BscB (IM) 6.SemesterBachelor Thesis
Author: Betina Gramstrup Koch
Advisor: Pradeep Divakaran
Dealing with Brands is a Process:
Decision, loyalty, and extensions.
The AarhusSchool of Business
2009
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Table of Contents
1.1Introduction…..…...…………………………………………………………...1
1.2Problem Statement………..…………………………………………………...2
1.3Delimitations………..…………………………………………………………3
1.4Definitions…………………..…………………………………………………3
1.4.1 Brand……………………..…………………………………...3
1.4.2 Branding…………………………..…………………………..4
1.4.3 Loyalty……………………………………...…………………4
1.4.4 Brand Loyalty……………………………………………..…..4
1.4.5 Difference between Brand Image and Brand Personality….....4
1.4.6 Brand Extension………..……………………………………..5
2.1 Brands…………………………………...……………………………………..5
2.1.1 Brand Awareness…………………..………………………….6
2.1.2 Brand Attitude………………………………..……………….9
2.1.3 Product/Brand Life Cycle Theory………………..…………...9
2.2 Branding………………………..……………………………………………...10
2.2.1 The Relationship………...…………………………………….11
2.3 Brand Personality……………………………………..……………………….11
2.3.1 Marketing Mix……………………………..………………….12
2.3.2 Brand Charisma…………………………………..…………...13
2.3.3 Brand Gender………………………………………...………..14
3.1 Strategic Branding…………………………………………………..…………14
3.1.1 Differentiating/Point of Difference…………………..……….14
4.1 Customer Behaviour………………………………………………………...…15
4.1.1 Decision Making…………………………………………...….15
4.1.2 Model of Consumer Behaviour…………..…………………...16
4.1.3 Brand Decision…………………………………………..……16
5.1 Creating Value………………………………………………...…………….…23
5.1.1 Value Proposition……………………………..………………24
5.1.2 Communities………………………………………...………...24
5.1.3 I-D-U Benefit………………………………………...………..24
6.1 Loyalty……………………………………………………………..………….25
6.1.1 The Internet…………………………………………………....26
6.2 Creating Brand Loyalty………………………………………………..………26
6.2.1 Categories………………………………………..……………27
6.2.2 Usage Rate……………………………..……………………...28
6.2.3 Satisfaction………………..…………………………….…….28
6.2.4 Familiarity…………..………………………………………...29
6.2.5 Trust…………...………………………………………………30
7.1 Brand Extensions……………………………..……………………………….33
7.1.1 The Parent Brand…………………………..………………….37
7.1.2 Making Successful Brand Extensions……………………..….39
7.1.3 Drawbacks of Brand Extensions…………………………..….41
7.1.4 Unsuccessful Brand Extensions……………………………….42
7.1.5 The Model………………………………………………….….43
8.1 Threats………………………………………………………………..………..44
8.1.1 Private Label Brands……………………………………….....44
8.1.2 The Media………………………………………………..……45
9.1 Conclusion…………………………………………………………………….45
9.2 Further Research……………………………………………………….……...47
Bibliography
Appendix
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Abstract
Dealing with brands is a process, and there are many areas which the company needs to pay attention to when having a brand. The areas which will be focused on are consumer decision making, brand loyalty, and brand extensions. However, first the company needs to make the consumers aware of the brand, so the consumers will be able recall or recognize the brand, and after this form an attitude towards the brand. Knowing how the consumer will make a decision to purchase a brand is important for companies, and here the level of involvement in the purchase and the consumer’s perceived difference between the brands in the product category, will influence the consumer’s decision process according to the typology of consumer decision. According to the model the consumer has four different decision processes based on the two above mentioned factors. The four different decision processes which the consumer will go through are; ‘extended problem solving’, ‘dissonance reduction’, ‘limited problem solving’, and ‘tendency to limited problem solving’.
Another area which the company should pay attention to is how the company can create brand loyalty among the consumers. There are five categories of brand loyalty. Starting with the most brand loyal category which is ‘undivided brand loyalty’, then ‘brand loyalty with an occasional switch’, ‘brand loyalty switches’, ‘divided brand loyalty’, and ‘brand indifference’. Many factors will influence whether or not the consumer will develop brand loyalty towards the company’s brand. The degree of the consumer’s satisfaction, familiarity, and trust in the brand will be determinant factors when it comes to creating brand loyalty. The higher the satisfaction, familiarity, and thrust in the brand is, the more likely it is that the consumer will become brand loyal. However, in order for the consumer to have trust in the brand, five factors are also important and will lead to trust in the brand which will then lead to brand loyalty. The five factors leading to trust in the brand are; ‘brand predictability’, ‘brand liking’, ‘brand competence’, ‘brand reputation’, and ‘trust in the company’.
When the company has an established brand then a new phase can start for the company. The company can start making brand extensions. There are two types of brand extensions which are line extensions and category extensions. Brand extension is an area were the authors can not fully agree, and therefore some contradictions occur in whether or not a strong parent brand is a good or a bad thing to have, when a company wants to extend the parent brand. A brand extension can strengthen the parent brand or damage the parent brand. This is a risk the company needs to access before launching the brand extension, will the upside of a successful outcome outweigh the downside of an unsuccessful outcome.
A model is proposed for how a company can increase the brand extension’s changes of becoming a successful extension. The factors which will influence the success of a brand extension are; ‘information about the market’, ‘similarity between parent brand and brand extension’, ‘awareness of brand extension’, and ‘limit the number of extensions within a product category’.
Furthermore, companies should become aware that it is not only the brands direct competitors which could pose a threat to the company’s brand, the media and private label brands have to a higher degree become a threat to ordinary brands nowadays.
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1.1 Introduction
Most people have heard of brands like Apple, Coke Cola or Nike, which are all very strong brands with many loyal and dedicated customers. Brands, like the above mentioned, have all been able to some degree to create a special bond between the customer and the brand itself and profit from this bond. However, not all companies have been able to create a brand which has made this special bond with company’s customer.
Companies have tangible and intangible assets. Intangible assets are the company’s brand and the company’s reputation. In the 1980´s a company’s financial statements capture approximately 75 percent of a company’s market value, this has changed drastically. In 2001 this number had dropped to around 15 percent (Nadeem, 2007: 46). From this one can see that intangible assets, such as brands, have gained an immense amount of value over the passed 20 years. This is why it would be interesting to have a look at brands, and how brands affect the companies’ ways of operating within the consumer market.
The number of brands has drastically increased over the pasted 13 years. In a typical grocery store the consumer went from having 15,000 to having 45,000 brands to choose from (Riesenbeck, 2007: 11). As one can see from these numbers, companies have become more focused on creating brands. So, the brands need to differentiate themselves from other brands, otherwise they get lost among the immense amount of brands, and the consumers will never notice that particular brand, which is struggling to gain the loyalty of the consumers.
Brand loyalty is important since studies have showed that gaining new customers costs between four and six times as much for companies than it does to keep a loyal customer (Light, 1994).That is why companies are so interested in getting loyal customer, since it will save them a lot of money and time.
In recent years 70 percent of the 15,886 food, household and personal care products, which were put in the market, were brand extensions (Peter, 1996). By this one can see the great impact which brand extensions have come to have in the market, and the consumers experience that more and more brands are conducting line extensions and category extensions.
A classical brand concept sounds like this; ‘one brand’ = ‘one product’ = ‘one promise’ (Apéria, 2004: 124). Apéria and Back (2004) argue that this is no longer true. Brand names are no longer just a name, now that name is associated with an identity, a style, and a personality. Furthermore, brand extensions have become something which is very common, which contradicts the ‘one brand’ = ‘one product´(p.124).
According to Apéria and back (2004) companies can extend their brand as long as they want, if the company just limits the extension to be within the product categories which the consumers seem fit for the brand. The same can be said about the brand promise; as long as the brand promise fits with the product category it can be used for more than one product but still under the same brand (Apéria, 2004).
The thesis will go through consumer behaviour in regard to the consumer decision-making process, regarding the purchase of a brand or product and also the different aspects of branding. Brand extensions are also a part of the thesis with regards to the pros and cons of brand extensions and the impact which brand extensions can have on the parent brand. Furthermore, the different aspects of brand loyalty will be explored.
For the consumer to be loyal to a brand and approve of the possible brand extensions, the consumer must first notice and understand the brand and its personality, therefore, as these elements are of importance for the consumer, these elements will also be covered in the thesis so that the reader will get a good and comprehensive understanding of brands.
The thesis will have a look at some of the different stages which an evolving brand might go through and a way to deal with these stages. Firstly, the thesis will focus on understanding the brand decision process which the consumer will go through. Secondly, creating brand loyalty. Lastly, the extension of a brand will be explored.
1.2 Problem Statement
As seen above branding and brand are nowadays some very important elements of companies’ business strategies. How does a consumer make a brand choice, and what will have impact on the consumer’s decision process? How can companies through brands create an attachment with the customers, which will result in customer brand loyalty? Furthermore, brand extensions have pros and cons will be explored and what impact brand extensions will have on the parent brand.
These are the questions which will be addressed throughout this thesis.
1.3 Delimitations
This thesis will have its main focus on the consumer market. Since examining both the business-to-consumer market and the business-to-business market will be too extensive for this thesis. And limiting the thesis to only focus on the consumer market will allow the author to go into more depth with this area.
Branding can be done within many areas, not just products and services. However, the thesis will mainly deal with products and services.
There are many areas which one could study about brands; nevertheless, for this thesis not all will be relevant to study in connection with the subject area of the thesis.Therefore, the main aspects which will be studied within brands are; Brand awareness, brand personality, and brand attitude. However, some other minor areas will also be looked into to get a more comprehensive understanding of brands.
Lastly, the thesis will have its main focus on the companies’ viewpoint and only to a minor degree the consumers’ viewpoint.
1.4 Definitions
In this section a clear definition of the concepts central for this thesis will be made, so that the reader will be in no doubt of what is meant by the concepts.
1.4.1 Brand
What is a brand? There are several definitions of what a brand is, such as Kotler and Keller (2006); “a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors” (Glossary G1).
Lau and Lee (1999) have this definition; “A brand is a name, term, sign, symbol, or design (or a combination) intended to identify a seller’s goods or services, and to differentiate them from competitors”. “A brand is a set of mental associations, held be the consumer, which add to the perceived value of a product or service” (Keller, 1998).
The definition seen as the most appropriate for this thesis will be the definition from Kotler and Keller (2006).
1.4.2 Branding
What is branding? Branding can be defined in many ways, such as Kotler and Keller (2006); “endowing products and services with the power of a brand”(Glossary G1).
This is also the definition which will be used for this thesis.
1.4.3 Loyalty
Loyalty in relation to consumer purchasing will be defined as; “A commitment to re-buy or re-patronize a preferred product or service” (Kotler, 2006: Glossary G4).
1.4.4 Brand Loyalty
Brand loyalty is an important part of this so therefore a definition of this seems appropriate, however authors have very different definitions of what brand loyalty is ; “The degree to which a consumer consistently purchases the same brand within a product class” (Peter, 1996: 707). “A behavioural intention to buy a brand of product and to encourage others to buy that brand” (Lau, 1999: 351). “Some who had consumed the target brand at least half the time he or she consumed a brand from that product category” (Jacoby, 1978).
The definition which will be used for this thesis is Peter and Olson’s (1996) definition.
1.4.5 Difference between Brand Image and Brand Personality
Many authors have written about brand personality and brand image. Some distinguish between the two concepts and others see them as relatively the same. Lau and Lee (1999) see brand image and brand personality as somewhat the same concept: “A brand’s image gives it its perceived personality“(p.349). Throughout the thesis brand image and brand personality will be considered as the same.
1.4.6 Brand extension
A brand extension is when a company uses an established brand name to introduce a new product (Kotler, 2006: glossary G1) either in a new product category or as a line extension of the current product. The existing brand name which is the original bearer of the brand name is called the parent brand; however, if this original brand is already associated with several products by the use of brand extensions, then this could also be referred to as a family brand (Kotler, 2006). Sometimes a parent brand is also called a master brand (Apéria, 2004).
For this thesis the term parent brand will be used for simplicity and to limit the possibility of confusing the reader.
2.1 Brands
Brands make life easier for people, because when we encounter a familiar brand we do not have to test, challenge, classify, and critically weigh up this product, because as a familiar brand we know what this brand stands for (Riesenbeck, 2007:2).This is also the reason why, when people go to a different country, where the food is very different, many people will go and eat at a MacDonald’s or Burger King, because it is familiar and people know want they will get, no surprises.
Doyle (1990) argues that successful brands are not something which is created through advertising alone. Furthermore, there is, according to Doyle (1990), only little correlation between the amountsspends on advertising for a brand and the strength of a brand (pp.12-13). However, advertising can help to create awareness and interest in the brand faster (Doyle, 1990: 15). In regards to this, one should know that to build a brand and position in the minds of the consumers will take both time and money, and is not something which is done over night (Doyle, 1990:15). Even though it might seem like an easy way of creating a brand through a massive advertising campaign, it does take time to create a good and strong brand.
2.1.1 Brand awareness
Brand awareness is an important element in creating a brand and creating customers for the brand. Without brand awareness the consumers cannot or will not buy the brand, because they are simply not aware of the brand’s existence (Peter, 1996: 44).
Brand awareness measures how many people that knows what the brand stands for, and also knows what the brand promise is (Kapferer, 2004: 159).
Brand awareness is something which must be completed before the company makes any efforts the form a brand attitude or a brand personality (Apéria, 2004: 45). Therefore, brand attitude and brand personality will be studied after this section.
Apéria and Back (2004) state that there are four levels of brand awareness; ‘top of mind’, ‘brand recall’, ‘brand recognition’, and ‘unawareness of brand’ (pp.44-45). Kapferer (2004) proposes that there are three levels of awareness; ‘top of mind’, ‘unaided’, and ‘aided’ (p.159). The unaided corresponds to Apéria and Back’s (2004) brand recall and Kapferer’s aided is somewhat the same as brand recognition. Therefore, the two theories are somewhat the same.
Top of mind: If a brand has a ‘top of mind’ level of awareness, then the brand is the first brand which comes into the mind of the consumer within a specific product category (Apéria, 2004: 44).
‘Top of mind’ awareness benefits the brand when the consumer has to make a fast decision on a product or brand, or when the consumer wants to make a buying decision without getting to involved in all the different brands (Kapferer, 2004: 159).
Brand recall: “The brand is spontaneously named in the product category, but it is not the first brand that is mentioned” (Apéria, 2004:44). When the consumer makes the buying of a brand decision at home before the consumer visits the store, then it becomes important that the consumer will be able to recall the brand, without all the external stimuli which is in a store (Apéria, 2004).
If the consumer is about to purchase a product where the consumer has a low degree of involvement, then brand recall (unaided awareness) has immense impact on the consumer’s choice of brand. This is due to the fact that the consumer does not perceive any great risk with the brand, and at the same time the consumer does not want to spend a lot of time choosing this product (Kapferer, 2004: 159-161). Nevertheless, Kapferer (2004) proclaim that in some markets it is almost impossible for a brand to gain unaided awareness (brand recall) among the consumers (pp.159-161).
Brand recognition: With this level of awareness the consumer only recognizes the brand and which product category it belongs to, when the consumer is tickered by some external factors (Apéria, 2004: 45-46). If the consumer visits a store and has not decided on which brand to purchase within a product category, then brand recognition becomes important (Apéria, 2004: 45-46).
Unawareness of brand: This is the most unfortunate situation for the brand to be in, because in this situation the consumer is unaware of the brand’s existence (Apéria, 2004: 45-46). As stated above, if the consumer is unaware of the brand then it is very unlikely that the consumer will purchase the brand. Therefore, the company should find ways to make the consumer aware of the brand, because if consumers do not purchase the brand due to unawareness of the brand then the brand will not be able to stay the market for long.