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Dr. Wolfgang Grassl

Albion College
January 10, 2002



‡ what does the following symbol mean to you ?

«.. little girl in the rain with an umbrella

‡ which brand does the following tag line stand for ?

«.. ´when it rains it pours ®µ

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‡ salt is a relatively simple commodity -- how come most

of us seem to know any brand of salt at all ?
‡ there seems to be little to tell about the qualities of salt,
the product having few cues by which to store it in our
semantic memory
‡ isn·t marketing salt simply selling sodium chloride ?
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‡ quite on the contrary: for the marketer, that·s where

the challenge starts !
‡ Morton·s share of about 50 % of the U.S. market
achieved by
² (1) stability of brand (´stable brand personalityµ)
² (2) introducing a higher degree of product differentiation
‰ Morton Lite Salt®
‰ Morton® Kosher Salt
‰ Morton® Salt Substitute
‰ Morton® Popcorn Salt
‰ Morton® Canning and Pickling Salt brands
² (3) accepting a low price difference in comparison with
private-label salt
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‡ enormous importance of brand-building

‡ financial importance of brands
‡ everything can be marketed -- but can everything be
branded ?
² air ?
² sand ?
‡ branding of
² products (goods and services)
² personalities
² ideas
² places
‡ how do you market water and sugar (together) ?
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‡ Why are some companies able to establish a clear-cut

competitive position for their product in the mind of
market participants, while others never do so ?
² ´Cola warsµ
² McDonald·s vs Burger King
² Oldsmobile brand
‡ How do you differentiate your product from that of
your competitors in a way that is important to the
target customer segment ?
‡ How do you turn a brand advantage into profitability ?
‡ What are the rules of successful branding ?


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‡ What are the rules of successful branding ?
² What makes Coca-Cola, Levi·s, or Cartier strong brands ?
² Why does Pepsi seem unable to catch up with Coke ?
Share in ar nate S t ertisin
rinks Market, U.S., 2000 Ex en it re U.S., 1999
a a . 44.1% $403MM
Pe si a . 31.4% $672MM
Coke Classi + iet Coke 30.8%
Pe si Cola + iet Pe si 18.9%
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² Why has General Motors struggled with its portfolio of

brands for about forty years ?
‰ GM market share in U.S.:
1991: 36%, 2001: 28%
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‡ nature of brands
² products-plus (´mysteryµ)
² higher level of comple ity
‡ function of brands
² consumers
‰ convey information (´BMW: The Ultimate Driving Machineµ)
‰ instill trust (´you know what you can e pectµ)
² marketers (producer brands vs store brands)
‰ higher degree of product differentiation  stronger brand loyalty
 higher mark-ups  higher profitability
‰ unique company profile: differentiation on market
‰ brand equity = value of brands (surplus value over non-branded
products)
set of assets (or liabilities) linked to the brand that adds (or subtracts) value




    


          
 



 


 




 

  


  
   

        

     
  
    
     

     
    

   
 

‡ brand equity is determined by the customer

² culmination of the customer·s assessment of
‰ the product
‰ the company
‰ other variables that impact on the product
² brand equity e clusively subjective (´in the eye of the
beholderµ)
² brand equity can largely be influenced by marketing
management Ô

(and mainly through advertising)
‰ assumes infinite plasticity of mind
‰ brands seen in isolation from one another
² in philosophical terms: idealist view (structures of reality are
at the behest of the observer or actor)
‰ is this really the whole story ?

  
  

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1 Coca-Cola 68,945 113,000

  

2 Microsoft 65,068 380,000


 ë

3 IBM 52,752 198,700 j 

4 GE 42,396 498,000  ë
5 Nokia 35,035 104,200 ëë
ë
6 Intel 34,665 202,200




7 Disney 32,591 60,000 ë


8 Ford 30,092 45,900  j

9 McDonald's 25,289 35,400 
 
10 AT&T 22,828 148,950
ë ë

11 Marlboro 22,053 107,300 j  jj
12 Mercedes 21,728 45,350 
 

13 Citibank 19,005 268,900 
 
14 Toyota 18,578 133,400
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15 Hewlett-Packard 17,983 55,800 ëjj 

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‡ brand leverage = brand value in relation to the
previous year·s brand sales
² the higher the leverage the more value is being generated
from each dollar of sales
‡ results
² among the most valuable brands, the share of brand value
in market capitalization is as high as 1. % (McDonald·s)
or as low as .1% (Citibank)
² brand leverage is low for manufacturers of investment and
capital goods (Toyota, Ford, G , HP, Mercedes, IBM) but
very high for manufacturers of consumer goods and
service businesses (Coca-Cola, Microsoft, Marlboro,
Disney)
‰ why ? -- management issue or systemic e planation ?

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1 Coca-Cola 68,945 
 1,579  
2 Johnson & Johnson 68,208   1,075  ±
3 Microsoft 65,068

 559


4 IBM 52,752 j± 724 j
5 Procter & Gamble 45,435 ± 4,152
 
6 GE 42,396 ± 1,754 j

7 Nestlé 41,688 ±  1,886 jj

8 Unilever 37,847   3,665


9 Nokia 35,035  259
±j
10 Intel 34,665

 123 j

11 Disney 32,591 ± 1,104 j±j
12 Ford 30,092 ± 2,323
j±
13 McDonald's 25,289 
 1,404


14 AT&T 22,828
± n/a n/a
15 Marlboro 22,053 j  n/a n/a

   
   
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‡ at the level of brand portfolios, too, there is no clear
relationship between the level of advertising e pen-
diture and brand value
² m = -0.12 9 (inverse relationship !), m2 = 0.0163
² strong corporate brands like Intel, Nokia, Microsoft and
IBM enjoy a high advertising efficiency, umbrella brands
like P&G and Unilever (e pectedly) a low one
² but why do McDonald·s and Ford (which have the highest
and second-highest brand leverage among the 15 brands)
lag so far behind ?
‰ systematic relationship sales  brand value but not advertising
 brand value
‡ hypothesis: advertising is not a strong but a weak
force in determining brand equity

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‡ customer-based view (´brand idealismµ) called in
question
² degree to which products can be branded does not depend
on marketing management alone (or not even primarily on it)

 


‡ alternative: ´brand realismµ

² rooted in ecological psychology and evolutionary theory
‰ ´adaptive marketingµ
² philosophically: brands have a reality in addition to the
products they inhere in -- they are not just ´products-plusµ


    

consumer marketing
values management

 


cognitive product
constraints features

‡ ecological model - two levels:

² subjective
² objective

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‡ brand e tension research
² ´stretchingµ of a brand into a different product category
‰ more than 80% of NPD either brand e tensions
‰ vast majority of brand e tensions are failures
‰ successful
Calvin Klein: clothing > perfume > underwear
Jell-O: dry mi bo > ready-to-eat dessert > yogurt > ice pops
Virgin: record label > retail entertainment chain > airline >
tour operator > multimedia production
‰ unsuccessful
Levi·s: jeans wear > dress suits (but: Dockers, Slates)
J & J: baby oil > perfume
Pierre Cardin: fashion wear > dishware
Virgin: record label > cola
Bic: pens, disposable razors > pantyhose > perfumes

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‡ consumer perception cannot be arbitrarily manipulated
and brands cannot be arbitrarily stretched without
diluting the master brand
² consumers are ´hardwiredµ (tastes for sugar and fat, etc.)
‰ ca. 3,000 marketing messages bombard the human mind every day:
why do only few directly affect our consumer behavior ?
² consumers have cognitive constraints (comple ity of pro-
ducts, differentiation, distance old-new category, etc.)
‰ e ample: flop of Crystal Pepsi
² ´lawsµ of brand e tension: e tendibility enhanced if
‰ contiguity in perceptual space
‰ perceptual fit of core associations with product category
‰ low degree of category domination (´prototypesµ)
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‡ there are regularities governing the degree to which

products lend themselves to becoming strong brands
² ´nichesµ in product space (space not continuous but discrete)
‰ niche = specific combinations between product features and cognitive
constraints in consumers that enable a ´fitµ in some but not in other
cases
niches constrain or accommodate brands
² nature of ´boundariesµ surrounding a brand (co-) determine
e tendibility and lastly brand equity
‰ Federal press ´ownsµ the association ´overnightµ, Volvo ´safetyµ
² ´brandscapeµ (= landscape of interrelated brands) rather than
brands in isolation
‰ associations affect other brands
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‡ even the best marketing management and the largest
advertising budget cannot brand what the structures
of product space do not make ´brandableµ in the
first place
² comple ity of brands (= number of features by which we
differentiate products) determines number of potential
niches in any product category
‡ consequence: new understanding of brands necessary
² positioning maps  brand molecules
‰ brands not discrete but continuous
‰ surrounding product space not continuous but discrete

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‡ brands as molecules
´singleµ brand brand portfolio

´spill-overµ core asso- master parent brand

associations ciations brand company e tensions

´spill-oversµ from other (´contiguousµ) brands

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‡ brand equity is a function of the degree to which
brands can be ´mooredµ in niches
² accommodation, boundaries and ´defendabilityµ
‡ ecological niches
² environment (= product
space) determines degree of
branding potential
² every product category allows
for a finite number of niches
² niches can be empty

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‡ brand associations often below
threshold of consciousness
² cognitive constraints
‡ ´above groundµ: consumer decisions
‡ analogy: mycelium of a fungus

Mycelium of Matsutake
mushroom (hyphae)

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‡ opens up an interdisciplinary research program
² ecological conte ts (biology, psychology)
² comple ity theory (mathematics, computer science)
² ontology (philosophy, artificial intelligence)
² product differentiation (economics)
‡ better fit with empirical data about branding and
advertising
‡ better e planation of brand management strategies
² co-branding
‰ Subaru markets L.L. Bean Outback station wagon
‰ Dell stamps Microsoft and Intel logos on its computers
‰ credit card co-branded by Visa, Citibank and American Airlines
² brand e tension
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‡ old view: marketing is a battle over perceptions, not
products
² but: why did ´New Cokeµ fail in 1985 ?
‰ Coca-Cola Co. conducted 200,000 taste tests that showed that ´New
Cokeµ tasted better than Pepsi-Cola and than ´Coke Classicµ
‰ consumers did not accept a cola that tasted too much like Pepsi
‡ new view: marketing is more than about perception
² it requires a study of the total environment in which we live
and act
² ´naturalistic turnµ

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