Department of Business Administration
T
itle: “Brand
Management
in conjunction with
Merger and Acquisition in Theory and
Practice – Volvo Car Corporation”
Author:
Jochen
Steurenthaler
15 credits
Master Thesis
ABSTRACT
Title: “Brand Management in conjunction with Merger and Acquisition in Theory and Practice – Volvo Car Corporation”
Level: Thesis for Degree of Master of Science in Business Administration.
Author: Jochen Steurenthaler
E-mail: jochen.steurenthaler@gmx.net
Supervisors: Ass. Prof. Dr. Maria Fregidou-Malama University of Gävle, Sweden
E-mail: mma@hig.se
Date: 2009 - March
Aim: This study deals with Brand Management after acquisitions. Since this subject is still quite unexplored, a case study backed the theoretical review in order to answer the two research questions. Furthermore, the work educes a model which shows the ascendancies that are involved in the field of Brand Management after acquisitions. It is the aim to reveal the necessity of strong branding for acquired companies and the importance of the continuity of their presenting brand values. I hope this paper adds new knowledge in the Brand Management sector in connection with acquisitions and gives the reader a proper understanding about the issue.
Method: The study occupies a theoretical and an empirical study. The theory part presents a selection of theories and models developed by scholars in the field of business administration. While the first research question concerning brand equity after acquisitions is addressed in the theoretical review in chapter 3, the second question regarding brand image is mainly discussed during the empirical part. The data for the latter was primarily obtained by a case study which is a qualitative method and occupies interviews and discussions.
Result: Brand Management has become a key issue for companies and is a sensitive subject in the context of Merger and Acquisition. Hence, it is a challenge for the acquirer and the acquired company to manage control and adapt to the new situation. Brand equity as a key asset of Brand Management is the amount of loyalty a customer has towards a brand and it is certainly influenced by such transactions as M&A. In the real-life comparison of the specific case it proved to be successful for the acquirer to maintain the autonomy of the acquired brand and continue the meaning of the brand. In addition, the loyalty of the customers is of great importance to assure a smooth process of the business operations.
Suggestions for future research:
Due to the current situation and constant changes it would be interesting to repeat the study some time in the future for a final conclusion. Furthermore, since the findings for the empirical part of this study are based on a strong acquired brand, it would be interesting to investigate the case of another company of weaker nature, and maybe of a different branch. The high profile of the target firm and its strong brand values had a remarkable influence on the revelations of this study.
Contribution of the thesis:
The result of this study helps companies to maintain their brand values during an acquisition. The research adds new knowledge in the brand management sector in connection with acquisitions, and it is useful for companies which are involved in M&A activities.
Keywords: Brand Equity, Brand Loyalty, Brand Management, Brand Awareness, Automotive Industry, Merger and Acquisition
TABLE OF CONTENTS
Page
ABSTRACT ...I
TABLE OF CONTENTS... III
LIST OF FIGURES...VI
LIST OF ABBREVIATIONS... VII
1.
INTRODUCTION ... 1
1.1 Background ... 1
1.2 Purpose of the Study ... 2
1.3 Research Objective and Research Question... 2
1.4 Research Method... 3
1.5 Limitation ... 3
2.
METHODOLOGY OF RESEARCH – STRATEGIES AND
PROCEDURE... 4
2.1 Primary versus Secondary Data ... 4
2.2 Internal and External Secondary Data ... 6
2.3 Deduction versus Induction ... 6
2.4 Qualitative versus Quantitative Research ... 7
2.5 Direct Data versus Indirect Data ... 8
2.6 Case Study... 10
2.7 Data Collection and Quality of Research... 11
3.
THEORETICAL REVIEW – KEY ISSUES ABOUT BRAND
MANAGEMENT... 15
3.1 Brand Management – An Overview ... 15
3.1.1 Brands versus Products... 16
3.1.2 The Importance of Branding... 18
3.2 Brand Management in an M&A Context... 19
3.2.1 Company Acquisitions – An Introduction... 19
3.2.2 Motives for Brand Acquisitions ... 21
3.3 Brand Equity ... 24
3.3.1 Brand Awareness ... 25
3.3.2 Brand Image ... 26
3.3.3 Brand Loyalty ... 27
3.4 The Four Steps of Brand Building ... 30
3.4.1 Brand Salience ... 31
3.4.2 Brand Performance and Imagery ... 32
3.4.3 Brand Judgments Feelings ... 33
3.4.4 Brand Resonance... 35
3.5 Concluding Reflections on the Literature Review... 36
4.
CASE STUDY – VOLVO CARS AND THE ACQUISITION BY FORD
MOTOR COMPANY... 39
4.1 The Automotive Industry and Volvo Cars – An Introduction ... 39
4.1.1 VOLVO – A Traditional Swedish Car Manufacturer... 40
4.1.2 Facts and Figures about Volvo... 41
4.1.3 Volvo Cars as a Player within Ford Motor Company... 43
4.2 Ford Motor Company’s Acquisition of Volvo Car Corporation ... 45
4.2.1 Volvo Cars and the Attitude towards Acquisition ... 46
4.2.2 Risks of Brand Acquisitions ... 47
4.3 Brand Equity and Volvo Cars ... 48
4.3.1 Brand Awareness ... 48
4.3.2 Brand Image ... 49
4.3.3 Brand Loyalty ... 50
4.3.4 Brand Reinforcement and Revitalization ... 51
4.4 Volvo Cars faced to the Customer-Based Brand Equity Model ... 54
4.4.1. Brand Salience - Question Identity: Who are you? ... 54
4.4.2 Brand Performance and Imagery - Question Meaning: What are you?... 55
4.4.3 Brand Judgement and Feelings - Question Response: What about you?.... 56
4.4.4 Brand Resonance - Question Relationships: What about you and me?... 58
5.
ANALYSIS ... 62
5.1 Volvo Cars´ Sales Developments ... 62
5.2 The Acquisition’s Impact on the Volvo Brand ... 62
5.3 Brand Equity and Volvo Cars ... 65
6.
CONCLUSION AND DISCUSSION... 69
6.1 Brand Equity after an Acquisition ... 69
6.2 Brand Image after an Acquisition ... 70
6.3 Reflection and Future Research Suggestions... 71
REFERENCES ... 74
LIST OF FIGURES
Page
Figure 1: Classification of Research Data... 4
Figure 2: Primary Data vs. Secondary Data ... 5
Figure 3: Qualitative versus Quantitative Research ... 8
Figure 4: M&A Objectives... 20
Figure 5: Motives for Brand Acquisitions... 21
Figure 6: The Brand Equity Model ... 25
Figure 7: Brand Reinforcement / Revitalization ... 30
Figure 8: Costumer-Based Brand Equity Pyramid... 31
Figure 9: Branding and Acquisition ... 37
Figure 10: Sales Output... 42
Figure 11: Sales per Model in 2007 ... 43
Figure 12: FMC Portfolio... 44
Figure 13: Profit and Loss ... 44
Figure 14: FMC Acquisition of Volvo Cars... 46
Figure 15: The Brand Pyramid... 52
Figure 16: Branding and Acquisition, VCC & FMC ... 65
LIST OF ABBREVIATIONS
AB – Aktiebolag (Swedish), publicly traded firm
BM – Brand Management
CBBE – Customer-Based Brand Equity
Cf. – Confer
CEO – Chief Executive Officer
e.g. – exempli gratia (Latin), for example
Et allii – “And others”. Used if more than two names appear as authors of a publication
Etc. – Etcetera
f. (ff.) – and following page(s)
FMC – Ford Motor Company
GM – General Motors
PAG – Premier Automotive Group
p. (pp.) – page (pages)
R&D – Research and Development
UK – United Kingdom
USA (U.S.) – United States of America
VS – Versus
1. INTRODUCTION
This study deals with the concept of Brand Management, especially in conjunction with Acquisitions. The work intents from both a theoretical and practical perspective with a special focus on brand equity issues. The literature review presents a compilation of theoretic approaches and definitions in the field of Brand Management concerning acquisitions, merger and alliances. Theories and models published in seminal text books and articles throughout the past decade, but also most currently, served as sources for the review. After the reflection of the theory a model is drawn. This is the assumption for the empirical study in order to answer the research questions. The empirical part of this study consists of a qualitative short time analysis describing, and explaining how the brand Volvo Cars handled there strategic Brand Management after they were acquired by Ford Motor Company in 1999. Two research questions are the guidelines throughout this paper, and the first one is for the most part answered and discussed in the analysis and reflection of the theory. The second research question deals mainly with the case study, and is answered and discussed on the end of the paper in the analysis and conclusion.
1.1 Background
In the automotive industries it has become a fierce competition in the last decades. New technologies, tougher environmental conditions and so forth are challenges for car producers. It is the purpose of all brands to increase company value and to be one step ahead of the competitors. However, research and development (R&D) demand a huge amount of capital and a certain size of enterprise is required. Hence, automotive companies are undergoing considerable change in order to remain competitive advantage and thus, they have moved into the era of mergers, acquisitions and strategic alliances. Nowadays, single brand car manufacturers are rare compared to the past and there never have been so many multinational companies. Acquiring and selling brands inside the automotive industry became a normal procedure.1
It is the responsibility of company management to make the right decision and to apply effective Brand Management and control brand equity. After an acquisition appear changes in both – the acquired brand and the acquirer – organizations. However, the acquired brand is to a greater extent affected by such process and is confronted with different tasks through the
1
entire company. One of several key words in the context of Brand Management is brand equity.
The Volvo brand is an interesting object and ideal for a research project. The official date for the founding of Volvo was 14th April in 1927, when the first Volvo automobile left the production, but the first routes of the brand appeared even earlier, in 1915. It became one of the most famous Swedish brands and the Volvo Group provides different kinds of transportation related products, as for example, trucks, busses, construction equipment and marine engines. Besides, the company has achieved rapid growth in the service area with, for example, financial solutions supporting the sales of the manufacturing business units. However, this study deals only with Volvo Cars. This division was sold by the Volvo Group to Ford Motor Company in 1999.
Due to the popularity of the Volvo brand and the famousness and largeness of the acquirer this acquisition is a particular exciting case. The motivation for this research topic stems from my work experiences with several national and international companies in the automotive field. The theory versus real-life comparison is a great challenge and exposes very interesting findings.
1.2
Purpose of the Study
It is the purpose of this study to apply literature review and analysis together with empirical research in order to identify the problem and answer the research questions in a scientific way. The theoretical framework and the real-life situation in the case study should be an essential method, to research, evaluate and gain a better understanding about the issue. It is the aim to reveal the importance of strong branding for acquired companies and the necessity of managing their brand equity in order to continue with successful Brand Management.
1.3
Research Objective and Research Question
Managing a brand and brand equity respectively, after an acquisition seems to be an unexplored subject concerning Brand Management. This study occupies the following research questions:
• “How can a brand manage its brand equity after an acquisition?”
1.4 Research
Method
The theoretical review of this study is provided in chapter 3. The theory part presents a selection of theories and models developed by scholars in the field of Marketing Management, mainly from North American and European universities published in seminal text books and articles throughout the past decade but also most currently.
The secondary data is selected and analysed during the desk research of this paper and I always tried to choose the newest available editions for being up to date. Due to the lack of coherent available secondary data, the empirical part of this study is not only a necessity to answer the research questions but also to prove or disprove the assumption after the theoretical review.
The case study which is the essential part of the empirical part is a qualitative method and occupies interviews and discussions. A detailed description about strategies and procedure is provided in chapter 2.
1.5 Limitation
Although I took great care when preparing the literature review, some assumptions may appear simplified and generalised. Brand Management is a vast field and there is a large repertory of valued literature. An extensive literature study was done. I chose the sources and concepts considered the most related for this study for a reliable overview of the field study. However, the reader might disagree with my judgement of relevance in some cases, since all literature choices base on subjective opinions.
Despite the outmost care applied when collecting information during observations, interviews and discussions in the case study, some assumptions and conclusions could be victims to extended subjectivity.
As most researches this study is also influenced by time limitations. The actual tense situation in the automotive industry and the turbulent time of the quarterly reports had a negative influence on the availability of the interviewees due to their responsibilities.
2.
METHODOLOGY OF RESEARCH – STRATEGIES AND
PROCEDURE
This chapter presents different kind of research methods that can be used for a study as this one. Methods are explained and discussed in order to consolidate the use of the case study. The chosen research design for the empirical part is presented in this chapter and it illustrates how the used data was collected.
Figure 1: Classification of Research Data Source: Kumar, V. and Malhotra, Naresh K.
2.1
Primary versus Secondary Data
Primary research generally refers to that research which involves the collection of original data using an accepted research methodology. Secondary research normally denotes an activity whereby no new original data is collected but where the research project draws on existing (“secondary”) sources alone.2 According to Riley any research activity usually includes secondary research.
2
Primary data is normally specifically collected in pursuit of particular research objectives. It is originated by a researcher for the specific purpose of addressing the problem at hand.3 Thus, primary data is “new” and original data and there it differs to secondary data. Secondary data was collected for some purpose other than a specific problem at hand. It is all available information as for example books, statistical reports from government and other agencies, articles and so forth.4
Primary data collection is necessary when a researcher cannot find the data needed in secondary sources. Three basic means of obtaining primary data are observation, surveys, and experiments. According to Malhotra, primary data involves all six steps of the marketing research process:5
1. Problem definition
2. Development of an approach to the problem 3. Research design formulation
4. Field work or data collection 5. Data preparation and analysis
6. Report presentation and presentation
Usually the choice will be influenced by the nature of the problem and by the availability of time and money, since obtaining primary researches can be expensive and time consuming.
Secondary data is generally less expensive than primary data, and it can be located quickly. In other words, compared to primary data, secondary data can collected easily and more rapidly, at a quite low cost, and in a short time. Figure 2 shows an abstract of the difference between secondary data and primary data within the main characteristics of collection purpose, process, time and costs.
Primary Data Secondary Data
Collection purpose For the problem at hand For other problems
Collection process Very involved Rapid and easy
Collection cost High Relatively low
Collection time Long Short
Figure 2: Primary Data vs. Secondary Data
Source: Author, confer: Malhotra, Naresh K.; (2007)
3 Malhotra, Naresh K.; (2007), p. 106 4 Riley, M. et alii; (2000), p. 9 5 Malhotra, Naresh K.; (2007), p. 107
2.2
Internal and External Secondary Data
As shown in the research tree, the secondary data can be classified into internal and external data. Internal records are sales/patronage outcomes, marketing activities, cost information, distributor reports and customer feedback. These data are ready availability, reasonable accessibility, and relevance to the organization’s situation.6 There are two significant advantages of internal data. The records are easily available and the acquisition is inexpensive. It is actually, the least costly research data of marketing research and the importance for companies is increasing, since the popularity of database marketing rose.7
External data are those, generated by sources outside the organization. These data may exist in the form of published data as for example books, annual reports, private studies, newspapers or in form of standardized sources of marketing data as for example store audits, or different kind of panels. The internet would be a third form of external data.8 At this point it should be mentioned, that Malhotra classifies the Internet as a form of computerized database where he distinguishes between “online”, “internet”, and “offline”.9
The most popular external source is however published data, since the data is readily available and moreover, they are often sufficient to answer the research question.10
2.3
Deduction versus Induction
There are two ways of conducting research, the inductive and the deductive approach. Both have to be considered and are important to an understanding of theory construction. In the traditional dichotomy deduction is understood as the process that goes from the general to the specific. According to Riley, deduction is the process which begins with theory and proceeds through hypothesis, data collection, and testing of the hypothesis to deduce explanations of the behaviour of particular phenomena.11 More simply, using the identified theory and comparing it with the data means that the research follows the so called deductive approach.
6 Kumar, V, et alii (2002), p. 107 7 Malhotra, Naresh K.; (2004), p. 108 8 Kumar, V, et alii (2002), p. 106 9 Malhotra, Naresh K.; (2004), p. 112 10 Kumar, V, et alii (2002), pp. 109-111 11 Riley, M. et alii; (2000), pp. 12-13
An inductive approach would be planning to explore the data and develop theories from them which can be subsequently related to the literature.12 Thus, the researcher can study an object without first establishing the study in existing theory.
In this study both approaches – a deductive and an inductive – were chosen due to the fact that it was more efficient to answer the research questions, and thus reach my research purpose. Regarding the deductive approach, a model based on the existing theory was built and empirically tested. On the other hand, due to the rare theoretical information about Brand Management combined with M&A, an inductive approach is necessary as well, to provide reasonably accepted evidence. More precisely, the data obtained from the case study are key elements in order to build the model and hence, further develop theory. The model is related to the literature and adds new knowledge in a quite unexplored field of Brand Management.
2.4
Qualitative versus Quantitative Research
Research methods can be divided into qualitative methods and quantitative methods. Qualitative research provides insights and understanding of the problem setting. Quantitative research seeks to quantify the data and, typically, applies some form of statistical analysis.13 Some other researchers state that quantitative methods have been widely used because of the fact that things that can be measured or counted gain scientific credibility over the immeasurable.
Quantitative research gathers and analyses statistical data. It contains research on large scale and relatively large number of representative sets of data as the research seeks to quantify data. This method place reliance upon the research instruments employed to gather data and analyse/measure it; as for example experiments or questionnaires.14 Quantitative data can be distinguished in descriptive and causal research. Both research methods are types of conclusive research.
Qualitative research refers to studies when the researcher gathers and analyses detailed data of ideas, feelings and attitudes. This method is necessary for finding out what is in a consumers´ mind. The data is collected in order that researchers can know more about things that cannot
12 Saunders, M. et alii (2007), pp. 57, 117-118 13 Malhotra, N. K.; (2007), p. 143 14 Riley, M. et alii; (2000), p. 40
be directly observed and measured. Sometimes qualitative data is undertaken to explain the finding obtained from quantitative research. Both methods shouldn’t be seen as competing methods but rather as a complementary. For any new marketing research problem, quantitative research must be preceded by appropriate qualitative research.15
Qualitative Research Quantitative Research
Objective To gain a qualitative understanding of the underlying reasons and motivations
To quantify the data and generalize the results from the sample to the population of interest
Sample Small number of non representative cases
Large number of representative cases
Data collection Unstructured Structured
Data analysis Non statistical Statistical
Outcome Develop an initial understanding Recommend a final course of action
Figure 3: Qualitative versus Quantitative Research Source: Malhotra, N. K.; (2007), p.137
Furthermore, the purpose of qualitative data is to develop an understanding of the problem setting, which can be classified into direct and indirect approach (see next part).
2.5
Direct Data versus Indirect Data
Qualitative research procedures are divided in direct or indirect approach. In the direct approach the interviewee knows the purpose of the research or the aim is obvious given the nature of the interview. The major direct techniques for the research procedure are focus groups and depth interviews.16
Focus group interviews:
This technique is based on an interview which is conducted by trained moderator among a small group of respondents in a non structured and natural manner. According to Malhotra, it is the most important qualitative research method, and the main purpose of focus groups is to
15
Malhotra, N. K.; (2007), p. 143
16
gain insights by listening to a group of people from the appropriate target market talk about issues of interest to the researcher.17
Depth interviews:
The characteristics of depth interviews are like focus groups. However, depth interviews are conducted on a one-on-one basis. It is a direct way of obtaining information from a single interviewee. A highly skilled interviewer tries to uncover in a personal interview underlying motivations, beliefs, attitudes, and feelings from the respondent. Through the personal way of the interview depth interviews can uncover greater depth of insights than focus groups.18
In contrary, an indirect qualitative research is a type of qualitative research whereas the respondent doesn’t know the purpose of the project. The tools for indirect approaches are the so called projective techniques which contain association, completion, construction, and expressive techniques.
Association techniques:
This technique is a one-on-one technique whereas an individual is presented with a stimulus and has to respond with the first thing that comes to his mind. The best known technique concerning this issue is word association. In this case a list of words is presented to a respondent and he has to respond to each with the first word that comes on his mind.19
Completion techniques:
In completion techniques, the respondent has to complete an incomplete stimulus situation. In marketing research the common methods are sentence completion and story complementation.
Construction techniques:
This method is closes related to completion techniques and respondents are required to construct a response in the form of a story, dialogue, or description. The two main construction techniques are picture response and cartoon tests.
17 Malhotra, N. K.; (2004), p. 139 18 Malhotra, N. K.; (2004), pp. 147-150 19 Malhotra, N. K.; (2004), p. 151
Expressive techniques:
Respondents are presented with a verbal or visual situation and there job to relate feelings and attitudes of other people to the situation. In this technique they do not express their own feelings or attitudes, but those of others. There are two main expressive techniques which are role playing and third-person technique.
In this study, a direct approach in form of depth interviews was chosen. All interviews were conducted with only one interviewee, and thus the respondent was not influenced by other participants. The obtained information might uncover greater depth of insights than interviews with more than one participant.
2.6 Case
Study
The case study is a qualitative research technique which may or may not involve observation. As mentioned earlier, qualitative research is usually undertaken in a more unstructured, rather informal way than quantitative inquiry. Furthermore, it uses small samples that provide deep insights helping to explain the problem setting.20 A case study involves an empirical investigation of a particular contemporary phenomenon within its real life context. For this strategy multiple sources of evidence are used.21
The case study investigates a contemporary phenomenon within its real-life context and provides the researcher with the holistic and meaningful characteristics of the examined phenomena. In addition, the case study strategy also has considerable ability to generate answers to the question “why?” as well as the “what?” and “how?” questions and this is also the case in this study.22
It is an advantage of a case study that the data collection can include internal documents, interviews, discussions, and observations from real-life situations in the particular company.23 This study was also enriched by an extensive data collection, and besides interviews and discussions, internal documents were observed. The case study is not only about collection data, but rather about the analysis and interpretation of the information. The case study
20 Riley, M. et alii; (2000), p. 96ff 21 Saunders, M. et alii (2007), p. 139 22 Ibid 23 Saunders, M. et alii (2007), p. 140
research method was the chosen way to conduct the theory in conjunction with real-life comparison as it had been suggested from different scholars as for example Malhotra.24
2.7
Data Collection and Quality of Research
In this study both secondary and primary data were used. The external secondary data was mainly literature from textbooks, journals and websites and was the source for the theoretical review of this paper. The case study bases mainly on primary data, and somewhat on internal and external secondary data sources. In addition, annual reports and company brochures were ordered from the case study company to get a better overview over the target firm and in order to combine, expand and control the researches which are available on the internet as for instance the company website.
The data in the case study are obtained by external secondary data and by conducted unstructured interviews with people knowledgeable about the phenomenon of interest.25 The interviews were the tool for gathering detailed information about the company’s organization, the brand image, awareness, and loyalty after the acquisition by Ford Motor Company. Furthermore, information about brand reinforcement and brand revitalization were gathered through the interviews.
The researcher has to decide whether to perform a face-to-face or a telephone interview. According to Riley, telephone interviews require the same planning as face-to-face interviews. It needs even a more structured approach than a face-to-face interview; due to the fact without useful cues apparent in face-to-face contact it is less easy to monitor responses which suggest misunderstandings or inconsistencies.26
Initially, I preferred face-to-face interviews and discussions for the data collection of this study and complimented these meetings by several telephone calls and emails. To get detailed information from different sources I had the chance to conduct two lengthy interviews with responsible managers of the Volvo Car Corporation in Gothenburg, and an interview with the sales manager of a large Volvo car dealer. It was my idea that besides interviews with the headquarters of the company I could complete the research with a responsible person who is
24 Malhotra, N. K.; (2004), p. 130ff 25 Malhotra, N. K.; (2007), p. 42 26 Riley, M. et alii; (2000), p. 135
in direct contact day to day with the end customer. This can be valuable information in order to research the company from top to bottom. Before the interviews were conducted, a guideline with questions and headlines was designed in order to lead the discussion. I made sure that all questions were regarded to my area of research and related to the implemented theory. A guideline of the interview questions is attached in the Appendix on page 79.
In order to get also a neutral opinion about the issue, two more interviews were conducted. Both interviewees are working for an independent international car company. The companies were chosen, because they are familiar with the whole automotive industry and are dealing with all different kind of brands for several decades. To make sure interviewing the right persons, I interviewed the Managing Director of niche car specialist Dream Cars in the United Kingdom and the Marketing Manager of Kehler’s Prestige Autos of the World in Canada. Due to time and money limitations, both interviews were conducted through a video-telephone-interview. Video telephony is a useful technology and it enables the researcher to conduct an interview in another city on a regular basis without loss of time due to travel.27 At this point I want to mention, that I made sure, that my questions were all related to finding answers to the research questions or to enlarge my understanding of the subject from the company’s perspective.
All interviews were recorded by a tape-recorder in order to be able to reflect the respondents` answer correctly. Then, all interviews were inscribed and the information from the different interviewees was conducted and analysed.
Quality of Research
The quality of the research is an essential issue for the author. I do not strive for a generalisation of my findings, since my explanations and analysis depend on my socially constructed perception of the world and on the perspectives of those people that I collected my data from. The out coming findings of this study may be not objectively true, however, I still want to emphasize that they are trustworthy. To determine the trustworthiness and the quality of the gathered data two factors – validity and reliability – have to be considered.
27
There are four common tests to all social science methods including construct validity, internal validity, external validity, and reliability.28
Construct validity: The researcher has to make sure establishing correct operational measures for the concepts being studied. There are three tactics to meet the test of construct validity increase construct validity. The use of multiple sources of evidence would be the first one which is of great importance when collecting data. A second tactic is to establish a chain of evidence and the third tactic is to have the draft case study report reviewed by key information.29
For this study multiple sources of evidence were used such as annual reports, brochures, websites, textbooks and articles. The reader is in the position to follow the paper’s structure from the research questions to the conclusion on the end of the study. Documents and interviews are well cited and to make sure the third tactic is covered, I have had the key informants review a draft case study.
Internal Validity: This would be only relevant for explanatory or causal studies, and not for descriptive or exploratory studies. Internal validity is only a concern for causal case studies whereas the researcher wants to determine under what conditions even x lead to another event.30 However, due to the fact that this study is not primarily of explanatory nature the internal validity is not of a great importance in this case.
External Validity: At this point it deals with the problem in what grade the research results from a particular study are generalized to all relevant contexts.31 In other words the third test deals with the problem if the study of one issue is applicable to another issue of the same field of study. I have put the transferability of the made conclusions from this time and one-company study into question, and I would not dare to generalise the findings and transfer them to the situation at other cases, since acquisitions may be different.
Reliability: This is the extent to which a scale produces consistent results if repeated measurements are made on the characteristic.32 To put this simply reliability means that if the 28 Yin, R. K., (2003), pp. 33-38 29 Yin, R. K., (2003), pp. 33-38 30 Yin, R. K., (2003), p. 36 31 Saunders, M. et alii (2007), p. 598 32 Malhotra, N. K.; (2007), p. 284
inquiry would be repeated to a later moment or conducted by someone else, the obtained results would be the same or similar compared to this study. Since the goal of reliability is to minimize the errors and biases in a study, I tried to be as objective as possible. Although, I believe my finding to be credible and e.g. the interviews were recorded as evidence on a tape recorder, the investigation may turn out different when repeated. Several error potentials have to be considered such as the participant error which is depending on the mood of the subjects and time of the investigation. Furthermore, the observer error and the observer bias are relevant. Latter relates to the various interpretation procedures of interviewers.33
33
3.
THEORETICAL REVIEW – KEY ISSUES ABOUT
BRAND MANAGEMENT
This chapter presents the fundamental theory and models and it aims at answering the first research question, which asks how a brand can manage their Brand Equity after an acquisition. In order to approach this question, the field of Brand Management with the special focus on brand equity as one aspect of managing a brand after an acquisition are introduced and described in the theoretical review. In addition a model is drawn by the end of the chapter in order to answer the first research question and give an elementary assumption for the case study.
3.1
Brand Management – An Overview
In general Brand Management has become an important issue for Companies. Brand Management starts with understanding what “brand” really means. This starts with the leaders of the company who define the brand and control its management. It also reaches all the way down the company and especially to the people who interface with customers or who create the products which customers use.34
Today the situation became different and the availability of new technologies has enabled companies to easily imitate products, services and processes of others. Hence, it generates a huge strategic problem for businesses of differentiation.
According to Kevin Lane Keller, branding has been around for centuries as a means to distinguish the goods of one producer from those of another. He furthermore explains that the word “brand” is derived from an Old Norse word, the so called “brand”. This simply stands for “to burn” and it was and it is still the means how owners mark and identify their livestock.35
Intellectuals defined branding in different ways. However, most of the definitions are quite similar and deliver more or less the same message. One definition of branding by De Chernatony & McDonald is,36
34 Keller, K. L.; (2008), p. 2 35 Keller, K. L.; (2008), pp. 2-3 36
“A successful brand is an identifiable product, service, person or place, augmented in such a way that the buyer or user perceives relevant, unique added values which match their needs more closely. Furthermore, its success results from being able to sustain these added values in eth face of competition”.
When writing about definitions of branding, a word by the Marketing guru Kotler should be presented. He describes a brand as a name, term, sign, symbol or design, or a combination of these, that identifies the maker or seller of a product or service.37
The brand is an important part of a product and it helps sellers and buyers in many ways. A successful branding can add value to a product and thus, companies benefit from a clever Brand Management. For example, most consumers would call a Lamborghini a symbol of masculinity bursting with power and Italian magnificence and something bombastic, an expensive product. But the same technique in an unknown car would likely be viewed as a lower in quality, even if the attributes were identical.
3.1.1 Brands versus Products
Before providing an insight into the theoretical background of the paper, there is a short insertion about the difference between Brands and Products. This might help the reader to get a better understanding about the importance of branding and the empirical part of this work.
In the literature a product is defined as anything we can offer to a market attention, acquisitions, use, or consumption that might satisfy a need or want.38 This might be a physical good as for example an automotive, a computer or a pair of jeans. A product may be also a service such as an airline or a bank. Keller defines five levels of meaning for a product:39
1. The core benefit level is the fundamental need or want that consumers satisfy by consuming.
2. The generic product level, attributes or characteristics which are absolutely necessary for its function but with no distinguishing features.
3. The expected product level, what purchasers normally expect when they buy a product.
4. The augmented product level, it distinguishes in some way from its competitors.
37
Kotler, P. and Armstrong G.; (2004), p. 285
38
Keller, K. L.; (2008), p. 3ff
39
5. The potential product level, possible developments of a product in the future.
Products have to satisfy the consumer in some way. Taking a closer look to the illustrated levels it can be assumed that most competition takes place at the product augmentation level. Nowadays, most firms can successfully deliver satisfactory products at the expected product level. Competition is distinguishing on issues such as services, advertising, packaging, customer advice, financing, delivery arrangements, warehousing, and other things that people value.
Products are called “brand products” when possessing the following characteristics:40
• clear label mark
• constant or steady increasing quality • constant design
• market drawn consumption promotion • broad distribution in the business market • high awareness
According to Keller, a brand is therefore more than a product and it distinguishes from its unbranded commodity counterpart.41 Brand feelings and perceptions about the products are involved and matters for consumers. Furthermore, consumers pay attention about the brand name and what it stands for, and about the company associated with the brand and how they perform.
Unlike to the previous example about products, a branded product may be an Audi TT, a Dell computer or a pair of Levis jeans. In relation with a service it may be Lufthansa airlines or Deutsche Bank.
Kotler and Keller claim that nowadays hardly anything goes unbranded, since branding is such a strong force.42 The problem of “normal” products – so called commodities – is that they are hardly tangible and they are very basic. Thus, it cannot be physically differentiated in the minds of consumers.
40
Thommen, C.P. and Achleitner, A.K.; (2001), pp. 162-165
41
Keller, K. L.; (2008), p. 5
42
3.1.2 The Importance of Branding
First of all it should be mentioned that branding is not a must and since a few years – especially in the USA no-name products (Generics) have become somewhat more important. The characteristics of these products are elementary labels and mostly a low pricing which can be up to 50% under the pricing of an equal brand product.43
Branding is all about creating differences and it should be a competitive advantage for the company. Kotler and Keller illustrated eleven points of marketing advantages of strong brands:44
• Improved Perceptions of Product Performance • Greater Loyalty
• Less Vulnerability to Competitive Marketing Actions • Less Vulnerability to Marketing Crises
• Larger Margins
• More Inelastic Consumer Response to Price Increases • More Elastic Consumer Response to Price Decreases • Greater Trade Cooperation and Support
• Increased Trade Cooperation and Support • Possible Licensing Opportunities
• Additional Brand Extension Opportunities
The importance of branding begins with creating a simple name for your company. Consumers remember simple. Also, making sure the brand name can be associated with a positive value, characteristic, or position is part of the importance of branding. According to Charles Fuchs, a professional Internet and network marketer, consumers like products to which they can associate positive qualities.45
Other researchers explain the importance of branding with simply to issues which put companies in a fortunate position. The so called price-driver and the volume-driver can affect the revenue of a company in a positive way. For example, in the global market, the winner is usually the brand with the most consistent positioning in people’s mind. It is obvious that
43
Thommen, C.P. and Achleitner, A.K.; (2001), pp. 162-165
44
Kotler, P. and Keller, K. L.; (2007), p. 137
45
customers prefer a coherent brand instead of a less coherent brand, even if the less coherent brand has a better product. Hence, a coherent brand is in a “price-driver position” and can charge more for its products.46
This is also supported by Kotler. Coherent brands enjoy scale economies and higher brand recognition. He writes about a “bandwagon effect”, and first-time buyers have more confidence in choosing the company’s products. Thus, consumers are willing to pay more for a coherent brand than for a less coherent brand.47
Furthermore, consumers might have a fairly inelastic response to price increases and elastic responses to price decreases or discounts for the brand over time. It is a marketing advantage for strong brands when consumers are convinced about what they do and a brand with positive customer-based equity can command a price premium.48
As mentioned before, there is also a volume-driver. According to Gad it is a simple fact that well-known brands that stand for something special usually reach a higher market share than less-known brands.49 In general, market share leaders are in a better position and they make more money than their lamer competitors. However, according to Kotler, many high market share leaders are not that profitable. An example would General Motors. The world’s largest automotive manufacturer was doing more poorly in the 1980s than many of its smaller competitors.50
3.2
Brand Management in an M&A Context
This section presents the chosen theory of BM in connection with M&A. Due to the fact that M&A is a vast field but only the conjunction with BM are relevant for this study, the following parts give a proper theoretical understanding.
3.2.1 Company Acquisitions – An Introduction
Nowadays, company acquisitions are a normal procedure in the business world, and also mergers and other kind of “strategic alliances” have become commonplace. General speaking, an acquisition occurs when one company takes a controlling ownership interest in another
46 Cf. Gad, Thomas; (2001), pp. 23-25 47 Kotler, P., (1999), pp. 7-9 48 Keller, K. L.; (2008), pp. 88-89 49 Cf. Gad, Thomas; (2001), p. 23 50 Kotler, P.; (1999), p. 7
firm, a legal subsidiary of another firm, or selected assets of another firm such as a manufacturing facility.51 The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies – at least, that's the reasoning behind Merger and Acquisition (M&A).
There has been a phenomenal growth in M&A and there is no manager or worker who can consider that they are immune from the likelihood that their organization will be taken over or merged with another firm in the future.52
At this point it should be also mentioned that businesses also may combine acquisitions through joint ventures, strategic alliances or others. An alliance could be for example an agreement to sell each firm’s products to the other’s customers or develop a technology, product, or process.53 Some other researchers state that alliances are when companies join forces in pursuit of common goals. However, they should not lose their strategic autonomy and disregard their own specific interests.54 Through M&A merged or acquired companies abandon their independence and create a new entity. Thus, they are pursuing a single, coherent set of objectives. This is shown in figure 7:
Figure 4: M&A Objectives
Source: Lundbäck, M.; (2004), p. 12
An advantage of alliances is the opportunity for each partner to gain access to the other’s skills, products, and markets at a lower commitment of management time and financial resources. Some significant disadvantages are limited control and the requirement that each party share the profits, and the potential for loss of trade secrets and skills.55
51
DePamphilis, D.; (2005), p. 5
52
Cartwright S. & Cooper C. L; (1999), pp. 2-3
53
DePamphilis, D.; (2005), p. 12
54
Dussauge P. & Garrette B. ; (1999)
55
3.2.2 Motives for Brand Acquisitions
According to Cartwright and Cooper, acquisitions are considered to be rational financial and strategic alliances made in the best interests of the organization and its shareholders. Furthermore, it is a purpose to maximize company value and increase shareholder wealth and benefit through financial synergies as for example through economies of scale, transfer knowledge and increased control.56 However, there are also non-value-maximizing motives and are somehow related to mergers as for instance increasing market share, management prestige or reduce uncertainty. Furthermore, the acquiring company may restore market confidence or they might act as a takeover defence. It could be also a strategy for protecting profits from taxation.57
Some other researchers see an acquisition more as a total financial motive. Common theories of what causes mergers and acquisitions are shown in figure 8:58
Figure 5: Motives for Brand Acquisitions Source: DePamphilis, D.; (2005), p. 17
56
Cartwright S. & Cooper C. L; (1999), p. 21
57
Cartwright S. & Cooper C. L; (1999), p. 22
58
Furthermore, acquisitions may serve as an attractive alternative to investment in Research and Development (R&D). By acquiring another company they receive entrance to a new market and/or a larger share of a market served by the firm. Hence, an acquisition can be seen as a substitute for innovation.59
This was also supported by Schierenbeck. Companies are in the position to capture marketing resources. An acquisition enables a company to capture new marketing resources and exchange firm specific resources such as brands which are hard to develop internally.60
Above all, there are three underlying reasons why companies takeover and acquire other brands and why they are paying enormous sums for these:61
• The acquiring firm don not pay for the current performance of the brand but rather for their future potential. For example Nestlé has made Kit Kat into a truly European brand, with greatly improved sales and still further potential for future expansion
• It is a small market and only very few possible acquisitions are possible in these crowded but lucrative markets. The Acquires are willing to pay a premium only to prevent competitors from getting the brands.
• It is an advantage and easier for the purchasing firm buying already established and successful brands than building them than starting from scratch.
The acquiring of brands can be also a strategy for building a brand portfolio. In addition, the acquiring of brands is an extremely fast method of building a brand portfolio and it is more time consuming to develop a brand. According to Riezebos, it is the most important reason for a firm, to acquire another brand due to the market position that the brand occupies. By acquiring such brands it enables the acquirer to take control over the favoured market.62
Companies, which have a strong competitive position with their brands and a good reputation with consumers, appear to be attractive acquisition candidates. At this point it should be
59
Peck S. & Temple P.; (2002), p. 248ff
60 Schierenbeck, H.; (2003), pp. 49-56 61 Randall, G., (2000), pp. 18-19 62 Riezebos, R., (2003), p. 203
mentioned, that the value of the brand assets in many cases is largely excluded from the company’s balance sheet and thus it is almost impossible to determine an overall value. One commentator according to Keller put it in this way, “The worth of a strong brand is rarely represented fully in a company’s stock price. It does not appear on a balance sheet. But it is the motor behind the numbers, the fuel that drives consumers to the marketplace and helps them make choices.”63
Sometimes brand acquisitions are based on the benefits of having a multi-brand or a brand portfolio. Although in some cases there are reasons to reduce the number of brands, sometimes even to a single brand, it can occur the opposite on the other hand. Market growth would be an example why it is necessary to have several brands on the market at the same time. A single brand cannot cover a market on its own and multiple brands allow for the best market coverage. In addition, there is a need of differentiation and with a multiple presence is necessary to support the market as a whole.64
Another motive for brand acquisitions is the power of a strong multi-brand policy. This policy can stop any new competitors entering a market. Several brands in different sectors of the market can produce a strong entry barrier for other competitors.65
Above all, with a strong brand portfolio a firm has the ability to maximize brand equity. All brands in a portfolio play in the best case together and not harm or decrease the equity of the others. At best, each brand maximizes equity in combination with all other brands in the portfolio.66
3.2.3 Risks of Brand Acquisitions
Brand acquisitions are a mixed blessing. It was mentioned earlier that it is an ideal situation when each brand in the portfolio takes as many sales as possible away from competitors, but takes as few as possible from the other players among the own portfolio. However, by creating a multi-brand portfolio through acquisitions cannibalisation may occur. Brand cannibalization takes place when brand “A” of a company impacts brand “B” from the same company negatively. This happens because the brands belong to the same product category.67
63 Keller, K.L.; (2008), p. 413 64 Kapferer, J.N.; (2004), p. 333ff 65 Kapferer, J.N.; (2004), p. 334ff 66 Keller, K.L.; (2008), pp. 434-435 67 Randall, G., (2000), pp. 146-147
For example, Seat, Skoda, VW and Audi belong to the Volkswagen group. These brands have been separated geographically, however, they are still found in several countries. Thus, Volkswagen is currently subject to the “cannibalization” risk. Although, the Volkswagen group try to control the brands through for instance differentiation and price policies they are faced with a problem here. Most people are aware of the fact that these four brands come from the same factories. As some of GM´s brands are built on the same techniques, so are different Volkswagen cars. The lower price brands as Skoda and Seat use this as sales arguments, and thus it entails ideal conditions for internal cannibalisation.68
Furthermore, brand acquisitions may produce over branding. According to Aaker, most firms have too many brands, sub brands or endorsed brands. Some brands reflect product types and others may reflect price-value and so forth. Customers as well as employees may be overstrained by the portfolio and they have a hard time understanding what is being offered and what to buy.69
Kapferer also consider that the essence of a brand is differentiation. Hence, it may be a hard time for a brand after an acquisition, since the economic press, and thus the publicity, talks in terms of groups. Hence, they publicise the fact that brands that were once different and unique are now produced under the same umbrella by the same group. Questions are coming up and people are asking themselves what remains of the original brand identity of the acquired firm. Questions could be for example: Do Volvos still have a Volvo engine or do they have a Ford engine? Will the specificity of Saab disappear with its integration within the GM group?70
3.3 Brand
Equity
Brand Equity can be described as the amount of loyalty a customer has towards a brand or in other words it is a set of assets and liabilities linked to a brand, its name and symbol that add value or subtract from the value provided by a product or service, to a firm and customers respectively.71
Important points when considering brand equity are brand awareness and brand image. Sometimes brand awareness alone is enough to create favourable consumer response when
68 Kapferer, J.N.; (2004), p. 347 69 Aaker, D.A., (2008), p. 251ff 70 Kapferer, J.N.; (2004), p. 348 71 Randall, G., (2000), p. 23
consumers are willing to base their choices only familiarity. However, according to Keller, it is better for firms when consumers think that all brands in the category are the same. Thus, it needs more than only brand awareness to convince consumers that there are meaningful differences among brands.72
Other researchers see brand equity as a key asset of a firm whereas three other types of brand assets – brand awareness, brand loyalty, and brand associations – are the key issues which have to be actively managed.73
Figure 6: The Brand Equity Model Source: Aaker, D.A., (2008), p. 158
This study is mainly focusing on brand awareness and brand image. Furthermore, brand loyalty is illustrated, since it is an important issue for this study.
3.3.1 Brand Awareness
Brand awareness is consumers´ ability to identify the brand under different circumstances and it consists of brand recognition and brand recall performance. Brand recognition means that, customers can correctly discriminate the brand as having seen or heard it. For example if a customer goes to a store, if they can recognize that they have seen the brand before, they now have brand awareness about the brand.
Brand recall means that, customers are able to retrieve the brand when they are thinking of a special product category, for example: what car they should purchase when looking for a
72
Keller, K. L.; (2008), pp. 53-55
73
safety vehicle (a Volvo?). It is generally easier to recognize a brand than it is to recall it from the memory.74
Brand awareness is very important when the customers making a decision for three main reasons:75
Learning Advantages: The first way that brand awareness affects consumers decision making
is by influence the “right“ brand associations that make up the brand image. If you want to create a brand image you must establish it in people’s mind/memory.
Considering Advantage: It is important that the customer think of and consider your brand
whenever they are making a purchase for which your brand could be an option, or when they consuming a product that your brand could potentially satisfy.
Choice Advantage: The third advantage of creating brand awareness is that brand awareness
can affect choices among brands, even if there are basically no other associations to those brands. For example, in some cases consumers have been shown to adopt a decision role to choose more familiar, well-established brands.
In short, brand awareness is formed by increasing the knowledge of the brand through repeated exposure and strong associations with the right product category or relevant purchase or consumption cues.76
3.3.2 Brand Image
Brand image is what people have in memory about a brand and it is the perception and beliefs held by consumers. A positive brand image is created by marketing programs that link strong, favourable, and unique associations to the brand in memory.77
These three dimensions provide the key to building brand equity, it does not matter how unique brand association is unless customers evaluate the association favourable, and it does not matter how desirable a brand association is unless it is sufficiently strong that customers 74 Keller, K.L.; (2008), p. 54 75 Keller, K.L.; (2008), p. 54ff 76 Keller, K.L.; (2008), p. 54ff 77
actually recall it and link it to the brand. And it should be recognized that not all strong associations are favourable, not all favourable associations are unique.78
The important aspect of a brand image is the mental picture that consumers have of a brand or branded article.79 Brand image can be reinforced by brand communications such as packaging, advertising, promotion, customer service, word-of-mouth and other aspects of the brand experience.
3.3.3 Brand Loyalty
Brand loyalty is according to Aaker a very important issue and an enduring asset for some businesses is the loyalty of the regular customers.
Loyal customers are an essential important advantage for a company and there are four main reasons for this:80
1. It reduces marketing costs, since loyal existing customers are easier to hold. Furthermore, it is easier to keep existing customers happy and prevent them for changing to a competitor. The higher the loyalty, the easier it is to keep customers happy and it is above all less expensive keeping existing customers than trying to acquire new customers.
2. It is more difficult to enter a market where the competitor benefits from existing loyal customers. Significant resources are required for acquiring new customers in such market. Above all, the profit potential for the entrant is reduced.
3. Loyal customers create and strengthen the image of a brand. A base of existing customers also provides reassurance to others and people feel comfortable in the fact that others have selected the brand.
4. Loyal customers give a firm some breathing room. If a competitor of the firm develops a superior product, the loyal customer rather waits for his “home” brand and allows the firm the time needed to counter with an equal product. Above all, according to the
78 Keller, K.L.; (2008), p. 56 79 Riezebos, R.; (2003), p. 63 80 Aaker, D.A., (2008), p. 159ff
author, a firm can allow itself the luxury of pursuing a less-risky follower strategy when having an existing of high loyal customers.81
In addition, the theory above is supported by Keller and he agrees that brand loyalty is closely related to brand equity; however, it is a distinct concept. Brand loyalty may be for the first time when a new or resurgent competitor is attracting customers.82
3.3.4 Brand Reinforcement Brand Revitalization
Effective brand management requires taking a long-term view of marketing decisions and one important point is that brand equity has to be reinforced over time, or revitalized if necessary. Reinforcing brands involves ensuring innovation in product design, manufacturing, and merchandising and ensuring relevance in user and usage imagery. Brand equity is reinforced by marketing actions. This means that is has to consistently convey the meaning of the brand to consumers in terms of what products the brand represents, what core benefits it supplies, what needs it satisfies and how the brand makes those products superior. The aim is to create a strong, favourable, and unique brand association in the mind of the consumers.83
Concerning brand equity, it is important to recognize the tradeoffs that exist between those marketing activities that fortify the brand and reinforce its meaning and those that attempt to leverage or borrow from its existing brand equity to gather some financial advantage.
The researcher Keller furthermore claims that it is of great importance to fortify the brand. Otherwise the brand will decline brand awareness and weaken brand image. However, as mentioned before these elements – sources of brand equity – are essential and by disregarding them the brand itself may not continue to yield valuable benefits.84
Brand Revitalization
Market changes, changes in the consumer tastes, new technology, or any new development in the marketing environment could potentially affect the fortunes of a brand. Hence, it is an intention of the firm to revitalize a brand. Reversing a fading brand’s fortunes requires that it
81 Aaker, D.A., (2008), p. 160 82 Keller, K.L.; (2008), p. 88 83
Kotler, P. and Keller, K. L.; (2007), p. 144
84
“returns to its roots” and restore lost sources of brand equity. Another possibility may be that the brand establishes new sources of brand equity that are established.85
However, the “return to its roots” usually follows new paths that are very different from those that led to the brands initial success. Hence, Kapferer would not restore lost sources of brand equity since these paths did not lead to any new demand or pocket of growth and were probably the reason for the brands downfall. Revitalization involves establishing new parameters for the brand which is a necessity to attract new customers. Furthermore, it has to develop new user occasions, new distribution channels and new consumer networks.86
Considering the CBBE frame work which was explained earlier, two general approaches are possible to revitalize the brand. Firstly, the depth and/or breath of brand awareness should be expanded by improving brand recall and recognition by consumers during purchase or consumption settings. The second possibility would be to improve the strength, favourability, and uniqueness of brand associations making up the brand image.87
Revitalising a brand can be managed through distribution change which would be according to Kapferer the classic strategy. Another possibility according to the author is revitalising through innovations. Changing brand awareness is probably the easiest way to create new sources of brand equity. However, Keller does not see a problem with the depth of brand awareness but rather with the breath of brand awareness, since consumers think of the brand in very narrow ways. In his opinion strategies are needed to increase usage of the brand and find new uses for the brand that are already reviewed. It might be necessary to implement moreover a new marketing program to improve the strength, favourability, and uniqueness of brand associations for improving brand image.88
Considering brand revitalization by managing a brand portfolio, it is necessary to carefully consider the role of the different players in the portfolio over time. Furthermore, the relationships among the different players in the portfolio have to be considered.
85
Kotler, P. and Keller, K. L.; (2007), p. 145
86 Kapferer, J.N.; (2004), pp. 387-392 87 Keller, K.L.; (2003), pp. 671-673 88 Keller, K.L.; (2003), pp. 671-673
Figure 7: Brand Reinforcement / Revitalization Source: Keller, K.L.; (2003), p. 672
In addition, a brand migration strategy has to be especially designed and implemented due to the fact that customers have to understand how various brands in the portfolio can satisfy their needs as they potentially change over time or as the products and brands change themselves over time.89
3.4
The Four Steps of Brand Building
The way to build a strong brand, according to the CBBE model (Costumer-Based Brand Equity), is by the following four sequential steps, each one representing a fundamental question that customers ask about brands. Brand Equity can be described as the amount of loyalty a customer has towards a brand.90
The CBBE model is built by “six brand building blocks”, which can be assembled as a brand pyramid, shown in figure 5 on the next page.91
89 Keller, K.L.; (2003), pp. 671-673 90 Keller, K.L.; (2008), p. 58 91 Keller, K.L.; (2008), p. 59
Figure 8: Costumer-Based Brand Equity Pyramid Source: Keller, K.L.; (2008), pp. 60-61
3.4.1 Brand Salience
The Costumer-Based Brand Equity Pyramid above illustrates the brand building process. Achieving the right brand identity involves creating brand salience with customers. Brand salience relates to aspects of the awareness of the brand, for example, how often and easily the brand is evoked under various situations or circumstances.92
Brand salience is an important first step in building brand equity and according to Keller; a highly salient brand is one that has both depth and breath of brand awareness. Depth of brand awareness is explained by Keller that it concerns the likelihood that a brand element will come to mind and the ease with it does so. For instance, a brand that can be easily recalled has a deeper level of brand awareness than one that only can be recognized.
Moreover, the breath of brand awareness concerns the range of purchase and usage situations in which the brand element comes to mind. Brand awareness is more than just customers knowing the brand name and maybe heard about it earlier; maybe even many times. According to Keller brand awareness also involves linking the brand – the brand name, logo, symbol, and so forth – to certain associations in memory.
92
An example for the product name would be Apple or the company name as for example Maggi. A very well known symbol according to Keller’s assumption would be the crane of Lufthansa.93
Although brand salience is an important step in building brand equity, many customers consider also the meaning or the image of the brand and thus salience is not sufficient.94
3.4.2 Brand Performance and Imagery
The product it is the heart in brand equity, because that is what the consumer’s experience with a brand, what they hear about a brand from others, and what the firm can tell the customers about the brand in their sales promotions. A good product that completely satisfies consumer’s needs and wants is the base for a successful brand. Many studies shown that high-quality brands tend to perform better financially.95
There are five important types of attributes and benefits that often lie behind brand performance: 96
• Primary ingredients and supplementary features: The actually ingredients and supplementary features that allow for customization and more flexible use.
• Product reliability, durability, and serviceability: Mean satisfy performance overtime, expected economic life of the product and ease of servicing the product if it needs repair.
• Service effectiveness, efficiency, and empathy: Means how completely the brand satisfies the customer’s service needs, in speed and responsiveness etc and if the service providers are trusting, caring and having the customer’s interests in mind.
• Style and design: Colour, shape, size and materials. And how a product feels, locks or maybe how it smells or sounds.
• Price: The price is very important. Often high price is associated with high quality. And low price with low quality.
93
Thommen, C.P. and Achleitner, A.K.; (2001), p. 162
94 Keller, K.L.; (2008), pp. 60-61 95 Keller, K.L.; (2003) p. 81 96 Keller, K.L.; (2003), p. 83
