Branding Power

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Branding Power
Presented to the First Western North Carolina
Wine Conference Appalachian State University July
12, 2005

• Dr. Jim Stoddard
• Marketing Department
• John A. Walker College of Business
• Appalachian State University

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Does Brand Matter?
Price Over 40,000/year. Differences between
Harvard and other top-ranked schools are very
small. The of top executives who were Ivy
League graduates has dropped from 14 (1980) to
10 (2001). Harvard no longer owns the No. 1
ranking as the university attended by the most
CEOs of S Ps 500 companies (just under 4).
Same as the University of Wisconsin.
However, Last year, 22,796 high school seniors
applied for admission to Harvard, a school
record.
Source USA Today, Tuesday, June 7, 2005.
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What is Branding?
As Stephen King put it A product is something
that is made in a factory a brand is something
that is bought by a consumer
Charles Revson, the founder of Revlon, made a
similar point when he said that in the factory,
he made cosmetics in the store, his customers
bought hope.
If electronic technology completely replaces
existing cameras and film, Kodak could still be a
leading brand, though one that represents
excellence in image capture, storage and
reproduction.
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Jeremy Bullmore, one of the finest writers in the
advertising and business notes
A brand is not an objective fact it is made up
of a million or more individual and subjective
assessments a consensus of subjectivity. The
skill of brand management is to see that each
consumer is offered the right raw materials from
which he or she will build the brand as the brand
owner would prefer.
I believe that, at the very centre of every
great brand, if it is to remain a great brand,
there needs to be a product champion a
constructor, a maker, an engineer, a chemist, a
brewer, a butcher, a product designer, a chef, an
editor, an inventor, a nerd, a boffin, a maker of
things. Someone who puts quality before cost
control and can hold his own at senior level with
the most miserly of financial directors.
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One Conceptualization of a Brands Essence.
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Consumer Perceptions of Brands
Perception is a psychological process of the way
in which consumers Select, organize and
interpret information. Several
generalizations can be made about the way
consumers perceive brands 1. People perceive
the brand as a whole (attitudes toward the
brand). 2. Perception is selective (several
perceptual filters are employed). 3. Consumers'
perception is what counts (attitude leads to
behavior). 4. Consumer information processing
capability is limited (the magical number
seven, plus or minus two). 5. Consumers are
cognitive misers.
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The Power of Brands

• Several pieces of evidence as to the
  profitability of strong brands were drawn from
  the PIMS study and gathered together by Peter
  Doyle (1989)
• Brands with a market share of 40 percent generate
  three times the return on investment of those
  with a share of only 10 per cent.
• For UK grocery brands, the number one brand
  generates over six times the return on sales of
  the number two brand, while the number three and
  four brands are unprofitable.
• For US consumer goods, the number one brand
  earned a 20 percent return, the number two earned
  around 5 percent and the rest lost money.
• Small brands can be profitable a strong brand in
  a niche market earns a higher return than a
  strong brand in a big market. In large markets,
  competitive threats and retailer pressure can
  hold back profits even for the top brand.
• Premium brands earn 20 per cent more than
  discount brands.
• It can cost six times as much to win new
  customers as to retain current ones.
• Best feasible strategy to achieve profitability
  and growth is to focus on brand differentiation
  rather than on cost and price. Although the best
  strategy in theory is both low cost and high
  differentiation, it is worth paying some cost
  penalty to achieve strong differentiation.

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Building Brands
First and by far the most important fundamental
is to provide superior consumer value. In
providing this quality, the firm must find some
way of differentiation. It involves defining
what the brand's core values are what it stands
for, whom it is for. Then, because we expect the
brand to last many years, we must look not only
for consistency, but also for evolution. Brands
that chop and change merely confuse and alienate
consumers. Finally, the firm must support its
brands. The support may be in the form of heavy
advertising, in thorough staff training or in
spending on research and development. No brand
can survive for long without the commitment and
support of the whole company from the top down.
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Threats Facing Brands
Although brands can be powerful and attractive,
many brands face serious challenges. Some of
these challenges include 1. Mature
markets. 2. Brand proliferation. 3. Consumer
revolt. 4. Management failure (Weak
Advertising). 5. Media cost and
fragmentation. 6. Distributor power (Three tier
distribution structure).
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Advertising Analysis Using PIMS Data
Source Re-analysis of PIMS data by WPP, Biel.
(Quoted in de Chernatony and McDonald, 1992, p
265)
Businesses with high market share tend to spend
more on advertising and to have significantly
higher return on investment.
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Overcoming Threats to Brands Brand Alliances
Ingredient Branding
Brand Alliances are an increasingly popular trend
among marketers. Brand alliances exist when the
product(s) of one firm are linked to those of
another through their marketing program or to
other firm(s) brands. One form of brand alliance
is when key attributes of one brand are
incorporated into another brand as ingredients.
This strategy is known as ingredient
branding. Examples Ben Jerrys Heath Bar
Crunch Fat Free Cranberry Newtons with Ocean
Spray cranberries.
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The Basic Motivation for Ingredient
Branding 1. Differentiation of the brand from
the competition by specifically characterizing
the attribute in the brand. 2. Increasing the
equity of the brand to consumers by sending a
strong signal that the product offers extra
benefits.
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Ingredient Branding Elements
1. Most firms use a cobranded ingredient branding
strategy in which the attribute ingredients are
supplied by another firm. 2. The ingredient
brand modifies an existing attribute of the brand
to help the brand improve perceptions of
performance.
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Thank you
stoddardje_at_appstate.edu