Sahnaz Yasmin Khan. More From Revvie. Sajib Kumar Saha. Popular in Business General. Shreya Saransh Goel. Shubham Jadhav. The Maick.
Anand Prajapati. Johanna Francesca Cabeje. Brigette Domingo. Deepti Agarwal. Swetha Vasu. Everton Rosa. Najmul Hasan. Explore a preview version of Strategic Market Management, 10th Edition right now. Marketing professionals need to be able to adapt new strategies in order to keep their companies relevant.
Strategic Market Management, 10th Edition emphasizes a customer perspective and the fact that every strategy should have a value proposition that is meaningful to the customers.
To browse Academia. Skip to main content. By using our site, you agree to our collection of information through the use of cookies. To learn more, view our Privacy Policy. Can barriers be created to make it more difficult for competitors to dislodge loyal customers?
Creating brand equity: How is brand equity created? What are the driving determinants? As a practical matter, decisions on such elements need to be made as brand equity is created or changed.
Managing brand equity: How should a brand be managed over time? What actions will meaningfully affect the elements of equity—in particular the associations and perceived loyalty? Often a reduction of advertising results in no detectable drop in sales. Is there damage to the equity if a reduction is prolonged? How can the impact of a promotion or another marketing program be determined?
Forcasting the erosion of equity: How can erosion of brand equity, and other future problems, be forecast? The danger is that by the time that damage to the brand is recognized, it is too late. The cost of correcting a problem can be extremely high relative to the cost of maintaining equity.
The forecasting issue is especially crucial in durables like automobiles, where the time needed to replace a product can be as long as five years. A disaster such as the Tylenol tampering case has the advantage that the threat to brand equity, and the need to take action, are both obvious. More commonly, a brand is eroded so slowly that it is difficult to generate a sense of urgency. The extension decision: To what products should the brand be extended? How far can the brand be extended before brand equity is affected?
Of particular concern is the vertical brand extension: Can an upscale version of the brand be marketed? If so, will there be spillover impact upon the brand name? Do the Earnest and Julio Gallo varietals help the basic Gallo line? What about the temptation to exploit the brand by putting the name on a downscale product? How can the extent of damage to brand equity be predicted?
Will the new associations of an extension be helpful or harmful? Creating new names: The investment in a new brand name an alternative to a brand extension will generate a name with a new set of associations which can provide a platform for another growth stream. What are the trade-offs between these alternatives? Under what circumstances should the one be preferred over the other? How many brand names can a business support? Complex families of names and subnames: How should different levels of brand-name families be managed?
Should the recruiting effort of the U. Brand-equity measurement: A basic question which underlies all these issues is how to measure brand equity and the assets on which it is based. If it can be conceptualized in a given context precisely enough to measure and monitor it, the other problems become manageable.
Clearly, there are several approaches to brand equity and its measurement. Evaluating brand equity and its component assets: A pressing related issue is how to value a brand. Given that there is a market for brands, it is of enormous practical value to actually provide methods to estimate that value. Of even more importance is to place a value upon the underlying assets such as awareness and perceived quality. The key to justifying investment in building such assets is to be able to estimate the value of such activities.
Although some progress has been made, this area remains a signficant challenge for marketing professionals. One is to define and illustrate brand equity, providing a structure which will help managers see more clearly how brand equity provides value. Another is to document research findings and illustrative examples that demonstrate that value has emerged or has been lost from marketing decisions or environmental events that have enhanced or damaged the brand.
A third objective is to discuss how brand equity should be managed. How should it be created, maintained, and protected?
The next chapter will discuss the brand loyalty of the customer base and its link to brand equity. Chapters 3 and 4 cover brand awareness and perceived quality.
Clearly the management of associations, covering three chapters, is both important and complex. Brand extensions—the good, the bad, and the ugly —is the topic of Chapter 9. Chapter 10 presents methods to revitalize a tired brand, to breathe new life into it and its context; and the end game—how to allow a brand a graceful decline and, if needed, death.
I have lost my reputation. I have lost the immortal part of myself and what remains is bestial. With a clever use of pairs of keystrokes, a touch typist could do a wide variety of word- processing tasks extremely quickly. However, in doing so they did not really utilize the 10 function keys that were a main attribute of the new computer, choosing instead to retain the use of their multi-keystroke command structure.
A true touch typist had little interest in the new function keys, but then the emerging business user often was not a skilled touch typist anyway, and was attracted to the power of the function keys. Both offered several advances, including the full use of function keys.
MicroPro responded with WordStar Release 3. However, it was to be the last release for four years in a field which saw continuous refinement of programs in response to competitive software innovations and hardware improvement. Much more importantly, market share fell precipitously to Of course, literally hundreds of other word-processing firms did not survive, largely because they could not get off the ground; they could not get enough distribution and sales to be viable.
However, they also never had the installed base that WordStar enjoyed. WordStar lost position in large part because it turned its back upon its installed base. First, it failed to adequately provide support for existing customers. Second, the major follow-on product was not backward-compatible with the original WordStar, and in fact competed with it. As late as , MicroPro was deservedly known as being indifferent to customers, who would call with problems and not be able to get through.
Worse, when customers did get through, they often were referred to their dealer—even though the dealer might be either unwilling or unable to help. Understandably, the customer frustration level was high. By contrast, WordPerfect developed an unlimited-access, toll-free, phone-in advisory service which became an important point of distinction in part because of the MicroPro legacy.
In November of , MicroPro started to ship WordStar , which was eagerly awaited by WordStar users who wanted to upgrade the program they loved. Worse, it was not backward-compatible with the prior version: It involved learning a new set of instructions. Further, WordStar touch typists now were forced to use the function keys set apart from the keyboard. In fact, WordStar proved to be the product that launched WordPerfect, in that it virtually endorsed the kind of function-key processing that WordPerfect and Microsoft Word had touted.
More importantly, WordStar users now knew that to have the most advanced features, they would have to learn a new program. At long last Wordstar users had an update—but it was years late.
It was followed in August of by WordStar Professional Release 5, which got favorable reviews in the trade press, and by Release 5. First, they competed with each other: Both basically were after the same market, with similar features.
Which one should a customer select? There was no obvious answer. The confusion between the two was not helped by the advertising. However, the campaign broke just after WordStar Release 3 was introduced! In , MicroPro made a belated effort to turn it all around. WordStar was de- emphasized in favor of WordStar Professional—the program that was backward-compatible with the installed base of 1.
The WordStar Professional was positioned as a productivity tool for touch typists who could exploit the unique control-key commands.
WordStar graphics were sharpened up. And hardly the least important a direct sales force, bypassing the national distributors who might have helped them stay removed from their customers, was developed. It appears that WordStar will survive, but as a bit player in a market they once commanded.
And that WordStar, by inadequately supporting its product and going to the WordStar , turned its back on this asset—the result being an incredible opportunity that competitors the makers of WordPerfect and Microsoft Word exploited. It is not impossible to create a new model that obsoletes the old one, particularly if an established name can be used. In the mids, IBM came out with the System , a completely new line that entirely replaced the old one.
If customers are indifferent to the brand and, in fact, buy with respect to features, price, and convenience with little concern to the brand name, there is likely little equity. If, on the other hand, they continue to purchase the brand even in the face of competitors with superior features, price, and convenience, substantial value exists in the brand and perhaps in its symbol and slogans.
Brand loyalty, long a central construct in marketing, is a measure of the attachment that a customer has to a brand. As brand loyalty increases, the vulnerability of the customer base to competitive action is reduced. It is one indicator of brand equity which is demonstrably linked to future profits, since brand loyalty directly translates into future sales.
Each level represents a different marketing challenge and a different type of asset to manage and exploit. All may not be represented in a specific product class or market. The bottom loyalty level is the nonloyal buyer who is completely indifferent to the brand— each brand is perceived to be adequate and the brand name plays little role in the purchase decision. Whatever is on sale or convenient is preferred.
This buyer might be termed a switcher or price buyer. Basically, there is no dimension of dissatisfaction that is sufficient to stimulate a change especially if that change involves effort. These buyers might be termed habitual buyers. Such segments can be vulnerable to competitors that can create a visible benefit to switching. However, they can be difficult to reach since there is no reason for them to be on the lookout for alternatives. The third level consists of those who are also satisfied and, in addition, have switching costs— costs in time, money, or performance risk associated with switching.
Perhaps they have invested in learning a system associated with a brand, as in the MicroPro case. To attract these buyers, competitors need to overcome the switching costs by offering an inducement to switch or by offering a benefit large enough to compensate. This group might be called switching-cost loyal. On the fourth level we find those that truly like the brand. Their preference may be based upon an association such as a symbol, a set of use experiences, or a high perceived quality.
However, liking is often a general feeling that cannot be closely traced to anything specific; it has a life of its own. People are not always able to identify why they like something or someone , especially if the relationship has been a long one.
Sometimes just the fact that there has been a long-term relationship can create a powerful affect even in the absence of a friendly symbol or other identifiable contributor to liking. The top level are committed customers. The brand is very important to them either functionally or as an expression of who they are. Their confidence is such that they will recommend the brand to others. The value of the committed customer is not so much the business he or she generates but, rather, the impact upon others and upon the market itself.
The ultimate committed customer is the Harley Davidson rider who wears the Harley symbol as a tattoo, the Macintosh user who attends shows and will spend considerable effort to insure that an acquaintance does not buy IBM and forego the pleasure of the user-friendly Macintosh, or the Beetle owner of the s who flaunted the funkiness of the car.
A brand that has a substantial group of extremely involved and committed customers might be termed a charismatic brand. Not all brands should aspire to be charismatic, of course, but when a Macintosh, NEXT, Beetle, or Harley does achieve that aura, there can be a big payoff.
These five levels are stylized; they do not always appear in the pure form and others could be conceptualized. For example, there will be customers who will appear to have some combination of these levels—i. Others may have profiles somewhat different from those represented—i.
These five levels do, however, provide a feeling for the variety of forms that loyalty can take and how it impacts upon brand equity. The attrition rate for those with stronger levels of loyalty will be lower, causing their value to be higher. If a relationship between loyalty and the frequency of buying a brand can be estimated, the value of a change in brand loyalty can be estimated. A conceptual approach to providing such an estimate is discussed at the close of the chapter.
Brand loyalty is qualitatively different from the other major dimensions of brand equity in that it is tied more closely to the use experience. Brand loyalty cannot exist without prior purchase and use experience. In contrast, awareness, associations, and perceived quality are characteristics of many brands that a person has never used. Brand loyalty is a basis of brand equity that is created by many factors, chief among them being the use experience. However, loyalty is influenced in part by the other major dimensions of brand equity, awareness, associations, and perceived quality.
However, it is not always explained by these three factors. In many instances it occurs quite independent of them and, in others, the nature of the relationship is unclear. It is very possible to like and be loyal to something with low perceived quality e. Thus, brand loyalty provides an important basis of equity that is sufficiently distinct from the other dimensions.
For many, Perrier was bottled water. In February of , Perrier recalled its product worldwide after it was found to be contaminated by traces of benzene, a suspected carcinogen. However, the biggest factor was that the habit of ordering Perrier had been broken.
A large part of the Perrier success was the loyalty of its installed base. Many customers simply always ordered Perrier—never just bottled water Perrier was like Kleenex—it represented the product to many. When the supply was interrupted, by necessity customers had to sample other brands. They found that they were as good or better than Perrier.
Because Perrier had little real product advantages, such a break in supply disrupted its customer base. The bubble had burst. Perrier may never bounce back. In fact, all the brand equity dimensions have causal interrelationships.
Perceived quality, for example, will in part be based upon associations and even awareness a visible brand might be considered more able to provide quality. An association with a symbol, for example, might affect awareness.
Thus, there is no claim that the four major dimensions of brand equity are independent. A key premise is that the loyalty is to the brand—that it is not possible to transfer it to another name and symbol without spending substantial amounts of money and forgoing significant sales and profits.
If the loyalty is to a product rather than the brand, equity would not exist. Buying a commodity like oil or wheat rarely involves loyalty to the product itself, although the surrounding service may be attached to a brand and it could engender considerable loyalty. A customer base can too easily be taken for granted when the interest is in short-term sales rather than in building and maintaining equity.
The focus is often upon faceless sales statistics to be analyzed and controlled rather than on the people and organizations who are the customers. As a result, brand loyalty often is treated with benign neglect, and is neither nurtured nor exploited. Considering brand loyalty is a key, core bases of brand equity should help a firm treat customers as the brand assets that they are. A consideration of several measurement tacks will provide additional insights into its scope and nuances as well as provide a practical tool in using the construct and linking it to profitability.
One approach is to consider actual behavior. Other approaches are based upon the loyalty constructs of switching costs, satisfaction, liking, and commitment. Among the measures that can be used are: Repurchase rates: What percent of Oldsmobile owners purchase an Oldsmobile on their next car purchase? Percent of purchases: Of the last five purchases made by a customer, what percent went to each brand purchased? Number of brands purchased: What percent of coffee buyers bought only a single brand?
Two brands? Three brands? The loyalty of customers can vary widely among some product classes, depending upon the number of competing brands and the nature of the product. It may be inconvenient or expensive to obtain, and provides only limited diagnostics about the future.
Further, using behavior data, it can be difficult to discriminate between or among those who actually switched brands and the purchases of multiple brands by different members of a family or by different units in an organization. If it is very expensive or risky for a firm or a consumer to change suppliers, then the attribution rate from the customer base will be lower. The most obvious type of switching cost is an investment in a product or system.
When a firm buys a computer system, the hardware investment is only part of the investment involved. They have to also invest in software, and in training people.
The firm would have to reinvest in software and training, a process which would cost in time and productivity as well as money. Another type of switching cost is the risk of change. If the current system works, even if there are problems, there is always the risk that a new system will be worse. A consumer who has a relationship with a particular hospital and doctor may be reluctant, even when unhappy, to try unknowns.
There is a reluctance to fix something that is not demonstrably broken. Operationally, customers might be queried to see what risks are associated with change. A business should value the switching costs that it enjoys. WordStar, of course, did not follow that maxim. Further, it should work to increase the dependence of the customer upon its product or service. What problems are customers having?
What are the sources of irritation? Why are some customers switching? What are the precipitating reasons? A key premise of the second and third levels of loyalty is that the dissatisfaction is absent or low enough to avoid precipitating a decision to switch. It is important that any measure of satisfaction be current, representative, and sensitive.
Asking users of a service to return cards on which they can check whether the service such as courtesy on the phone is usually satisfactory is neither representative nor sensitive.
Clearly, there was an enormous level of resentment and frustration among customers which was not reflected in the surveyed measures of satisfaction that were used. Are there feelings of respect or friendship toward the firm or brand?
Is there a feeling of warmth toward the brand? A positive affect can result in resistance to competitive entries.
It can be much harder to compete against a general feeling of liking rather than a specific feature. General overall liking can be scaled in a variety of ways, such as: Liking Respect Friendship Trust The concept is that there is a general liking or affect which is distinct from specific attributes that underlie it. It is rather reflected by general statements of liking, such as those listed above. The concept of reliability may, in some cases, represent a specific attribute.
However, it also is often highly correlated with general affect. Another measure of liking is reflected in the additional price that customers would be willing to pay to obtain their brand and the price advantage that competitors would have to generate before they could attract a loyal buyer.
Several approaches to estimating the price premium that the brand name can support were discussed in Chapter 1. The simplest, the dollarmetric, asks how much a customer would pay to get his or her preferred brand.
When a substantial commitment level exists, it can be relatively easy to detect because it usually manifests itself in many ways. One key indicator is the amount of interaction and communication that is involved with the product. Does he or she not only recommend the product but tell others why they should buy it?
Another is the extent to which the brand is important to a person in terms of his or her activities and personality. Is it particularly useful or enjoyable to use? It is simply much less costly to retain customers than to get new ones. Because potential new customers usually lack motivation to change from their current brands, they will be expensive to contact, in part because they are not making an effort to locate brand alternatives.
Even when they are exposed to alternatives, they will often need a substantial reason to risk buying and using another brand. A common mistake—attempting to grow by attracting new customers while neglecting existing ones—will be discussed at the close of this chapter.
The familiar is comfortable and reassuring. It is usually far less costly to keep existing customers happy, to reduce the reasons to change, than to find new ones. Of course, the higher the loyalty, the easier it is to keep customers happy.
Yet, customers will leave, especially if their problems and concerns are not addressed. The challenge is to reduce this flow. Loyalty of existing customers represents a substantial entry barrier to competitors. Entering a market in which existing customers are loyal or even satisfied with an established brand, and must be enticed to switch, can require excessive resources.
The profit potential for the entrant is thus reduced. For the barrier to be effective, potential competitors must know about it; they cannot be allowed to entertain the delusion that customers are vulnerable. Thus, signals of strong customer loyalty which can be sent to competitors, such as advertisements about documented customer loyalty or product quality, can be useful. Strong loyalty toward brands like Nabisco Premium Saltines, Cheerios, or Tide will ensure preferred shelf space because stores know that customers will have such brands on their shopping list.
At the extreme, brand loyalty may dominate store choice decisions. Trade leverage is particularly important when introducing new sizes, new varieties, variations, or brand extensions. A purchase will thus not represent an adventuresome thrust away from the crowd. Especially in product areas that are new or otherwise risky, the acceptance of the brand by a group of existing customers can be an effective message, a way to exploit the installed base.
Using existing customers to sell new customers rarely happens automatically; it usually takes an explicit program. A relatively large satisfied customer base provides an image of the brand as an accepted, successful product which will be around and will be able to afford service backup and product improvements.
In many businesses where follow-on service and product support are important, such as computers and automobiles, two of the main concerns often are whether the firm is healthy and committed enough to be around when it is needed, and whether its products are accepted. Brand awareness can also be generated from the customer base. Existing customers and dealers will enhance recognition merely by being there. Friends and colleagues of users will become aware of the product just by seeing it.
Seeing a product being used by a friend will generate the kind of memory links to the use context and the user that any advertisement would have great difficulty in doing.
Brand recall thus would be stronger. In selecting target markets, one consideration should be their potential to create visibility and awareness for the brand. If a competitor develops a superior product, a loyal following will allow the firm time needed for the product improvements to be matched or neutralized.
For example, some newly developed high-tech markets have some customers who are attracted by the most advanced product of the moment; there is little brand loyalty in this group. In contrast, loyal, satisfied customers will not be looking for new products, and thus may not learn of an advancement. Further, they will have little incentive to change even if exposed to the new product.
With a high level of brand loyalty, a firm can allow itself the luxury of pursuing a less risky follower strategy. You literally have to work at it. For perhaps two decades General Motors had, by many objective measures, inferior cars. Logically its share of the U.
The fact is that customers do not like to change; you almost have to beat some of them off with a baseball bat. Incredibly, some firms such as MicroPro have done just about that.
Changing brands requires effort, especially if the decision involves substantial investment or risk. Further, positive attitudes toward an incumbent brand are likely to develop which will not only justify but enhance prior decisions. People do not like to admit that they were wrong—it is much easier to rationalize prior decisions. In truth an enormous inertia exists in consumer choice. And they ultimately carried the day: The withdrawn original Coke formula reappeared—although this time it was forced to bear the dubiously distinctive name Coke Classic.
The bottom line is that it should be easy to keep customers merely by following some basic rules, as Figure suggests. Hardly an unbelievable concept. The point is that a product or service that works—that functions as expected—provides a basis for loyalty, a reason not to switch.
Again, customers need reasons to change. The key to keeping them often is simply to avoid driving them away. It should not be difficult to avoid such behavior, yet customers experience it all the time. The goal, of course, is to have the interaction be positive—to treat the customer as any person would like to be treated: with respect. Good source for conceptual framework. However, rather light reasoning on why these concepts are necessary. Read this back-to-back with Doyle's Management and Strategy, and marketing hell will turn into heaven.
Extremely American though. It should get 4.
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