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(Czepiel, 44). The generic strategies and their competitive settings are shown in Figure 1. Essentially related to product differentiation are brands that convey added values to the market. This can have a material basis and an immaterial basis. The immaterial basis is even of greater influence since that makes people go to McDonalds despite its hamburgers are of equal quality to Quick, McDonalds competitor in Europe (Kapferer, 142). Brands enable distinguishing between entities with possible capability to satisfy a consumer need. From that primary function of brands originates series of benefits for the customers as well as for the firms (Berthon et al). What these benefits are will be examined in the next chapter.



Origins of brands date back to medieval times when craftsmen stamped their name-signs or guild-marks on their products in order to protect their clients of getting cheated (Wertime, 2). Contemporarily, brands in their basic function perform nearly the same purpose as can be seen by the following definition: A brand is a distinguishing name and/or symbol (such as a logo, trademark, or package) intended to identify the goods or services of either one seller or a group of sellers, and to differentiate those goods or services from those of competitors (Aaker, 7). A brand, thus, behaves like a signalling flag to the customers indicating the source of the product, and as a shield protecting the customers and the product provider


from outsiders (competitors, cheap copies) who would try to deliver goods of identical appearance. Davis (31) proposes yet another definition: Brand is an intangible but critical component an organisation owns that represents a contract with the customer, relative to the level of quality and value delivered tied to a product or service. A customer cannot have a relationship with a product or service, but may with a brand. [] A brand is a set of consistent promises. It implies trust, consistency, and a defined set of expectations. A brand is an asset and, next to your people, no asset is more important. Here the buyer-seller relationship enters into brand dimension. In this aspect, brands carry implications and relations that are loaded with meanings to customers and other stakeholders of firms (Berthon et al). Hence, brands value stems from its resourcefulness of mastering a benevolent, special and outstanding significance in the eyes of all the stakeholders of a firm (Kapferer, 25). Brands make possible promotional efforts by providing the firm something that can be recognized and a name on which to concentrate (Berthon et al.). Significance of brands stands in their ability to live longer than products brands enable firms to revitalise themselves via constant introduction of new things to marketplace under the same brand that is already familiar to audience. Among these enduring values of longevity and extendibility is customer loyalty that brands can create these are the reasons why firms spend large sums on building brands (Wertime, 12). As one study found out that even for a product class as plain as


pizzas, customer loyalty may result in up to eight thousand US dollars in residual sales over a customers lifetime (Wertime, 13). Importance of brands increases in correlation with the rise in the perceived risk. The greater the unit price of a product or the worse the consequences of a wrong choice, the higher the perceived risk (Kapferer, 26). Customers, or more accurately humans, are social cattle looking at others for behaving clues and therefore tend to appraise themselves on the choices they make. That explains the construction of social identity around the trademark signs and the brands, and the significance of them, as they function to diminish the felt dangers (Kapferer, 26). Thus, one of the purposes of brands is to reduce consumers anxiety in making choices. There is just a single risk with lessening anxiety and taking the hazard out of the objects people experience and purchase and this is that customers can become bored (Ind, 18). Brands in this stance increase customer value because of the benefit of feeling that right purchase decision has been made. Another aspect of customer value enlargement comes from search costs reduction: brands assist customers to identify certain goods of known quality (Berthon et al.). A part of value enhancements a brand can bring are demonstrated by the studies of consumers (Davis, 5-6): Seventy two percent of customers say they will pay a twenty percent premium for their brand of choice, relative to the closest competitive brand. Fifty percent of customers will pay a twenty five percent premium. Forty percent of customers pay up to thirty percent premium; Twenty five percent of customers state that price does not matter if they are buying a brand that owns their loyalty;


Over seventy percent of customers want to use a brand to guide their purchase decision and over fifty percent of purchases are actually brand driven; Peer recommendation influences almost thirty percent of all the purchases made today, thus, a good experience by one customer with a brand may influence anothers purchase decision; More than fifty percent of consumers believe a strong brand allows for more successful new product introductions and they are more willing to try a new product from a preferred brand because of the implied quality. Consumers kinship with the brand known to them, as economists put it, is not just an innate reaction. When buyers recognise that they have noticed a brand before, they take their recognition as an indication that the brand is good, because of a general belief that firms will not spend money on supporting bad produce (Aaker, 11). In a study, that was carried out to show the influence of a recognised brand, there were respondents asked to rank in a taste test three samples of peanut butter. One of the samples was of superior quality in taste (favoured in blind taste tests seventy percent of the time), another was of inferior quality (not favoured in blind tests) and labelled with a brand name known to respondents but not yet used by testers before. The results were that seventy three percent of the respondents choose the known brand name (inferior in blind taste tests) peanut butter to be the best tasting option (Aaker, 11). As Stephen King says in one of his book:A product is something that is made in a factory; a brand is something that is bought, by a customer. A product


can be copied by a competitor; a brand is unique (Ind, 23). Hence, it can be said that manufacturers make products but clients purchase brands.

Fine management starts with good measurement, although measures here are more soft (soft because the measures will give a rough estimate, within plus or minus some certain percent (Aaker and Joachimsthaler, 16)) than concrete figures like the usual well-developed financial measures of sales statistics, cost and profit analyses. The issue with those concrete measures is that these are short-term, indicating an attractive investment to be the one that brings immediate financial results. The idea is that the usual measures must be complemented by a set of sensible measures of brand strength that can give a more long-term perspective of a brands health (Aaker, 316). When talking about strong brands the word strong refers to brand equity (Boyett, 45). Brand equity is a strategic asset as a competitive advantage can stem from it, and therefore long-term profitability, making it the goal of a firm to build the brand equity (Aaker and Joachimsthaler, 9). According to Aaker (7-8) brand equity is: a set of assets (and liabilities) linked to a brands name and symbol that adds to (or subtracts from) the value provided by a product or service to a firm and/or that firms customers. These assets are grouped into four units as shown in Figure 2.


The significance of these assets calls for further elaboration. Since each of the units is a separate asset, the brand management involves allocation of resources for creating and enhancing these assets to achieve the highest possible levels of the brand awareness, loyalty, perceived quality, and the optimal set of associations (Aaker, 8). Next, as the term equity implies each brand equity asset is meant to create value (Aaker, 8). Appendix 1 shows how brand equity generates value. Another crucial aspect brand management has to guide is the brand equitys

Figure 2. Brand Equity Assets

Brand awareness

Perceived quality

Brand loyalty



Source: Data for diagram drawn from David A. Aaker and Erich Joachimsthaler, Brand Leadership, 2002: 17

quality to create value for the firm in addition to the customer value creation (Aaker, 8). In this context the customer stands both for the final user and those that make up the channel to the final user. For example, Hotel Olmpia needs to take care of its image besides the travelling customers also along with the travel agents. Finally, it is important that the assets are linked to the name and symbol of the brand in order to benefit brand equity. Change in the name or symbols can result in affected or even lost assets, although some of the value might be migrated to the new markings (Aaker, 9).


Brand awareness. Awareness is about a brands presence in the consumers minds, referring to the relative strength of a brand to stick out from other brands the customer has had contact with (Aaker, 10). It has been demonstrated that awareness can affect perceptions (Aaker and Joachimsthaler, 17).

Table 1. Awareness measures

Measure Recognition Recall Graveyard statistics Brand dominance Top of mind Brand familiarity Brand knowledge

Have you heard of the BMW M5? What brands of cars can you recall recall level of the those who recognise the brand the only brand recalled the first-named brand in a recall task the brand is familiar person has an opinion about the brand

Source: Data for table drawn from David A. Aaker, Building Strong Brands, 2002: 33031

People feel fine towards the familiar and therefore are prone to ascribe all kind of good attitudes to items familiar to them. For some of the categories (especially food) awareness can be the most influential driver of purchase decision, and it has a leading role in brand equity (Aaker, 330). Measures of awareness range from recognition (Have you been exposed to this brand before?) to recall (What brands of this category can you recall?) to top-of-mind (the first brand recalled), more measures are shown in Table 1. The level of ultimate awareness brand dominance is where, in a recall task, most consumers are able to provide only one single brand name: this can be seen with Kleenex,


Xerox, Jell-O. The dominant brand status is of very high value it presents itself as reference in its product class, thereby erecting entry barriers to competitors (Kapferer, 139). That performance is depicted in Figure 3. In extreme cases, the Figure 3. Dynamics of Brand Awareness
Unaided awareness 100% Unaided awareness 100%

100% Assisted awareness Assisted awareness


a) Blocked market

b) Accessible market

Source: Kapferer, Jean-Nol, Strategic Brand Management: Creating and Sustaining Brand Equity Long Term, 2001: 139

ultimate success can convert the brand name into a common label making it legally unprotected examples are: Aspirin, Cellophane, Escalator, and Windsurfer and the company loses its asset. In order to avoid a brand name becoming a common denominator for the product class it is sometimes necessary to create a generic name; for Xerox the generic name copier helped to protect its trademark. (Aaker, 15-16). Aaker (16) says that it is necessary to beware of names such as Windows as these are descriptive in nature making harder the distinguishing from the generic product and therefore making it harder to protect the name. Creating awareness establishing recall and recognition requires considerable resources since buying media is costly. Having a broad sales base is surely a supporting