Importance of Brands and Branding

Abstract

Repetitive failures cost companies millions of dollars in redesign costs, liabilities, and transaction costs. However, by far the most serious cost of these failures is the lost business that results from customer defection. For service companies, the task of providing error-free services is even more challenging because their intangible nature renders subjective perceptions of quality. Equally troublesome is the uncontrollable element of customer participation in the service process because production and consumption occur as a simultaneous process. Despite these challenges however, service quality and customer satisfaction are closely related constructs. When service providers continuously strive to develop error-free processes, customer satisfaction is sure to follow.

Chapter 1: Introduction

Many marketers are rethinking their branding because competitive pressures, new channels, and changing customer needs have eroded their brands’ positions of strength. However, increased marketing expenditures to reposition brands often fail to produce any improvements in either overall image or market share. Experience has shown that companies should focus on achievable rather than aspirational positioning, and that three steps can help ensure success:

1. Ensure relevance to a customer’s frame of reference.

• Be fully aware of the brand’s “frame of reference” so that a repositioning strategy will resonate with customers.
• Look at a combination of customers’ attitudes and the situations in which the brand is used to obtain the most powerful customer insights.

2. Secure the customer’s “permission” for the positioning.

• Recognize that permission amounts to a reasonable and logical extension of the brand in the customer’s eyes.
• Leverage a brand’s unique emotional benefits to carry customers from their current brand perception to the intended one.

3. Deliver on the brand’s new promise.

• Identify the pathway of performance “signals” that will convince customers of the new brand positioning.
• Develop product/service programs to ensure consistent performance on these signals.
• Track and assess performance against customer signals prior to launching the new positioning.
• Adopt an “interim positioning” to establish brand credibility and performance.

An array of factors is requiring marketers today to rethink their brand positioning. Changing customer needs are often eroding the brand’s established position. At the same time, increasing competitive pressures created by new entrants and product innovations, and the proliferation of new channels and promotional campaigns, are driving marketers back to the drawing board.

Many CEOs and CMOs, however, find themselves displeased with the results of their repositioning efforts. Increased marketing expenditures devoted to repositioning brands in the minds of consumers often fail to produce any improvements in either overall image or market share. Why do these well-intentioned efforts turn into marketing failures? While there are many causes, companies often fail to focus on achievable brand positioning rather than branding in service sector. Too often, their efforts target an ambitious goal that outstrips the actual ability of the brand to deliver on what it has promised to customers. Or the goal is too far from customers’ current brand perception to be a realistic brand objective. For example:

• In the late 1 980s Oldsmobile wanted to revitalize its brand and gear it to a younger audience. Thus marketers at General Motors launched a creative campaign around the tagline, “Not your father’s Oldsmobile,” highlighting the car’s improved styling and new features. But for many younger consumers, this was too much of a stretch for the brand. The product modifications did not go far enough to meet the needs and expectations of the new customer set they were targeting. As a result, Oldsmobile recognized the need to shift its campaign. Eventually, GM closed its Oldsmobile division.
• More recently, United Airlines’ Rising campaign attempted to position the brand as the most passenger-centric airline, with a clear understanding of customer problems and the solutions needed to fix them. The campaign had the effect of raising expectations, which were quickly deflated, however, by the brand’s inability to deliver against the promises made as part of its bold new positioning platform. Consequently, United was forced to change its central brand message — no longer emphasizing Rising.
• Many high-tech businesses have recently repositioned themselves as e-business brands. However little effort was made by these brands to clearly differentiate themselves from one another despite the millions of dollars spent on elaborate marketing programs. The net effect, according to their research, has been to sow confusion in the minds of customers, rather than to forge strong brand identities.

These examples — and most marketers can cite many others — underscore the imperative to pursue a brand positioning that is eminently achievable, not just attractive. Based on our experience, three steps can help ensure that they make this distinction: 1) ensuring relevance to a customer’s frame of reference; 2) securing the customer’s “permission” for the positioning; and 3) making sure that the brand delivers on its promise.

Be Relevant to the Customer’s Frame of Reference:

When repositioning a brand, it’s essential for marketers to capture not just the emotional and physical needs of the customer but the dynamics of the situation in which those needs occur. We refer to this as the customer’s “frame of reference.” For example, while isotonic beverages like Gatorade and Powerade are thirst-quenching drinks, consumers tend to think of them in the broader context of sports, exercise, and physical activity. Importantly, the frame of reference sets the parameters for customers’ consideration set — the brands they will choose from. Indeed, most customers have a very specific definition of what the brand is and what it can be relative to their frame of reference. Repositioning a brand too far from this frame of reference creates customer confusion that makes a positioning unsuccessful.

Attempting to brand Gatorade, for example, within a social, lighthearted context would probably be stretching the brand too far from the current sports/physical activity frame of reference. Similarly, a communications company known for data services for business customers would likely be positioning the brand too far outside of the customer’s frame of reference if it suddenly tried to launch a “friends-and-family” calling plan. Being fully aware of the frame of reference for a brand can help ensure that its repositioning strategy will resonate with customers. But the frame of reference is usually a combination of both customers’ attitudes and the situations in which the brand is used. As a result, we typically find the most powerful customer insights and segmentation come from looking at a combination of these factors

• In some categories, customers’ broader attitudes are the dominant factor. How customers think about pet-related brands, for example, can be seen in the context of how they treat their own pets — whether they view them as family members, best friends/companions, or in a less personal way. If customers view pets as family members, the optimal message for the brand will appeal to such human qualities as nurturing and pampering. This “family member” orientation or frame of reference may help support a brand extension to a full range of pet services, such as grooming and accessories.
• Other customer needs are not as consistent, but better understood within the context of specific situations or sub-categories. In the field of airline travel, for example, the customer’s frame of reference may be a function of the type of trip they are taking. The customer who is used to traveling within the U.S. in cramped coach-class conditions, for example, will have a much different set of needs and expectations than the traveler who is used to flying to international destinations with all the comforts of first-class service.
• As a result, in most instances the frame of reference is built upon a combination of both of the above attitudinal and situational forces. For example, while consumers may generally have a health-conscious attitude about the foods they eat, on certain “special” occasions they may allow themselves to become more indulgent, creating what we call a “need state.”

A strong brand identity can also help marketers secure the desired permission from consumers. Because Victoria’s Secret owns or is associated with the notion of intimate moments, for example, it would be easier for that brand to get permission to introduce a new line of lingerie or perfume with a sensual connotation than it would be to launch a line of jeans or handbags.

In repositioning, marketers must embrace the idea that they are brand “stewards,” while customers define their relationship with the brand and determine the basis for the relationship. A steward must spend more time deeply understanding what customers really think about the brand and where potential “bridges” to growth and new branding exist. For example, Smuckers could leverage the “wholesome goodness” their loyal customers attribute to them instead of solely focusing on themselves as fruit processors.

Marketers should not attempt to cover the waterfront here, but instead focus on the relevant interrelated “hot buttons” that will clearly convey the message. For example, in the case of a technology brand positioning itself as “humanizing technology for everyday people,” the strongest set of pathways to the positioning came from product signals such as customized hardware and specific application platforms (e.g., games, household management) rather than from equipment with the latest features and innovative design. The pathway modeling also indicated the strong signal value of the brand’s customer service representatives having an understanding of an individual customer’s needs. This important service signal led to the broader customer perception of the brand as caring — an important personality signal for the brand to deliver on its positioning. Additionally, the marketer learned that having technicians follow through with customers to issue resolution was a critical service signal that led to the broader personality signal of the brand being professional — another key for the brand to live up to its positioning. With these insights, the marketer could allocate resources accordingly, ensuring that the more important signals were being appropriately supported.

• Develop necessary product/service programs to ensure consistent performance on these signals to the customer. For example, if the brand positioning is built around superior customer satisfaction, but frontline sales people are measured on revenue rather than satisfaction, it is unlikely that consistent performance will be achieved. So, if airline gate agents are the first and most important contact point for customers, they should be empowered to solve customers’ issues instead of redirecting them to customer service personnel. In the technology brand example, given the importance of the customer service representatives and service technicians, there should be a greater emphasis on the quality of the service delivered rather than on the number of customers that can be serviced over a given time period.
• Make sure approaches are in place to track and assess your performance against these customer signals prior to the formal launching of the new positioning. Applying rigorous quality assurance procedures to key elements of the new brand experience will often ensure that customers are not disappointed, or fail to have their expectations met. Current data-collection methods allow for rapid response and can be leveraged to determine whether the launch programs are having their desired effect on brand perceptions.
• Due to the complexities of brand positioning, many marketers are correctly choosing to move to an “interim positioning.” This interim positioning is designed to establish brand credibility and performance on the road to fully achieving the longer-term aspirational positioning. Such a positioning focuses on those aspects of the brand on which the organization is currently able to deliver. Interim positioning is often essential when a brand stakes out new territory considered “up market,” addresses an important or longstanding deficiency, or is attempting to redefine its competitive set. As the brand evolves (based on customers’ changing perceptions), additional components of the new platform can be put into place and confidently communicated to consumers. Target Stores successfully employed an interim positioning as it evolved the brand up market from a position as a discount retailer of national brands to a contemporary “urban chic” retail brand providing good value. The interim positioning emphasized value without sacrificing style and involved specific merchandising efforts such as stylized color blocking and associations with name designers (e.g., Frank Gehry). As the brand evolved to its current positioning, it further emphasized the “designer” theme in its advertising, often having models wearing various house wares as high fashion.

By focusing on achievable instead of aspirational brand positioning, companies can help ensure meaningful market share results while enhancing their brand image. This requires, however that the new brand position fits comfortably within the customer’s frame of reference, and that it not attempt to overreach. Marketers must also secure the customer’s permission to extend the brand by building a bridge of relevant benefits to carry customers from the current to the intended brand position. Implementing the performance delivery systems to ensure the brand is able to live up to its new promise is the final critical step in building and executing a successful brand positioning program.

Chapter 2: Literature Review
2.1 Branding: Definition and benefits

Literature gives several definitions of the term brand. The common themes are that a brand is more than just a combination of a name, a design, a symbol or other features that differentiate a good or a service from others. It is a unique set of tangible and intangible added values that are perceived and valued by the customer. In addition a brand is said to have personality, an emotional bond to the customer that grows out of the perceived characteristics.

These certain features of a brand grow out of a complex set of added values that can comprise of history and tradition, additional services, marketing messages, quality, popularity of the product amongst a certain group of users (status) and others. These basis’s of a brand perception prove that a strong brand can not be established over night The development of a brand takes time, strong financial marketing muscle and good marketing skills such as

• Insight into customer needs,
• Ability to offer products or services that meet those needs,
• Creativity to produce exiting and compelling advertising,
• Ability to communicate differentiation in a way that customers understand and that motivates them.

Without this process they do not have a brand but only a name and a sign for a product. Brands have benefits for both, the brand owners as sellers and the customers:

Benefits of a brand for

Sellers

Customers

• Identifies the companies products, makes repeat purchases easier
• Facilitates promotion efforts
• Fosters brand loyalty – stabilises market share
• Allows to charge premium prices and thus to get better margins
• Allows to extend the brand to new products, new markets and to new geographic areas
• Can communicate directly with the customer, reach over the shoulder of the retailer
• More leverage with middlemen
• Is more resistant to price competition
• Can have a long life
• Is more forgiving of mistakes
• Helps identify products
• Helps evaluate the quality of a product
• Helps to reduce perceived risk in buying, provides assurance of quality, reliability etc.
• Is dependable (consistent in quality)
• May offer psychological reward (status symbol)
• “rout map” through a range of alternatives
• Saves customer time
• Is easier to process mentally

With this potential a brand can offer an important competitive advantage for a seller who has decided for a differentiation strategy. Even in markets with many similar products or services a brand can provide some sort of uniqueness to a certain product. Depending from the strength of a brand the branded product thus can be positioned towards a more monopolistic situation.

With all these characteristics a brand is important in an organisations marketing mix. Although it is basically a certain feature of the category “product”, it influences every component of the marketing mix:

• The product gets a higher value in the perception of the customers.
• This influences the pricing policy in the way that often a premium can be charged.
• The promotional strategy and mix will be different because it is more focused on the brand than on the individual product. For instance the introduction of a new product under a well established umbrella brand requires a very different promotion campaign than the introduction of a new brand or an unbranded product.

The decision for the place and the marketing channel is influenced because a branded product with a higher perceived value might be placed in an environment that is well related to the brands personality, e.g. gourmet shop vs. food department in a supermarket.

2.2 Branding strategies:

Besides the more general decision for the use of brands the decision for the branding strategies is important. There are several aspects to be considered:

• Ownership of brands
• Structure of brand systems

Regarding the ownership, Dibb (1997) and Kotler (1999) differentiate between five categories:

These decisions need to be taken carefully. They offer not only large opportunities but also various risks:

A company which has strong manufacturer brands may decide to sell the same or similar products to retailers for use as their own label brands. If consumers become aware of this they might change their perception of the manufacturer brand:

• “They get the same product for a lower price under my retailers brand.” or
• “They sell the same thing under another name very cheap. This product is not exclusive anymore. I go for another brand then.”

Extensive permissions for the licensed use of a strong brand for other products can destroy the value of the brand. Pierre Cardin has lost lots of its luxury appeal since various goods with this name can be found in every department store. The structure of brand systems describes how an organisations products and brands are related. Dibb (1997) distinguishes between:

2.3 Branding for service industries:

2.3.1 Reason for branding services:

Although the principles for branding of goods and services are generally the same there occur some differences. These arise from the different natures of both categories. The main differences that influence branding policies are that services

• Have a changing level of quality,
• The consumer has to become involved in the consumption of a service actively,
• They are intangible and not storable.

When a brand in general gives the consumer more confidence in his choice this is even more important for services. Their quality and other features are more difficult to asses. Because of their intangibility and complexity it is harder for the customer to distinguish between the offers from the wide range of service companies are working in the market place.

This especially applies to the market of accounting, auditing and consulting where consolidation and globalisation increase competition. In an FT-article about branding accounting services (Kelly 1998) a branding expert states that “more than 70 % of the Fortune 500 companies …said branding is increasingly important in helping them to choose where to get a service. They want to be able to tell who is good at what.”

2.3.2 Drivers for the use of branding in the accounting/consulting industry with a focus on the Big Five (former Big Six) firms:

The Big Five accounting firms have a long history up to 75 to 100 years. These firms have developed from smaller entities through co-operations and mergers. Often new products and new markets have been developed by “buying in”, by buying the expertise and the access in the form of other firms. For many small and medium accounting and auditing firms it is attractive to join the association (in most cases) of one of the large players for the following reasons:

The form of an association with independent member firms allows to retain a level of individuality – although in some cases this is not long-lasting. The membership in an large powerful firm gives a competitive advantage (reputation, access to knowledge, access to new markets, higher market share, cost savings through sharing resources, e.g. for training and recruitment etc.).

Partners of these smaller firms are often offered to become partners in the large firm.

For a long time the industry did not put much effort in the development of brands.

The tradition and long lasting reputation of the Big Five itself gave their names a considerable brand value. For quite a long time this was fairly enough for their purposes. In Kelly’s (1998) article a professional firms branding expert states that for many years the accountancy firms hid behind the “convenient parapet” of the Big Six brand label. In the audit market most shareholders were happy to have any audit firm as long as it was from the Big Six.Other factors were legal limitations for advertising. Accounting firms were first allowed to advertise in 1984. That means that marketing and communications focused mainly on activities like excellent work and the power of word of mouth, job advertisements (as the only allowed advertisements they were used as a means to present the company), speaking at conferences, publishing articles in professional journals, co-operating with universities and business schools and so on. Accounting firms saw themselves as a conservative industry with discretion as one of their services. In their minds this didn’t go together with an aggressive marketing campaign.In the last years the industry has seen some developments that required new strategies:

• Globalisation: A global client needs a global auditor because companies are legally required to prepare consolidated financial statements including all subsidies around the world. This is much easier if you have all subsidies audited by the same firm. In addition global clients have a high need for specialised consulting. They often prefer a consultant that is as global as they are to get more expertise and consistency.
• Stagnation in the core business: The traditional auditing business does not show high growth rates. An individual firms growth can mainly be achieved at the expense of competitors.
• Growth in consulting services: On the contrary to the auditing business there is an enormous growth for consulting services. The accounting firms have traditionally done some consulting and now they developed these activities aggressively. This had two results:
• A growing variety of services offered – these new products had to be communicated to existing and potential clients Accounting firms came into direct competition with the traditional consulting firms which had their own brands and reputation
• Need for qualified people: With the development of new products/services all firms needed much more highly qualified people. Recruitment became an important issue. (For example: The German member firm of PricewaterhouseCoopers took on about 1000 new employees in 1998, the first year after the merger.) This led to a competition to attract the best university students.

All these factors together increased competition amongst the Big Five. For this industry excellent quality is not a means to get a competitive advantage, it is an important requirement for any success at all. A large variety of services is important; but the customer will perceive it only in the moment he needs a certain service.

In this situation the Big Five did not manage to differentiate themselves successfully from competition. A survey conducted by PricewaterhouseCoopers during the merger process revealed that “the business community and the general public did not – and do not – perceive any compelling differences between and among either the Big Six or the Big Five. Not only did all firms appear to have similar defining qualities, they were also not sending any consistent messages about their organisations to external audiences.”Here a strong brand with a personality and a clear message can be a valuable means for differentiation and thus for gaining a competitive advantage. By now we can say that the Big Five have become aware of this. Now they invest heavily to reposition themselves and to develop their good names to real power brands.

2.4 Benefits of branding:

Branding is the process of creating distinctive and durable perceptions in the minds of consumers. A brand is a persistent, unique business identity intertwined with associations of personality, quality, origin, liking and more. Here’s why the effort to brand their company or their self pays off.

· Memorability: A brand serves as a convenient container for a reputation and good will. It’s hard for customers to go back to “that whats its name store” or to refer business to “the plumber from the Yellow Pages.” In addition to an effective company name, it helps when people have material reminders reinforcing the identity of companies they will want to do repeat business with: refrigerator magnets, tote bags, date books, coasters, key rings, first aid kits, etc. Memorability can come from using and sticking with an unusual color combination (FedEx’s purple and orange), distinctive behavior (the gas station whose attendants literally run to clean your windshield), or with an individual, even a style of clothing (Author Tom Wolfe’s white suits). Develop their own identifiers and nail them to their company name in the minds of their public.

· Loyalty: When people have a positive experience with a memorable brand, they’re more likely to buy that product or service again than competing brands. People who closely bond with a brand identity are not only more likely to repurchase what they bought, but also to buy related items of the same brand, to recommend the brand to others and to resist the lure of a competitor’s price cut. The brand identity helps to create and to anchor such loyalty. Consider the legions of car owners who travel up to 2,000 miles at their own expense to attend a Saturn celebration at the company’s plant in Spring Hill, Tennessee. That’s loyalty. And supposedly, more people have the motorcycle brand “Harley-Davidson” tattooed on their body than any other brand name. That’s out-of-this-world loyalty.

· Familiarity. Branding has a big effect on non-customers too. Psychologists have shown that familiarity induces liking. Consequently, people who have never done business with you but have encountered their company identity sufficient times may become willing to recommend them even when they have no personal knowledge of their products or services. Seeing their ads on local buses, having their pen on their desk, reading about them in the Hometown News, they spread the word for them when a friend or colleague asks if they know a ____ and that’s what they do.

· Premium image, premium price: Branding can lift what they sell out of the realm of a commodity, so that instead of dealing with price-shoppers they have buyers eager to pay more for their goods than for those of competitors. Think of some people’s willingness to buy the currently “in” brand of bottled water, versus toting along an unlabeled bottle of the same stuff filled from the office water cooler.The distinctive value inherent in a brand can even lead people to dismiss evidence they would normally use to make buying decisions. I once saw one middle-aged Cambridge, Massachusetts, intellectual argue to several colleagues that Dunkin’ Donuts’ coffee tastes better than Starbucks’. So contradictory was this claim to the two companies’ reputations for this demographic group that the colleagues refused to put the matter to a taste test.

· Extensions: With a well-established brand, they can spread the respect they will earn to a related new product, service or location and more easily win acceptance of the newcomer. For instance, when a winery with a good reputation starts up regional winery tours, and then adds foreign ones, each business introduction benefits from the positive perceptions already in place.

· Greater company equity: Making their company into a brand usually means that they can get more money for the company when they decide to sell it. A Coca-Cola executive once said that if all the company’s facilities and inventory vanished all around the world, he could walk into any bank and take out a loan based only on the right to the Coca-Cola name and formula.

· Lower marketing expenses: Although they must invest money to create a brand, once it’s created they can maintain it without having to tell the whole story about the brand every time they market it. For instance, a jingle people in their area have heard a zillion times continues to promote the company when it’s played without any words.

· For consumers, less risk: When someone feels under pressure to make a wise decision, he or she tends to choose the brand-name supplier over the no-name one. As the saying goes, “They’ll never be fired for buying IBM.” By building a brand, they fatten their bottom line.

2.5 Brand structures for services industries:

As for services, literature suggests to use the companies name – a so called corporate brand – as the overall family brand for all the services offered. Murphy (1990) calls this the “monolithic approach”. He argues that especially for companies which offer an enormous array of services (e.g. consultants, banks) corporate names must be used to deliver more generalised benefits of quality, value and integrity. de Chernatony (1996) comes to the conclusion that corporate brands are a crucial means to help make the service offering more tangible in consumers minds and can enhance consumers perceptions and trust in the range of services provided by the company.

One disadvantage of corporate brands – little opportunity for developing second or sub-brands for differentiated product lines- applies more to branded products. However Murphy (1990) states that many companies have chosen an approach of “local autonomy but group-wide coherence” as a system whereby individual divisions and products are largely free-standing but mention is made in all literature and on all stationery and products that “company A is member of the XYZ group”. This approach is very common amongst the Big Five accounting and auditing firms. It allows their national member firms, to exploit the groups brand name and their own (brand) name at the same time. Many member firms that had joined the global firms have lon