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Archive for May, 2009

Brand Equity

Perceived Quality: Critical Asset For Brands


American Express Brand Perceptions Strategy

Perceived quality is a brand association that is elevated to the status of a brand asset for several reasons:

* among all brand associations, only perceived quality has been shown to drive financial performance.

* perceived quality is often a major (if not the principal) strategic thrust of a business.

* perceived quality is linked to and often drives other aspects of how a brand is perceived.

Perceived Quality Drives Financial Performance

There is a pervasive thirst to show that investments in brand equity will pay off. Although linking financial performance to any intangible asset (whether it is people, information technology, or brand equity) is difficult, three studies have demonstrated that perceived quality does drive financial performance:

* Studies using the PIMS data base (annual data measuring more than one hundred variables for over 3,000 business units) have shown that perceived quality is the single most important contributor to a company”s return on investment (ROI), having more impact than market share, R&D, or marketing expenditures. Perceived quality contributes to profitability in part by enhancing prices and market share. The relationship holds for Kmart as well as Tiffany: Improve perceived quality, and ROI will improve.

* A five-year study of 77 firms in Sweden, conducted by Claes Fornell and his colleagues at the National Quality Research Center at the University of Michigan, revealed that perceived quality was a major driver of customer satisfaction, which in turn had a major impact on ROI.

* A study of 33 publicly traded firms over a four-year period showed that perceived quality (as measured by the EquiTrend method) had an impact on stock return, the ultimate financial measure. The study looked at American Express, AT&T, Avon, Citicorp, Coke, Kodak, Ford, Goodyear, IBM, Kellogg’s, and 23 other firms for which the corporate brand drove a substantial amount of sales and profits. Remarkably, the impact of perceived quality was nearly as great as that of ROI (an acknowledged influence on stock return), even when the researchers controlled for advertising expenditures and awareness levels.

Perceived Quality as a Strategic Thrust

Perceived quality is a key strategic variable for many firms. Total quality management (TQM) or one of its relatives has been central to many firms for the past decade, and perceived quality is usually the end goal of TQM programs.

Many firms explicitly consider quality to be one of their primary values and include it in their mission statement. For example, one of the guiding principles put forth by IBM’s president, Lou Gerstner, is an “overriding commitment to quality.” In one study in which 250 business managers were asked to identify the sustainable competitive advantage of their firms, perceived quality was the most frequently named asset.

Perceived quality is often the key positioning dimension for corporate brands (such as Toshiba or Ford) and other brands that range over product classes (such as Weight Watchers, Kraft, and store brands such as Safeway Select). Because these brands span product classes, they are less likely to be driven by functional benefits, and perceived quality is likely to play a larger role.

Further, for many brands perceived quality defines the competitive milieu and their own position within that milieu. Some brands are price brands, and others are prestige or premium brands. Within those categories, the perceived quality position is often the defining point of differentiation.

Perceived Quality as a Measure of “Brand Goodness”

Perceived quality is usually at the heart of what customers are buying, and in that sense, it is a bottom-line measure of the impact of a brand identity. More interesting, though, perceived quality reflects a measure of “goodness” that spreads over all elements of the brand like a thick syrup. Even when the brand identity is defined by functional benefits, most studies will show that perceptions about those benefits are closely related to perceived quality. When perceived quality improves, so generally do other elements of customers” perception of the brand.

Creating Perceptions of Quality

Achieving perceptions of quality is usually impossible unless the quality claim has substance. Generating high quality requires an understanding of what quality means to customer segments, as well as a supportive culture and a quality improvement process that will enable the organization to deliver quality products and services. Creating a quality product or service, however, is only a partial victory; perceptions must be created as well.

Perceived quality may differ from actual quality for a variety of reasons. First, consumers may be overly influenced by a previous image of poor quality. Because of this, they may not believe new claims, or they may not be willing to take the time to verify them. Suntory Old Whiskey, Audi automobiles, and Schlitz beer all found that making excellent products was not enough to erase consumer doubts raised by previously tarnished quality. Thus it is critical to protect a brand from gaining a reputation for shoddy quality from which recovery is difficult and sometimes impossible.

Second, a company may be achieving quality on a dimension that consumers do not consider important. When Citibank dramatically increased back-office efficiency by automating its processing activities, the expected impact on customer evaluations was disappointing. Customers, it turned out, either did not notice the changes or did not recognize any benefit from them. There is a need to make sure that investments in quality occur in areas that will resonate with customers.

Third, consumers rarely have all the information necessary to make a rational and objective judgment on quality — and even if they do have the information, they may lack the time and motivation to process it. As a result, they rely on one or two cues that they associate with quality; the key to influencing perceived quality is understanding and managing these cues properly. Thus, it is important to understand the little things that consumers use as the basis for making a judgment of quality.

Courtesy: David Aaker in Building Strong Brands

Sponsored ByThe Brand Positioning Workshop

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Naming Steve Rivkin

Keys To Impactful Name Design


Tide Brand Naming Strategy

A great name should be pleasing to the ear and to the eye. So how do designers make a name look good?

We got some answers from Scott Yaw, a senior partner and managing director of Deskey Integrated Branding in Cincinnati. Scott joined Deskey in 1978 and his expertise encompasses brand strategy and identity programs. Some of Deskey’s recognizable brand design efforts include the iconic Tide detergent bull’s-eye logo, DeWalt Power Tools, Ingersoll-Rand equipment, 3M’s Post-It Notes, Brawny Paper Towels and retail packaging for Starbucks.

Q: You say that smart design is a competitive weapon. How so?

That statement actually paraphrases a principal our founder Donald Deskey said in the 1940’s, but we find it very relevant. With so many parity products and services in today’s market place, design is one strategy marketers can use to differentiate their brands and help close the sale with customers. When marketers fail to differentiate, customers will likely choose low-price. This is the start of commodity thinking and the race to the bottom begins. Great design moves both hearts and minds. Great design moves customers up to premium price points.

Q: Let’s say a client brings you a name for a new product. Describe your process for turning that name into a visual identity.

We start the identity process with a five-step analysis: (1) How the product works; (2) How and where customers use the new product; (3) What significant benefits (if any) it provides to customers; (4) The actual selling environment where the product appears; and (5) An audit and evaluation against competition.

We prefer developing unique graphic symbols and easy-to-read word mark typography for new products. Unique graphic symbols can be trademarked as a barrier against forthcoming competition. Unique graphic symbols and easy-to-read logos with ownable colors can be integrated with marketing programs to create a consistent look.

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Brand Watch Mark Ritson

Ford’s Fruitful Brand Strategy


Alan Mulally Ford Brand Strategy

Ford chief executive Alan Mulally is famous for one of the first decisions he made after joining the automotive company in 2006. Barely three months into his tenure, Mulally borrowed big, using his company as collateral. At the time, the decision raised eyebrows, but it is now widely regarded as a masterstroke. The $26bn he raised, when financing was still cheap and available, has enabled Ford to avoid bankruptcy or the need to seek government handouts. It has also led to a growing recognition that, compared with ailing rivals Chrysler and General Motors, Ford is in much better financial shape for the long haul.

Mulally certainly deserves credit for his savvy financial decision-making, but it is his brand strategy that is at the heart of Ford's positive outlook. Ford is a salutary example of one of the hardest lessons of brand management – one that I continue to struggle to get through to MBAs and executives. It is not about creating brands any more, it's about culling them. While this is not a difficult lesson to explain, to accept that you should kill off some, perhaps most, of your brands to help your company grow is a counterintuitive step many marketers simply cannot contemplate.

Yet Ford illustrates the perils of pluralism and the potential salvation that comes from reducing the brand portfolio. Once upon a time, when cars were still a relatively new invention, Ford enjoyed that most focused and parsimonious of brand architectures – a branded house. However, acquisition and expansion ensured that, like most companies, Ford grew this portfolio and gradually lost its focus. One of Mulally's first decisions at Ford was to sell off many of these additional brands – Land Rover, Jaguar and Aston Martin have all been divested, and Volvo is now up for sale, too. They are all fine brands, but not part of Mulally's vision for Ford, and were, therefore, a dangerous distraction from the core business.

Managing a brand portfolio is like learning to juggle. You start with the simple task of throwing a tennis ball into the air and catching it. If you add a cricket ball, the challenge becomes significantly more difficult. If you keep adding more disparate items – a shuttlecock, a brick, a football – the task eventually becomes impossible and all the items crash to the floor. Unlike GM, which continues to struggle with its seemingly impossible juggling act of managing a dozen brands, from Hummer to Chevrolet, Ford decided to discard its distractions and focus on managing one brand well.

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Mark Ritson Marketing

Brand Management From The Field


The Damned United Brand Marketing

The Damned United, a film charting the tumultuous 44-day reign of Brian Clough at Leeds United FC, opened recently. UK Marketers under the age of 30 will probably remember him as a rather melancholy old man, but the young Clough was a wonder to behold. Imagine a manager today leading a club toiling at the bottom of the Championship to win not only the Premier-ship but two back-to-back Champions League finals as well. That was, in essence, the equivalent of Clough's astonishing achievement as manager of Nottingham Forest in 1979 and 1980.

He was a genius. But what can the Clough School of Management teach all marketers about marketing?

Keep it simple

Clough had a simple philosophy. He believed that defenders should defend, midfielders create chances and strikers score goals. There was little else to his tactics. His simple approach carried over to his coaching 'technique' in which he would stand on the training ground holding a big stick shouting 'hit the target' repeatedly at his players.

The simplicity of his approach was its biggest strength. As John McGovern, one of his players, explained: 'He made everything crystal clear to ordinary working men, which is what footballers are. If you make things clear to them and make them work hard, you will find you have an amazing product.'

One of the biggest weaknesses of some marketing strategies is their complexity. It's easy to come up with a brand strategy that no one can understand, much harder to devise one straightforward enough for everyone to be able to execute.

Take Procter & Gamble's chief executive, AG Lafley, who is widely regarded as a great leader. Under his 'Sesame Street simple' philosophy, brevity, repetition and simplicity have replaced complex corporate buzzwords. P&G's entire corporate strategy fits onto one sheet of paper.

Pick an enemy

Clough was a man who bore grudges. Throughout his career he picked fights with anyone he felt opposed his own viewpoint. His most famous feud centred on his hatred for the tactics of Leeds United and the club's most successful manager, Don Revie.

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Brand Watch

Local Brand Dominance


Jollibee Brand Strategy

In today's globalized world where global brands quickly adopt to local demands in order to gain customer acceptance, being a local brand seems like waging a losing battle. But one Asian brand has proved this wrong by beating a global giant flat!

Jollibee is the brand pride of the Philippines. The brand has been so hugely successful that even the mighty McDonald's has been forced to copy Jollibee. Jollibee was started in 1975 as a two brand ice cream parlor by a small time entrepreneur Tony Tan. Jollibee gradually expanded its product portfolio to venture into the burger business. From 2 outlets in 1975, the brand has come a long way and today has more than 400 outlets in Philippines alone and 24 outlets in 7 countries including the US, China and Hong Kong.

A whopping 69% choose Jollibee compared to a mere 16% for McDonald's of the entire fast food population in the Philippines.

What is the secret behind the Jollibee brand?

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