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| About the Author | 381 |
The New copy of this book will include any supplemental materials advertised. Please check the title of the book to determine if it should include any access cards, study guides, lab manuals, CDs, etc.
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What do you need to be the best?
Concentration. Discipline. A dream.
Florence Griffith Joyner, Olympic gold medalist
An orange...is an orange...is an orange. Unless, or course, that orange happens to be a Sunkist, a name eighty percent of consumers know and trust.
Russell L. Hanlin, CEO, Sunkist Growers
THE KODAK STORY
In the 1870s, a photographer's outfit included not only a large camera but also a sturdy tripod, glass plates, a big plate holder, a dark tent, a nitrate bath, and a water container. You did not bring just a camera to take a picture; you brought the whole lab.
All this was to change, thanks to George Eastman. Eastman founded a company that has had major worldwide influence almost since its inception. To initiate and maintain an organization with such clout, Eastman required a variety of resources, including the intelligence to develop new processes, a good business sense, and a willingness to take risks. But it is unlikely that Eastman's success could have been achieved without his strong brand: Kodak.
Kodak, with its block letters and bright yellow background, has been used for over a hundred years to crystallize and communicate the essence of Eastman's products and organization. The brand (and the company it represents) survives today primarily because of four factors: a commitment to quality, the generation of awareness, the fostering of loyalty, and -- most important -- the development of a strong and clear brand identity.
Eastman's commitment to quality was evident even in his first product introduction. In the late 1870s, he developed a patent for a "dry" plate that promised to greatly simplify the photographic process. The Eastman plates soon became known for superior results, particularly in weak light and with long exposures. A year after their introduction, however, trouble with a component caused some plates to lose sensitivity. Eastman's financially risky insistence on recalling the plates reflected his understanding that product quality was the fastest route to customer satisfaction. It also helped to initiate customer associations between the Kodak brand and quality, associations that persist today.
For Eastman's company, quality also meant ease of use. Over the years Kodak was associated repeatedly with photography products that produced reliable results without much effort on the consumer's part. In 1888, Eastman began marketing a camera that made photography accessible to all, not just to the committed artist. The camera, which sold for twenty-five dollars, had none of the laboratory accessories usually associated with photography of the day: The novice had only to "pull the cord, turn the key, and press the button." For another ten dollars the pictures would be developed and new film reloaded at a "modern," efficient facility in Rochester, New York.
One of Kodak's first ads, run in 1888, served to position the firm for the next century. It showed a picture of a hand holding a camera, with a headline written by Eastman: "You press the button, we do the rest" (see Figure 1-1). The camera delivered on the promise -- and many Kodak products since have carried on in its spirit. The folding Kodak, introduced in 1890, was easier to carry and preceded the Kodak Brownie, a simple camera launched at the turn of the century that became the company's staple product for almost eighty years. More recently, the tradition has continued with the Instamatic (an easy-to-load camera with flash cubes), introduced in 1963, and the disposable Kodak FunSaver (which is returned to photofinishers, who process the film and recycle the camera), introduced in 1988.
One by-product of such consistent long-term quality and innovation was increased awareness of the Kodak name. Promotions, advertising, and a ubiquitous logo also did their part to build awareness for Kodak. In 1897, Kodak sponsored an amateur photographic competition in which twenty-five thousand people participated. In 1904, the company sponsored the Traveling Grand Kodak Exhibition of forty-one photographs. In 1920, it found scenic spots along highways and erected small "Picture Ahead!" road signs to alert motorists. The result of such efforts plus ongoing advertising campaigns has been to increase consumers' familiarity with the Kodak name and its yellow signature logo. Few people can see the Kodak symbols without the positive feelings that accompany the familiar, and one of the first things that come to mind when the subject of cameras, film, or family photos is raised is the wordKodak.
Kodak's strong awareness and presence worldwide can also be attributed to an early decision to distribute its products outside the United States. Only five years after the Kodak camera was introduced in the United States, a sales office was opened in London, and it was quickly followed by offices throughout Europe. In 1930, Kodak had 75 percent of the world market for photographic equipment and about 90 percent of the profit. This dominance has decreased very little over the years.
Kodak has a set of associations that provides a distinct image and the basis for a loyal relationship. The strong Kodak identity, backed by decades of products and marketing, can be summed up with two words: simplicity (supported primarily by product features) and family (supported primarily by marketing communications and visual imagery).
Around the turn of the century, Kodak introduced two characters -- the Brownie boy and the Kodak girl -- to represent its products. They created not only a sense that the camera was easy to operate (because even a child could use it), but also an association with children and family. Kodak's early advertisements showed settings that could be easily recorded on film, especially family scenes with children, dogs, and friends (see the 1922 advertisement in Figure 1-2). During the Kodak hour heard on radio in the 1930s, listeners might hear family photo albums described. A 1967 award-winning Kodak commercial featured a couple in their sixties cleaning the attic. They find a carton of old snapshots showing them in their twenties and in the years that followed -- getting married, enjoying their honeymoon, having their first child, and attending the graduation of their son. The commercial ends with the woman, now a grandmother, running to grab an Instamatic to take a picture of her new grandchild.
Because of repeated marketing efforts like these -- supported by an unmatchable set of quality products -- consumers have come to view Kodak as a family friend who is always around to help enjoy the good times. This image has been a key factor in cementing customer loyalty for Kodak.
An indication of Kodak customer loyalty is the brand's resilience in the face of misfortune. For example, the Kodak Instant Camera (introduced in 1976 to compete with Polaroid) had captured one-third of the instant camera market after one year. However, the company was forced to discontinue the product in 1986 after a successful patent encroachment suit by Polaroid. Kodak's forced withdrawal of a product from a market it virtually owned is about as bad as it gets. Many brands would have been irrevocably tainted by such a calamity. The fact that Kodak survived this debacle is a tribute to its innate brand strength and to its handling of a painful situation. Every camera owner was invited to return their Kodak Instant Camera in exchange for either a Kodak Disk Camera and film, fifty dollars' worth of other Kodak products, or a share of Kodak stock. Kodak thus used the incident and the surrounding communication opportunities to reinforce Kodak associations and to support the Disk Camera.
Contexts change, though, even for Kodak. Its challenge for the next century is to stretch the Kodak brand name, known for traditional cameras and films, into the world of digital imagery, which is expected to become the company's prime business area. The Kodak name, with its tradition and connection with special times and family scenes, will need to adapt to an innovative, high-tech image to support products such as the Photo CD (which will store photographic images digitally and play them back on a computer) and the Copy Print (which will instantly provide large copies from a print without a negative). This need to adapt, faced by a host of strong brands in different markets, is discussed in detail in Chapter 7.
Another problem faced by Kodak is aggressive price competition in the film business, coming in part from private-label (or "retail") brands. One Kodak response has been to offer three versions of its film: Royal Gold, a premium film for special events; GoldPlus, the everyday Kodak film; and FunTime, a lower-priced, seasonal brand targeted at bargain shoppers. The efforts of Kodak and other firms to move brands both up and down to react to deteriorating markets will be covered in Chapter 9.
Today, several studies suggest that Kodak is one of the world's strongest brands. In the film category, where the bulk of Kodak's sales and profits reside, the brand enjoys both a U.S. market share of around 60 percent and a substantial price premium over Fuji, its principal rival. In addition, Kodak is aggressively expanding its presence in the worldwide market, in which it holds a 40 percent share.
The Kodak story shows how brand equity can be created and managed. This chapter provides an overview of brand equity and, in so doing, expands on the conceptualization that was first offered in my bookManaging Brand Equity.Although the conceptualization is the same, new research, case studies, and perspectives have been added. Chapter 1 also sets the stage for the key points that will be made in this book about building strong brands. The chapter's final section includes some observations about why it is so difficult to build strong brands in today's dynamic, competitive marketplaces.
WHAT IS BRAND EQUITY?
Brand equity is a set of assets (and liabilities) linked to a brand's name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and/or that firm's customers. The major asset categoriesare:
1.Brand name awareness
2.Brand loyalty
3.Perceived quality
4.Brand associations
Several aspects of the definition deserve elaboration. First, brand equity is a set of assets. Thus, the management of brand equity involves investment to create and enhance these assets. Figure 1-3, drawn from and discussed inManaging Brand Equity,provides a compact overview of how brand equity generates value. (Note that a fifth category of assets, other proprietary assets, is included for completeness in Figure 1-3. This category is meant to cover assets such as channel relationships and patents that are attached to the brand.)
Second, each brand equity asset creates value in a variety of very different ways (seventeen are actually listed in the figure). In order to manage brand equity effectively and to make informed decisions about brand-building activities, it is important to be sensitive to the ways in which strong brands create value.
Third, brand equity creates value for the customer as well as the firm. The word customer refers to both end users and those at the infrastructure level. Thus, Hilton needs to be concerned with its image among not only consumers who travel, but also travel agents. And Coke's image among retailers -- particularly its perceived customer acceptance -- can be critical to market success.
Finally, for assets or liabilities to underlie brand equity, they must be linked to the name and symbol of the brand. If the brand's name or symbols should change, some or all of the assets or liabilities could be affected and even lost, although some might be shifted to the new name and symbol.
Several observations will be made below about each of the four principal brand asset categories that will serve to recap, extend, and update the extensive discussion that appeared inManaging Brand Equity.The intent is to provide an understanding about exactly how each category underlies brand equity.
BRAND AWARENESS
Awareness refers to the strength of a brand's presence in the consumer's mind. If consumers' minds were full of mental billboards -- each one depicting a single brand -- then a brand's awareness would be reflected in the size of its billboard. Awareness is measured according to the different ways in which consumers remember a brand, ranging from recognition (Have you been exposed to this brand before?) to recall (What brands of this product class can you recall?) to "top of mind" (the first brand recalled) to dominant (the only brand recalled). As psychologists and economists have long understood, however, recognition and recall are signals of much more than just remembering a brand.
<B>THE BRAND AS A MENTAL BOX
A brand such as Mr. Goodwrench is much like a "box" in someone's head. As information about GM service programs is received, a person will file it away in the box labeled Mr. Goodwrench. After time passes, little in the box might be retrievable. The person knows, however, if it is heavy or light. He or she also knows in which room it is stored -- the room with the positive boxes (that is, objects that have earned positive feelings and attitudes) or the one with the negative boxes.
Brand Recognition: Familiarity and Liking
Recognition reflects familiarity gained from past exposure. Recognition does not necessarily involve rememberingwherethe brand was encountered before,whyit differs from other brands, or evenwhatthe brand's product class is. It is simply remembering that there was a past exposure to the brand.
Research in psychology has shown that recognition alone can result in more positive feelings toward nearly anything, whether it be music, people, words, or brands. Studies have demonstrated that, even with nonsense words (like "postryna" vs. "potastin" for example), consumers instinctively prefer an item they have previously seen to one that is new to them. Thus, when a brand choice is made -- even when the decision involves products like computers or advertising agencies -- the familiar brand will have an edge.
In a study that dramatically demonstrated the power of a recognized brand name, respondents were asked to taste each of three samples of peanut butter. One of these samples contained an unnamed superior (preferred in blind taste tests 70 percent of the time) peanut butter. Another contained an inferior(notpreferred in taste tests) peanut butter labeled with a brand name known to the respondents but neither purchased nor used by them before. Remarkably, 73 percent of the respondents selected the brand-name (inferior) option as being the best-tasting peanut butter. Thus the fact that a name was recognized affected what should have been a very objective taste test, making the peanut butter with a known brand name seem to taste better.
Economists tell us that consumer affinity for the familiar brand is not just an instinctive response. When consumers see a brand and remember that they have seen it before (perhaps even several times), they realize that the company is spending money to support the brand. Since it is generally believed that companies will not spend money on bad products, consumers take their recognition as a "signal" that the brand is good. How a company can use such signaling to its advantage is illustrated by the "Intel Inside" program described in the boxed insert.
The familiarity factor can be especially important to the brand that has a familiarity handicap with respect to more visible and established competitors. In such a case, awareness-building may be necessary to reduce this liability.
Brand Recall and The Graveyard
A brand (for example, MetLife) is said to have recall if it comes to consumers' minds when its product class (for example, life insurance companies) is mentioned. Whether or not a customer recalls your brand can be the deciding factor in getting on a shopping list or receiving a chance to bid on a contract.
The relative power of recall (versus recognition) is shown in Figure 1-5, which depicts the "graveyard model" developed by Young and Rubicam Europe under the guidance of Jim Williams. In this model, brands in a product class are plotted on a recognition versus recall graph. For example, the recall and recognition of each of twenty automobile brands could be measured, and these measurements could be used to position each brand on the graph. One finding consistent across dozens of product classes is that brands tend to follow the curved line shown in the figure. There are two exceptions, each of which reveals the importance of recall.
INTEL INSIDE
Intel makes microprocessors, which are the heart of personal computers. Their successive product generations were called the 8086, 286, 386, and 486 microprocessors. Unfortunately, Intel did not obtain trademark protection on its numbering system, and thus the 386 and 486 names were available to competitors such as AMD, Chips and Technologies, and Cyrix who made their own chips and applied the X86 name to them.
Intel responded in 1991 by encouraging computer firms like IBM, Compaq, Gateway, and Dell to put the "Intel Inside" logo in their ads and on their packages. The enticement was a cooperative advertising allowance from Intel amounting to 3 percent of the companies' Intel purchases (5 percent if they used the logo on packaging). An Intel Inside ad is shown in Figure 1-4.
The campaign, which was initially budgeted at $100 million per year, worked on several levels. It generated more than ninety thousand pages of ads in an eighteen-month period, which translated to a potential 10 billion exposures. During that period, the recognition of Intel among business end users increased from 46 percent to 80 percent, the same level that Nutrasweet enjoyed among consumers after years of exposure of the Nutrasweet logo. The brand equity of Intel, as measured by the price discount needed to get a customer to accept a computer without an Intel microprocessor, appeared to be positively affected. During 1992, the first full year of the Intel Inside campaign, Intel's worldwide sales rose 63 percent.
Why should the Intel Inside program make a difference to consumers? No reason was provided as to why an Intel microprocessor was better. In fact, it is likely that many customers did not even know what a microprocessor was.
A customer's logic might have been something like this: Computer makers, including industry leaders like IBM and Compaq, are expending a lot of money and effort to tell me that Intel makes a part of this computer. These people are not dumb. Therefore the component must be an important one, and Intel must be a good supplier. I could do some research to determine what a microprocessor is and how much better Intel is than its competitors, or I could just pay a little more and get Intel. An easy decision -- I will simply rely on the reassurance of the Intel brand name.
Interestingly, the Intel Inside campaign actually originated in Japan, where Matsushita used it as a way to build high-tech credibility for its computers. Japan is a country in which the prestige and visibility of corporate names is extremely important. By building up the Intel corporate name, Matsushita created credibility for itself.
(A postscript: The Pentium chip, which succeeded the 486 in late 1994, was found to make some arithmetic errors under certain conditions. Instead of immediately acknowledging the error and offering to replace the involved products -- few customers may have actually gone through the bother -- Intel claimed the problem was rare and could be ignored. Intel belatedly did adopt a customer-oriented return policy, but only after a storm of damaging protest from the press and the public. Because Intel's equity was based on awareness and the presumption that a customer did not have to know what happens "inside," the incident had considerable potential for damage. Although initial sales were not affected, recovering from the incident presents a challenge for Intel.)
One exception is healthy niche brands, which fall below the line because they are not known to a substantial group of consumers, and therefore have relatively low overall recognition. But because they do have high recall among their respective loyal customer groups, their low recognition is not necessarily an indication of poor performance. And healthy niche players sometimes have the potential to expand recognition and thus the scope of their customer base.
The second exception is the graveyard, an area in the upper-left-hand corner populated by brands with high recognition but low recall. Being in the graveyard can be deadly: Customers know about the brand, but it will not come to mind when considering a purchase. Breaking out of the graveyard can actually be hindered by high recognition, because there is little reason for people to listen to a story (however new) about a familiar brand. One point of the graveyard model is that high recognition is not necessarily the mark of a strong brand -- it is associated with weak ones as well.
The dynamics of brands located in the upper-middle or upper-right part of the figure can be important predictors of future brand health. Movement toward the graveyard is associated with sliding sales and market share. If, however, the brand is moving away from the graveyard, sales and market share can be expected to increase. Thus the graveyard model provides evidence that recall is as important as recognition.
Brand Name Dominance
The ultimate awareness level is brand name dominance where, in a recall task, most customers can only provide the name of a single brand -- e.g., A-1 Steak Sauce, Kleenex, Xerox, Jell-O. Ironically, this ultimate success can be tragic if the brand name becomes such a common label for the product that it is not legally protectable and is lost. Such a fate occurred with Aspirin, Cellophane, Escalator, and Windsurfer.
In order to avoid losing a trademark, a firm should begin protecting it early in its life, starting with the selection of the name itself. Beware of descriptive names such as Windows because they become harder to distinguish from the generic product and thus harder to protect. Sometimes it is helpful and even necessary to create a generic name so that the brand does not become one. The generic name "copier" helped Xerox protect its trademark. Windsurfer belatedly attempted to create the term "sailboard" to mean the generic product. It is also important to be rigorous about how the brand name is used. Chrysler states that "Jeep is a registered trademark of Chrysler" and never allows the use of Jeep to describe a type of product.
Creating Awareness
Because consumers are bombarded every day by more and more marketing messages, the challenge of establishing recall and recognition -- and doing so economically -- is considerable. Two factors are likely to be increasingly important as firms struggle with this challenge.
First, given the resources required to create healthy awareness levels, a broad sales base is usually an enormous asset. It is expensive and often impossible to support brands with relatively small unit sales and a life measured in years instead of decades. For this reason, corporate brands such as General Electric, Hewlett-Packard, Honda, or Siemens have an advantage when it comes to building presence and awareness, because multiple businesses support the brand name. Firms are thus attempting to reduce the number of their brands in order to provide focus to brand-building efforts. (More on this subject and on the value of spreading brands over different businesses follows in Chapters 8 and 9.)
Second, in the coming decades, the firms that become skilled at operating outside the normal media channels -- by using event promotions, sponsorships, publicity, sampling, and other attention-getting approaches -- will be the most successful in building brand awareness. For example, WordPerfect created instant visibility and credibility in Europe for its word processing software by sponsoring one of the top three bicycle racing teams. Media coverage of the team, both during and outside the races, established WordPerfect as a recognized brand. A yellow race car sponsored by Kodak similarly created over a billion individual impressions in 1993.
Getting consumers to recognize and recall your brand thus can considerably enhance brand equity. As will be emphasized throughout this book, however, simple recall, recognition, and familiarity are only part of the awareness challenge. "Just spell the name right," the classic dictum of old-time PR firms, will not suffice as a brand-building strategy. The strongest brands are managed not for general awareness, but forstrategicawareness. It is one thing to be remembered; it is quite another to be remembered for the right reasons (and to avoid being remembered for the wrong reasons).
PERCEIVED QUALITY
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 beenshown 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, which is described in Chapter 9) 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. Figure 1-6 portrays the relative impact of changes in perceived quality and ROI on stock return. 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. If consumers
Excerpted from Building Strong Brands by David A. Aaker
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