The Strategy of Global Branding and Brand Equity

Alvin Lee, Jinchao Yang, Richard Mizerski, Claire Lambert

• Publisher: Routledge
• Year: 2015
• Print ISBN: 9780415749114
• eBook ISBN: 9781317525219
• Topic: Business
• Subtopic: Business General
• Index: Business

Why does a customer choose one brand over another? What are the factors which would make an individual more inclined to choose your brand?

This book offers a way to predict which brand a buyer will purchase. It looks at brand performance within a product category and tests it in different countries with very different cultures. Following the Predictive Brand Choice (PBC) model, this book seeks to predict a consumer's loyalty and choice. Results have shown that PBC can achieve a high level of predictive accuracy, in excess of 70% in mature markets. This accuracy holds even in the face of price competition from a less preferred brand.

PBC uses a prospective predicting method which does not have to rely on a brand's past performance or a customer's purchase history for prediction. Choice data is gathered in the retail setting – at the point of sale. The Strategy of Global Branding and Brand Equity presents survey data and quantitative analyses that prove the method described to be practical, useful and implementable for both researchers and practitioners of commercial brand strategies.

1 Brands – Origins, Heritage and Importance

DOI: 10.4324/9781315722528-1

When asked how they form their decision on which brand to buy, many consumers are likely to explain the logic behind their decision. Consumers like to believe they use reason to inform their choice of purchases, not impulse. However, research has revealed the opposite; consumers discriminate very poorly between the many brand choices available in most markets, even for categories they frequently use and buy. While consumers often report reasoned decision-making, they happily select brands that represent less than optimal choices, often mistakenly perceiving their favorite brand as being the best brand. Many companies and governments have investigated the basis of consumers’ decisions. Their studies seek to understand consumers’ decision-making, trying to predict their future choices. Until now, none of the methods for prediction reported in the literature have been particularly accurate or reliable. This book documents the rationale and development of the PBC – Predictive Buyer Choice model – that can predict the brand choice of individual consumers exceptionally well, exceeding 95% accuracy under some circumstances.

Investigations into how people view successful brands indicate that consumers who have favorable knowledge about the brand (Brand Knowledge) tend to be more loyal to the brand (Brand Loyalty). They are also willing to pay a premium price (Brand Equity) and are more willing to buy other items from the same brand (Brand Extensions). But how is this possible if their Brand Knowledge is rarely based on an objective evaluation of the brand? While it is easy to credit good brand advertising for the consumers’ Brand Knowledge, in truth, most buyers have developed knowledge of their brand from a wide variety of sources. These are sources that lie beyond the brand marketers’ control. This book discusses how several product categories have nurtured successful brands. Some of these brands have even become international brands. These brands are seen by consumers to possess elements of what is often called favorable Brand Knowledge. These Brand Knowledge elements have enabled the brands to bridge cultures and age groups to become international leaders in their categories.

The first chapter provides an introduction to the topic of branding. Here we address the core characteristics of a brand and the differences between products and brands. We trace the origin of brands and what brands mean to business and consumers. Further, we introduce the importance of building a strong brand to maintain growth in increasingly competitive markets. This theme will be developed with much greater detail in subsequent chapters.

What is a product?

A product is anything that can be offered to a market that might satisfy a want or need (Armstrong, Adam, Denize and Kotler 2010). A product can be an idea (e.g., intellectual property such as an industrial process), a good (e.g., a computer) or a service (e.g., a haircut). A customer seeks a product to fulfil a need or want. In this case, the product serves to solve a problem for the customer. For example, if customers want to get from home to their workplace, they may choose an automobile to solve their transport problem. The automobile may compete with other products that provide a similar benefit, the customer may instead choose a bus, train, ride a bicycle or walk to work. To surmise, a product is a good or service, or a combination of goods and services that serve as a means to an end – that is, the product is a way to produce a desired outcome. This outcome solves a problem – i.e., a car solves the problem of transportation.

Most consumers will not buy products that do not provide any benefits. When they do, they are unlikely to buy again. Businesses that lose sight of the fact that they are selling benefits and not products tend to encounter economic trouble. Examples of companies that have failed to acknowledge this distinction and have consequently gone bankrupt include Kodak, Borders and Three Deer. Kodak forgot they were selling the benefit of recording memories. As such, they became too tied into the product format of film and film processing and were not focused on the emerging consumer benefit of digital photography – ironically, Kodak invented digital photography. When consumers migrated to the cheaper and more convenient method of storing their memories digitally, Kodak became a company with an outdated product, a product that was no longer desired by the brand’s former customers.

Borders was very good at selling paper-based books. However, Borders became so tied to this format of distribution that the brand failed to transition to selling digital and online books. Borders is now a distant memory.

In China, Three Deer brand infant formula lost sight of its consumer benefit, the provision of safe and nutritious baby formula. When it did not control its supply chain tightly enough, contamination in the form of melamine (an industrial solvent), made its way into its product. This resulted in death and physical harm to many babies in China. The company selling Three Brand infant formula is now closed, and many directors have been tried and executed.

To enhance the chances of success, a company must define its products in terms of satisfying consumer needs. This will improve the prospect of successful branding the company’s products and minimize the chances of encountering the same situation experienced by Kodak, Borders and Three Deer.

Tangible versus intangible

A product can be classified as tangible or intangible. A tangible product is a physical object that can be touched; for example, a computer, car, beer or smartphone. An intangible product is a product that cannot be touched. Usually, intangible products can only be perceived indirectly; examples include, digital files, a movie, or an insurance policy. Something that is tangible can also have an intangible aspect. For example, a DVD is tangible, but the movie stored on the DVD is intangible. The easiest way to verify if a product is tangible is to consider whether it can be touched or picked up. If it can be, it is a tangible product (e.g., DVD). However, if it cannot be touched or picked up, it is intangible.

What is a brand?

There may be many brands within a product category. For example, the automobile category has brands like Toyota, Mercedes Benz and Great Wall. While people buy products for the benefits the products offer, people buy brands because they perceive different brands to offer different kinds of value. As such, brands are designed to help consumers perceive the branded product as different from other products within the same product category.

The word “brand” is very commonly used (Stern 2006). When used by nonmarketers, the word seems to have an imprecise meaning. Brand can refer to an idea, as in “The brand name is well-known”. It can represent an item – “I am carrying a branded handbag”, or even “That is a good brand” – referring to the product maker’s reputation. Unsurprisingly, this varied use increases the confusion surrounding “brand”. This murkiness surrounding the concept we call brand appears to have been around for more than a century (Stern 2006), and persists as the use of the word continues to evolve in the English language. It is due to the concept of brand still evolving. The ongoing relevance of the concept of brand, and the redefinition of the meaning ascribed to brand attests to the concept’s importance and longevity.

To marketers, the word brand carries a very specific set of meanings. The American Marketing Association (2014) dictionary defines a brand as “a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers”. Kotler (1991) provides a near identical definition of a brand as, “a name, term, sign, symbol, or design, or combination of them which is intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors” (p. 442). In this definition, a brand appears to mean a name, term, symbol, design or other specially defining or differentiating feature to distinguish one seller’s products from those of other sellers (Brown et al. 2006). Keller (1993) refers to these individual components as a brand’s identity and in totality “the brand”. This definition emphasizes the marketer-controlled differentiation and communication of a product in the market. However, Duncan defines a brand as “a perception resulting from experiences with, and information about, a company or a line of products” (Duncan 2005). Duncan’s definition highlights the element of a customer’s experience that is related to a brand.

A brand acts as a promise to its prospects and consumers. It represents the actual product or service the consumer expects to receive, its quality but also the emotions evoked when consumers use the product or service. If you think of the Heineken brand, the brand might represent quality, tradition, premium and indulgence. The Heineken brand promises something to its consumers.

For many a company, a brand is the most precious asset they own. It is something that cannot be touched, but is something the consumer feels about the product or service. From an accounting perspective, a brand is identified as an intangible asset. This asset is commonly the most valuable asset on a firm’s balance sheet. Brands are carefully managed to generate shareholder value. They are a valuable intangible asset which will grow exponentially with investment and careful management. In fact, according to Brigham and Linssen (2010), Thomason Reuters and Interbrand reported that in the 1970s as much as much as 95% of the average corporation’s value comprised of tangible assets. However, this has reduced to 75% today. This shows that its brands and reputation are normally regarded as a company’s most valuable asset.

Product versus a brand

You may ask about the difference between a product and a brand. A product is manufactured by a company and is sold to a consumer in exchange for money. On the other hand, a brand is established based on what the customer perceives, experiences and expects of a product or service. A brand is not what a marketer of a product says it is, but what a consumer thinks it is. For this reason, a brand is more than a product. It is the emotional and behavioral relationship the consumer forms with the product. It is what sets the product apart from its competitors.

Products can be superseded, while brands can live on and on. Products such as cameras and photographic film have become obsolete as a result of technology advances that introduce more innovative products like the digital camera and smartphones into markets. The same has occurred for music cassettes and vinyl records – these have been superseded with the introduction of digital music devices such as iPods. The Beatles brand will forever live on, whilst the music cassette will be a distant memory that is relegated to history.

A brand cannot be copied; a product is easily copied. It did not take long for competitors to copy and launch their own branded product mimicking the Apple’s iPad. But it is with the brand related to the product that consumers develop different perceptions, experiences and emotional connections.

A product can also be replaced if a competitor offers a better product or a similar product with the same features and benefits. For most of us, we see sugar as just sugar. You really only care that sugar is sweet, over what brand it is.

Products can very quickly become meaningful to consumers if the product offers unique and beneficial functions. However, it takes longer for a brand to create a meaningful relationship with a consumer. Time is required for a consumer to become aware of, to build an experience with, and to trust a brand. A positive relationship between the customer and brand only exists with awareness, experience and trust. To give an example, USB “thumb” drives were an instant hit with consumers. However, until today, there does not seem to be an especially strong brand in the market. Ones that come to mind are San Disk, Kingston and Transcend. The fact that brands do not feature strongly in this category is reflected in the number of brands and lack of differentiation among competing brands. For thumb-drives, it appears that consumers consider the products of different brands interchangeable and substitutable; USB thumb-drives are treated as a commodity.

As the specialty area of branding has grown in marketing, so has the number of specialist terms associated with brand and branding (Keller 2008). These combine “brand” with other words to literarily or metaphorically represent ideas to describe the different components that make the branding process work. For example, brand implementation, brand relationship spectrum, brand architecture, brand knowledge, brand structure and matrices, branded house and house of brands. Combinations of these terms also describe the outcomes of the branding process – brand equity, brand personality and brand identity. This explosion of specialist sub-terms within the study and practice of branding tends to increase the confusion novice readers are likely to have in identifying the differences between brand, branding and branded. To help better answer the question, “What is a brand?” let’s explore the way the word brand has evolved.

Early references to brand

The word brand has a long history in the English language. Literature that has survived (Stern 2006) traces the word “brand” to the epic poem Beowulf. In Beowulf, brand is a synonym for sword (Oxford English Dictionary Online 2014), which is still a fitting association today, because brands now refer to a commercial tool that facilitates competition in marketplaces. Beowulf was first written around the year ad 1000 (Heaney 2002). However, the word brand is likely to have been used from around the fifth century, when the events that inspired Beowulf occurred (Klaber 1950). In the 1400s, brand was used as a verb in Wycliffe’s An Apology for Lollard Doctrines (Todd 1842).

The word brand seems to have ro...

Table of contents

• Cover Page
• Half-Title Page
• Title Page
• Copyright Page
• Table of Contents
• List of figures
• List of tables
• List of worksheets
• Preface
• 1 Brands – Origins, Heritage and Importance
• 2 The Art of Branding
• 3 The Science of Measuring Brand Performance
• 4 Cross-Cultural Studies, Loyalty, Choice, Experiments and Hypotheses
• 5 Research Method
• 6 Results: sample comparability and Brand Knowledge constructs
• 7 Results: predicting brand choice using multiple discriminant analysis
• 8 Results: predicting brand choice using multinomial logistic regression analysis and binary logistic regression analysis
• 9 Discussion of Results and Summary
• 10 Workshop: predictive Brand Choice (PBC) work process
• Appendices
• Index