HARVARD BUSINESS REVIEW ON BRAND MANAGEMENT PDF
Harvard Business Review on Customer Relationship Management. Read more Management Tips: From Harvard Business Review · Read more. Customer-Centered Brand Management. Customer-Centered Brand Management. magazine article. Roland T. Rust · Valarie A. Zeithaml. Brands exist to serve customers, not the other way around. Summary Full Text; Save; Share; Comment; Text Size; Print; PDF; Buy Copies These include replacing traditional brand managers with a new position—the customer.
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To effectively build a corporate brand, executives need to identify where their strategic stars fall out of line. To guide managers through this. Harvard Business Review on Brand Management book. Read 5 reviews from the world's largest community for readers. With the increasing globalization of bra. MKTG () - Strategic Brand Management – "Brands and Brand Equity,” in course packet – HBS Product # PDF-ENG by "Getting Brand Communities Right", Harvard Business Review, April,
To ensure that decisions based on customer relationships trump brand-based decisions, create or strengthen the role of customer segment manager and allocate resources to that function rather than to traditional brand managers. Build Brands Around Customer Segments, not Vice Versa Differentiate your brands by target customer segment more than by product features.
Witness the television channels geared specifically to Latinos, golfers, senior citizens, African-Americans, women, and gays. Retire Ineffective Brands Sometimes a brand becomes very unattractive to a customer segment. Reversing that impression might be prohibitively difficult.
Instead, retire brands that no longer have avid customers—even if overly aggressive brand managers want to protect their fiefdom. Nabisco, for instance, phased out its Mr. Salty brand when the public became concerned about the ill effects of too much sodium.
Most managers today agree with the notion that they should focus on growing the lifetime value of their customer relationships.
Indeed, given the cost of winning new customers much higher than that of keeping current ones , and the ultimately finite universe of buyers out there, a mature business would be hard-pressed to increase profits otherwise. The problem is, for all that managers buy into this long-term customer focus, most have not bought into its logical implications. Listen to them talk, and you may hear customer, customer, customer. Brand management still trumps customer management in most large companies, and that focus is increasingly incompatible with growth.
Consider the story of Oldsmobile, an American car brand launched earlier than any other in existence today.
In the s, it enjoyed outstanding brand equity with many customers. But as the century wore on, the people who loved the Olds were getting downright old. The managers that parent company General Motors put in charge of the brand realized that maintaining market share meant appealing to younger buyers, who unfortunately tended to see the brand as old-fashioned.
A Better Way to Map Brand Strategy
And in December , General Motors announced that the Oldsmobile brand would be phased out. Car aficionados might have shed a tear at the passing of a proud old marque, but we see the tragedy differently. Why did General Motors spend so many years and so much money trying to reposition and refurbish such a tired image? Cultivating the customers, even at the expense of the brand, would surely have been the path to profits. We know why not, of course. They are the fiefdoms, run by the managers with the biggest jobs and the biggest budgets.
And never have those managers been rewarded for shrinking their turfs. We propose a reinvention of brand management that puts the brand in the service of the larger goal: growing customer equity.
But it does mean fundamentally changing how management thinks about the goals, roles, and metrics associated with a well-managed brand. These changes will be among the most wrenching your organization ever undertakes. Known as one of the founders of funk, Clinton in the s sought the attention of two different segments of record buyers—mainstream listeners, who liked vocal soul music with horns, and progressive listeners, who liked harder-edged funk.
The solution was simple. The same group of musicians, essentially, recorded and performed under two different band names: Parliament, when the music was aimed at popular tastes, and Funkadelic, when it was edgier. Both bands were very successful, even though some Parliament fans would never listen to Funkadelic and vice versa. The point is that Clinton did not try to make his original brand a big tent by stretching it to accommodate the tastes of very different markets.
The same car was introduced in most other countries, including Japan, as the Honda Legend. But the company had good reason to think it would not succeed using that name Stateside.
In the s, U. They expected and trusted the company to provide inexpensive, dependable—if not very exciting—cars. Rather than work to change that image which served the company well with other models , management decided to launch a new brand. The Phaeton, however, is a high-priced luxury car, positioned to compete with such icons as BMW and Mercedes. To Volkswagen, the car is simply an extension of the engineering prowess it already prides itself on.
And by all accounts, the objective attributes of the Phaeton fit and finish, comfort, and power are competitive with those of other luxury marques. It has virtually no brand equity among luxury buyers. When the Phaeton was launched in Europe in , Volkswagen predicted 15, would be sold. Several months later, it admitted that only about 2, had been. In Japan, there is a brand called WiLL that is owned and managed by a consortium of consumer goods companies.
The companies have little in common on the production side of things; they range from carmaker Toyota to electronics marketer Matsushita Panasonic to beer brewer Asahi.
But they have a great deal in common in their pursuit of a certain new and affluent demographic. The design of the WiLL Web site, www. It features a hip mix of Japanese and English, a fashionable color palette, and disparate products unified by the quirky playfulness of their design.
These megabrands have chosen to become, in essence, private label manufacturers behind a brand they own jointly. It makes sense because, independently, none of them would have invested so heavily in a branding effort that hit just one segment, no matter how squarely between the eyes. For that matter, the list of partnering companies could change, along with the kinds of products offered, and the WiLL brand would remain strong—because its meaning and value stem from its customers.
Customer Equity Is the Point Forward thinkers like George Clinton, Honda, and the WiLL consortium aside, most companies today are geared toward aggrandizing their brands, on the assumption that sales will follow. But for firms to be successful over time, their focus must switch to maximizing customer lifetime value—that is, the net profit a company accrues from transactions with a given customer during the time that the customer has a relationship with the company. Companies must focus on customer equity rather than brand equity.
But what happens if Ann grows tired of Brand A? Or if the brand ceases to resonate with her? If we manage the customer relationship properly, we can introduce Ann to another of our brands that is a better match with her sensibilities. In fact, we should be willing to do whatever is necessary with our brands including replacing them with new ones to maintain our customer relationships. Our attitude should be that brands come and go—but customers like Ann must remain.
The Value of a Brand Depends on the Customer One of the most important things to understand about a brand is that its value is highly individualized. A customer might grow tired of a brand, or more enamored, independent of how other customers are responding to it.
One reader sees the Wall Street Journal as the pinnacle of probity; another calls it a reactionary rag. Between the two extremes are infinite shades of gray. Yet most marketing managers speak about the value of a brand as though it were solid and monolithic, and they measure brand equity with a summary metric of brand strength.
We conducted a survey of customers in two cities to measure brand equity for 23 brands in five industries. Look, for example, at the wide range of values customers assigned to the American Airlines brand.
Customers Differ on Brand Equity We surveyed customers of 23 brands to measure differences in brand equity. For the American Airlines example shown here, customers had widely varying perceptions of the value of the brand. This distribution was typical across brands and industries and shows why average measures of brand equity are misleading. Assigning an average value to brand equity is dangerous because it obscures the fact that brand value is idiosyncratically assigned by the customer.
Managers begin to believe that the value of their brand is somehow intrinsic—that, like a diamond in a necklace, the brand has an objective, inherent value. We know of one company, for example, that stumbled badly as it tried to make headway in South American markets. In truth, while the brand tended to have very high equity with consumers in the United States and many other countries, people in South America were more likely to favor local brands.
Confused by poor sales, management seemed unable to acknowledge that the brand might not be such an asset. The company only redoubled its efforts at what could be called brand imperialism, with limited success. Put Your Brands in Their Place If you accept that the goal of management is to grow customer equity, not brand value, and that brand value is only meaningful at a highly individual level, then you will likely manage your brands in a profoundly different way.
Our work with leading companies crafting customer-centric branding strategies suggests seven directives that go against the grain of current practice. Make brand decisions subservient to decisions about customer relationships. This means creating or strengthening the role of the customer segment manager and allocating resources to that function rather than to traditional brand managers.
It may even make sense to go beyond segments and assign managers to specific customers, if they are big and important enough.
In the business-to-business world, this is known as managing key accounts; companies like Ericsson and IBM assign account managers and give them broad authority in marketing to important customers. Consumer companies can also use the approach, organizing around customers or customer segments. Brand managers will still have an important role in the marketing function, but they will be dependent on the customer segment managers for distributing resources.
Brand management will become a team-oriented task. Build brands around customer segments, not the other way around. Some products, like Viagra, are inherently directed at the needs and requirements of a particular customer segment. Others, like the Black Pride beer once sold actively in the African-American neighborhoods of Chicago, are generic products positioned for a specific segment.
Its laundry detergents, too—Tide, Gain, Cheer, Ivory, Bold—are differentiated more by target customer segment than by product features. Each of its customer segments has its own named brand and personality.
The company makes the high-end Dana Buchman brand for professional women; the stylish Ellen Tracy brand for sophisticated but casual women; the young, upscale Laundry brand for individualists; the Liz Claiborne brand for its traditional casual market; and the Elizabeth brand for plus-size women. The lines are so well differentiated by brand, fit, and style that few consumers know they are made by the same company. Make your brands as narrow as possible. As advances in technology and customer information make such segmentation easier, this trend is likely to become even more pronounced.
And it should. If the customer is central, then the purpose of a brand should be to satisfy as small a customer segment as is economically feasible. Allowing for the fact that some breadth is desirable for its own sake, the tendency should be toward brands that are increasingly narrow over time. How Big to Brand? Once your frame of reference has shifted to customer management, the central problem of brand management becomes: How big should the brand be?
Customers are individuals with unique tastes and desires. Suppose, for example, a customer named Benito was being targeted by a company. Not quite.
To some extent, customers look to brands to provide safety in numbers. So even if it were financially and operationally feasible to create millions or billions of separate brands, it would not be advisable.
Still, brands should cater to individual needs as specifically as possible, given the current threshold of economies of scale. The magazine industry is a good indicator of how narrow the niches can become, given the technology and consumer information available today. People used to subscribe to general interest magazines.
Depending on the woman, the right magazine might focus on general fitness Shape , health Natural Health , self-esteem Self , parenting Working Mother , high fashion Vogue , high fashion in midlife More , shopping Lucky , ethnic women Essence , gay women Curve —the choices go on and on. Long-term historical trends indicate that this trade-off point is steadily shifting toward even narrower brands, due primarily to changes in both customer tastes and production capabilities.
In the United States and other developed countries, explosions of immigrant populations and the proliferation of media have made for increasingly fragmented customer markets. Meanwhile, computerization and modular manufacturing are making it progressively cheaper to customize goods and services—and individualized communication networks like the Internet, combined with computerized data analysis, enable companies to microtarget their messages.
The shift to narrower and more numerous brands is difficult for even the most astute marketers to accept. Unilever, for example, fought against market fragmentation by instituting a brand consolidation program in Its management eliminated hundreds of brands in search of economies of scale. Among the discarded were such successful brands as Elizabeth Arden cosmetics and the Diversey cleaning and hygiene business.
The vast majority of people who use personal computers would not recognize the microprocessor in their PCs if the machine were disassembled and the parts arrayed in front of them. How many people do you know once claimed that they would be the last Apple buyer? In short, a rational decision means one that maximizes value, but value can be based on objective or subjective data. But those activities will fall short of their intended goals if they are developed and implemented without some sort of unifying foundation.
The foundation for all marketing activities should be creating and nurturing a promise of value to customers. A promise of value the brand —and delivery on that promise—is critical if a company is going to differentiate itself from its competitors and stake a solid claim in its intended market.
If all functions in an organization are not helping to create and nurture a single promise of value, customers will be, at best, confused and, at worst, angry. But for that product to achieve some degree of broader market acceptance, the product will likely need to attract not only a broader base of customers but also a network of ancillary products and services.
A company cannot expect to build that broader acceptance simply by making a promise of value in advertising.
Two Case Studies
It must first know what promise to make and to whom. It must also ensure that the promise of value is understood and fulfilled as the company manages complex networks of value-adding partners, ranging from consulting firms to systems integrators, from independent software vendors to resellers.
Gateway Computer Systems is a good example of a company that understands the importance of marketing as a companywide function.
Gateway differentiates itself from other mail-order PC companies through folksy advertisements in otherwise terse and dense catalogs. But the company knows that its marketing message—in essence, a promise of friendly service—must be backed up by efficient help lines and effective order and service fulfillment to ensure that its promise of value is consistently kept. A trademark is a distinguishing name, sign, symbol, or design, or some combination of them, that identifies the goods or services of one seller.
A brand is a distinctive identity that differentiates a relevant, enduring, and credible promise of value associated with a product, service, or organization and indicates the source of that promise. Emphasis can be placed at the corporate level or at the level of a subbrand. IBM does not have subbrands for its e-business offerings, for example, since its solutions are unique to each of its servers and include software, service, and support provided by business partners.
By contrast, Lotus shares brand equity with its subbrand Domino. Brands can be built around many different promises of value. Consider how IBM tweaks its brand message for application development tools.
What Does Your Corporate Brand Stand For?
Traditionally, target customers for the tools were IT managers in large organizations. Those managers valued service, support, and reliability.
However, a new breed of customer has emerged in recent years. These customers are young, sophisticated, highly competent, and comfortable with technologies. Some even look forward to the hassles of working with new technologies for the intellectual and technical challenges they pose. EMC, a manufacturer of data storage systems, knows the importance of choosing a particular type of customer before defining the promise of value. Attempting to avoid the price wars that resulted from marketing to technically sophisticated buyers in IT departments, EMC instead tailored its promise for senior managers who could dictate purchasing decisions.
In a series of advertisements in publications like the Wall Street Journal, EMC raised relevant issues for senior executives, such as the role of data storage in securing competitive advantage. EMC realized that in IT departments, purchasing decisions are often narrowly based on price, but for senior executives, any decision reflects broader considerations. Under Michael C. Managers in high-tech businesses face many of the same problems as managers in other businesses in formulating distinctive and credible promises of value.
There are almost as many business failures as there are start-ups in the high-tech arena in a given year; any high-tech company attempting to build a brand must pay for the mistakes other high-tech companies have made along the way. Any high-tech company attempting to build a brand must pay for the mistakes other companies have made.
Building trust is a worthy goal, however. It would be difficult, for example, for a new entrant, or even an established one, to claim that it could fulfill phone or Internet orders for personal computers better than Dell does. On the other hand, consider that Netscape had little competition for quite some time for its Internet browser. With that knowledge, Netscape might have emphasized the salient dimensions of its value proposition in its advertising and modified certain technical aspects of its offering along those same lines as well.
Powerful brands make promises that are enduring. Making a promise is serious business, and, as in personal life, making too many promises, or changing them frequently, raises uncertainty in the people to whom the promises are made. Making and keeping a promise, and keeping it consistently, can be a powerful source of competitive advantage. Studies of the U. True, newer technologies can eclipse older ones; electromechanical calculating machines never had a chance against electronic ones.
Consider the devotion of scientists and engineers to Hewlett-Packard. The Novell brand—and its promise of leadership in superior and secure networking software—has bought that company time in the face of competitive inroads from Microsoft NT and Netscape Calendar.
Monopoly power built on overwhelming market share is not, in the end, a promise of value.
Remember WordPerfect? Witness the practice by high-tech vendors of giving away software and hardware products in order to penetrate a market rapidly.
However, sheer presence and satisfactory performance do not ensure that users will become loyal customers—that is to say, customers who are eager to buy products, not just customers who feel compelled to buy them. Sooner or later, customers will defect. People will buy because they feel they have to buy, but they will not become loyal customers. Building a Powerful Brand Powerful high-tech brands build equity through a process we illustrate in our brand pyramid, which is based on materials developed by Larry Light.
Many high-tech managers are most comfortable in this space, and, unfortunately, it is where many high-tech products reside. Increasingly, however, high-tech purchases involve not just technologists but also business managers and end users, who are far more interested in what a technology product does for them than in how it works. As high-tech managers come to understand this, many start changing the way they speak of their offerings.
But it is not enough. The first two levels of the pyramid still embody the elements of product competition, not those of brand competition. Competitors can continually match and leapfrog over one another by offering better and more features and by identifying the benefits of their products for customers.
For instance, two manufacturers make Unix-based servers that not only perform similarly but also produce the same benefits for customers—the ability to run data-mining applications, executive information systems, and the like. How High-Tech Brands Build Equity To build a strong high-tech brand, managers need to answer the following questions: The third level of the pyramid is where a company can truly differentiate itself from competitors by providing emotional rewards for its business.
How do customers feel when experiencing the functional benefits of the offering? How do customers feel when experiencing the benefits of the brand?
Do they feel confident? But goods and services that reside in that third level are indeed developed and positioned as a way of fulfilling a promise of value to selected customers, not simply as technologies in search of a market.
They shop for well-known, trusted brands. Declining profit margins in the business as a whole, fueled by such strategies as companies actually giving PCs away to encourage end users to get on the Internet, have left the PC market barren of strong brands. Compaq is currently pinning its hopes on translating its promise of value for higher-end technology applications.
Time will tell if Compaq can leverage its promise of value in this very different market. The top two levels of the pyramid illustrate the concept that powerful brands attract and hold customers with their particular promises of value. At the top level of the pyramid is the personality of the brand. The next level of the pyramid describes the deeper values that the brand reflects. We are particularly interested in reflecting values of the target customer that will create and reinforce brand loyalty.
Taken together, these two levels of the pyramid define the relevant and differentiating character of the brand. Focusing a company around brand management—getting from the bottom two basic levels of the pyramid to levels three, four, and five—does not mean tearing up the organization chart, forming yet another set of teams to explore a new initiative, or instituting a gaggle of new processes.
Business-planning processes and topics are the same in a promise-centric company as they are in a product-centric organization. A brand plan is a business plan. The fundamental difference between a product-centric and a brand-centric company lies in the attitudes of the people throughout the organization—not just in the marketing department—in their understanding of what it means to shift from selling products or services to selling a promise of value.
How can senior managers help the process along? What do customers think of the company and its offerings? Do they see offerings as brands or merely as technology products? Consider, for example, the experience of one manufacturer of Unix-based servers. In a very competitive marketplace—where nearly equivalent boxes are produced by HP, IBM, Silicon Graphics, and Sun—managers at one of these companies conducted a series of focus groups with server buyers and users around the world. They found that those people had many and complex perceptions of the competitors, the offerings, and the promises they felt the competitors made.
In other words, they had a lot to say.
What High-Tech Managers Need to Know About Brands
The most intriguing data were about the kinds of promises of value the customers wanted but felt some vendors did not or could not deliver. Armed with the data, the company formulated several alternative promises of value and tested them out in a second round of research.
Do the internal and external impressions match? If not, how do they differ? Refine the promise of value. This step requires managers to make three crucial decisions. First, they must understand how the potential customer markets are segmented and choose the segments they wish to serve. Second, they must determine what type of promises are feasible to offer.Confused by poor sales, management seemed unable to acknowledge that the brand might not be such an asset.
This value developed over decades. It must also ensure that the promise of value is understood and fulfilled as the company manages complex networks of value-adding partners, ranging from consulting firms to systems integrators, from independent software vendors to resellers.
As shown in the bottom chart of the exhibit, revenue which was low before the policy change eventually began to turn around as a result of the reduction in discounting. Now suppose such a lingering stench has attached itself to your brand. It serves as a north star, providing direction and purpose. Description Publication Date: September 01, This article includes a one-page preview that quickly summarizes the key ideas and provides an overview of how the concepts work in practice along with suggestions for further reading.
In the United States and other developed countries, explosions of immigrant populations and the proliferation of media have made for increasingly fragmented customer markets.
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