Effective Brand Building: A Case Study of McDonald’s Corporation

Knowing role the brand performs and the processof brand building allow the company to control how it is assessed in consumers’ minds.Careful studying McDonald’s brand building process sh

Student ID: 282826 Supervisor: Jan Friis

Bachelor Thesis

Effective Brand Building

A Case Study of McDonald’s Corporation

Jaroslaw Sliwka

Aarhus School of BusinessAarhus University2010

The changing world has encouraged big companies to create more personal connection withcustomers In addition, the constant sustaining of this relationship is required The conceptwhich is used by the companies and prove to be successful is brand building Even thoughcompanies establish the brand, not all of them are using it properly and make a good use of it.Maximum utility and using all aspects of the brand is the key to success In order to do that,the knowledge about the brand is necessary Thesis will present how to effectively build

a strong brand by taking theoretical and practical perspective At the beginning reader will beprovided with various concepts in the field of branding After that, the case of McDonald’sCorporation will be studied Analysis of McDonald’s brand building process will help

in understanding how this extraordinary brand was created

In the theoretical part there will be five main issues brought up First various concepts of what

a brand is and what are the function of the brand will be described After gaining knowledgewhat a brand is, different approaches how to build a brand are presented After that the idea

of brand equity and valuable functions it perform of the brand is explained The process

of creation of brand equity is possible thanks to brand equity drivers Different kind of driversand function they carry out for brand equity are described At the end of this chapter, afterknowing the basic element of the brand, all is summarized by showing various models useful

in assessing brand and its equity All theories are useful in assessing and describing effectivebrand building process

The second part of the thesis focuses on McDonald’s Analysis starts with brief presentation

of some essential to the case facts After that brand equity drivers of McDonald’sare described one by one, together with the function they perform for brand equity Then theoverview of McDonald’s struggle with the brand is presented in chronological order Both

of this sections show, that McDonald’s is a successful company thanks to proper brandmanagement and constant control over its image By implementing various elementscompany can be safe that even if one of them fail, there are others to compensate for it.Last section of practical use of branding knowledge present McDonald’s on BrandAsset Valuator Model and the financial value of the brand Even though McDonald’s has

a minor loss of brand equity values it stand for towards competition, the financial result aremany times better then the ones of competitors After this summary the future of McDonald’s

is speculated

Thesis shows it is important for companies to have a well thought our branding strategyand knowledge of brand building processes Knowing role the brand performs and the process

of brand building allow the company to control how it is assessed in consumers’ minds.Careful studying McDonald’s brand building process shows that the company knows how

to deal with its brand and proper brand management is their competitive advantage

Table of Contents

1.Introduction 4

Problem Statement 5

Content 5

Method 6

Delimitations and Assumptions 6

2.Theoretical background of brand building 7

2.1.The Brand 8

2.1.1.What is the brand 9

2.1.2.Role of the brand 9

2.1.3.Extend of branding 11

2.2.Brand building 12

2.2.1.Brand Building Theories 12

2.2.2.What is brand building for? 17

2.3.Brand Equity 17

2.3.1.What is brand equity? 18

2.3.2.Brand equity theory (elements of brand equity and their function) 19

2.3.3.Brand equity drivers (building brand equity) 21

2.4 Brand life cycle, expansion and position on the market 28

2.4.1.Product/Brand life cycle 28

2.4.2.Brand Growth Direction Matrix 30

2.4.3.Brand Asset Valuator 32

3.McDonald’s strategy for building a successful brand 35

3.1 Historical background of McDonald’s Corporation 36

3.2.McDonald’s Brand Equity drivers 37

3.2.1.McDonald’s Brand Elements 38

3.2.2.McDonald’s marketing activities related to brand building 40

3.3 Historical developments in McDonald’s brand building 45

3.4 Perspectives for McDonald’s 48

4.Conclusion 53

Bibliography 54

Wright, Owen (2007) McCafe: The McDonald's co-branding experience Journal of Brand Management 14, 442 57

1 Introduction.

The world has changed thoroughly in last few decades, especially because of the impact of globalization Frequent migration of individuals, the tremendous acceleration

of information exchanges as well as the enhanced geographical expansion and trade of goods and services, have transformed the economic and social environment in many ways Doing

business is not the same as forty, fifty years ago Companies have to adapt to the changingworld in order to survive or keep the position on the market These changes are especiallyprofound for fast-food sector Looking at the market leader provides good understanding ofthis process And where should we look for this leader if not in the United States, the marketwhere fast-food become part of national culture There are many outstanding fast-foodproviders in the USA, but one of them is beyond the competition, McDonald’s Corporation(McDonald’s) It is difficult to find a person who will not know basic information about theGolden Arches But how it is possible? What happened, that children when hear this magicword, instantly know what stands behind it? The interesting problem of McDonald’s brandwill be researched at in this thesis

Problem Statement

The main goals of the thesis are to explain what is a brand, and by applying thisknowledge to McDonald’s Corporation, the answer to the question why has McDonald’s been

a successful brand, will ne given The goal is also to describe brand building strategy in order

to get understanding why having a strong brand is important for the company The paper iswritten from marketing perspective Market of fast-food is changing together with the world,and despite many attacks McDonald’s was able to come out of the various situationsunharmed This was possible because of the strong brand it has Using the case ofMcDonald’s the thesis describes what a strong brand is What is the role of the brand? Howdoes the process of brand building looks like? What is brand equity and what are brand equityelements? The thesis focuses on getting fair view of how to build and keep the strong brandalive, and how to create, maintain and defend its position in consumer minds

Content

The thesis is divided into two chapters The first one contains the theoreticalbackground about brand building At the beginning the general idea is presented, and as textproceeds, more details about brand building are introduced The first chapter starts byexplaining the idea of the brand and its role Next part in about the process of building the

brand Different theories are presented in order to show there are many ways of describingbrand building process After that some theories about brand equity, which differ in categoriesare described Brand equity drivers together with their role and how to manage them properly

is the theme of another subsection The last part of the chapter shows different models whichare helpful in assessing stage the brand is currently in, and position it occupies in consumerminds Second chapter is about brand building done by McDonald’s First subsection is a briefhistory and essential fact which help is further analysis of the brand Analysis of the brandstarts with description of McDonald’s brand equity drivers and functions they perform Afterthat the process of building McDonald’s brand is explained by focusing on problems theGolden Arches faced throughout the years of existence Applying knowledge gained inprevious sections and comparing it with the models used in describing the brand is the theme

of next part Current position of McDonald’s brand and it’s performance is estimated At theend of the practical part of the thesis future of the brand, McDonald’s has build throughout theyears, is briefly assessed

Delimitations and Assumptions

Theories that are used for the discussion of McDonald’s case are commonly used andmentioned in literature when the concept of the brand is brought up Even though they havesome flaws and they sometimes are criticized, they provide a good understanding of how tobuild a successful brand The thesis will not focus on criticizing individual theories, but on

combining them in one entity in order to obtain a fair method for description and analysis ofthe chosen brand, which in case of this paper is McDonald’s Throughout the thesis sometheories are limited by focusing on case relevant approach Since the marketer approach waschosen in writing the thesis, the financial aspect of the brand is limited to the minimum Thepractical part, which is applying the theory to the case, is limited only to the McDonald’s inthe United States If McDonald’s international activities were taken into consideration theconclusion might be slightly different, however since this subject is too broad, it is limited tothe national market of the company Even though the general idea of McDonald’s brand is thesame throughout the world, brand operations in specific countries differ according to theconsumers That is why, in order to provide a fair understanding of building a brand, the deepanalysis of national market is done What is more, since building a successful brand is moreabout developing relationship with customers by using brand building methods by thecompany, the influence of competition on this process is omitted

2 Theoretical background of brand building

The process of building a strong brand and gaining competitive advantage is not

an invention, that at some point of time was made It was the process that throughout the yearswas growing in importance and along with the scope of branding Nowadays brand building isthe process that every company has to take into consideration When looking at market

leaders like Google, Nike or Coca-Cola we notice not only the name of the company but alsothe whole idea behind it This chapter will focus on a brand as crucial element of connecting acompany with its customers At the beginning the concept of the brand will be explained,together with its role and implications Then the idea of brand building and functions itperforms will be explained together with steps vital to the creation of significant brand equity.After that the great focus will be placed on brand equity First different theories will bepresented, secondly three main sets of drivers that help in creating brand equity will bedescribed and at the end factors that influence those drivers The next thing that chapter willfocus on is the life cycle of the brand

2.1.The Brand

There are many definitions of what a brand is There are as well many origins of theword brand But when did it get the meaning it has now? Originally brand was “a markburned on the hide of an animal to identify its owner, or on the person of a convicted criminal

to warn the public of theirs character”(Black 2003: 38) Mark Ritson writes that “the origin of

the term brand comes from brandr, the Norse word for fire It means to burn the mark of the

producer onto the product that they made.” (Ritson 2006: 17) It is not the time to discusswhich meaning was the first and wonder which one is more important The fact is that bothinterpretations are relevant Even these days, in the era of globalization, there are differentdefinitions of a brand Everything depends on the perspective we are looking from In the pastthe owners of animals used the word brand which meant for them claiming their property and

in case of theft, easy identification For producers of tools the same word meant marking theproducts with logo of the producer so if there was a need to complain, repair or suggestbuying the product to third party the manufacturer could be easily traced For the judiciarybranch word brand meant to mark a criminal and inform society of his past and whatbehaviour could be expected There were many functions which brand had in the past, and so

it is nowadays The first chapter includes a brief discussion of brand building theory Afterexplanation of the idea of the brand, theories of brand equity and brand equity drivers areintroduced The chapter includes also an assessment of the position of the brand in consumerminds and life cycle the brand follows

2.1.1 What is the brand

The definition of what a brand is depends on how deep and from what perspective it isdescribed The Oxford Dictionary of Economics describes brand as “a name used to identifythe maker or distributor of a good” For the economists this simplified explanation is enough

to understand what a brand is and it is sufficient for the perspective they look at a company.The American Marketing Association defines brand as “a name, term, sign, symbol, or design,

or a combination of them, intended to identify the goods or services of one seller or group ofsellers and to differentiate them from those of competitors”(Kotler 2006: 276) From themarketing perspective brand consists of some specific elements and carries out some function.From the perspective of the branding consultancy - Interbrand – brand is “a mixture oftangible and intangible attributes symbolised in a trademark, which, if properly managed,creates influence and generates value” (Interbrand 2007: 4) As it could be expected,consultancy firm is focused more on output, when explaining what a brand is

A brand is thus a dimension that differentiates products or services from products andservices of the competition which are designed to satisfy the same needs This dimension maycontain differences that communicate what brand represents or may be related to the product

or service performance This is the definition that will be used in the thesis

2.1.2 Role of the brand

In the past the idea of branding was used mostly in terms of marking property

or people The function was to inform about the ownership, assign workmanship to theproducer or signal the reputation of the individual In today’s world many diversified products

or services are branded But why do companies decide to brand them? Is it because of thepressure the competitors put on branding and because everybody do it? What is the reason ofbranding and what is the purpose? We simply may say because there are valuable functionswhich brand performs for a company as well as for customers This chapter will explain mainfunctions of branding by dividing it into two destination groups For contractors the threeimportant roles will be presented, and after that the implications for the consumers andbenefits of branding will be explained

The brand plays significant role in a performance of a company From the marketerperspective the main advantages of branding are legal protection, identity and loyalty

The first role is legal protection Having a brand helps in protecting the uniquefeatures or quality of the product, process or any other aspect of the company Kotlerand Keller explain how each type of intellectual property rights can be used, by distinguishinginto parts, “the brand name can be protected through registered trademarks; manufacturingprocess can be protected through patents; and packaging can be protected through copyrightsand proprietary designs”(Kotler 2006: 277) Legal protection has many implications.

It ensures that no one beside the company will have the benefits and it guarantees that moneycan be safely invested in brand building process Large amounts of money spend onadvertising campaigns prove a success only if the company can reap benefits from them

Identity is the second vital role the individual brand performs for a company The importantfeature of having a brand is being identified by consumers Having identity allows customers

to differentiate the company from the competition It helps them assign past experiences, likethe consequences of using the product, to specific manufacturer or distributor What is more,

by using brand building the consumer evaluation process of identical items may beinfluenced by brand awareness For a company having identity means having image whichcan be managed Even though once it is established it is difficult to change, it is worth aneffort since consumers often perceive image as representation of quality and performance.Image together with reputation are important issue in brand building process

Another function that brand performs is loyalty Brands signal a certain level of quality so thatsatisfied buyers can easily choose the product again.(Erdem 1998) The certain level

of satisfaction that is signalled by a brand like quality has major impact on loyalty Repeatablechoosing of the same product has advantages for both a seller and a buyer Brand loyaltyassures also “the tendency for consumers to prefer familiar names”(Black 2003: 38) Havingcertain number of customers helps sellers to plan the investment and development of thecompany It is a predisposition that every marketer wishes to achieve In other words havingloyal customers results in better earnings, which allow to invest money in brand building and

in result having a strong brand and better product behind it

On the other hand brand performs valuable functions also for consumers According toKapferer there are eight functions that create value in the eyes of consumers (Table 1)

These eight functions could be divided into three groups: recognition, reduction of theperceived risk and the pleasure side of the brand Identification and practicalityare mechanical and concern the essence of the brand According to Kapferer their role

is “to function as a recognised symbol in order to facilitate choice and to gainvalue”(Kapferer, 1997) Guarantee, optimisation and badge are responsible for reducingperceived risk Finding the same quality every time when making purchase, being sure

of buying the best product in its category and knowledge about the image the product presentsplay an important role in the decision making process Continuity, hedonistic and ethicalfunctions have “a more pleasurable side”(Kapferer, 1997) Continuous satisfaction with thebrand which may lead even to enchantment is the goal of every marketer Nowadays more andmore emphasis is placed on the ethical function of the brand since customers feel moreconnected to the brand and expect responsible behaviour in exchange of making the purchase.However, all these functions are not achieved automatically, and not every company performsall this functions

2.1.3 Extend of branding

Every company strives to establish a brand as strong as possible, since it makes doingbusiness easier and smoother For customers brand offers easiness of product choice There

is no need to test, challenge or classify to a great depth because of familiar brand, which

if properly managed, leaves the hints what this brand stands for and what could be expected

(Reisenbeck, 2007) The good example is Apple brand It is possible due to successfulbranding which is “endowing products and services with the power of a brand” (Kotler, 2006:278) It is the marketers role to teach consumers about the product, what it does and whyconsumers should care by creating “mental structures that help consumers organize theirknowledge about products and services in a way that clarifies their decision making process”(Kotler, 2006: 278) Crucial role of the brand is to convince customers there are significantdifferences among brands offering the product But how to create a brand that will performsuch functions? It could be done through brand building

2.2.Brand building.

In order to build a successful brand a lot of effort has to be devoted to brand buildingprocess There are many models and each of them focuses on different aspects of the brand.There will be presented four different theories BRANDZ and Brand Resonance Modelconsider brand building as a series of steps, whether Brand Orientation and Brand Leadershipare focused on building interconnected models

2.2.1 Brand Building Theories.

Millward Brown, the marketing research consultant, is the one who developed themodel of brand strength called BRANDZ The main idea is the BrandDynamics pyramidpresented in Figure 1 which argues that brand building is the process

As Kotler captures it “brand building follows a sequential series of steps, eachcontingent upon successfully accomplishing the preceding one” (Kotler 2006: 283) The mainpoint is the distribution of the consumers The most consumers could be found on lower levelsand it is the job for marketers to increase the number of programs and activities that will helpconsumers move to higher levels

There is assigned enquiry to each level of the pyramid The weakest relationship andlow share of category expenditure is at Presence level “Do I know about it?” At Relevancelevel consumer is aware of the product and answers question “Does it offer me something?”.The next level is Performace, “Can it deliver?” After that is the Advantage level whichconsiders reaction to the question “Does it offer something better then others?” The last level

at which is the strongest relationship and the highest share of category expenditure isBonding It is the best and the most awaited level of bond with the consumer They make achoice to buy the preferred brand automatically without considering products of competitors

Another theory which ponder the brand building process as a series of steps is BrandResonance Model Kotler had distinguished six “brand building blocks” which together form

a four steps pyramid presented in Figure 2 He differentiated two sides of the pyramid:rational and emotional Kotler argues that in order to create significant brand it requires

“reaching the top or pinnacle of the brand pyramid, which occurs only if the right buildingblocks are put into place”(Kotler, 2006: 285)

The first step, Brand Salience, considers how often and how easily do customers think ofthe brand under various situations like purchase or consumption The objective of this step

is to ensure that brand and its associations are identified in consumers’ minds with a specificproduct class of customer need The second step consists of two blocks: Brand Performancewhich considers if the customers’ functional needs are met by the product or service andBrand Imagery which describes the properties, including the ways in which customers’psychological and social needs are attempted to met by the brand The purpose of the secondstep is to “establish the brand meaning in the minds of customers by strategically linking

a host of tangible and intangible brand associations”(Kotler, 2006) The role of advertising

is crucial at this step since it shapes the image of the brand Crafting association with thebrand that are strong, unique and favourable are necessary to keep brand competitive For thethird tier of the pyramid Kotler proposes two blocks: Brand Judgements and Brand Feelings.Judgements emerge from Performance and Imagery associations and are focused on personalopinions and evaluations like perceived quality of the brand, credibility, consideration andsuperiority Feelings, on the other hand, are the emotional responses and reactions to the brandlike social approval, self-respect, excitement, fun It is important to obtain a proper positiveresponse in the consumer mind in terms of judgement and feelings The last block of thepyramid is Brand Resonance which refers to nature of the relationship and psychological bondthat customers have with the brand and their level of engagement

The other way of building a brand is through building an interconnected structure.Brand building model presented by Urde is Brand Orientation “Brand Orientation is

an approach in which the process of the organization revolve around the criterion,development and protection of the brand identity in an ongoing interaction with targetcustomers with the aim of achieving lasting competitive advantages in the form ofbrands”(Urde, 1999) Basically the model focuses on the brand by considering it as strategicresources Urde argues that when building the brand one should “first create a clearunderstanding of the internal brand identity The brand becomes strategic platform thatprovides the framework for the satisfaction of customers’ wants and needs”(Urde, 1999).The development of the brand focuses on more deliberate and active manner, starting with thestrategic platform which core point is brand identity Moreover the response of customers

is what partially drives and directs the development “What is demanded by customers at anygiven moment is not necessarily the same as that which will strengthen the brand as

a strategic resource”, “the wants and needs of customers are not ignored, but they are not

allowed unilaterally steer the development of the brand and determine its identity”(Urde,1999) Figure 3 presents the theoretical illustration of the model.

Figure 3 Brand Hexagon (Source: Urde 1999)

It can be clearly seen that integration and interconnection of the factors have important role

in this model The core process of creating brand meaning, which consists of positioning thecore values lies at the central point of the model The emotional functions (Corporate nameand Brand name) are reflected in the left side of the model The rational view (ProductCategory and Product) is presented at the right side of the model The way in which targetconsumers interpret the brand (Target Audience) is at the upper side, while intensions of thebrand (Vision and Mission) are situated at the lower part of the model

The last brand building theory presented is Brand Leadership model This modeldiffers from traditional branding models by emphasizing not only strategy but also tactics.Aaker and Joachimsthaler understood that building the brand is one of crucial functions

of doing business and argued that brand manager should “be higher in the organization with

a longer-term job horizon”(Aaker, 2000: 350) They expect the brand manager to be the topmarketing professional in the organization “The brand manager in the brand leadershipparadigm is strategic and visionary rather than tactical and reactive He or she takes control ofthe brand strategically, setting forth what it should stand for in the eyes of the customer andothers relevant parties and communicating that identity consistently, efficiently andeffectively”(Aaker, 2000: 350) Brand leadership model’s main concept is that the brandstrategy should be influenced by the business strategy and should reflect the same strategic

vision and corporate culture Organizational challenge considers the creation of brandbuilding organization The second challenge is the development of brand architecture that will

be providing company with strategic direction The third challenge is the development

of brand strategy that differentiates the brand including motivating brand identity andrecognition among consumers The last challenge for company is refining brand buildingprograms to be efficient and effective so customer perceptions, attitudes and loyalty could beshaped In order to achieve brand leadership there are four challenges presented in Figure 4

Figure 4 Brand Leadership Tasks (Source: Adapted from Aaker 2000: 350)

The first challenge company encounters is the creation of organizational structure andprocesses of company that will lead to strong brands Authors claim that brands should not be

“at the mercy of ad hoc decisions made by those with no long-term vested interest in thebrand”(Aaaker, 2000) Additionally, there should be a brand leader for every product, market

or country There should be brand-nurturing structure, tools and culture which will allow thecommunication and management process to share experience, information, insights andinitiatives

Another challenge of Brand Leadership approach concerns brand architecture It is aboutidentification of the brands, sub-brands that will be supported, their relationships andrespective roles If managed properly, the effect will include clarity of customer offerings,synergies in communication programs and ability to leverage brand assets Another keyfunction of brand architecture are decisions about extending brands: should company use sub-brand, endorse brand or create a new one “The relative role of each brand in the portfolio

should be determined”(Aaker 2000) in order to make proper decision about assigningadequate resources.

One more challenge, the company faces, is brand identity and position Brand position helps

in prioritizing and focusing the brand identity by setting communicating objectives The brandidentity – “a vision of how that brand should be perceived by its target audience”(Aaker,2000) is the key element in brand leadership model It guides and inspires the brand-buildingprogram However if there is ambiguity and confusion in brand identity, the chances ofeffective brand building are strongly reduced

The last challenge company faces are brand building programmes and communicationactivities which are necessary to develop the brand identity They are useful not only in theimplementation of brand identity but also in brand defining process Accessing multiple mediahelps being noticed and remembered, helps in changing customer perceptions, reinforcingattitudes and creating loyalty

2.2.2 What is brand building for?

Even though the four models of brand building, presented in previous section, differ inapproach, they all have the same goal: lead the brand to a point where omnipotence andrecognisability allow becoming the leader of the market and reaping all possible benefits from

it Building the brand is not simple and there are many different aspects that has to be takeninto consideration Building successful brand requires putting a lot of effort into this processand constant monitoring of the situation If the brand building process is without supervisionand left on their own there is little chance it will create desired loyalty, associations andattitudes toward company and its products But what exactly are those differences created inconsumers’ minds that brand building tries to achieve? Next section will focus on finding outwhat are the differentiators of a brand in the same product or service category

2.3.Brand Equity

The main role of branding is to create differences in minds of consumers But whatinfluences the way the product or service is perceived? What processes can be influenced andendowed with the brand? This section will focus on brand equity theory First, definition

of brand equity and approaches of measuring it will be presented After that different theories

about from which elements of brand equity will be described Then the discussion will focus

on components creating brand equity, called brand equity drivers The final part of the chapterwill focus on choosing and designing brand equity drivers

2.3.1 What is brand equity?

The concept of brand equity is widely accepted However depending on perspective

there are different definitions of brand equity Knowles in his article Varying Perspectives on Brand Equity distinguished three definitions: financial, accounting and marketing approach.

In the financial concept the brand equity means “the incremental cash flow that accrues to thecompany as a result of owing a brand”(Knowles 2008: 23) Such a definition resulted fromthe financial attitude towards equity There is also accounting concept, which as author writeswould use the term “trademark and associated goodwill”(Knowles 2008: 23) This definitionresults from the perspective that accountants perceive assets The marketing concept, on theother hand does not describe brand equity in terms of money Knowles’ definition of a brandequity from marketing perspective is similar to Kotler’s which describes it as “the added valueendowed on products and services”(Kotler 2006: 280), since that is the job of marketers Butwhat are those values and where are they added? What aspect of company are influenced bythe brand building?

Studying and measuring the brand equity can also be done by using three perspectives.The firm or managerial level approach assesses the brand as financial asset The intangible

value of the brand is calculated William Neal and Ron Strauss(2008) wrote A Framework for Measuring and Managing Brand Equity which explains the way of measuring it The goal

of their paper is helping in a better framework development for addressing brand equity.Measurement of brand equity can also be conducted on product level At this level the equity

is calculated by comparing the price of a generic product to the price of the equivalentbranded product The remainder is due to the perception of the brand in the marketplace.The last measurement method is not about calculating the financial value of equity It is aboutfinding what are the associations in consumer mind connected to the brand The marketingdefinition of the brand equity and customer-based brand equity measurement method will

be used in the thesis

2.3.2 Brand equity theory (elements of brand equity and their

function)

This section will use consumer-based brand equity approach, since it will provide thebest insight into the process of brand building There are many researches and many models,which conclude that various dimensions of brand equity are reliable They will be brieflyexplained together with included parameters

The first and most commonly cited author is Kevin Lane Keller He defines based brand as “differential effect that brand knowledge has on consumer response to themarketing of that brand A brand is said to have positive customer-based brand equity whenconsumers react more favourably to a product and the way it is marketed when the brand

customer-is identified than when it customer-is not identified”(Keller 2004: 60) Keller identifies three keyingredients that constitute brand equity:

- brand knowledge: consists of all the thoughts, feelings, images, attributes, awareness,experiences, beliefs, attitudes and benefits that become associated with thebrand(Keller 2004: 60) Brands should create associations with customers which will

be strong, favourable and unique;

- consumer response to advertising: if there is no difference, the brand name product is

a commodity and competition will probably be based on price;

- differential effect: the perception, preferences and behaviour related to all aspects

of the marketing of the brand

The second author, David Aaker, initially grouped brand equity measures into fivedimensions His original idea of brand equity consisted of four dimensions which were based

on the customer perceptions of the brand He decided to add fifth dimension which “includestwo sets of market behavior measures that represent information obtained from market-basedinformation rather than directly from customers.” Each dimension defined by Aaker consists

of measures and there are ten measures totally which are grouped into categories: loyaltymeasures, perceived quality, associations, awareness, market behaviour The Brand EquityTen (Aaker 1996: 105) include:

- loyalty measures:

• price premium – “the amount a customer will pay for the brand in comparison withanother brand”(Aaker 1996: 106), willingness to pay price that is different fromcomparable product ,

• satisfaction/loyalty – a direct indication of customer satisfaction applied to customerswho used the product or service within a certain time frame, usage of the product

or view customers holds create product experience,

- perceived quality:

• perceived quality – comparison of perceived quality to alternative brands,

• leadership – consists of three dimensions:

 no 1 syndrome(if enough customers are buying into a brand concept it musthave merit),

 leadership taps innovation(is brand moving ahead technologically),

 leadership taps the dynamics of customer acceptance

- associations: (how brand can be differentiated from competitors)

• perceived value – brand as value proposition, indicates the believes of customerswhether value received for the money is good when comparing to competing brands,

• brand personality – brands emotional and self-expressive benefits, assessment of thebrand as a human being by associating human characteristics,

• organizational associations – brand as the corporate entity consisting of people, valuesand programs that lies behind the brand

- awareness:

• brand awareness – salience of the brand in the consumer mind, levels of awareness:recognition, recall, top of mind, brand dominance, brand knowledge, brand opinion

- market behaviour:

• market share – performance measured by market share and the position company has

on the market (leader, follower, nicher, challenger)

• price and distribution indices - relative market price at which the brand is being soldand distribution coverage

The third model of brand equity is one of the most recent ones Atilgan, Akinci, Aksoyand Kaynak studied global brands in culturally dissimilar countries From the empiricalevidence they deducted that “The brand equity for global brands can be measured under fourbasic dimensions: perceived quality, brand loyalty, brand associations, and brandtrust.”(Atilgan, 2009: 115)” The new dimension discovered (trust) seems to suit very wellwhen talking about the brand in the present time, especially when very little about theperformance of the brand could be hidden from the media

Perceived quality Product quality dimensions (performance and features), service quality

dimensions (reliability, responsiveness and tangibles)Brand loyalty Behavioral loyalty (repeat purchases, how often and how much),

attitudinal loyalty (attitude towards the brand compared to otherbrands offering similar benefits)

Brand associations Anything linked in memory to a brand(product attributes, brand name,

benefits and attitudes associated with brand)

Brand trust Consistency and credibility of the brand

Table 2 Elements of brand equity according to Atilgan model

The authors decided to take this dimension into consideration since as they say, “there arestrong references made, implicitly and explicitly, to the existence and importance of trust notonly in the brand equity literature but also in global branding and global consumptionstudies”(Atilgan, 2009: 127) The financial crisis forced strong brands or big companies

to make tough decisions considering way of doing business It encouraged the customers tostart thinking about expertise and trustworthiness when delivering what has been promised bythe company

The theories of brand equity presented in this section differ in parameter mix whichthey consist of and groups they are assigned to However, there are similarities between themand issues they cover overlap in many contexts

2.3.3 Brand equity drivers (building brand equity).

In order to create brand equity marketers have to build “the right brand knowledgestructures with the right consumers”(Kotler 2006: 258) This process is possible only if there

are drivers which would initiate this process Kotler in his book Marketing Management

distinguishes brand equity drivers into three main groups: brand elements, marketingactivities and indirect associations Each group of brand equity drivers consist of variouselements which require specialist techniques in order to be successful

The first group are brand elements, “those trademarkable devices that identify anddifferentiate the brand”(Kotler 2006: 286) It is worth mentioning that multiple brandelements contribute to the development of strong brand much faster then the same elements

individually Kotler describes them as “the initial choices for the brand elements or identitiesmaking up the brand (brand names, URLs, logos, symbols, characters, spokespeople, slogans,jingles, packages, and signage)” Each element can play a number of brand-building roles,however it is important to understand that each single element provides a positive contribution

to brand equity Kotler argues that way to do it is “the test of the brand-building ability ofthese elements is what consumers would think or feel about the product if the brand elementwere all they knew” Basically, brand elements should be easy to recognize and recall,likeable, persuasive and as descriptive as possible They should also, if it is possible, captureintangible characteristics This can be done in many ways, for example by adapting symbols

or inventing slogans which would help consumers, as Kotler phrase it, “grasp what the brand

is and what makes it special, summarizing and translating the intent of a marketing program”.Kotler distinguishes six main criteria for choosing brand elements:

• Memorability – How easily is the brand element recalled and recognized?

The intrinsic nature of names, symbols, etc might gain more attention and make

it easier to recall or recognize when making purchase decision or consumption

• Meaningfulness - Is the brand element credible and suggestive of the corresponding category? It could suggest the type of person who might use the

brand or something about product ingredient Basically it takes on differentmeanings which vary in persuasive and descriptive content

• Likable – How aesthetically appealing is the brand element? Richness in visuals,

verbal imagery or maybe some other way in which element is inherently likeable

• Transferability – Can the brand element be used to introduce new products in the same or different categories? Does it add to brand equity across geographic boundaries and market segments? It is the usefulness of brand element not only

in product or line extensions but also in market expansion

• Adaptability – How adaptable and updateable is the brand element? Since there

are changes in consumers opinions and values sometimes there is a need for brandelements to be flexible and easy updateable, so consumers will still see it relevant

• Protectability – How legally protectable is the brand element? It is important

to remember about the future of the brand, so the element should be able to belegally registered and protected internationally

The criteria presented by Kotler could be distinguished into two functions they provide Thefirst three criteria: memorability, meaningfulness and likeability characterize and describe

choice of well thought out elements when building the brand equity However, the nature

of the latter three is more defensive and concern brand element together with brand equity

it creates and which could be preserved and leveraged when facing different constraints andopportunities

The second group of brand equity drivers are “product and service and allaccompanying marketing activities and supporting marketing programs”(Kotler 2006: 285).Kotler’s view on these drivers is rather holistic He explains the general ideas behind them,rather than explaining specific marketing activities This approach suits the purpose of thispaper since marketing is a broad concept, and customers discover the brand though the range

of brand contacts, “any information bearing experience, whether positive or negative, acustomer or prospect has with the brand, the product category, or the market that relates to themarketer’s product or service”(Schultz 2003) The contacts and touch points like: paymenttransaction, telephone or online experience, word of mouth, interaction with personnel orsimply personal use and observations show that strategy and tactics behind marketing are nolonger as simple as they were in the past The study of interconnection and interdependence ofvarious factors emphasize there are three important themes when designing marketingprograms of brand building The three ideas are: personalization, integration andinternalization

“Personalizing marketing is about making sure the brand and its marketing are

as relevant to as many customers as possible”(Kotler 2006: 288) In the world where everycustomer is treated individually customers desire more attention In order to adapt to thisrequirement marketers have embraced different methods: experiential marketing, one-to-onemarketing and permission marketing

Experiential marketing was the concept developed by Schmitt in 1999 The main idea wasthat “if you want to win and keep customers, you must offer them an experience that is tied tothe purchase of your goods and services”(Kinni 1999: 132) Schmitt in his model used fivestrategic experiential models: sense, feel, think, act and relate as a strategic basis

of marketing He argues that it is necessary to engage as many senses as possible In his book

Experiential Marketing How to Get Customers to Sense, Feel, Think, Act and Relate to Your Company and Brands Schmitt writes “Traditional marketing was developed in response to the

industrial age, not the information, branding and communications revolution we are facingtoday"(Schmitt 1999: 12) The engagement and interaction with the brand, products andservices create experiences which drive sales, create image and awareness of the brand

The aim of personalized marketing is to establish the connection with the consumer whichwill be not only rational but also emotional

The second idea is, one-to-one marketing which is explained as “being willing and able

to change your behavior toward an individual customer based on what the customer tells youand what else you know about that customer”(Peppers 1999: 151) Peppers and Rogersoutlined a four-step framework that can be used in one-to-one marketing:

1) Identify you prospects and customers

2) Differentiate customers in terms of (1) their needs and (2) their value to your company 3) Interact with individual customers to improve your knowledge about their individual needs and to build stronger relationships

4) Customize products, services, and messages to each customer

This concept, however, requires a lot of investments in information collection process, andproves to be successful only for companies that collect plenty of information about individualcustomers

The third method marketers use is permission marketing This concept is about marketing

to consumers only after getting permission to do it In this type of marketing it is thecustomer, who decides whether he or she wants to receive or not marketing information andunder which form As Godin wrote in his book “marketers can develop stronger consumerrelationships by respecting consumers’ wishes and sending messages only when they expresswillingness to become more involved in a brand”(Godin 1999) Leaving decision to thepotential customer makes the decision more personal and makes him or her feel more relevantthus creating deeper and stronger relationship with the brand

The second main theme in designing marketing programs is integration marketing.Kotler explains it saying it is “about mixing and matching marketing activities to maximizetheir individual and collective effects” In order to achieve it, variety of diverse marketingactivities is needed that will reinforce the brand promise This kind of approach comes fromthe holistic view on marketing which assumes that, “Marketing programs should be puttogether so that the whole is grater than sum of the parts”(Kotler 2006: 289) Sum of theindividual marketing activities in not equal to the total outcome of marketing program Allintegrated marketing actions can be evaluated by looking at their effectiveness, efficiency, andeffect they have on brand awareness or creating and maintaining brand image The twoimportant marketing concepts in integrated marketing are brand identity and brand image.They are closely related to each other According to Kotler(2006) “Identity is the way acompany aims to identify or position itself or its product” The aim of brand identity strategy

is creation of a “set of processes that include the coordinated efforts of the brand strategists in(1) developing, evaluating, and maintaining the brand identity/identities, and (2)communicating the brand identity/identities to all individuals and groups responsible for thefirm's marketing communications” (Madhavaram 2005) It is important to remember thatidentification should be done properly, so it is clear what brand stands for and what it is about.

“Image is the way the public actually perceives them” writes Kotler The main issue aboutbrand image is to convey properly with customers, so they will not confuse what brand standsfor The right establishment in consumer minds requires from marketers to communicatethrough all available channels The message sent must be expressed in symbols, colors,slogans, events, atmosphere, employee behavior, packaging and advertisements Marketingactivities may vary in strength and can accomplish different objectives The complementarityand enhancement of the effects of possible marketing activities should be carefully studied Inorder to build and maintain exceptional brand equity, the engagement in a mixture ofintegrated marketing activities is needed

The last important concept applied to the second group of brand equity drivers isinternalization, also called internal branding defined as “activities and processes that help toinform and inspire emplyees”(Kotler, 2006) This issue is especially crucial for servicecompanies and retailers Employees need an up-to-date information about brand promise anddeep understanding of it The job of marketers is to “adopt internal perspective to be sureemployees and marketing partners appreciate and understand basic branding notions and howthey can help – or hurt – brand equity”(Dunn, 2003) Motivation to work harder, faster andbetter comes from believing in a brand success, promise and attitude That is how loyalty

among personnel is created Colin Mitchell (2002) in his article Selling the Brand Inside

distinguishes three principles of internal marketing:

1 Choose Your Moment – When company is implementing changes, such a turningpoints are ideal opportunities for an internal branding campaigns, “employees areseeking direction and are relatively receptive to these changes”(Mitchell 2002), that’swhy it is the unique occasion to capture their attention and imagination

2 Link internal and external marketing – The messages sent internally and externallymust match “Employees need to hear the same message that you send out to themarketplace”(Mitchell 2002) The observation that different message is being sent

to the public and different instructions are received from the management is confusingand makes employees feel insecure

3 Bring the Brand Alive for Employees – It is about improving morale The goal is

“to create an emotional connection to your company that transcends any one particularexperience”(Mitchell 2002) The energizing and informative communication shouldfill employees’ minds with brand vision and make them feel that every decision theymade is supporting the brand Company should give employees the reason to care

All three concepts applied to the second group of drivers and supporting marketingactivities accompanying them are crucial for building brand equity Managing brand equity

is more effective and efficient if necessary marketing operations are implemented In addition

to that, by making drivers and supporting marketing activities interdependent andinterconnected the outcome in many cases is astonishing

The last group of brand equity drivers are indirect associations, also called

“secondary” associations This idea is about creating “brand equity by linking the brand

to other information in memory that conveys meaning to consumers”(Kotler 2006: 290).Making consumers associate the brand with the entity in direct or indirect way affects brandknowledge If the similarities between the entity and the brand are substantial, consumerswould transfer the knowledge of entity back to the brand more frequently The job of thesecondary association is, as Keller explains, “to affect consumers’ evaluations of a productwhen they lack the motivation or ability to judge it on a deeper level When consumers don’tcare about choosing a particular brand or they feel that they don’t possess the knowledge tochoose the appropriate brand, they make decisions based on secondary considerations”(Keller, 2005) Such an approach seems to be a very topical issue Consumers are bombardedwith information and very little of it is remembered Keller identified three factors whichaffect secondary associations:

• Consumers’ knowledge of the entity – familiarity with the entity Strong,

favourable, and unique judgements and feelings about the entity are desired

• Meaningfulness of consumers’ knowledge of the entity – relevancy of the

knowledge of the identity to the brand Some associations have little connectionwhile on the other hand, other seem valuable for the brand

• Transferability of consumers’ knowledge of the entity – extent to which consumers

link the knowledge to the brand Creating easy transferable brand associations

is desired

Brand associations could be linked to the brand by four different entities presented in Figure

All three kinds of brand equity drivers play important role in enhancing brand equity.Creation of advantageous brand knowledge structures is not an easy task “As marketers try

to squeeze more value out of fewer dollars in their budgets, they must closely examine theiractivities and programs for effectiveness and efficiency”(Keller 2005) Marketers have

to choose carefully brand elements, marketing strategies and brand associations in order to getthe highest benefit possible It is their task to find a proper mix of attributes and techniquesthat will maximize the brand equity of the brand, and make brand building process moresmooth The optimization of results and getting as much profits as possible from appropriateselection of brand equity drivers make brand stronger, helps achieve favourable market

position and leads to the growth and expansion of the brand But how can this be measured?

At which state is the brand currently, what position on the market it has? Next section willfocus on answering these questions

2.4 Brand life cycle, expansion and position on the market

With the time every brand is facing some changes Techniques presented in previoussections help company in achieving goals and following specific strategies they have

Every one of them prove to be useful at some point of time But how exactly looksthe development of the brand? Does it follow some cycle? What are the strategies brands arefollowing? How can the equity of the brand be measured and how it is perceived by thepotential customers? The answer to these questions will be given in this section First lifecycle of the brand will be presented Next section will focus on brand expansion strategiesand implications to brand life cycle After that Brand Asset Valuator model will be presentedwhich focuses on measuring brand equity and assessing brand position on the market in eyes

of consumers All models presented will help the reader in understanding how brands evolve

2.4.1 Product/Brand life cycle

Model that will be presented as the first one is Product Life Cycle All products thatare an object of exchange stay on a market for some time which is difficult to estimate Thistime is divided into few phases, which together make up product life cycle According toKotler life cycle model can be also used “to analyze a product category, a product form, aproduct, or a brand”(Kotler 2006: 318) This paper will present only a bell-shaped pattern ofthe brand Brands, in a comparable manner to people are born, capture the market, liveand die

However brand life cycle acts different from human life, since brand’s life seems

to shorten together with technological progress, economic and civilization development.Economic ageing of brand results from development of science and technology, internationalexchange, society’s wealth and increased information flow Brand life cycle for majority

of the products consist of four stages:

• Introduction

• Growth