MGMC11H3 Chapter Notes - Chapter 1: Brand Loyalty, Brand Management, Brand Equity

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MGMC11 – Chapter 1: Brands and Brand Management:
What is a Brand?
- Brands are used to distinguish the goods of one producer from those of another
- The word brand is derived from the Old Norse word brandr, “to burn”  owners of livestock mark their animals
to identify them
-Brand (AMA definition, b) – a name, term, sign, symbol, or design, or a combo of them, intended to identify the
goods and services of one seller or group of sellers and to differentiate them from those of competition
oIndustry concept, B  something that creates a certain amount of awareness, reputation, prominence,
etc. in the marketplace
-Brand Elements:
oBrand elements – different components of a brand that identify and differentiate it
oBrand names come in various forms: people’s names, names based on places, names based on
animals/birds, others
Some use words:
Inherent with product meaning
Suggesting important attributes/benefits
Made up words and include prefixes/suffixes that sound scientific, natural, or
prestigious
oOther brand elements (logos and symbols) can be based on people, places, things, and abstract images
-Brands versus Products:
oProduct – anything we can offer to a market for attention, acquisition, use, or consumption that might
satisfy a need or want
Physical good, service, retail outlet, person, organization, place, idea
o5 levels of meaning for a product:
Core benefit level – the fundamental need or want that consumers satisfy by consuming the
product or service
Generic product level – a basic version of the product containing only those attributes or
characteristics absolutely necessary for its functioning but with no distinguishing features
Expected product level – a set of attributes that buyers normally expect and agree to when they
purchase a product
Augmented product level – includes additional product attributes, benefits, or related services
that distinguish the product from competitors
Potential product level – all the augmentations and transformations that a product might
ultimately undergo in the future
oMost competition in many markets occurs at the product augmentation level  most firms have
successfully built satisfactory products at the expected product level
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Compete between what they can add to their factor output (packaging, services, advertising,
customer advice, financing, delivery arrangements, warehousing, etc.) that people value
oA brand is more than a product  can have dimensions that differentiate it in some way from other
products designed to satisfy the same need
Differences may be rational and tangible (product performance of the brand) or more symbolic,
emotional, and intangible (what the brand represents)
oSome brands create competitive advantages with product performance (i.e. ability to innovate) or
through non-product-related means (i.e. associations)
oCreating perceived differences among products through branding and by developing a loyal consumer
franchise  create value and translate to financial profits
Why Do Brands Matter?
-Consumer – encompasses all types of customers, including individuals and organizations
oIdentification of source of product
oAssignment of responsibility to product maker
oRisk reducer  buy well-known brands w/ favourable past experiences
Functional risk – the product does not perform up to expectations
Physical risk – the product poses a threat to the physical well-being or health of the user or
others
Financial risk – the product is not worth the price paid
Social risk – the product results in embarrassment from others
Psychological risk – the product affects the mental well-being of the user
Time risk – the failure of the product results in an opportunity cost of finding another
satisfactory product
oSearch cost reducer
oPromise, bond, or pact with maker of product
Realize advantages/benefits from purchasing the brand  derive satisfaction from product
consumption  likely to continue buy it
oSymbolic device  project self-image  convey associations that reflect values or traits
oSignal of quality
Search goods (grocery produce) – consumers can evaluate product attributes by visual
inspection
Experience goods (automobile tires) – consumers cannot assess product attributes where actual
product trial and experience is necessary
Credence goods (insurance coverage) – consumers may rarely learn product attributes
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oBrands take on special meaning to consumers  past experiences w/ the product  simplify product
decisions
oLess engagement in thought processing when making decisions if brand is recognized and some
knowledge is present
Economic perspective  lower search costs internally (think) and externally (look around)
Using what they already know about the brand  make assumptions and form reasonable
expectations about what they may not know about the brand
- Firms:
oMeans of identification to simplify handling or tracing  organize inventory and accounting records
oMeans of legally protecting unique features
Retain intellectual property rights  giving legal rights to the brand owner
Brand name can be protected through registered trademarks
Manufacturing processes can be protected through patents
Packaging can be protected through copyrights and designs
oSignal of quality level to satisfied customers
Brand loyalty  predictability and security form the firm and creates barriers of entry that make
it difficult for other firms to enter the market
oMeans of endowing products with unique associations
oSource of competitive advantage  “consumers grow up w/ the brand”
oSource of financial returns  brands = large valuable pieces of legal property  mergers & acquisitions
Price premium paid = opportunity to earn and sustain extra profits from their brands &
difficulty/expense of creating similar brands from scratch
Can Anything be Branded?
- A brand is something that resides in the minds of consumers  reflects the perceptions and habits of consumers
- To brand a product  necessary to teach consumers “who” the product is
oLabel (here’s how you can identify the product)
oMeaning (here’s what this particular product can do for you and why it’s special/different from others)
- Branding creates mental structures and helps consumers organize their knowledge about P/S simplify decision
making and provides value to the firm
-The key to branding is that consumers perceive differences among brands in a product category
oDifferences can be related to attributes/benefits of the offering or related to more intangible image
considerations
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Document Summary

Mgmc11 chapter 1: brands and brand management: Brands are used to distinguish the goods of one producer from those of another. The word brand is derived from the old norse word brandr, to burn owners of livestock mark their animals to identify them. Brand elements: brand elements different components of a brand that identify and differentiate it, brand names come in various forms: people"s names, names based on places, names based on animals/birds, others. Made up words and include prefixes/suffixes that sound scientific, natural, or prestigious: other brand elements (logos and symbols) can be based on people, places, things, and abstract images. Brands versus products: product anything we can offer to a market for attention, acquisition, use, or consumption that might satisfy a need or want. Physical good, service, retail outlet, person, organization, place, idea: 5 levels of meaning for a product: Core benefit level the fundamental need or want that consumers satisfy by consuming the product or service.

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