11 New Strategic Brand Management by Philip Kotler   4th Edition
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11 New Strategic Brand Management by Philip Kotler 4th Edition

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Price premium
Brand preference or attachment Percentage of products the 
Patents and rights trade cannot delist
brand assets may produce different brand
strength over time: this is a result of the
amount of competitive or distributive
pressure. The same assets can also have no
value at all by this definition, if no business
will ever succeed in making them deliver
profits, through establishing a sufficient
market share and price premium. For instance
if the cost of marketing to sustain this market
share and price premium is too high and
leaves no residual profit, the brand has no
value. Thus the Virgin name proved of little
value in the cola business: despite the assets of
this brand, the Virgin organisation did not
succeed in establishing a durable and prof-
itable business through selling Virgin Cola in
the many countries where this was tried. The
Mini was never profitable until the brand was
bought by BMW.
Table 1.1 also shows an underlying time
dimension behind these three concepts of
assets, strength and value. Brand assets are
learnt mental associations and affects. They
are acquired through time, from direct or
vicarious, material or symbolic interactions
with the brand. Brand strength is a measure of
the present status of the brand: it is mostly
behavioural (market share, leadership, loyalty,
price premium). Not all of this brand stature is
due to the brand assets. Some brands establish
a leading market share without any noticeable
brand awareness: their price is the primary
driver of preference. There are also brands
whose assets are superior to their market
strength: that is, they have an image that is far
stronger than their position in the market
(this is the case with Michelin, for example).
The obverse can also be true, for example of
many retailer own brands.
Brand value is a projection into the future.
Brand financial valuation aims to measure the
brand\u2019s worth, that is to say, the profits it will
create in the future. To have value, brands
must produce economic value added (EVA),
and part of this EVA must be attributable to
the brand itself, and not to other intangibles
(such as patents, know-how or databases).
This will depend very much on the ability of
the business model to face the future. For
instance, Nokia lost ground at the Stock
Exchange in April 2004. The market had
judged that the future of the world\u2019s number
one mobile phone brand was dim. Every-
where in the developed countries, almost
everyone had a mobile phone. How was the
company still to make profits in this saturated
market? If it tried to sell to emerging countries
it would find that price was the first purchase
criterion and delocalisation (that is, having
the products manufactured in a country such
as China or Singapore) compulsory. Up to that
point, Nokia had based its growth on its
production facilities in Finland. Nokia\u2019s
present brand stature might be high, but what
about its value?
It is time now to move to the topic of
tracking brand equity for management
purposes. What should managers regularly
Tracking brand equity
What is a brand? A name that influences
buyers. What is the source of its influence?
A set of mental associations and relationships
built up over time among customers or
distributors. Brand tracking should aim at
measuring these sources of brand power. The
role of managers is to build the brand and
business. This is true of brand managers, but
also of local or regional managers who are in
charge of developing this competitive asset in
addition to developing the business more
generally. This is why advanced companies
now link the level of variable salary not only
to increments in sales and profits but also to
brand equity. However, such a system presup-
poses that there is a tracking system for brand
equity, so that year after year its progress can
be assessed. This system must be valid,
reliable, and not too complicated or too
costly. What should one measure as a
minimum to evaluate brand equity?
An interesting survey carried out by the
agency DDB asked marketing directors what
they considered to be the characteristics of a
strong brand, a significant company asset.
The following were the answers in order of
l brand awareness (65 per cent);
l the strength of brand positioning, concept,
personality, a precise and distinct image (39
per cent);
l the strength of signs of recognition by the
consumer (logo, codes, packaging) (36 per
l brand authority with consumers, brand
esteem, perceived status of the brand and
consumer loyalty (24 per cent).
Numerous types of survey exist on the meas-
urement of brand value (brand equity). They
usually provide a national or international hit
parade based just on one component of brand
equity: brand awareness (the method may be
the first brand brought to mind, aided or
unaided depending on the research institute),
brand preference, quality image, prestige, first
and second buying preferences when the
favoured brand is not available, or liking.
Certain institutions may combine two of the
components: for example, Landor published
an indicator of the \u2018power of the brand\u2019 which
was determined by combining brand-aided
awareness and esteem, which is the emotional
component of the brand\u2013consumer rela-
tionship. The advertising agency Young &
Rubicam carried out a study called \u2018Brand
Asset Monitor\u2019 which positions the brand on
two axes: the cognitive axis is a combination
of salience and of the degree of perceived
difference of the brand among consumers; the
emotional axis is the combination of the
measures of familiarity and esteem (see
Chapter 10). TNS, in its study Megabrand
System, uses six parameters to compare
brands: brand awareness, stated use, stated
preference, perceived quality, a mark for
global opinion, and an item measuring the
strength of the brand\u2019s imagery.
Certain institutions, which believe that the
comparison of brands across all markets makes
little sense, concentrate on a single market
approach and measure, for example, the
acceptable price differential for each brand.
They proceed in either a global manner (what
price difference can exist between a Lenovo PC
and a Toshiba PC?) or by using a method of
trade-off which isolates the net added value of
the brand name. Marketing directors are
perplexed because so many different methods
There is little more consensus among
academic researchers. Sattler (1994) analysed
49 American and European studies on brand
equity and listed no fewer than 26 different
ways of measuring it. These methods vary
according to several dimensions:
l Is the measure monetary or not? A large
proportion of measures are classified in
non-monetary terms (brand awareness,
attitude, preference, etc).
l Does the measurement include the time
factor \u2013 that is, the future of the brand on
the market?
l Does the brand measure take the compe-
tition into account \u2013 that is, the perceived
value in relation to other products on the
market? Most of them do not.
l Does the measurement include the brand\u2019s
marketing mix? When you measure brand
value, do you only include the value
attached to the brand name? Most
measures do not include the marketing mix
(past advertising expenditure, level of
distribution, and so on).
l When estimating brand value do you include
the profits that a user or a buyer could obtain
due to the synergies that may exist with its
own existing brand portfolio (synergies of
distribution, production, logistics, etc)? The
majority of them do not include this, even
though it is a key factor. 
l Does the measurement of brand equity
include the possibility of brand extensions
outside the brand\u2019s original market? In
general, no.
l Finally, does the measure of brand equity
take into