Macroeconomics Homework 2 Chapter 3: 5. a. England has the absolute advantage in scones & Scotland has the absolute advantage in sweaters. England has the comparative advantage in producing scones….
Keller’s Brand Value Chain
The Brand Value Chain(BVC) is a structured approach to assessing the sorces and outcomes of brand equity and the manner by which marketing activities create brand value. It provides insights to support the various decision makers in the company and stresses that every member of the company contribute to this branding effort. It believes that the value of rand ultimately resides with customers. There are several steps to this when we look at this value creation process. Step I) Firm invests in a marketing program targeting actual or potential customers * Step II) The associated marketing activity then affects the customer mind-set –what the customers know and feel about the brand. * Step III) This produces the brand’s performance in the marketplace – how much and when customers purchase, the price that they pay and so forth.
* Step IV)The investors considers this market performance and other factors to arrive at an assessment of shareholder value in general and a value of the brand. This model also assumes that there are a number of linking factors that intervene between these stages. These linking factors determine the extent to which value created at one stage transfers or “multiplies” to the next stage. * The three stages of multipliers moderates transfer between the marketing program and the three value stages: the program quality multiplier, the marketplace condition multiplier and the investment sentiment multiplier. Step I) Marketing Program Investment Firm invests in a marketing program targeting actual or potential customers. This can be intentional or unintentional.It is outlined by many activities such as product research, development, design, trade or intermediary support; marketing comm incl advertising, promotion, sponsorship, direct and interactive marketing, personal seling, publicity and personal relations and employee training.
Big not always good. Multiplier I) Program Quality Multiplier The ability of the marketing program to affect the consumers will depend on its quality. The question is on what basis should it be judged. There are four major ones 1) Clarity: The understability of the brand is what is meant here.A brand with strong clarity will be easily interprested and evaluated by the consumers. It should leave an imprint and should not leave a doubt in the consumers mind when a brand is put in front off them. The program should answer the question of what is the brand.
2) Relevance: This is the meaningfulness of the program. A brand with strong relevance should make consumers take the brand seriously. It should make them believe that the brand exists for a reason. It should be clear to them about WHY they need it. 3) Distinctiveness: It is matter of uniqueness.The program should be differentiated so it doesn’t get lost in the sea of millions of other programs available to the consumers. It should be able to explain the brand to the people by grabbing their attention.
4) Consistency: The marketing program needs to cohesive and well-integrated. All the aspects must converge to create an impact on customers. And, it should also not differentiate from the past programs greatly and if there is a need to there needs to be a balance of continuity and change while evolving the brand in the right direction. Step II) Consumer Mind-SetThe associated marketing activity then affects the customer mind-set – what the customers know and feel about the brand. The mind-set includes everything that exists in the minds of the consumers: thoughts, feelings, experiences, images, perception and attitudes. If we understand this we can pretty much gauge the value of the brand. There are mainly five dimensions 1) Brand Awareness: The extent and ease with which customers recall and reorganize the brand and can identify the products and services with which it is associated.
It measures consumers’ knowledge of a brand’s existence.This is probably the first step to having a mind-set as without knowing a brand, one cannot judge it. A deep and broad brand awareness is what most companies look for. 2) Brand Association: The strength, favorability and uniqueness of perceived attributes and benefits for the brand. This is the sectors which give key sources of brand equity as these are the means that satisfy the needs of the consumers. If they see that a brand fulfills a task that they need whether functionally, aesthetically, socially or otherwise, it would have major brand associations. ) Brand Attitudes: These are overall evaluations of the brand in terms of its quality and satisfaction it generates.
Positive brand judgements. A customer after fulfilled with his need needs to feel that the brand is awesome. 4) Brand Attachment: The degree of loyalty the customer feels towards the brand. A strong form of attachment, adherence, is the consumer’s resistance to change and the ability of a brand to withstand bad news like product or service failure. In extreme cases, it could lead to addiction. It is the next step after strong brand attitudes. ) Brand Activity: The extent to which customers use the bran, talk to others about the brand and seek out brand information, promotions and events.
The interesting thing here is how brand awareness and associations are part of salience when it comes to CBBE. The Brand Attitudes deals with judgements and feelings and brand attachment and activity is to do with resonance. Essentially the brand building process is putting out in customer mind-set. The above two steps relate to price premiums and elasticity. Especially the second one. Multiplier II) Marketplace Conditions MultiplierThe extent to which value created in the minds of customers affects market performance depends on factors beyond the individual. An individual might have high resonance with the brand but if the market conditions that is the external environment of the brand is not supportive, it can be disastrous for the brand’s market performance.
Some of these factors include: 1) Competitive Superiority: If the competition has better programs, it is definetly going to harm your brand as the mindspace for your line of product cateogory will be taken by that of your competitor. ) Channel and Other Intermediary Support: After your brand is out there in the market, it goes into the hands of various other intermediaries such as franchisees, distributers, retailers etc. who have as much impact on the brand as the marketing program itself. So, unless they reinforce the same brand values that the marketing program does. 3) Customer Size and Profile: In the end, it depends on your customers, who are they? What are they capable of spending? Is it Profitable to cater them? These questions are as important as any.Unless the customer size is huge and hence, the profile is broad, a marketing program may not have enough impact. Step III) Market Performance This produces the brand’s performance in the marketplace – how much and when customers purchase, the price that they pay and so forth.
Brand value is created by several ways: 1) Price Premiums and Elasticity: Greater price premiums and ore elastic responses to price decreases and ineleastic responses to price increases. This is contributed by the first two things. 2) Market Share: The amount of the brand that people buy in a particular category. ) Brand Expansion: The success of the brand allows it to have the ability to add enhancements to the revenue streams by category extensions and new-products. 4) Cost Structure: Reduced marketing program expenditures thanks to the prevailing customer mind-set. When customers already have favorable opinions and knowledge about a brand. Any aspect is likely to be more effective for the expenditure level.
Also lower cost because ads are more memorable, sales calls, more productive and so on. 5) All these lead to Brand Profitability. Multiplier III) Investor Sentiment MultiplierFinancial analysts and investors consider those of factors in arriving at their brand valuations and investment decisions. Some of them include: 1) Market Dynamics: The financial market that the brand is important as it fives the brand the necessary tools for its success. These include interest rate, investor sentiment, supply of capital etc. 2) Growth Potential: The rate at which the economy grows, country policies, PESTEL. Etc affects the growth of the brand too.
3) Risk Profile: Despite of the success of the brand, it might be risky based on the needs it fulfills. Its vulnerability about its facilitating and inhibiting factors. ) Brand Contribution: The importance that the brand has in its bigger portfolio also matters. If it is consequential, the ups and downs of the market performance may really affect the shareholder value. Step V) Shareholder Value The final step which involves both current and forecasted information about the brand as well as many consideations, the financial market formulates opinions and assessments that have very direct financial implication for the brand value. The most important indicators are the stock price, the P/E multiples and overall market capitalization for the firm.