BBM-7-IBM International Brand Management
Question 1:“Indeed, at the surface, there is not much connection between the fields of activity of marketing and finance departments. Marketers focus on customers, products, and distributors”. Fischer, (2016)
Critically assess the importance and methods of valuing a brand financially paying attention to its role for the organisation.
Answer 1
Brands today are not restricted to marketing or profits made by a company, but are a part of our everyday life. In the light of emergence of concepts of consumer awareness and the new world economy, brands have a quintessential role to play. The term brand, infers to names, terms, signs, symbols and logos that identify goods, services and companies; Brand Value is not just a financial number. Brand Value is a measure of several factors like loyalty of customers, the ability of a brand to keep offering newer products and technology, and to connect with consumers, who give it a premium. Brand Valuation can be defined as the process used to calculate the value of a brand or the amount of money another party is willing to pay for it or the financial value of the brand.
Still, branding is a necessary tool for companies to display how they are different and special from their competitors. In a Forbes article, “Why Brand Building Is Important,” Scott Goodson writes, “Brands outlive product cycles…. No branding, no differentiation. No differentiation, no long-term profitability. People don’t have relationships with products, they are loyal to brands.”
Brand strength often runs parallel to the success of a company. Consumers latch onto a brand they feel comfortable and familiar with, one that deviates slightly from other similar products in some way. As a result of this loyalty, customers are more likely to purchase from their favorite brands than from other brands. Apple has mastered this idea. Consumers line up to buy their new products (Apple
Watch, iPad, iPhone) even before all information about the products has been provided to the public. Apple has created a brand where consumers trust that the products released by the company will be of the highest quality and worth the money. In the current market, Apple is able to easily convince consumers that they have a need for a product Apple is selling; consumers trust that Apple knows them enough to suggest good products. For Apple and many other brands, trust contributes to consumers’ loyalty and desire to return for future purchases.
Brands have three primary functions – navigation, reassurance and engagement. Navigation is when the brands help customers to select from the bewildering array of alternatives while Reassurance ensures that they communicate the intrinsic quality of the product or service and assure consumers at the point of purchase. On the other hand, engagement communicates a distinctive imagery and associations that encourage identification of the brand by customers. It is an obvious hypothesis that the value of brands and the process of their valuation both are important.
The process of brand valuation is of primal importance not only for the brand and the respective owning company to improve upon the same but also for the purposes to increase the market value and ascertain accuracy in instances of mergers and acquisitions. In other words, brand valuation would comprise of technical valuation which can be utilized for reporting financial statement, tax planning, securitization, licensing, mergers and acquisitions and investor relations purposes and commercial valuation. At the same time, brand valuation is operational for the purpose of brand architecture, portfolio management, market strategy, budget allocation and brand scorecards. Thus, the application of brand valuation would be for strategic brand management and financial transactions.
Role of brand valuation for the organization
The brand valuation plays a significant role for the organization by providing a competitive advantage and also brand provides a stable asset to the organizations. Brands are the most sustainable asset of any organization, and when aligned with the overall strategy of the organization they can function as the central organizing principle for the organization’s decision making. In addition to it, the role of brand valuation is to measures the portion of the purchase decision that is attributable to the brand and related to the other factors (for example, purchase drivers like price, convenience, or product features).
The Role of Brand Index (‘RBI’) quantifies this as a percentage. The organization relies on customers and customers rely more on brands to guide their choice when competing products or services cannot be easily compared or contrasted, and trust is deferred to the brand (e.g. computer chips), or where their needs are emotional, such as making a statement about their personality (e.g. luxury brands). RBI tends to fall within a category-driven range, but there remain significant opportunities for brands to increase their influence on choice within those boundaries, or even extend the category range where the brand can change consumer behavior.
As stated above, branding provides a value to companies beyond the tangible assets held by companies (Abratt & Bick, 2003). It entices (or deters) consumers to purchase certain goods and services. For example, many iPhone users purchase their phones because they trust the quality of the Apple brand. This value that goes beyond the value of the physical assets held by companies is invaluable, especially for such famous brands as Apple, McDonalds, Coca-Cola, Wal-Mart and Google.
Brand value is not currently recorded on the balance sheet or in any financial statements.
It is left to financial analysts, marketers and economists to assess.
However, this is problematic for investors. It fails to fairly present companies’ financials to the public. A (hypothetical) company may have the same assets as Apple, but without the same brand awareness in the marketplace. Blindly looking at the financial statements of each, investors would not know the difference; a sensible investor would have to be aware that the Apple name differentiates Apple from the other similar company. It is the responsibility of accountants and corporate executives to make the public aware of the status of a company in a way that allows the public to compare companies’ worth. Therefore, it can be concluded that it is important for the firms to value the brand financially.
Methods of brand valuation
Accumulated Cost method
Accumulated Cost or Historical cost method is the method involves historical cost of creating the brand as the actual brand value. It is often used at the initial stages of brand creation when specific market application and benefits cannot yet be identified. However, the shortfalls of this method are that there exists difficulties as to what would classify as marketing costs and subsequent amortization of marketing cost as percentage of sales over the brand’s expected life.
Replacement Cost Method
The Replacement Cost Method values the brand considering the expenditures and investments necessary to replace the brand with a new one that has an equivalent utility to the company. In addition, it is also proposed that the cost of launching a new brand is divided by its probability of success. Although this method is easy in terms of calculation, it neglects the success of an established brand.
Income split method
This values the brand as the present value portion of the economic profit attributable to the brand over the rest of its useful life. This has problems in that profits can sometimes be negative, leading to unrealistic brand value, and also that profits can be manipulated so may misrepresent brand value. This method uses qualitative measures to decide the portion of economic profits to be accredited to the brand.
Recognize Brands on the Balance Sheet:
The most explicit way to account for brands would be to value them at inception and record them on the balance sheet. Every year, brands would be revalued and balance sheet values would be adjusted to account for any increases or any decrease in value, assuming that it is efficient and cost effective to do so. Creating a line item to capitalize brands would make their value transparent to investors and other financial statement users. In doing so, brand value would remain separate from other line items, so users would still be able to easily distinguish brand assets from other assets (Wasserman, 2015). This approach would be beneficial because it would provide support for marketers. It would provide validity to the theory of brand valuation.
Therefore, all these methods can be used to value the brand in financial terms that can be important to achieve the actual goal of branding.
Abratt, R., & Bick, G. (2003). Valuing brands and brand equity: methods and processes. Journal of applied management and entrepreneurship, 8(1), 21.
http://www.brandvaluation.co.uk/Brand-Valuation-Issues/Brand-valuation-methods~14.html
Wasserman, B. (2015). Valuation of Intangible Assets: Should Brand Equity Be Accounted for on the Balance Sheet?.
Question 2: The role of the international brand manager is varied. Evaluate and prioritise the different functions giving justifications for your argument.
Answer 2
The international brand manager plays an important role by performing different functions.
A brand manager monitors market trends and oversees advertising and marketing activities to ensure the right message is delivered for their product or service. They work closely with many teams, including product developers, researchers, marketing personnel and creative agencies to make sure their company brand values and image are followed. They work both for consultancies and in-house marketing departments. Brand managers usually work normal office hours, Monday to Friday. Evening and weekend work is sometimes necessary to meet deadlines, attend product launches, conferences and exhibitions. They regularly travel to attend meetings with creative agencies. Those working on international brands may travel overseas. On the other hand, there is different role that is played by the international brand manager in different places. Brand managers are concerned with creating a lasting impression among consumers and improving product sales and market share (Daye, 2012). This is achieved by making sure their organization’s advertising and marketing activities send out the right image. Key aspects of the job include creating brand guidelines and making sure that employees follow them.
Employers cover most industry sectors, including manufacturers and retailers of food, drink, clothes and electrical products, and companies involved in providing financial services, travel, leisure or entertainment. Brand managers may also be employed in house by public sector bodies, charities and business-to-business service providers, such as IT, training and recruitment firms. Marketing agencies and consultancies that specialize in brand management usually look for candidates with marketing and commercial experience.
Brand management positions are spread throughout the UK. Many are concentrated in London and south-east England. Competition for brand management positions is high, and most people move into it after gaining experience in product development or marketing.
Principle Accountabilities:
The key principle accountabilities of the international brand manager are as below:
- Assist in development and execution of brand plans by leading and delivering projects working effectively with cross functional teams, end markets and agencies.
- Promote fact based decision making through data-analysis, reporting and providing sound recommendations based on category and ex-category reviews, working closely with the Strategic Planning & Insights team and other functions (Brand Uniq, 2017).
- Work with Trade Marketing & Distribution, Digital and agency teams in the preparation of engagement programmes and cycle plan activities to ensure brand strategies and objectives are effectively executed and evaluated at field level.
- Support the end to end development of New & Existing Product Innovation platforms working with cross functional teams and maximizing platform ROI (Creative Pool, 2015).
- Monitor marketing mixes, execution of brand strategies, plans and standards at end markets to maintain the integrity of brand equity taking action as required. Safeguard product
- Integrity by ensuring that any proposed changes to product specifications are approved by the assigned approver in Central Brand Marketing.
- Develop working relationships with Regional and End Market brand marketing teams to facilitate communications of brand/market information, share best practices and promote commitment/support behind implementation of brand strategies to optimise efficiency and prove the effectiveness of the marketing mix.
- Report and analyse brand performance in a clear, concise manner with focus on required actions, demonstrating understanding of brand issues and market opportunities.
- Monitor and report brand expenditure to ensure it does not exceed budget defined in operational brand plan (Career Advice, 2017).
- Monitor external agencies to ensure brand programmes are performed with required quality and agreed cost & timescales.
- Support development and delivery of the annual rhythm of marketing, meeting requirements of governance cycle.
Career Advice (2017) The role of a brand manager. Retrieved from: https://www.robertwalters.com.br/en/career-advice/the-role-of-a-brand-manager.html
Creative Pool (2015) Job Description: Brand Manager. Retrieved from: http://creativepool.com/articles/jobdescriptions/brand-manager-job-description
Brand Uniq (2017) A Career in Brand Management: Everything You Need To Know. Retrieved from: http://branduniq.com/2011/brand-manager-job-description/
Daye, D. (2012) Brand Management: Process And Responsibilities. Retrieved from: https://www.brandingstrategyinsider.com/2012/01/brand-management-process-and-responsibilities.html#.WYG67lHhWUk
Question 3
‘Brand Imagery is the most important element of brand knowledge structure’.
Critically discuss this statement.
Answer 3
This statement is true because brand knowledge structure has different elements and from that brand imagery is a one important element of it. Brand imagery is combination of user and usage imagery. User imagery describes the user of the brand with personality traits while usage imagery describes the context in which to use the brand. Brand image is defined as consumer perceptions of a brand and is measured as the brand associations held in consumers’ memory.
To measure brand image, you can either use and adapt an existing list of brand associations (e.g., Young & Rubicam’s Brand Asset Valuator or Aaker’s brand personality list) or start from scratch by eliciting brand associations and then measuring the strength of these associations. The major brands with a strong brand image are apple, Google and Puma, Adidas and many more (Zhang, 2015).
For example, Colgate is a brand name known in every Indian household. The brand has been able to create an image that defines trust, hope and belief. The consumer is convinced that the usage of Colgate products will give satisfactory results. The mindset of customers is set that using Colgate toothpaste will take care of their teeth and using the product will result in better health and oral care. Thus, when in the market, the consumer will mostly buy Colgate, as the brand Colgate has been synonymous with trust. Similarly, if there is another brand image etched in the consumers mind, he will buy that particular product.
Keller came up with the concept “customer-based brand equity (CBBE)” in 1993, which refers to the various reactions to the branding campaign from consumers who have knowledge of the brand in varying degrees. In other words, brand image and brand awareness are the basis and sources of brand equity. According to Keller
(1993), positive brand image could be established by connecting the unique and strong brand association with Brand knowledge refers to brand awareness (whether and when consumers know the brand) and brand image (what associations consumers have with the brand). The different dimensions of brand knowledge can be classified in a pyramid (adapted from Keller 2001), in which each lower-level element provides the foundations of the higher-level element.
In other words, brand attachment stems from rational and emotional brand evaluations, which derive from functional and emotional brand associations, which require brand awareness. Brand knowledge measures are sometimes called “customer mind-set” measures because they capture how the brand is perceived in the customer’s mind. However, the differential effect of brand knowledge is on the consumer response to the marketing of the brand (Rizwan, 2008).” For instance, More than just products, Apple offers a lifestyle, one that is hip, fun, and on the cutting-edge of technology (or so they would have you believe).
Their products meet needs you didn’t even know you had and their advertising skews to the young (and young at heart) with trendy music and splashy, colorful graphics. This is one big lesson in innovation and advertising success.
The main advantage is that a customer is secure in the knowledge that the brand is dependable and will provide him/her maximum benefits. The honor of a company is replicated by its brand image and it is this image that a person looks towards at. Hence, brand and its image are very important for the success of a company. On the other hand, it is possible to build brand image with strong advertisements because of which companies are promoting their products through various famous personalities to enhance their image of brand (Chandon, 2003). For example, McDonald’s is a company that produces insanely unhealthy food for bargain basement prices. But they’ve managed to make themselves desirable to a world that is leaning towards healthier fare by cutting Trans-fats, offering healthy options, and tossing the biggie-size mentality that has been blamed for making America fat. They have also garnered an image of social responsibility through their charity, the Ronald McDonald House, which helps families deal with illness and injury and by contributing to large humanitarian organizations like the Red Cross.
While studying, it is identified that current purchases are affected by brand image mostly directly and by brand awareness mostly indirectly. In contrast, future purchases are not affected by either dimension of brand knowledge directly; rather, brand knowledge affects future purchases via a brand relationship path that includes brand satisfaction, brand trust, and attachment to the brand. Thus, brand knowledge alone is not sufficient for building strong brands in the long term; brand relationship factors must be considered as well.
Thus, it can be concluded that brand imagery plays a significant role in developing brand knowledge among the customers by using effective marketing strategies.
Chandon, P. (2003). Note on measuring brand awareness, brand image, brand equity and brand value (pp. 1-12). Fontainebleau: Insead.
Rizwan, M. (2008). Study of Brand Awareness and BrandImage of Starbucks.
Zhang, Y. (2015). The Impact of Brand Image on Consumer Behavior: A Literature Review.
Question 4
Muir and Reynolds (2011) wrote: “…this ad hoc approach to deletion decision-making appears to remain in today’s environment …” (pp 12)[1]
Critically discuss to what extent product deletion is a demonstration of weak product and marketing management.
Answer 4
Product deletion is a process of eliminating products that perform below market expectations or fail to meet company objectives. This deletion process results in either product replacement or product elimination. When a consumer goes shopping they have lots of choices of things to buy in a store. New products are constantly being introduced; existing products are quickly being updated. Companies are competing with each other for sales in the market place. Sometimes products get phased out or deleted from a product line. There are many reasons for this happening a product is obsolete, loss of consumer interest changes in technology as well as other reasons (Hart, 1988). There is one example of product that is no longer sold in stores like Pogs were little plastic disc shaped toys. The Pogs had designs or characters on them people would trade them with each other. They were popular when they came out in the mid 1990’s but eventually consumers just simply lost interest in them. Also many school districts considered Pogs a form of gambling and banned kids from bringing them to school.
In context to it, the decision to eliminate a product is based on its impact on the overall product mix of the firm, and if a weak product is no longer making a contribution and the resources employed can be more effectively deployed, then it may be deleted. Various approaches to rationalization exist, which are based on different criteria to monitor and evaluate product performance. Product deletion may occur at any time. However, a company generally does so when the product has reached the decline stage of the product life cycle or when sales begin showing a dramatic downward shift and profit erode. In relation to this, Prospect theory assumes that losses and gains are valued differently, and thus individuals make decisions based on perceived gains instead of perceived losses. Also known as “loss-aversion” theory, the general concept is that if two choices are put before an individual, both equal, with one presented in terms of potential gains and the other in terms of possible losses, the former option will be chosen.
A declining product reduces an organization’s profitability and drains resources that could be used to modify other products or develop a new one. On business armlets, product deletions may become quite complex, involving not just communication with customers, but also existing long-term contracts remaining estimated demand, carful production planning and estimated demand for spare parts. It is also complex decision that is likely to have ripple throughout the organization. There are some organizations that delete the products only after the products have become heavy financial burdens (Muir & Reynolds, 2011). A better approach is one form of systematic review in which each product is evaluated periodically to determine its impact on the overall effectiveness of the firm’s product mix.
There are four stages of process of product deletion which are as follows:
- Detection of weak products
- Analysis of the weak products identified
- Decision to eliminate the product
- Implementation of the deletion decision
There are some factors of product deletion which creates impact on the business and marketing management activities which are carried by the organization. In other words, the business impact of product deletion explains that when a company eliminates a product once from its offering, the brand must decide whether its goal is to maintain or increase sales. To maintain revenues, the company must continue investing in its remaining products and ensure they are competitively positioned in the marketplace. However, if the company seeks to increase sales in the near future, then it must introduce a new group of successful products to generate additional revenue.
There are also many advantages that the company gets as a result of product deletion and hence the process of product deletion becomes important for the company. There are some reasons for product deletion is important like a drain of financial resources of the firm. In addition to it, marketing management is other reason which company faces as a problem sometimes when there is a situation that a company creates a large number of products in a single line. This leads to the overpopulation of the products and the marketing resources are used too thinly. Also there are chances of excess competition among the company’s own set of products and creates confusion in the minds of the customers. In these cases the companies go for deletion of the product.
In support of this, managerial problem is issue which company faces when a product is weak it acts as a burden on the company and the management attention (Hart, 1989). A weak product may require intense managerial efforts with respect to its price, distribution, sales etc. A weak product may also lead to weakening the image of the company and dissatisfaction among the intermediaries.
Therefore, it can be concluded that product deletion is a demonstration of weak product and marketing management.
Hart, S. J. (1989). Product deletion and the effects of strategy. European Journal of Marketing, 23(10), 6-17.
Muir, J., & Reynolds, N. (2011). Product deletion: a critical overview and empirical insight into this process. Journal of General Management, 37(1), 5-30.
Hart, S. J. (1988). The causes of product deletion in British manufacturing companies∗. Journal of Marketing Management, 3(3), 328-343.
