Week 7: Customer-Based Brand Equity and Broadcast Media

Week 7 (brand equity and broadcast media) consists of two parts. The branding part (based on Keller, Strategic Brand Management, chapter 2) explains customer-based brand equity (CBBE): brand knowledge, brand awareness and brand image, the four steps of brand building and the CBBE pyramid, and the link between brand equity and customer equity. The media part discusses the broadcast media, television and radio: their advantages, limitations and ways of buying time.

Part A: Customer-based brand equity

The three key ingredients:

1. Differential effect: brand equity arises from differences in consumer response. If there are no differences, the brand is essentially a commodity or generic product, and competition is on price.
2. Brand knowledge: the differences result from consumers' knowledge about the brand, that is what they have learned, felt, seen and heard about it over time.
3. Consumer response to marketing: the differential response is reflected in perceptions, preferences and behaviour related to all aspects of marketing, such as the choice of a brand, recall of copy points from an ad, response to a sales promotion, or evaluations of a proposed brand extension.

A brand has positive CBBE when consumers react more favourably to its marketing than to the same marketing of an unnamed or fictitiously named version of the product; negative CBBE when they react less favourably.

Brand equity as a "bridge"

• Brand equity is a reflection of past investments in the marketing of a brand: what was done in the past shapes what consumers know now.
• It gives direction for future marketing actions: the knowledge in consumers' minds indicates which marketing programs and extensions will work.

Making a brand strong: brand knowledge

• Brand knowledge is the key to creating brand equity.
• Brand knowledge consists of a brand node in memory with a variety of associations linked to it (associative network memory model).
• Brand knowledge has two components: brand awareness and brand image.

Sources of brand equity

Advantages of brand awareness

• Learning advantages: awareness registers the brand in consumers' minds, which is the first step in building brand associations.
• Consideration advantages: awareness increases the likelihood that the brand will be a member of the consideration set (the brands seriously considered for purchase).
• Choice advantages: awareness can affect choices among brands in the consideration set, especially in low-involvement decisions where consumers may choose the familiar brand.

Establishing brand awareness

• Increase the familiarity of the brand through repeated exposure: this mainly builds brand recognition.
• Create strong associations with the appropriate product category or other relevant purchase or consumption cues: this builds brand recall.

Creating a positive brand image

• Brand associations can come from many sources: marketing communication, direct experience, word of mouth, the company, the country of origin, retailers and so on. It does not matter which source created an association.
• What matters is that associations are favourable, strong and unique, in that order of importance for building equity.
• Marketers should recognise the influence of these other sources of information, manage them as well as possible, and account for them in designing communication strategies.

The four steps of brand building

1. Ensure identification of the brand with customers and an association of the brand in customers' minds with a specific product class or need.
2. Firmly establish the totality of brand meaning in the minds of customers by strategically linking tangible and intangible associations.
3. Elicit the proper customer responses to this brand identification and brand meaning.
4. Convert brand response to create an intense, active loyalty relationship between customers and the brand.

The four steps correspond to four questions customers (implicitly) ask of brands:

The CBBE pyramid

The steps are shown as a pyramid with six brand building blocks. The left side represents a more rational route (performance, judgments), the right side a more emotional route (imagery, feelings). Resonance at the top is the most valuable block and can only be reached when the lower blocks are in place.

Sub-dimensions of the CBBE pyramid

Salience (identity): category identification and needs satisfied.

• Depth of brand awareness: ease of recognition and recall.
• Breadth of brand awareness: the range of purchase and consumption situations in which the brand comes to mind; includes purchase consideration and consumption consideration, and the strength and clarity of category membership.
• Depth and breadth both matter: the product category hierarchy shows that the brand must be top-of-mind and have sufficient "mind share", but it must also do so at the right times and places.
• Product category structure: to understand brand recall, we need to appreciate how product categories are organised in memory (e.g. beverages split into non-alcoholic and alcoholic, then into soft drinks, juices, water, and so on). A brand is recalled when consumers think of the category level at which it is linked.

Performance (meaning, how well the product meets functional needs):

1. Primary characteristics and supplementary features
2. Product reliability, durability and serviceability
3. Service effectiveness, efficiency and empathy
4. Style and design
5. Price

Imagery (meaning, the extrinsic properties and how the brand meets psychological and social needs):

1. User profiles: demographic and psychographic characteristics; actual or aspirational users; group perceptions such as popularity.
2. Purchase and usage situations: type of channel, specific stores, ease of purchase; time (day, week, month, year), location and context of usage.
3. Personality and values: sincerity, excitement, competence, sophistication and ruggedness (the brand personality dimensions).
4. History, heritage and experiences: nostalgia and memories.

Judgments (response, customers' personal opinions and evaluations):

• Brand quality: perceived quality, value and satisfaction.
• Brand credibility: expertise, trustworthiness and likeability.
• Brand consideration: relevance, whether customers would actually consider buying it.
• Brand superiority: differentiation, whether the brand is seen as better than others.

Feelings (response, emotional reactions): warmth, fun, excitement, security, social approval and self-respect. The first three are more immediate and experiential; the last three more private and enduring.

Resonance (relationships, the nature of the relationship and the extent to which customers feel "in sync" with the brand):

• Behavioural loyalty: frequency and amount of repeat purchases.
• Attitudinal attachment: loving the brand (one of favourite possessions, "a little pleasure"), being proud of it.
• Sense of community: kinship and affiliation with other users of the brand.
• Active engagement: seeking information, joining a club, visiting the website and chat rooms; the strongest form of loyalty, where customers invest time, energy and money beyond purchase.

The lecture also shows an alternative pyramid used by consultancy Interbrand for Apple: from the base up, brand vision (the brand's reason for being: the best personal computing experience through hardware, software and internet offerings), brand attributes (easy to use, enabled through design), consumer benefits (technology becomes transparent and complexity vanishes), brand values (self-image as creative, a sense of mastery), brand personality (friendly, creative and empowering) and brand essence at the top (the digital hub of my life).

Application: identifying the key drivers of brand equity

The CBBE model can be tested with survey data: items measuring each block (P-1 to P-12 for performance, I-1 to I-12 for imagery, J for judgments, F for feelings, R for resonance) are analysed with a path model that estimates how strongly each block drives the next. In the lecture example, performance had strong paths to judgments (0.65) and feelings (0.66), imagery weaker paths (0.17 and 0.24), and judgments (0.58) and feelings (0.49) both drove resonance. Such an analysis tells managers which building blocks to invest in. In this example, functional performance is the key driver.

Brand building implications

• Customers own brands: the power of a brand lies in what customers have learned, felt, seen and heard about it; marketers must ensure the right experiences.
• Don't take shortcuts with brands: a strong brand is built by establishing the building blocks step by step; awareness and meaning must come before response and resonance.
• Brands should have a duality: strong brands appeal to both head and heart, combining the rational (performance, judgments) and emotional (imagery, feelings) routes.
• Brands should have richness: many different associations and routes create a rich meaning and multiple ways to respond.
• Brand resonance provides important focus: resonance is the top and the goal of marketing decisions; marketers should use it to interpret all brand-related activity.

Creating customer value and CRM

Customer-brand relationships are the foundation of brand resonance and of building a strong brand; the CBBE model puts this notion front and center.

Is a company consumer-centric? (Selden and Colvin, 2004)

• Is the company looking for ways to take care of you?
• Does the company know its customers well enough to differentiate between them?
• Is someone accountable for customers?
• Is the company managed for shareholder value?
• Is the company testing new customer offers and learning from the results?

Customer equity

Customer equity consists of three components:

• Value equity: the customer's objective assessment of the brand's utility (quality, price, convenience).
• Brand equity: the customer's subjective, intangible assessment of the brand beyond its objective value.
• Relationship equity: the customer's tendency to stick with the brand beyond objective and subjective assessments (loyalty programs, community, knowledge).

Blattberg and Deighton (1996): eight guidelines to maximise customer equity

1. Invest in highest-value customers first.
2. Transform product management into customer management.
3. Consider how add-on sales and cross-selling can increase customer equity.
4. Look for ways to reduce acquisition costs.
5. Track customer equity gains and losses against marketing programs.
6. Relate branding to customer equity.
7. Monitor the intrinsic retainability of your customers.
8. Consider writing separate marketing plans, or even building two marketing organisations, for acquisition and retention efforts.

Relationship between customer equity and brand equity. Customers drive the success of brands, but brands are the necessary touch point that firms have to connect with their customers. CBBE holds that brands create value by eliciting differential customer response to marketing activities. The higher price premiums and increased loyalty generated by brands produce incremental cash flows. Both perspectives are complementary.

Part B: Broadcast media, television

Television and radio, the broadcast media, are the most pervasive media in most consumers' daily lives and offer the opportunity to reach vast audiences. Both are time-oriented rather than space-oriented and are organised similarly: a system of affiliated stations belonging to a network, as well as individual stations.

Advantages of television

• Creativity and impact: perhaps the greatest advantage is the opportunity TV provides for presenting the message. The interaction of sight and sound offers great creative flexibility and makes dramatic, lifelike representations possible. TV can convey a mood or image, develop emotional or entertaining appeals that make a dull product interesting, and is an excellent medium for demonstration: print can show a car and its features, but only TV can put you in the driver's seat.
• Coverage and cost effectiveness: TV reaches large audiences; nearly everyone, regardless of age, sex, income or education, watches some TV (Nielsen: nearly 270 million people aged 2+ in 106.7 million US TV households). The cost per person reached is low.
• Captivity and attention: TV is intrusive; commercials impose themselves on viewers as they watch their favourite programmes. Unless we make an effort to avoid them, we are exposed to thousands each year.
• Selectivity and flexibility: TV is often criticised as non-selective, but some selectivity is possible through programme content, broadcast time and geographic coverage (e.g. Saturday morning TV for children, weekend afternoon sports for men, weekday daytime shows for homemakers).

Limitations of television

• Costs: expensive both in airtime and production. A national 30-second spot costs on average over $300,000 to produce and can exceed $1 million. Advertisers producing commercials for specific ethnic markets (Burger King, Coca-Cola) and media-driven creative strategies with many versions drive costs up; high costs price small and medium advertisers out of the market.
• Lack of selectivity: advertisers seeking a very specific, small audience find TV coverage extends beyond their market, reducing cost effectiveness. Geographic selectivity is a problem for local advertisers such as retailers, since stations base rates on their total market area.
• Fleeting message: commercials usually last 30 seconds or less and leave nothing tangible to examine; they have become shorter as demand for limited airtime intensified.
• Clutter: the message is one of many spots and non-programme materials in a break, so it may not be noticed; clutter reduces effectiveness.
• Limited viewer attention: advertisers buy the opportunity to communicate, not guaranteed exposure. Audiences shrink during breaks as people leave the room or are distracted.
• Zipping and zapping: zipping is fast-forwarding through commercials in recorded programmes (Nielsen: 80% of recorded shows are played back, but viewers zip past more than half of the commercials). Zapping is changing channels to avoid commercials; up to a third of programme audiences may be lost, mostly at the beginning and end of programmes, because breaks there are long and predictable.
• Distrust and negative evaluation: critics see TV commercials as everything wrong with advertising because of their pervasiveness and intrusiveness; consumers cannot control what appears. Viewers dislike TV ads that are offensive, uninformative, shown too often, or whose content they do not like.

Buying television time

• Sponsorship: the advertiser assumes responsibility for the production and usually the content of the programme as well as the advertising in it (early TV: Texaco Star Theater, The Colgate Comedy Hour). Today most shows are produced by networks or independent production companies. A modern form is sponsorship of events, e.g. Coca-Cola as worldwide Olympic partner.
• Participations: most advertisers want more flexibility; nearly 90% of network time is sold as participations, with several advertisers buying spots in a programme.
• Selecting time periods and programmes: costs vary by time of day and programme, because audience size varies with these two factors. TV time is divided into dayparts, specific segments of a broadcast day (commonly early morning, daytime, early fringe, prime-time access, prime time, late news and late fringe; prime time attracts the largest audiences and is the most expensive).

Part B: Broadcast media, radio

Advantages of radio

• Cost and efficiency: commercials are very inexpensive to produce (only a script read by an announcer or a prerecorded message), and airtime is cheap. The low relative cost makes radio one of the most efficient media; the low absolute cost means an effective campaign needs a smaller budget.
• Selectivity: a high degree of audience selectivity through programme formats (adult contemporary, easy listening, classical, country, news/talk, jazz, all news) and the geographic coverage of many stations. Among 12 to 24 year olds contemporary hits is most popular; 45 to 54 year olds prefer news/talk. Elusive consumers such as teenagers, students and working adults are easier to reach. Radio also reaches light TV viewers (generally upscale in income and education), light readers of print, and non-English-speaking ethnic markets (e.g. Spanish-language stations in Los Angeles, New York, Dallas and Miami). As mass marketing gives way to segmentation and regional marketing, radio grows in importance.
• Flexibility: probably the most flexible medium, with a very short closing period; messages can be changed almost until airtime, produced and scheduled at short notice and adapted to local conditions.
• Mental imagery: radio encourages listeners to use their imagination; the absence of a visual lets consumers create their own picture.
• Image transfer: radio can reinforce TV messages. The marketer first establishes the video image of a TV commercial and then uses a similar or identical audio portion (spoken words and/or jingle) in the radio spot. When consumers hear the radio message, they connect it to the TV commercial and its images, so radio and TV work together synergistically.
• Integrated marketing opportunities: stations and DJs become part of their communities; advertisers use them to increase involvement in local markets and influence with local retailers. Radio works well with place-based and point-of-purchase promotions: on-site broadcasts combined with sales attract consumers to stores, and live broadcasts support event marketing.

Limitations of radio

• Creative limitations: the absence of a visual image.
• Fragmentation: the large number of stations fragments the audience.
• Chaotic buying procedures: buying radio nationwide on a spot basis means dealing with many stations, which makes planning and purchasing complex.
• Limited research data: audience data is limited compared with TV and print, as most stations are small and cannot fund detailed studies.
• Limited listener attention: radio, especially music, is often background to another activity.
• Clutter: most stations carry an average of nearly 10 minutes of commercials per hour.