Brand Equity & Advertising

Advertising's Role in Building Strong Brands

David A. Aaker, Alexander L. Biel, David A. Aaker, Alexander Biel, David A. Aaker, David A. Aaker, Alexander Biel

• Publisher: Psychology Press
• Year: 2013
• ISBN:
  9781317759829
• Edition: 1
• Topic: Business
• Subtopic: Consumer Behaviour
• Index: Business

The tenth annual Advertising and Consumer Psychology Conference held in San Francisco focused on branding -- a subject generating intense interest both in academia and in the "real world." The principle theory behind these conferences is that much can be gained by joining advertising and marketing professionals with academic researchers in advertising. Professionals can gain insight into the new theories, measurement tools and empirical findings that are emerging, while academics are stimulated by the insights and experience that professionals describe and the research questions that they pose. This book consists of papers delivered by experts from academia and industry discussing issues regarding the role of advertising in the establishment and maintenance of brand equity -- making this volume of interest to advertising and marketing specialists, as well as consumer and social psychologists.

Chapter 1

Brand Equity and Advertising: An Overview

David A. Aaker

University of California at Berkeley

Alexander L. Biel

Alexander L. Biel & Associates, California

Brand equity, a concept born in the 1980s, has aroused intense interest among marketing managers and business strategists from a wide variety of industries. The Marketing Science Institute, a consortium of over 50 leading firms, considers brand equity one of its top research priorities. For this reason, substantial research effort has been channeled into defining, measuring, and understanding the antecedents and consequences of building strong brands. This book is one result of that effort. The topic is prominent because of (a) the financial community's interest in placing a value on brands, and (b) reaction against the frequency of short-term price competition that dominates many industries.

The financial community has placed extraordinary prices on the value of established brands, treating them as intangible assets with the potential to grow in value rather than depreciate. As a result, interest in a company's portfolio of brands has been elevated from the marketing department or product group to the executive floor and boardroom.

Philip Morris purchased Kraft for more than six times its book value. In his 1989 keynote address to the Advertising Research Foundation, Hamish Maxwell, the man behind the acquisition, emphasized that he was buying strong brands. Philip Morris sought brands that (a) had a loyal consumer franchise, (b) could convert the pull of that consumer franchise into leverage with the grocery trade, (c) could be extended, and (d) most importantly, could guarantee the successful diversification of Philip Morris outside the tobacco business.

In some ways, Nestle's recent acquisition of Perrier for $2.5 billion represents the quintessential tribute to brand equity. As a sparkling mineral water, Perrier is as undifferentiated from its competitors as a product can be. Yet, as the long-established, category-defining brand, Perrier brings something quite valuable to Nestle.

A second impetus for interest in branding is the debilitating price competition that has occurred in industry after industry, from TV sets, to airlines, to automobiles, to coffee, to frozen food. The percentage of advertising/promotion mix that is diverted to brand-building advertising shrank from 90% in the 1950s to 25% in the early 1990s. The balance is spent on trade (nearly 50%) and consumer promotions. This has resulted in a tendency to compete on prices, an accompanying reduction in loyalty, and often a focus on costs while sacrificing product improvement and quality standards.

What is the route away from a reliance on prices as the primary competitive arena? Many believe the answer is brand equity—building brands that are strong enough to resist the pressure to compete largely on price. The emphasis would then turn from the short-term pay-offs of price promotion to longer term strategy.

We must first determine exactly what the concept of brand equity means. A consumer perceives a brand's equity as the value added to the functional product or service by associating it with the brand name. A company may view it as the future discounted value of the profit stream that can be attributed to the price premium or enhanced loyalty generated by the brand name. From a managerial perspective, it is a set of assets—including brand awareness, brand loyalty, perceived quality, and brand associations—that are attached to a brand name or symbol (Aaker, 1991). This book expands on these views and suggests others.

There is a broad consensus that advertising is a major contributor to brand equity, and many of the papers in this volume explore that contribution. Other papers explore issues related to the broader questions of how brand equity should be created and managed:

• How can/should the asset value of a brand name be measured?

• On what is brand equity based?

• How can it be developed and enhanced?

• How can brand equity be exploited through brand extensions?

The book contains six sections, plus this introduction and a concluding commentary by Bill Wells. In the first section, three chapters present a global view of branding. The second section discusses brand personality. The third section deals explicitly with the role of advertising in creating brand equity. The fourth provides three different perspectives on brand equity. The fifth delves into brand extensions, and the sixth includes several case studies.

A GLOBAL VIEW ON BUILDING BRANDS

There is, with good reason, intense interest in branding issues as firms grapple with developing and implementing global branding strategies. In this context, the three chapters that open the book provide timely insight into the area, each from a very different perspective.

The lead chapter in this section, by Owen at Landor, is “The Landor ImagePower Survey—A Global Assessment of Brand Strength,” which includes perceptions of hundreds of brands in Europe, Japan, and the United States, determined along esteem and awareness dimensions. In our view, this survey is a useful empirical effort to study brand power. The survey methodology and results have never been published in as great detail as they are here.

The ImagePower survey provides a specific operational view of what brand strength is and how it should be measured so that brands can be compared. It identifies how brands perform along these measures, a first step toward learning how strong brands become strong and why weak brands are weak. Of special interest is the existence of side-by-side data in Europe, Japan, and the United States. Thus, we can observe which types of brands are strong in each market (e.g., car brands tend to be stronger in Europe). We also explore how foreign brands fare in each market.

The next piece, by Jeri Moore of DDB Needham, “Building Brands Across Markets: Cultural Differences in Brand Relationships Within the European Community” describes a survey of brand strength for 93 brands in 13 product categories across five countries, conducted by DDB Needham. The awareness dimension is similar to the Landor measure, but esteem is replaced by brand affinity (“brand I like,” “suits me,” “brand I trust”) and brand perceptions (“leading brand,” “worth the price,” “excellent quality”).

Moore also explores cultural factors that may contribute to the ease with which a brand can build its equity within a particular market. These factors, combined with graphic examples of how actual brand equities vary, by dimension, across markets, suggest the dangers of using a common marketing strategy across markets within the European Community.

The next selection, by Tanaka of Dentsu, “Branding in Japan,” is a rare paper by a leading Japanese researcher that discusses why advertising in Japan is so different. Tanaka describes the extent to which Japanese advertising relies upon mood advertising and proposes reasons for this. His arguments provide true insight into the Japanese culture and advertising environment. He discusses the role of new product velocity and its impact on the corporate brand in Japan. Tanaka reviews nine empirical studies sourced in Japan, basing his theories on sound evidence.

BRAND PERSONALITY AND BRAND EQUITY

A number of chapters in this book explore brand personality in the context of equity. Brand equity is a newcomer to the lexicon of marketing, whereas brand personality has been around for some 40 years. Martineau, writing in the early 1950s, was an early champion of the concept. The chapters in this section take a new look at brand personality, brand image, and their relationship to brand equity.

In chapter 5, “Converting Image to Equity,” Biel presents an overview of the brand image concept. Noting the easily confused terminology for brand image and brand equity, he argues that brand equity is driven by consumer choice. Choice, in turn, is driven by brand image. Biel notes that functional differences between brands are becoming ever more trivial. As a consequence, he suggests that the “soft” concepts of brand personality and brand relationships (see Blackston, chapter 8) are likely to be far “harder” and more effective in creating brand equity than most marketers realize.

In “The Brand Personality Component of Brand Goodwill: Some Antecedents and Consequences,” Batra, Lehmann, and Singh explore the impact of brand personality on the extendibility of a brand. They present the results of a pilot study and speculate about some of the ways in which advertising contributes to brand personality.

Smothers notes that a brand, like a person, can have a personality. This well-known concept leads to a similar analogy to explain the extraordinary loyalty enjoyed by a few brands. Are certain commanding, almost magnetically appealing brands—like certain people—charismatic? If so, what implications can we draw about how these brands attained their enviable position? In his chapter, “Can Products and Brands Have Charisma?” Smothers draws on the sociological literature to develop the implications of this unique concept.

Blackston, on the other hand, is concerned that brand personality alone does not adequately explain the interaction of people with brands. For example, he notes that those who like a brand and those who do not often describe a brand's personality in much the same terms. This led him to develop the concept of brand relationships, which he explores in “Beyond Brand Personality: Building Brand Relationships.” Specifically, Blackston advocates a very different perspective on brand relationships, going beyond asking consumers to describe the personality of brands to determining what they believe that brands (as people) think of them. Blackston, who won the coveted British Market Research Society prize for a paper discussing this subject, argues that this concept helps to explain brand equity.

Whereas Smothers looks at brands through the lense of sociology, McCracken approaches brand equity from the anthropological viewpoint. His thesis is elegantly simple: Brands have value because they add value. In “The Value of the Brand: An Anthropological Perspective,” the author focuses on the cultural meanings of brands: How do they get there and why are they important to consumers? A particularly interesting construct in McCracken's paper is the process he calls meaning transfer.

McCracken suggests that cultural meanings are constantly drawn from the general culture, transferred to brands and product categories by advertising, and then transferred from brands to consumers. Strong brands, he notes, are rich “storehouses of the meanings” that consumers use to define their actual and aspiration selves.

THE ROLE OF ADVERTISING IN CREATING BRAND EQUITY

Advertising, along with personal experience, is an undeniable force majeure in creating brand equity. But how, exactly, does advertising impact equity? What is the mechanism involved? Biel notes that advertising drives brand equity by creating or enhancing brand image. The chapters in this section represent the latest, best thinking on how advertising contributes to equity.

In Aaker's Managing Brand Equity (1991), one of the four dimensions of equity is perceived quality. Work by The Ogilvy Center using the Profit Impact of Market Strategy (PIMS) data base suggests that advertising affects profits by amplifying a brand's relative perceived quality. In turn, perhaps the most robust of all PIMS findings is the clear relationship between quality and ROI.

Kirmani and Zeithaml, in “Advertising, Perceived Quality, and Brand Image,” develop a model of perceived quality while exploring the relationship between intrinsic and extrinsic cues, and how they relate to perceived value. Of particular interest is their conceptualization of perceived value as the con-trast of what is received compared to the cost in both monetary and nonmonetary terms.

The conventional U.S.-originated conceptualization of advertising is expressed in terms of its effect on consumers. But Lannon, one of the most prolific writers on this topic in the United Kingdom, turns this idea upside down. “What do consumers do with advertising?” she asks. In her contribution to this volume, “Asking the Right Questions,” Lannon shows that these two essentially different models produce very different kinds of advertising.

Lannon argues that advertising styles depend not only on the intuitive choice of models, but also on the evolution of advertising style. Utilizing a semiological approach, Lannon describes the evolution of advertising styles in developed markets from what she calls “the manufacturer speaks” to “the brand creates its own language code.”

In “Expansion Advertising and Brand Equity,” Wansink and Ray examine advertising's ability to increase the frequency of usage for an established brand. However, encouraging frequency of use is not without its risks. For example, advertising encouraging people to eat Campbell's soup at breakfast, an inap-propriate time, could evoke negative overall attitudes toward the brand. Experimental data on two alternative approaches to extending use contexts is reported, one using a situation-specific frame, the other a product-specific frame. Each has a place, the authors argue, but the conditions favoring each vary.

Edell and Moore, in their chapter on “Impact and Memorability of Ad-Induced Feelings: Implications for Brand Equity,” demonstrate that the feelings induced by advertising exposure are stored in memory as part of the ad trace. In addition, the authors show that ad-induced feelings and brand claims are equally well recalled. Importantly, the ability to retrieve these feelings can be facilitated with a number of different retrieval cues.

Krishnan and Chakravarti, in “Varieties of Brand Memory Induced by Advertising: Determinants, Measures, and Relationships,” are interested in how memory is created. In particular, they focus upon implicit memory, where the consumer is unaware of the role of advertising in affecting memory even though it has an impact. After reviewing several theoretical bases for the phenomenon, they discuss how it might be measured using indirect tests.

PERSPECTIVES ON BRAND EQUITY

This section contains three very differen...

Table of contents

• Cover Page
• Half Title page
• Series page
• Title Page
• Copyright Page
• Contents
• Preface
• 1 Brand Equity and Advertising: An Overview
• Part I A Global View on Building Brands
• Part II The Brand Personality and Brand Equity
• Part III The Role of Advertising in Creating Brand Equity
• Part IV Perspectives on Brand Equity
• Part V Perspectives on Brand Extensions
• Part VI Case Studies and a Commentary
• About the Contributors
• Author Index
• Subject Index