Brand Value in a Commoditized Market 2019
Defining a brand
⚭ A brand is the vector which defines the relationship between a company and its products, its customers and consumers, and human culture as a whole.
⚭Brands do not coincide with the company nor with their product(s), but live as separate horizontal entities that capture all of the company's collective image, and they manifest as the sum of a number of attributes, some tangible and others intangible that companies surface mostly, but not exclusively, throughout the stages of the customer lifecycle.
When consumers interact with companies and products through their brands, value is not only transmitted, but also created, acquired and returned at marketplace prices.
The value exchanged in these transactions is measured in brand equity.
⚭ In economic terms, brand equity is the surplus that consumers are willing to pay for a particular product or service over the intrinsic value of the product(s) or services provided. Brand equity is considered to be intangible and has been most notoriously defined by Keller in his Customer-Based Brand Equity (CBBE) model 1 as a pyramid in which value is accrued due to a layering effect that happens over time.
The Customer-Based Brand Equity model
⚭For our purposes, we will augment Keller's original model to offer five levels through which a brand can build value, mapping directly to different stages in the customer lifecycle: reach, acquisition, conversion, retention and loyalty.
⚭ Brand salience encompasses awareness and the differentiating character of the brand: this is what helps customers to learn about and distinguish one brand from another and corresponds with the reach phase of the customer lifecycle.
⚭ Brand performance & imagery explores the features and qualities showcased by a brand (e.g. product features, pricing, reliability), as well as how the brand is characterized in our shared social consciousness (e.g. what are the brand values), aligning to the acquisition phase of the lifecycle.
⚭ Once a conversion has happened, customer judgements reflect customer’s opinions about the product - both from a rational/tangible and an emotional/intangible point of view.
⚭ Consumer satisfaction measures the degree of contentment experienced by customers, which leads to customer retention.
⚭ Finally, at the pinnacle of the pyramid we find consumer resonance, which expresses to which extent consumers identify with the brand and effectively predicts their long term loyalty.
Weighing brand value
⚭Building a brand can employ many different marketing strategies, but their mandate fundamentally is to support the products and services the company provides.
⚭For a brand to be successful, it is important that it is aligned to the business model it supports. In this essay, we will focus on various industry verticals, uncovering how their approach to branding can be fundamentally opposite.
The aspirational brand
⚭Brands communicate with their consumers in many ways.
Car manufacturers utilize a range of strategies which speak to both the rational, technical and data-driven aspect of their offering and tops it off with the emotional, aspirational and status-driven facet of the product.
Companies in luxury markets also rely heavily on the aspirational side of branding as a mean to elevate their products and company image by evoking primarily an emotional response within the customers (a great example of this is perfume marketing, in which the product in itself is effectively a commodity).
As brands and customers interact with each other over time, they create a meta construct called brand archetype.
The brand archetype has an anthropomorphic correspondent in the brand persona, which describes the qualities and the lifestyle of the archetypical consumer of aforementioned brand.
As consumers begin to identify with that persona, the lines between the brand, the company and their notion of self begin to blur, and consumers begin to utilize products as a vector of self expression.
As such, even when choosing between products that have no quantifiable difference, consumers tend to make the choice that represents them more accurately.
⚭As alluded to by Olins, all who identify with the brand are not necessarily in the same stage of the customer lifecycle.
In fact, some might not be actual customers (purchasers) at all or even consumers (the beneficiary of the product or service) and yet identify with the brand so intensely to be considered loyalist, just by virtue of the aspirational emotions that a brand can provoke.
In this case, a company can build a relationship with a cohort of “non-customers-consumers”, a group that has a taste for aspirational products and is looking to elevate its social status, and can steer how the brand is perceived outside of its immediate customer base and into society as a whole.
The nature of the products sold by a company and their position in the competitive landscape will inform the branding strategy around them.
Some companies invest hugely in their brand, and in some cases start accruing equity before having any products or services for sale (some might remember the unsubstantiated claims made by Theranos, or the thousands of ICOs which have failed in 2018 alone).
Companies that operate in competitive markets and offer commoditized products (e.g. Morton's salt, Desani's water or companies in the steel industry) cannot market their products as superiors based on tangible product qualities and rely solely on brand as a differentiator 3, 4, 5.
The brand is the product
Under this type of market circumstance, product sales rely only on the cognitive interpretation that consumers have of the company's brand.
Studies have demonstrated how a brand can be effectively employed to “reduce the primacy of price upon the purchase decision” 4, establishing that consumers do not make their purchase decision based on the product, but only on the brand, creating a phenomenon in which effectively the brand becomes the product.
⚭ Conversely, companies which rely in delivering highly specialized products utilize their features to differentiate themselves amongst competitors. This type of company often fees confident enough in their IP not to invest in brand substantially. Consumers on the other hand understand the differentiating value of the product that each company provides and in this case brand is considered a commodity.
The product is the brand
⚭ In the consumer space, companies such as Netflix or Amazon acquire and maintain market share by re-defining the baseline of entire product categories and by offering unique features to their subscribers (original content for Netflix, two-day free shipping for Amazon), which their competitors cannot beat directly, due to their high cost of entry and the dynamics of economies of scale 7.
These conditions characterize the "brand indifferent" consumer, whose inclination on making purchase decisions based on brand influence alone is very limited.
The perceived company value is now supported solely features of their product or service, and its brand becomes effectively incorporated under the company offerings, establishing particular circumstances under which the product becomes the brand.
As the lines between brand and product start to blur, we come to consider the aggregate value of both brand and product in the eyes of the customer.
This experiential journey is captured by the concept of customer experience.
⚭ From a structuralist perspective, the customer experience acts as the semiotic connection between function (product) and emotion (brand), as perceived by a consumer through their thoughts and [inter]actions with the company 9.
This emergent point of view impacts the purview of all the roles included in product and brand creation, demanding that all involved begin to consider the totality of the customer touch-points throughout their lifecycle and how each can impact the customer experience.
The challenge of balancing investments between brand and product is something many companies face.
⚭ Finding the right formula can become a very powerful tool of consumer activation: a virtuous process where the brand supports and amplifies product cycles and in which product cycles assist and fulfill the aspirational side of the brand (e.g.: Volvo's 19% increase in sales during Q1 of 2018 is a exemplary case of how turning safety into something not only practical but also aspirational can become extremely profitable 10).
- Keller, L. Kevin. “Building Customer-Based Brand Equity: A Blueprint for Creating Strong Brands” Marketing Science Institute, Report N° 01-107, 2001.
- Jun, Paul. “Understanding How Brands Affect Who We Are & Who We Aspire to Become – Motivated Mastery.” Motivated Mastery, 16 Nov. 2015, motivatedmastery.com/understanding-how-brands-affect-who-we-are-who-we-aspire-to-become/.
- Getman, Peter. “Why You Should Launch a Brand, Not a Product” Entrepreneur, 19 June 2017, entrepreneur.com/article/295306.
- Morrison, Mark; Eastburn, Mark. "A Study of Brand Equity in a Commodity Market", Australasian Marketing Journal, 14 (1), 2006.
- McQuiston, Daniel. "Successful branding of a commodity product: The case of RAEX LASER steel", Department of Marketing, Butler University, 21 July 2003.
- Bellos, Ioannis; Ferguson, Mark. "Moving from a Product-Based Economy to a Service-Based Economy for a More Sustainable Future", June, 2015, mason.gmu.edu/~ibellos/bfchapter.pdf.
- Roettgers, Janko. "Barry Diller: Disney’s Streaming Service Won’t Beat Netflix", November, 2017, variety.com/2017/digital/news/barry-diller-disney-netflix-1202613573/.
- Havas Group. "Meaningful Brands", 2017.
- Joseph, Jim. "Is There a Difference Between a Product and a Brand?", April, 2015, entrepreneur.com/article/245569.
- Winton, Neil. "Volvo Cars Flotation Valuation Will Show If Its Premium Claims Hold up", May, 2018, forbes.com/sites/neilwinton/2018/05/14/volvo-cars-flotation-valuation-will-show-if-its-premium-claims-hold-up/.