Strategic Marketing 1 Imperatives for MarketDriven Strategy 2

Strategic Marketing 1. Imperatives for Market-Driven Strategy 2. Markets and Competitive Space 3. Strategic Market Segmentation 4. Strategic Customer Relationship Management 5. Capabilities for Learning about Customers and Markets 6. Market Targeting and Strategic Positioning 7. Strategic Relationships 8. Innovation and New Product Strategy 9. Strategic Brand Management 10. Value Chain Strategy 11. Pricing Strategy 12. Promotion, Advertising and Sales Promotion Strategies 13. Sales Force, Internet, and Direct Marketing Strategies 14. Designing Market-Driven Organizations 15. Marketing Strategy Implementation And Control

Chapter 9 Strategic Brand Management Mc. Graw-Hill/Irwin Copyright © 2009 by The Mc. Graw-Hill Companies, Inc. All rights reserved.

STRATEGIC BRAND MANAGEMENT Strategic Brand Management Strategic Brand Analysis Brand Equity Measurement and Management Brand Identity Strategy Managing Brand Strategy Managing the Brand Portfolio Brand Leveraging Strategy 9 -3

STRATEGIC BRAND MANAGEMENT A product is anything that is potentially valued by a target market for the benefits or satisfaction it provides, including objects, services, organizations, places, people, and ideas 9 -4

A brand is a name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers. American Marketing Association A compelling logic has been proposed that the distinction between goods and services should be replaced by a view that services are the dominant perspective in the 21 st century, consisting of both tangible and intangible components. * *Stephen LVargo and Robert F. Lusch, “Evolving to a New Dominant Logic for Marketing, ” Journal of Marketing, January 2004, 1 -17. 9 -5

Strategic Role of Brands A strategic brand perspective requires managers to be clear about what role brands play for the company in creating customer value and share-holder value. FOR BUYERS, BRANDS CAN: • reduce customer search costs by identifying products quickly and accurately, • reduce the buyer’s perceived risk by providing an assurance of quality and consistency (which may then be transferred to new products), • reduce the social and psychological risks associated with owning and using the “wrong” product by providing psychological rewards for purchasing brands that symbolize status and prestige. 9 -6

FOR SELLERS, BRANDS CAN FACILITATE: • repeat purchases that enhance the company’s financial performance because the brand enables the customer to identify and re-identify the product compared to alternatives, • the introduction of new products, because the customer is familiar with the brand from previous buying experience, • promotional effectiveness by providing a point of focus, • premium pricing by creating a basic level of differentiation compared to competitors, • market segmentation by communicating a coherent message to the target audience, telling them for whom the brand is intended and for whom it is not, • brand loyalty, of particular importance in product categories where loyal buying is an important feature of buying behavior. Source: Marketing Science Institute Report No. 97 -422, 1997 9 -7

Brand Management Challenges* Internal and external forces create hurdles for product brand managers in their brand building initiatives: Intense Price and Other Competitive Pressures Fragmentation of Markets and Media Complex Brand Strategies and Relationships Bias Against Innovation Pressure to Invest Elsewhere Short-Term Pressures *David A. Aaker, Building Strong Brands, 1996, 26 -35. 9 -8

Responsibility for Managing Products Product/Brand Management § Planning, managing, and coordinating the strategy for a specific product or brand Product Group/Marketing Management § Product director, group manager, or marketing manager Product Portfolio Management § § Chief executive at SBU Team of top executives 9 -9

Strategic Brand Management Brand Identity Strategy Identity Implementation STRATEGIC BRAND ANALYSIS BRAND EQUITY MANAGEMENT Brand Strategy Over Time Managing the Brand Portfolio Leveraging the Brand 9 -10

GLOBAL FEATURE Recharging Sony’s Strategy Brand Management Sir Howard Stringer, a Welsh-born American citizen, was appointed CEO of Sony, the troubled Japanese electronics giant in 2005. Sony’s past strategic brand management initiatives had failed to close the digital gap between software/services/content/ devices. During the CEO’s first year several cost reduction and portfolio initiatives were implemented to launch the turnaround strategy: The Aibo, a beloved robotic pet, was put to sleep. They shut down the Qualia line of boutique electronics that included a $4, 000 digital camera and a $13, 000 70 -inch television. They eliminated 5, 700 jobs and closed nine factories, including one in south Wales. (He took some flak back home for that). They have sold $705 million worth of assets. You probably don’t know that Sony owned a chain of 1, 221 cosmetics salons and the 18 Japanese outlets of the Maxim’s de Paris restaurant chain. They’re gone. Gone, too, is a group of salary-men in their 60 s, 70 s, and 80 s who, after retiring from senior management positions, were given the title of “advisor, ” a tradition established by Sony’s founders. “That was very symbolic, ” says Hideki (Dick) Komivama, a Sony executive and key ally of Stringer’s. The 45 advisors each had a secretary, a car and driver, and worst of all, the ability to gum up decision-making and second-guess people doing real jobs. No more. Source: Marc Gunther, “The Welshman, the Walkman, and the Salary Men, ” Fortune, June 12, 2006, 72. 9 -11

STRATEGIC BRAND ANALYSIS Analyses Product Line Portfolio of Product Lines □ Market and Customer □ Competition □ Brand(s) 9 -12

Tracking Brand Performance Objectives Select Method(s) for Evaluation Identify Problem Products Decide How to Resolve the Problem 9 -13

Financial analysis Product life cycle analysis Analyzing Brand Performance Research studies Standardized information services Product performance analysis Brand positioning analysis 9 -14

Product Life Cycle Analysis Relevant issues in PLC analysis include: * * * Determining the length and rate of change of the PLC Identifying the current PLC stage and selecting the product strategy that corresponds to that stage Anticipating threats and finding opportunities for altering and extending the PLC 9 -15

* Product Performance Analysis § Management’s performance criteria § Strengths and weaknesses relative to portfolio * Brand Positioning Analysis § Perceptual maps for brand comparison § Buyer preferences * Other Product Analysis Methods § Information Services § Research studies § Financial analysis 9 -16

BRAND EQUITY Company/Customer Value of Brand Name and Symbol of a Product Determined by the brand’s set of assets (and liabilities) 9 -17

Brand Equity Effective strategic brand management requires that we understand brand equity and evaluate its impact when making brand management decisions: “Brand equity is a set of brand assets and liability linked to a brand, its name, and symbol, that add to or subtract from the value provided by a product or service to a firm and/or to that firm’s customers. * * David A. Aaker, Managing Brand Equity, The Free Press, 1991, 15. **Ibid, 102 -120. 9 -18

Measuring Brand Equity. Several measures are needed to capture all relevant aspects of brand equity. ** * loyalty (price premium, satisfaction/loyalty), * perceived quality/leadership measures (perceived quality, leadership/popularity), * associations/differentiation (perceived value, brand personality, organizational associations), * awareness (brand awareness), and * market behavior (market share, price and distribution indices). These components provide the basis for developing operational measures of brand equity. 9 -19

BRAND IDENTITY STRATEGY Brand identity is a unique set of brand associations that the brand strategist aspires to create or maintain. These associations represent what the brand stands for and imply a promise to customers from the organization members. * Four Brand Identity Perspectives Product Organization Person Symbol * David A. Aaker, Building Strong Brands, 1996, 68. 9 -20

Private Branding Specific Product BRAND FOCUS Combination Branding Line of Products Corporate Branding 9 -21

MANAGING BRAND STRATEGY Proactive efforts should be devoted to managing each brand over time. 9 -22

Strategies for Improving Product Performance Cost reduction Add new product(s) Product improvement Product line Strategy Alter marketing strategy Eliminate specific product(s) 9 -23

MANAGING THE BRAND PORTFOLIO Leverage Commonalities to Generate Synergy Allocate Resources BRAND PORTFOLIO OBJECTIVES Facilitate Change and Adaptation Reduce Brand Identity Damage Achieve Clarity of Product Offerings Source: David A. Aaker, Building Strong Brands, New York: The Free Press, 1996, 241 -242. 9 -24

Strategies for Brand Strength § § § Brand-Building Strategies * Developing the brand identification strategy * Coordinate identity across the organization Brand Revitalization * Find new uses for mature brands * Add products related to heritage Strategic Brand Vulnerabilities * Brand equity can be negative * Retailer private brands compete with manufacturer brands * Major shifts in consumer tastes * Competitive actions * Unexpected events 9 -25

Product Mix Modifications Motivation for changing the product mix: * Increase the growth rate of the business * Offer a more complete range of products to wholesalers and retailers * Gain marketing strength and economies in distribution, advertising, and personal selling * Leverage an existing brand position * Avoid dependence on one product line or category 9 -26

STRATEGY FEATURE Limited Brands Shifts its Focus from Apparel to Accessories q Ten years ago apparel represented 70% of Limited’s sales. By 2005 70% of sales were from skin-care products, cosmetics, and lingerie q Clothes are increasingly out of fashion—after declines for 3 years, U. S. apparel sales increased only 4% in 2004 to $172. 8 billion. q Apparel $ sales declines are due to discount pricing and households spending more on electronics, home improvement, and spa services. q Limited is trying to make itself over as a high-end Procter & Gamble. q Victoria’s Secret is adding hair and cosmetics lines to its beauty business (has 3 of the top 10 selling fragrances in the U. S. ). Sources: Limited Brands 2005 Annual Report; Value Line; and Amy Merrick, “For Limited Brands Clothes Become the Accessories, ” The Wall Street Journal, March 8, 2005, A 1 and A 14. 9 -27

q One new product is “Tutti Dolci” (all sweets), food inspired scents-lotion and lip gloss in fragrances like lemon meringue, angel-food cake, and chocolate fondue. q Victoria’s Secret has also accelerated new product development. q From 2003 through 2005 Intimate Brands (lingerie and beauty products) accounted for all the corporation’s operating income. q Limited is also partnering with other companies to sell its brands and develop new products. q Limited has three business groups: • Beauty and Personal Care • Lingerie • Apparel q Apparel is a continuing challenge with 2004 operating margins @ 1. 4% compared to over 19% for Bath & Body Works and Victoria’s Secret. q Limited has about 3700 stores. 2005 sales were nearly $9. 7 billion with net profits at $51 million. 9 -28

BRAND LEVERAGING STRATEGY LINE EXTENSION BRAND EXTENSION Minor variants of a single product are marketed under the same brand name Extensions of the brand name to other product categories --Similar --Dissimilar 9 -29

LEVERAGING ALTERNATIVES LINE EXTENSIONS Horizontal Extension BRAND EXTENSIONS Vertical Extension Up from Core Brand Another Product Class Range Brand Co. Branding Down from Core Brand 9 -30

BRAND LEVERAGING IN UPSCALE AND VALUE MARKETS Vertical Brand Extensions* Core Brand New Down-Market Brand New Up-Market Brand Core Brand * ONE OF THE MOST DIFFICULT BRAND PORTFOLIO CHALLENGES 9 -31

MOVING DOWN IS EASY BUT RISKY q Affects perceptions of the brand –perhaps even more significantly than other brand management options. We are influenced more by unfavorable information than by favorable information. q The brand’s ability to deliver self-expressive benefits may be reduced. q Potential cannibalization problem. q Potential failure risk. q Problem when the value entry is perceived to be inconsistent with the quality expected from the brand. 9 -32

MOVING A BRAND UP THE DRIVERS • Enhanced Margins at the High End • Energy & Vitality • Enhance Credibility and Prestige of the Brand THE RISKS OF DAMAGING THE CORE BRAND • Lacks Credibility • Lacks Self-Expressive Benefits • Falls Short of Expectations 9 -33

BRAND EXTENSION DECISIONS Extending into Different Product Classes THE PROCESS ◊Identify product categories for which the product fits and adds value. Determine existing brand associations and the brand identity. ◊Identify related product category opportunities Screening should be limited ◊Evaluate each category Attractive Growing Good margins Competition Assets/Capabilities ◊Select the most promising extension concept ◊Develop a viable Brand Strategy 9 -34

CO-BRANDING Co-branding (dual branding) involves two or more established brands making a joint offer of their product brands — The participant’s brand names are identified on the good or service. Several different forms – Component co-branding (Volvo and Michelin) Same company co-branding Alliance co-branding (Delta and American Express) Ingredient co-branding 9 -35

BRAND LEVERAGING EVALUATION CRITERIA §Brand Relevance/Differentiation §Capabilities/Perceived Value Match §Market/Segment Opportunity §Cannibalization Risks §Potential for Core Brand Damage §Clarity of Product Offerings §Estimated Financial Performance §Brand Equity Impact 9 -36

SEVEN DEADLY SINS OF BRAND MANAGEMENT* §Failure to fully understand the meaning of the brand. §Failure to live up to the brand promise. §Failure to adequately support the brand. §Failure to be patient with the brand. §Failure to adequately control the brand. §Failure to properly balance consistency and change with the brand. §Failure to understand the complexity of brand equity measurement and management. *Kevin Lane Keller, Strategic Brand Management, Prentice Hall, 2003, 736. 9 -37