Kellers Customer Based Brand Equity Model Marketing Essay

Kellers Customer Based Brand Equity Model Marketing Essay Principles of Marketing, by Philip Kotler and Gary Armstrong and the American Marketing Association defined brand  as a name, term, sign / symbol or a  combination of these that identifies the maker or seller of the product and differentiates them from those of the competition. Aakers (1991) widely accepted definition of a brand is to identify the goods or services of whether one seller or a group of sellers, and to differentiate those goods or services from those of competitors. Brands are thus, valuable assets and tools influencing consumer behavior which includes awareness, choice, use, satisfaction, recommendation, trust and loyalty. They reduce information search costs and risk for consumers and deliver quality, values, promises, and lifestyle enhancement (Czellar, 2010) .According to Keller (2002) the benefits of a strong brand can be categorized under 4 different categories, namely, product-related effects, price-related effects, communication-related effects and channel r elated effects. Product-related effects of brand include consumer product evaluations, consumer confidence, perceptions of quality, and purchase rate positively related to a brand name. If consumers are well aware of a brand, their attitude and their purchase intention toward the brand are increased. Price-related effects refer to the fact that brand leaders have higher priced positions and consumers have a lower level of price sensitivity toward those leaders. Communication-related effects refer to how the evaluation of brand advertising can be positively biased when consumers have positive feelings toward a brand which is a well known and well-liked brand and the effect of the well-known brand, which is most likely to have competitive advantage in marketing activities, is the channel-related effect. 2.2 Fashion and Branding According to Solomon and Rabolt (2004), fashion is defined as a style that is accepted by a large group of people at a given time. Generally people use the term fashion and style interchangeably. In the fashion context, consumers choose a certain fashion brand over others because they are associated with a certain style (Ferney et al.2005).The way individuals have their own distinctive personalities and styles in the manner of living, speaking as well as dressing, the brands too can be associated with a particular personality, because branding has the propensity to distinguish a brand from others by creating an individual brand personality, by using different brand elements like name, logo, symbol, and package design(Newman and Patel ,2002).Branding is important in fashion retailing as the brand can project a specific image like personality, sex, lifestyle and age, to the target consumers. Like in case of a sports brand, the attribute of sporty feeling would be formed in consumers mi nd whereas a casual fashion brand would be associated with the casual attribute (Keller 2002). The brand image allows fashion merchandise to communicate a distinct symbolic meaning, through merchandise, store atmosphere, sales associate attraction with customers, and marketing campaign, between the retailers and the consumers (Ferney et al, 2005). Newman and Patel discovered that brand image is crucial in this intensely competitive fashion retail sector. As different types of fashion consumers are matched with particular clothing styles, brand image can create a point of difference and assist consumers in selecting a suitable fashion brand. A successful fashion brand can capture the market share and maintain a positive relationship with its customers, therefore creating an appropriate fashion brand is one of the primary ways for the marketers to differentiate the products from the competitors. In brief, fashion and branding are closely related (Solomon and Rabolt 2004; Newman and Pa tel, 2002). 2.3 Brand Equity In Building Strong Brands, David Aaker defined brand equity as a set of brand assets and liabilities linked to the brand-its name and symbols-that add value to, or subtract value from, a product or service. The major asset categories are brand loyalty, brand name awareness, perceived quality and brand associations. http://www.tvonlinesurveys.com/enquete/Brand%20equity%20model%20Aaker.bmp(Aakers Brand Equity Model) The model mainly talks about how brand equity is formed of five components and how each has a role to play in the performance of the brand and indicates that how the brand equity will rise with the increase in brand loyalty, brand name awareness, and perceived quality and with stronger and positive brand associations and also with the increase in the number of brand related proprietary assets. This model can thus be used to get to grips with a brands equity and gain insight into the relation between the different brand equity components and the future performance of the brand. Apart from the five components, the model also reflects indicators or the consequences of the pursued branding policy. (Aaker, 1991) The five components and the factors having an influence on these components are: Brand loyalty: Aaker (1991) defines brand loyalty as the attachment that a customer has to a brand. Two different levels of loyalty are classified: behavioral and cognitive loyalty (Keller, 1998). Behavioral loyalty can be indicated by a number of repeated purchases (Keller, 1998) or commitment to buy the brand as a primary choice .Cognitive loyalty refers to the consumers intention to buy the brand as the first choice .Another indicator of loyalty is the customers willingness to pay higher price for a brand in comparison with another brand offering similar benefits. The extent to which people are loyal to a brand is expressed in the following factors: Reduced marketing costs, as hanging on to loyal customers is way cheaper than charming potential new customers. Trade leverage, as loyal customers represent a stable source of revenue for the distributive level. Attracting new customers, as current customers can help boost name awareness and hence bring in new customers Time to respond to competitive threats, as loyal customers that are not quick to switch brands give a company more time to respond to competitive threats. (Aaker, 1991) Brand awareness: It is a key determinant of brand equity. It is defined as an individuals ability to recall and recognize a brand. Top-of-mind and brand dominance is other levels of awareness included by Aaker (1996) in measuring awareness. Awareness can affect customers perceptions, which lead to different brand choice and even loyalty (Aaker, 1996). A brand with strong brand recall (unaided awareness) and top of mind can affect customers perceptions, which lead to different customer choice inside a product category. The extent to which a brand is known among the public ,can be measured using the following parameters: Anchor to which associations can be attached (depending on the strength of the brand name, more or fewer associations can be attached to it, which will, in turn ,eventually influence brand awareness) Familiarity and liking (consumers with a positive attitude towards a brand ,will talk about it more and spread brand awareness) Signal of substance/commitment to a brand. Brand to be considered during the purchasing process (to what extent does the brand form part of the evoked set of brands in a consumers mind) (Aaker, 1991) Perceived quality: It is defined as the customers judgment about a products overall excellence or superiority in comparison to alternatives brand and overall superiority that ultimately motivates the customer to purchase the product (Aaker and Jacobson, 1994). It is difficult for customers to make a rational judgment of the quality. They are likely using quality attributes like color, flavor, form, and appearance of the product and the availability of production information to infer quality. The extent to which a brand is considered to provide good quality products can be measured on the basis of the following criteria: The quality offered by the product / brand is a reason to buy it. Level of differentiation/position in relation to competing brands. Price, as the product becomes more complex to assess and status is at play, consumers tend to take price as a quality indicator. Availability in different sales channels, i.e. consumers have a higher quality perception of brands that are widely available. The number of brand extensions (this can tell the consumer the brand stands for a certain quality guarantee that is applicable on a wide scale) (Aaker, 1991) Brand associations: Consumer must first be aware of the brand in order to develop a set of associations. Brand association contains the meaning of the brand for consumers; it is anything linked in memory to a brand (Aaker, 1991). Brand associations are mostly grouped into a product-related attribute like brand performance and non product related attributes like brand personality and organizational associations. Customers evaluate a product not merely by whether the product can perform the functions for which it is designed for but the reasons to buy this brand over the competitors. Brand personalities include symbolic attributes (Aaker, 1996; Keller, 1993) which are the intangible features that meet consumers needs for social approval, personal expression or self-esteem. The associations triggered by a brand can be assessed on the basis of the following indicators: The extent to which a brand name is able to retrieve associations from the consumers brain, such as information from TV advertising. The extent to which association contribute to brand differentiation in relation to the competition (these can be abstract association or associations with concrete product benefits) The extent to which brand associations play a role in the buying process (the greater this extent ,the higher the total brand equity) The extent to which brand associations create positive attitude/feelings(the greater this extent, the higher the total brand equity) The number of brand extensions in the market (the greater this number, the greater the opportunity to add brand associations) (Aaker, 1991) Other proprietary assets: Some of the examples are patent and intellectual property rights, relations with trade partners, etc. (the more the proprietary rights a brand has accumulated, the greater the brands competitive edge in those fields) (Aaker, 1991) The model also provides an insight into the criteria that indicate to what degree actual value is created with both consumer and company due to pursued branding policy. However, this model does not make a clear distinction between added value brand can have for the consumer /customer and added value it can have for the brand owner/company and does not even discuss the process that goes into building strong brands, and is only useful to gain insight into the various brand equity components and the relation between them. (Wood, 2000) 2.4 Kellers Customer-based Brand equity model This model depicts the process that goes into building strong brands. It is set in the realm of brand added value, i.e. the focus of this model is on the added value a brand offers its customers/consumers. Kevin Lane Keller introduced this customer-based brand equity model, and has defined it as the differential effect that consumers brand knowledge has on their response to the marketing of that brand (Keller 1993).Differential consumer response is mainly based on consumers knowledge of the brand as well as the favorability of associations. The model is made up of various steps, which should be taken in a fixed order. The model talks about the six dimensions of brand equity, namely, brand salience, brand performance, brand imagery, consumer judgments, consumer feelings and brand resonance. According to Keller, the highest level of brand equity is realized when the top of the pyramid is attained. In his view, the resonance comes about when the consumer has a high level of awareness of and familiarity with the brand and holds some strong, favorable and unique associations in memory. (Keller, Strategic brand management, 2002) http://markhendrikse.squarespace.com/storage/post-images/july-2009/cmmemodel.jpg?__SQUARESPACE_CACHEVERSION=1247443493748 (Kellers customer based brand equity model) The six dimensions and the process that goes into building of strong brands, as identified by Keller are: Brand Salience: The first step in the development of a strong brand involves describing its identity, and revolves around the question: Who am I? .To achieve this, the brand managers need to ensure that the customers should be able to identify with the brand. A clear associative link between the brand and a specific product class/category has to be established in the mind of the consumer, this also further helps in creating a solid footing for the building of brand awareness and knowledge. Salience basically refers to how familiar consumers are with a brand and whether the brand is actively considered when consumers find themselves in purchase or consumption situations. A high level of salience means that a consumer has knowledge of both the depth and the width of a brand, (depth here refers to the ease with which a brand can be activated in the consumers brain, while width refers to the extent to which happens when the consumer is making a purchase decision.)Brand Salience is thus a precondition for moving up on the brand pyramid. (Keller, 2002) (Keller, Strategic Brand Management: a european perspective, 2008) Brand performance and brand imagery: when brand salience has been realized, the process moves on to the next steps in the development of brand meaning. The second step basically answers the question: What am I?This question is answered by using intrinsic (tangible) and extrinsic (intangible) characteristics of a brand.(Intrinsic characteristics refer to the degree to which a product/service is seen to perform by consumers, and extrinsic characteristics refers to how consumers think about a brand. In order to boost overall brand equity the focus needs to be on both brand performance and brand imagery, since they together add on to the brand associations. Raising brand performance starts by delivering a product/service that fulfills current customers needs, followed by attempts to surpass the triggered customer expectations. Brand imagery on the other hand can be increased by tailoring to consumerspshyco-social needs. Imagery refers to what people think about a brand (in terms of value and meaning) and not so much about what exactly the product does or can do (in terms of functionality).It can be raised directly by creating brand experience or indirectly through advertisement. In the end, these two dimensions together need to bring about certain brand associations that are strong, positive and unique. These dimensions also play an important role in creating brand loyalty. (Keller, 2002) Brand judgments and brand feelings: After realizing strong, positive and unique brand associations, the third step deals with the way consumers think and feel about a brand. This step basically contains the responses to the efforts from step 2(performance and imagery).the brand is evaluated and judged at this stage, formulating a certain attitude towards the brand. The two dimensions at play here are: brand judgments (rational) and brand feelings (emotional).the former denotes the opinion consumers have of a brand, and how they evaluate the brand. The opinion in this case is formed rationally and based on three criteria, quality, reliability and superiority. Brand feelings on the other hand are the emotional reactions by consumers to brands and their marketing efforts. What feelings does the brand evoke in the consumer, and in the social environment? Are these feelings intense or not, positive or negative? These feelings can very strong and can have an affect on brand observation dur ing actual use of the product. These feelings are based on various factors, namely, warmth, pleasure, tension, security, social acceptance and self respect. (Keller, 2002) Brand resonance: once when the consumer has acquired a positive idea of the brand in both a rational and an emotional sense, a solid base is created to further jump on to the last stage. This stage answers the question whether the consumer is willing to enter into a (lasting) relationship with a brand. If this stage is attained, then its considered as the brand has achieved true brand loyalty, where the consumer identifies him/herself with the values of the brand to a considerable degree and is willing to invest in a relationship. Brand resonance is an ultimate relationship between a brand and a consumer. The closeness of the bond can be measured using factors like loyalty, emotional bond, being a member of a brand community and active brand involvement. (Keller, 2002) Brand equity if used appropriately, possesses a huge potential to create advantages and benefits for the firm, the trade and the consumer. Some of the benefits of strong brand equity being, improved perceptions of product performance, greater loyalty, less vulnerability to competitive marketing actions and marketing crises, larger margins , more inelastic consumer response to price increases and more elastic consumer response to price decreases ,greater trade cooperation and support ,increased marketing communication effectiveness along with licensing opportunities and additional brand extension opportunities.(Wood ,2000 ; Feldwick, 1996) 2.5 Brand equity and brand extension Brand equity can be leveraged by building it, borrowing it, or by buying it. Building brand equity is not an easy task due to the rapid increase in the number of brands and the intense competition that is prevalent in many industries. Thus, the brands generally prefer to opt for the alternatives to building brand equity i.e. by borrowing it or buying it. (Moisescu, 2005; Tuominen, 1999) Since the study focuses on the role of brand equity in brand extensions, leveraging brand equity by borrowing it, will be discussed. Borrowing brand equity: According to Tuominen (1999), many firms borrow on the brand equity in their brand names by extending existing brand names to other products, which is referred to as brand extension. There are two types of brand extensions namely, a line and a category extension. A line extension is when a current brand name is used to enter new market segment in the existing product class, whereas, a category extension is when the current brand name is used to enter a different product class. A line extension occurs when a company introduces additional items in the same product category under the same brand name. A line extension often involves a different size, color, flavor or ingredient, a different form or a different application for the brand (Richard Elliot, 2006). Products in line extensions are technically congruent, i.e., similar in many attributes. They belong to the same product category or subclass. The vast majority of new-product activity consists of line extens ions. Excess manufacturing capacity often drives a company to introduce additional items. The company might want to meet the consumers desire for variety. The company may recognize a latent consumer want and try to capitalize on it (Moisescu, 2005). The company may want to match a competitors successful line extension. Many companies introduce line extensions primarily to command more shelf space from resellers. Line extensions involve risks. There is a chance that the brand name will lose its specific meaning. This is called the line-extension trap (Eun Young Kim, 2000) .The other risk is that many line extensions will not sell enough to cover their development and promotion costs. Furthermore, even when they sell enough, the sales may come at the expense of other items in the line. A line extension works best when it takes sales away from competing brands, not when it cannibalizes the companys other products (Moisescu, 2005).A category extension occurs when a company decides to us e an existing brand name to launch a product in a new product category. Category extensions capitalize on the brand image of the core product or service to efficiently inform consumers and retailers about a new product or service (Richard Elliot, 2006).The potential benefits of category extensions include immediate name recognition and the transference of benefits associated with a familiar brand. A well-regarded brand name gives the new product instant recognition and earlier acceptance (Eun Young Kim, 2000). It enables the company to enter into new-product categories more easily. Moreover, category extensions eliminate the high costs of establishing a new brand and often reduce the costs of gaining distribution (Eun Young Kim, 2000; Dennis A. Pitta, 1995). Category extensions also involve risks. The new product might disappoint buyers and damage their respect for the companys other products. The brand name may lose its special positioning in the consumers mind through over-extensi on. (Dennis A. Pitta, 1995) Brand dilution is said to occur when consumers no longer associate a brand with a specific product or highly similar products (Richard Elliot, 2006). Companies that are tempted to transfer their brand name must research how well the brands associations fit the new product. The best result would occur when the brand name builds the sales of both the new product and the existing product. An acceptable result would be when the new product sells well without affecting the sales of the existing product. The worst result would be when the new product fails and hurts the sales of the existing product (Tuominen, 1999). Transferring an existing brand name to a new product category requires great care. In order to successfully maintain and further leverage the existing brand equity and to prevent it from any damage, a brand needs to carefully extend itself by maintaining perceptual fit, competitive leverage, and benefit transfer. Where in perceptual fit means that the consumer must perceive the new item to be consistent with the parent brand, competitive leverage means that the new item must be comparable or superior to other products in the category and benefit transfer means that the benefit offered by the parent brand is desired by consumers of products in the new category (Dennis A. Pitta, 1995; Tuominen, 1999). To use brand equity efficiently and appropriately and to further maintain perceptual fit, competitive leverage and benefit transfer, a brand needs to know and consider various factors while deciding upon a brand extension strategy. Consumers beliefs and feelings about the original brand are likely to be transferred, only when the extension product is perceived as a member of the original brand family (Abhishek Dwivedi, 2007).The greater the fit / similarity perceived by consumers between the extension product and the original brand, the more likely, the affect associated with the original brand would be transferred to the extension product. Thus the consumer perception of fit is s the most important construct in a consumer evaluation of brand extension. The consumer perception of fit serves as a heuristic cue in a consumer brand extension evaluation process because one of the functions of similarity is to allow people to make educated guesses in the face of limited knowledge with the brand extension (Leslie de Chernatony, 2001). The extension product is new to the consumers so if it is perceived as similar to the original brand, the consumers will be able to make inferences or judgments about the new extension based on these similarities. The perceived fit will be achieved when a consumer perceives that the new extension product is consistent with the parent brand ,or a family member of the brand name, and then affect or attitude transference will be more likely to occur ,to facilitate the brand extension evaluation. It is widely accepted that fit perceptions between an extension and its parent brand determines consumer evaluations of brand extensions and there is a positive relationship between the fit perceptions and consumers attitudes toward the extension. (Abhishek Dwivedi, 2007; Havard Hansen, 1998) 2.6 Dimensions of fit The perception of fit is an important determinant but there still considerable variances about its dimensions in the literature. The most popular concepts that have been used to define the dimensions of fit are similarity ,relatedness, typicality, and brand concept consistency. These concepts define the perception of fit from different aspects, but they also have some overlaps. (Langlotz, 2008; Izabella b.2009) 2.6.1 Similarity: In most research similarity refers to how alike the original product and the extension product are in terms of features and attributes. The consumer similarity judgment involves comparing or matching features between the original product category and the new extension product category. The more features that overlap or match between the two classes of products, the more likely it is that these two products will be perceived to belong to the same cognitive category (Dr. Ashish Sharma, 2007) .Besides, shared features between two product classes, similarity also refers to shared benefits, which means that two products have a common goal. Similarity can also be used to refer to sharing same usage situations, or being complementary in usage. From the firms perspective similarity also refers to manufacturing synergies or the firms ability to transfer the marketing, operating or manufacturing capability from the original product to the new extension product ( Izabella b.20 09). According to Aaker Keller (1990), similarity is based on three elements, complement, substitute, and transfer. Complement indicates the extent to which consumers view two product classes as sharing the same usage context. Substitute is the extent to which consumers perceive two product classes can replace each other in satisfying the same need. Transfer is the extent to which the perceived ability or skill of a manufacturer that is required for the extension overlaps with that of the parent brands. Consumer perceived similarity plays an important role in brand extension evaluation. It can enhance the transferability of perceived quality of the brand to the extension, and directly affect the attitude towards the extension; the higher the level of similarity, the more favorable the attitude toward brand extension (Langlotz, 2008). 2.6.2 Typicality: It is used to measure the consumers perception of fit between the extension product and the original family branded products. According to Tauber (2001), when an extension shares more features of current family branded products, it will be a more typical member of the family brand and the affect transference will be more likely to occur on the new extension. Typicality refers to how representative the extension product category is of the original family branded products .An extension product may be perceived as a typical member of the original brand family not only because it shares many physical features of the original product, but also because it represents the family brand image at a high level. Typicality is basically a broader view of similarity .It also includes some non product related aspects like the brand image. Typicality has an impact on consumer brand extension evaluations; however the notion of typicality may be more useful measurement of fit percepti on when the original brand has more than one existing product, because it measures how representative the new extension is of the brand family. (Tauber, 2001; Vukasovic, 2001) 2.6.3 Relatedness: It is another word used to describe the fit between the extension product and the original brand .It refers to the strength of the association between the brands parent category and the target extension category (VukasoviÄ , 2001). The consumer attitudes transference is more likely to occur on extensions which are closely related to the parent categories. Relatedness is a similar concept to similarity. It depends on the similarity of common features, complementarities in a common usage situation, and substitutability in providing a common function. However, relatedness is a more inclusive construct than similarity. The notion of similarity only refers to the common physical features between the original product category and the extension category. It does not accommodate the notion of conceptual coherence; i .e, sometimes two product categories are perceived to be related to each other conceptually not physically. So it can be concluded that relatedness offe rs a broader view of similarity. (Langlotz, 2008).Like the concept of typicality, the notion of relatedness defines consumer perceptions of fit on the concept of similarity, but they both offer some idea that is more than the similarity concept. These two concepts indicate that the consumer perceptions of fit in brand extension evaluations include not only physical product similarities, but also consistencies at some non physical levels, for example the brand image level and product conceptual level. (Langlotz, 2008; Vukasovic, 2001) 2.6.4 Brand concept consistency : Although both concepts of typicality and relatedness capture some non physical aspects of fit, the non product aspects of fit are accommodated more by the concept of brand concept consistency. A brand concept is the brand image, which is made up of specific associations that differentiate the brand from other competing brands. It is the unique abstract meaning that is derived from a particular configuration of product features (Tauber, 2001). Langlotz (2008) reveals that when consumers evaluate a brand extension, they not only take into account information about the product feature similarity, but also the concept consistency between the brand concept and the extension. The brand concept consistency is more non product related and is more about the brand image than the physical features. The more that consumers think the extension is consistent with the parent brand concept or image, the more favorable consumer attitudes are toward the extension. Thu s those extensions, which are very different from the parent product category physically, can also be perceived as fitting with the parent brand, as long as they have consistent images and concepts with the parent brand. Compared with the notion of similarity, brand concept consistency captures a totally different aspect of fit. However it is believed to be equally important to the similarity between the extension product and the original product in a consumer brand extension evaluation process. The concept of consumer fit perceptions in brand extension evaluation is incomplete without either similarity or brand concept consistency (Tauber, 2001; Vukasovic, 2001). 2.7 Role of Consumer knowledge in brand extension evaluations Consumer knowledge is indicated as one of the moderating variables that have an impact on consumer fit perceptions in the brand extension evaluation process (Ma, 2005). Thus, review of the importance of the consumer fit perception in a brand extension evaluation, and its dimensions is followed with the review of consumer knowledge. 2.7.1 Influence of knowledge on consumers behaviors: Consumers with high and low knowledge react differently in a variety of consumer behaviors like information processing evaluation strategies and decision making. The differences between high and low knowledge consumers are addressed in three related areas: Differences in cognitive structure ,capabilities of analysis, inference and memory, Differences in internal knowledge transfer, Differences in similarity judgments between brands, Differences in fit perception in brand extension evaluations. (Phau, 2003)