can’t Be Put in One Box,” Advertising Age, 2 March 2010;
Charles Duhigg, “Six Decades at the Center of At- tention, and Counting,” New York Times, 6 January 2008.
33. Ronald Frank, William Massey, and Yoram Wind, Market Segmentation (Englewood Cliffs, NJ: Pren- tice Hall, 1972); Malcolm McDonald and Ian Dun- bar, Market Segmentation: How to Do It, How to Profit from It (Oxford, UK: Elsevier Butterworth- Heinemann, 2004).
34. “CVS’ Goal: Attract Customers for Life,” DSN Retail- ing Today, 23 May 2005; “Women Making a Differ- ence at CVS,” Chain Drug Review, 18 April 2005.
35. A complete treatment of this material is beyond the scope of this chapter. Useful reviews can be found in any good marketing strategy text. For example, see David A. Aaker, Strategic Market Management, 9th ed.
(New York: John Wiley & Sons, 2011) or Donald R.
Lehmann and Russell S. Winer, Product Management, 4th ed. (New York: McGraw-Hill/Irwin, 2005).
36. James R. Bettman and Mita Sujan, “Effects of Framing on Evaluation of Comparable and Non- comparable Alternatives by Expert and Novice Consumers,” Journal of Consumer Research 14 (September 1987): 141–154; Michael D. Johnson,
“Consumer Choice Strategies for Comparing Non- comparable Alternatives,”Journal of Consumer Re- search 11 (December 1984): 741–753; C. Whan Park and Daniel C. Smith, “Product Level Choice: A Top-Down or Bottom-Up Process?” Journal of Con- sumer Research 16 (December 1989): 289–299.
37. Teri Agins, “As Consumers Find Other Ways to Splurge, Apparel Hits a Snag,” Wall Street Journal, 4 February 2005, A1, A6.
38. Isaac Arnsdorf, “The Best Shot: Cell or Camera?,”
Wall Street Journal, 23 June 2010.
39. Patrick Barwise and Sean Meehan, Simply Better: Win- ning and Keeping Customers by Delivering What Mat- ters Most (Cambridge, MA: Harvard Business School Press, 2004).
40. Richard Heller, “Folk Fortune,” Forbes, September 4, 2000, 66–69; Lauren Collins, “House Perfect,” New Yorker, 3 October 2011.
41. Jeff Green and Alan Ohnsman, “At Subaru, Sharing the Love Is a Market Strategy,” Bloomberg BusinessWeek, 24–30 May 2010, 18–20; Jean Halliday, “Subaru of America: An America’s Hottest Brands Case Study,”
Advertising Age, 16 November 2009; “Love Guru:
How Tim Mahoney Got Subaru Back on Track,”
Brandweek, 13 September 2010; “Subaru Announces Third Annual Share the Love Event,” PR Newswire, 8 November 2010.
42. Personal correspondence, Leonora Polansky, 16 June 2011.
43. http://www.lamsoon.com.my/;http://www.timeoutkl.
com; Nielsen MAT Report, February 2012.
44. Robert Klara, “‘The Other White Meat’ Finally Cedes Its Place in the Pen,” Brandweek, 4 March 2011.
45. Richard A. Melcher, “Why Zima Faded So Fast,” Busi- ness Week, 10 March 1997, 110–114.
46. Keith Naughton, “Ford’s ‘Perfect Storm,’” Newsweek, 17 September 2001, 48–50.
47. Elizabeth Jensen, “Campbell’s Juice Scheme: Stealth Health,” Wall Street Journal, 18 April 1997, B6.
48. David A. Aaker, Brand Relevance: Making Competitors Irrelevant (San Francisco: John Wiley & Sons, 2011).
49. Heather Landi, “Good to the Core,” Beverage World, Au- gust 2010, 35–42.
50. For a thorough examination of how an organization can improve its marketing capabilities, see Andy Bird and Mhairi McEwan, The Growth Drivers: The Definitive Guide to Transforming Marketing Capabilities (West Sussex, UK: John Wiley & Sons, 2012).
51. “POM Battles FTC Over Health Claims,” Beverage World, October 2010, 14.
52. Steven Gray, “How Applebee’s Is Making It Big in Small Towns,” Wall Street Journal, 2 August 2004, B1, B4;
Douglas Quenqua, “Polishing Up the Apple in Apple- bee’s, New York Times, 25 October 2007; Kenneth Hein,
“Applebee’s Plan to Emulate IHOP, Brandweek, 8 July 2008.
53. P&G Corporate Newsroom, www.news.pg.com;
“ Proctor & Gamble to Move Beauty Unit to Singapore,”
www.reuters.com, May 2012.
54. Abraham Maslow, Motivation and Personality, 2nd ed.
(New York: Harper & Row, 1970).
55. Thomas J. Reynolds and Jonathan Gutman, “Laddering Theory: Method, Analysis, and Interpretation,” Journal of Advertising Research (February/March 1988): 11–31.
Thomas J. Reynolds and David B. Whitlark, “Applying Laddering Data to Communications Strategy and Adver- tising Practice,” Journal of Advertising Research (July/
August 1995): 9–17.
56. Brian Wansink, “Using Laddering to Understand and Le- verage a Brand’s Equity,” Qualitative Market Research 6, no. 2 (2003): 111–118.
57. Marco Vriens and Frenkel Ter Hofstede, “Linking At- tributes, Benefits, and Consumer Values,” Marketing Research (Fall 2000): 3–8.
58. Kevin Lane Keller, “Brand Mantras: Rationale, Criteria, and Examples,” Journal of Marketing Management 15 (1999): 43–51.
59. Brand Focus 2.0 is based in part on Steven Hoeffler and Kevin Lane Keller, “The Marketing Advantages of Strong Brands,” Journal of Brand Management 10 (August 2003): 421–445.
60. Ian M. Lewis, “Brand Equity or Why the Board of Di- rectors Needs Marketing Research,” paper presented at the ARF Fifth Annual Advertising and Promotion Work- shop, 1 February 1993.
61. The following sections review seminal research in each of the areas. For more recent research on these topics, see Philip Kotler and Kevin Lane Keller, Marketing