Chapter 1

Why it is crucial to create powerful brands

What is a Product?
Features and Benefits? Levitt, 1980: Layers of product Generic Expected Augmented Potential

The top 10 brands in Brand Value (Interbrand 2012)

Brand Coca-Cola Apple IBM Google Microsoft GE Value in $m 77,839 76,568 75,532 69,726 57,853 43,682 % change year on year +8% +129% +8% +26% -2% +2%

McDonalds
Intel Samsung Toyota

40,062
39,385 32,893 30,280

+13%
+12% +40% +9%

See: http://www.interbrand.com/en/best-global-brands/2012/Best-Global-Brands-20123 Brand-View.aspx

Products:
Products are functional Core product is easy to imitate Surround makes the product unique Consumers buy benefits

What is a Brand?
AMA: A brand is a name, term, sign, symbol, or design which is intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors.

Is this definition sufficient?

Why do brands matter?

Brand is intangible asset for the firm Brand offers value for consumers:
Identification of source Assignment of responsibility Risk reducer Search cost reducer Promise Symbolic Device

 Brand offers value for manufacturers:

Identification and ease of handling/tracing Means of legally protecting features Signal of quality Endows products with unique associations Source of competitive advantage Source of financial returns

Components of world class marketing

A deep understanding of the market place Correct needs-based segmentation and prioritisation Segment-specific propositions Powerful differentiation, positioning and branding Effective strategic marketing planning processes Long-term integrated marketing strategies Deep understanding of major customers needs Market/customer-driven organisation structures Professionally-qualified marketing people Institutionalized creativity and innovation

Confusion about what marketing is

Marketing is a process for: Defining markets in terms of needs Quantifying the needs of the customer groups (segments) within these markets Putting together the value propositions to meet these needs Communicating these value propositions to people in the organisation responsible for delivering them Playing an appropriate part in delivering these value propositions (usually only communications) Monitoring the value actually delivered ( McDonald, 2007 )

The Growing Importance of Intangible Assets

In 2006, Proctor and Gamble paid 31 billion for Gillette Only 4 billion was accounted for by tangible assets:

(David Haigh, Brand Finance, Marketing Magazine, 1st April 2005)

Why would P&G pay so much for an intangible?

Some P&G Brands:

Pantene Herbal Essences Head & Shoulders Aussie Wella Ariel Bold Daz Bounty Febreeze Duracell Pampers Fairy

Olay Gillette Mach 3 Oral B

Brands are key intangibles in most businesses

Brands are estimated to represent at least 20% of the intangible value of businesses on the major world stock markets. Brands combine with other tangible and intangible assets to create value Developed Markets Brand
Brand Patents Software

Marketing intangible

20%
Intangible assets

Technology intangibles Customer intangible Contract intangibles

Customer relationships Distribution rights Assembled workforce Business Goodwill

Other Intangible Assets

55%
Tangible Assets 25%
Source: Brand Finance

Tangible assets Illustrative