Topic Gateway Series. Brand Management. Brand Management. Topic Gateway Series No. 3

Topic Gateway Series No. 3 Prepared by Ray Perry and Technical Information Service Revised November About Topic Gateways Topic Gateways are intended as a refresher or introduction to topics of interest
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Topic Gateway Series No. 3 Prepared by Ray Perry and Technical Information Service Revised November About Topic Gateways Topic Gateways are intended as a refresher or introduction to topics of interest to CIMA members. They include a basic definition, a brief overview and a fuller explanation of practical application. Finally they signpost some further resources for detailed understanding and research. Topic Gateways are available electronically to CIMA members only in the CPD Centre on the CIMA website, along with a number of electronic resources. About the Technical Information Service CIMA supports its members and students with its Technical Information Service (TIS) for their work and CPD needs. Our information specialists and accounting specialists work closely together to identify or create authoritative resources to help members resolve their work related information needs. Additionally, our accounting specialists can help CIMA members and students with the interpretation of guidance on financial reporting, financial management and performance management, as defined in the CIMA Official Terminology 2005 edition. CIMA members and students should sign into My CIMA to access these services and resources. The Chartered Institute of Management Accountants 26 Chapter Street London SW1P 4NP United Kingdom T. +44 (0) F. +44 (0) E. 2 Brand management Definition and concept From the company perspective, a brand is: a name, term, symbol or design, or a combination of them, which is intended to signify the goods or services of one seller or group of sellers and to differentiate them from those of competitors. Kotler, 2000 From the customer perspective, a brand is a shorthand which differentiates one product or service from others. A successful brand is able to shortcut the decision making process because the buyer trusts the brand promise, which may be based on quality, reliability, image, price or service level. A brand may be one product or service or a range. The difference is that brand attributes are physical and emotional, for instance, snob value. A product alone does not necessarily have such attributes. A brand gives the product or service a personality. Brand management is a marketing role with specific marketers responsible for brands or products. The objective is to ensure that brand differentiation is clearly understood and that all promotional messages are consistent. Additional products and services, known as brand extensions, must be logical and consistent with the values of the brand. Context In the current syllabus, CIMA students will learn and may be examined on this topic in paper P6 Management Accounting Business Strategy. A study system for this paper is available from CIMA Publishing. Related concepts Added value; brand equity; customer relationship management; product management. 3 Overview A company decides whether to invest in branding based on how difficult it is to differentiate its products. In general, the motivation to invest in brands is to be able to charge a price premium. In a market where all products are equal, such as coal, milk, or paper, products are commoditised. Here the only advantage is price discounting, which is not in the long term interest of the organisation. Willingness to pay a premium is based on tangible and intangible benefits. This is called brand equity. Without equity, there is no brand. A brand with very large equity is termed a power brand. Here the customer has deep affinity with the brand, for instance, the owner of a Porsche who covets the macho driving experience, or somebody who wears a favourite cosmetics brand. Benefits of the brand Benefits of a brand from a customer perspective are: time saving products not trusted are easily disregarded. This makes repeat purchase an easier choice minimises risk of unhappiness with the purchase makes a statement about the customer for instance, a Rolex watch implies wealth, while Nike suggests sport and youth can lead to a feeling of pleasure in the purchase self-reassurance that the correct decision has been made. For companies, the benefits of branding include: a premium pricing opportunity protection from competitors branding makes it harder for competitors to attack the product and acts as a barrier to market entry building brand loyalty studies have shown that it costs a factor of seven times more to attract a new customer than to persuade an existing customer to buy again easier communication with customers and potential customers ability to advertise a whole range so that promotional cost per product is reduced guaranteed retail stocking where applicable 4 greater ease to introduce new products a longer life for recognised products risk factors customers forgive brands they trust. For instance, Perrier and Coke have had quality issues, Euro Disney had financial problems and Shell has been attacked over environmental issues. Brand components A brand consists of various components: attributes for instance, Mercedes cars are considered to be well built benefits makes the customer feel important, for instance, a gold credit card values for instance, a Nikon camera gives a quality image culture an Armani suit makes you look good personality what does it say about me? For instance, reading the FT implies I understand commerce. Application Branding policies There are various types of brand policy. A parent brand where the company brand is used as an umbrella but not on products, for instance, Diageo. Individual brands where separate brand names are applied to different groups of products. Disadvantages are lack of economies, advantages are that if a new brand group is a flop the rest of the business is not affected. An example of an individual brand is Procter and Gamble s Clairol brand of shampoos. Family brands all products and services have the same brand or an element of the same name, for instance, Ford Mondeo and Ford Fiesta cars, Vodafone or Shell Oil. Line family brands where the company brands only some of its products with the company name but has different lines with a different branding. For instance, Prudential developed Egg as a distinct brand from Prudential in the UK banking sector. 5 Extension brands where the company name is used as part of a name to expand into new products or sectors, for instance, Virgin Cars, Virgin Mobile, Virgin Records. Brand extensions and risk Brand extension is one way to reduce marketing costs. It must be relevant to the product. For instance, a car manufacturer extending to bicycles would be a risk if customers do not see the logic. Extensions can also expose the brand to the dangers of brand dilution or of confusing the customer. Vertical extension occurs when a brand is extended up or downmarket. For instance, Holiday Inn extended the brand downwards with Holiday Inn Express which they believed did not put the brand at risk. However, in moving upscale they created a new brand called Crowne Plaza. Rules for branding The product or service must be fit for purpose. Advertising cannot fool the customer. A good logo or message won t help poor performance. Must appeal emotionally to achieve the price premium. Differentiation must be consistent and relevant. Market research is an essential pre-requisite. Types of brand in the supply chain Manufacturing brands the producer stimulates demand by promotion, quality and guarantees which encourage retailers to stock the product, for instance, Barbie dolls. Service brands the provider advertises to the customer base and contact is directly with the company or its appointed agents, for instance, Cisco systems. They compete on quality of service like Virgin Air Premium Class or First Direct bank, or on speed like McDonald s or FedEx. Retail brands generally retailers use corporate branding of the organisation, for instance, HSBC bank or Tesco, and apply their name to in-house product ranges. Ingredient brands a component which is marketed as a separate brand, usually on quality, performance or uniqueness, for instance, Intel processors, Nutrasweet or Lycra. 6 Brand management in practice There are four levels of brand development: 1. tangible product where products have some degree of competitive advantage such as performance or features 2. basic brand some degree of differentiation or unique position 3. augmented brand a number of additional products or services, and repeat purchase achieved 4. potential brand customers are not willing to accept substitutes and are loyal to the brand. Brand management focuses on: ensuring the quality is high and maintained maintaining service to a high level with consistency making sure the brand is differentiated and that advertising reinforces the brand. Importantly, a good brand takes years to build but if the underpinning credibility is undermined, it can be destroyed in seconds. One example is the impact of Enron on Arthur Andersen. The role of the brand manager is to develop and to protect the brand. The brand manager also manages relationships with third parties such as research agencies, promotional agencies, PR companies and the media. The manager produces collateral or advertising materials and decides which channels to market to use in order to maximise impact. These might include magazines, newspapers, TV, direct mail, or in-store POS (point of sale) material. 7 Brand composition It is important for the organisation to understand the attributes, benefits and essence of the brand. Using the Virgin brand as an example, the make up of a brand is shown below. Figure 1. Virgin: The anatomy of a brand Attributes Imagery Brand core Brand logo Value for Money Good quality Great Customer Service Innovation Fun (youthful) Friendly Independent Rising to competitive challenge Supporting the ripped-off, under-served customer Break into market and shake it up This is sometimes called positioning the brand. A successfully positioned brand is well understood. Messages to customers must be in line with all aspects of the positioning in order to influence perception. This includes: product and service what we are selling price what we charge to whom place of distribution how is it purchased (e.g. shop, telephone, the Internet) and how it gets to the customer promotion how we communicate and encourage uptake physical evidence such as literature, logos or designs processes for instance, call centre people sales force, contact staff. This is called the marketing mix or the seven Ps. The more targeted the activity, the more cost efficient the campaign. Advertising at the Football World Cup or Superbowl may look good, but a focus on direct mail to people who share the attributes of the core buyers may be far more cost effective. 8 In business to business markets, direct marketing, database marketing and building, monitoring and nurturing relationships is increasingly the key to communicating brands successfully. Brand measurement An important issue is how to measure brand success and the effectiveness of marketing campaigns. For tactical campaigns the basic measures of success are: uplift in sales during and immediately after the promotional activity market share change market growth growth in first time buyers acquisitions on the customer database inbound calls relating to the activity. However, many campaigns are focused on building the brand and influencing the consumer over a long period of time. For this, market research tracking exercises can be used to ascertain impact on: brand awareness brand loyalty perceived quality brand associations. Typically market research would try to establish the value of the brand based on the following criteria. Value how does perceived value differ between those who buy and those who don t? Respect is it a credible brand? Relevance does it meet the needs? Performance what does the brand excel in? For instance, quality, efficiency, delivery. Popularity is it growing? Recommendation would buyers recommend to others? 9 Another key element of success is whether staff understand the differentiation of the brand, and could explain the brand instantly to a customer. This is particularly relevant in a service business. Why brands fail Matt Haig in Brand Failures points to the seven deadly sins of branding. 1. Brand amnesia owners forget what the brand stands for. For instance, Coca Cola changed its formula with disastrous results. 2. Brand ego think they can sell anything, for instance, Harley Davidson selling perfume. 3. Brand deception promoting attributes it can t live up to. 4. Brand fatigue lack of creativity. 5. Brand paranoia protecting the market by filing lawsuits rather than innovating. 6. Brand irrelevance must stay relevant. For instance, camera manufacturers cannot ignore the shift to digital cameras. 7. Brand megalomania very few brands can diversify into completely different areas without diluting the brand. References Arnold, David (1992). The handbook of brand management. London: Century Business Haig, Matt (2003). Brand failures. London: Kogan Page Kotler, Philip (2000). Marketing management. London: Prentice Hall Further information Articles Full text available from Business Source Corporate through My CIMA [Accessed 7 November 2008] Anand, D. The importance of brand management. Managing Intellectual Property, May 2008, Issue 179, pp Banerjee, S. Strategic brand-culture fit: a conceptual framework for brand 10 management. Journal of, May 2008, Volume 15, Issue 5, pp Bartram, P. Brand power. Management Accounting, June 2000, pp16-18 Haigh, D. Brand valuation: stand up and be counted. CIMA Insight, April Available from: [Accessed on 7 November 2008]. Hankinson, G. The management of destination brands: five guiding principles based on recent developments in corporate branding theory. Journal of Brand Management, February 2007, Volume 14, Issue 3, pp Hinshaw, M. A survey of key success factors in financial services marketing and brand management. Journal of Financial Services Marketing, September 2005, Volume 10, Issue 1, pp Keller, K., Sternthal, B. and Tybout, A. Three questions you need to ask about your brand. Harvard Business Review, September 2002, pp Lagerqvist, A.M., Wolff, R. and Lindberg, B. Use brand management to increase profits. Managing Intellectual Property, April 2007, Issue 168, pp Roslender, R. and Hart, S. Making the case for value brands. CIMA Insight, December Available from: [Accessed on 7 November 2008]. Roslender, R. and Hart, S. Accountants forge clear links with marketing. CIMA Insight, October Available from: [Accessed on 7 November 2008]. Sandberg, K. Building brand: a road map. Harvard Management Update, July 2001 Brand Mangement 2.0. EContent, September 2008, Volume 31, Issue 7, pp Articles Abstract only available from Business Source Corporate through My CIMA [Accessed 7 November 2008] Beverland, M. Brand management and the challenge of authenticity. Journal of Product and, 2005, Volume 14, Issue 7, pp Grassi, W. The new strategic brand management: creating and sustaining brand 11 equity long term. Journal of Product and, 2006, Volume 15, Issue 1, pp Krake, F. Successful brand management in SMEs: a new theory and practical hints. Journal of Product and, 2005, Volume 14, Issue 4, pp Books Abraham, D. (2008). Brand risk: adding risk literacy to brand management. Aldershot: Gower Asker, D. (1996). Building strong brands. New York: London: Free Press de Chernatonay, L. and McDonald, M. (1998). Creating powerful brands. Oxford: Butterworth Heinemann Dhar, M. (2007). Brand management 101: 101 lessons from real-world marketing. Singapore: John Wiley Doyle, Peter (2000). Value based marketing: marketing strategies for corporate growth and shareholder value. New York: Chichester: Wiley Haigh, M. (2003). Brand failures: the truth about the 100 biggest branding mistakes of all time. London: Kogan Page Kapferer, J.N. (2008). The new strategic brand management: creating and sustaining brand equity long term. 4th ed. London: Kogan Page Keller, K.L. (2007). Strategic brand management: building, measuring and managing brand equity. 3rd ed. Harlow; Upper Saddle River, NJ: Prentice Hall Kotler, P., Waldemar, P. and Michi, I. (2006). B2B brand management. Berlin; New York: Springer Murray, R. (2007). Churnmore: a true taste of brand management. London: Williams Murray Hamm Perry, R. (2001). Marketing unwrapped. Chichester: Wiley Upshaw, L. (1995). Building brand identity. Chichester: Wiley 12 Websites Chartered Institute of Marketing (CIM) Covers all aspects of marketing and includes a library resource. Available from: [Accessed 7 November 2008] Brand Channel Features recommended books, a directory of preferred suppliers and updates with live links to new articles. Available from: [Accessed 7 November 2008] Interbrand Includes white papers and ranking of the world s most valuable brands. Available from: [Accessed 7 November 2008] Copyright CIMA 2006 First published in 2006 by: The Chartered Institute of Management Accountants 26 Chapter Street London SW1P 4NP United Kingdom Printed in Great Britain No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publishers. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means method or device, electronic (whether now or hereafter known or developed), mechanical, photocopying, recorded or otherwise, without the prior 13 permission of the publishers. Permission requests should be submitted to CIMA at
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