Marketing Management Series of Essays
Brand Equity: Apple Inc. How a firm can implements frontal and flank attack: Coca Cola
1.0 Introduction Brand is a name or symbol used to identify the source of a product. When developing a new product, branding is an important decision. The brand can add significant value when it is well recognized and has positive associations in the mind of the consumer. This concept is referred to as brand equity
2.0 What is Brand Equity? The goal of the brand leadership paradigm is to create strong brands. Brand equity was defined as the brand assets or liabilities linked to a brand’s name and symbol that add to (or subtract from) a product or service. Brand equity is an intangible asset that depends on associations made by the consumer. There are at least three perspectives from which to view brand equity:
One way to measure brand equity is to determine the price premium that a brand command over a generic product. For example, if consumers are willing to pay RM200 more for a branded television over the same unbranded television, this premium provides important information about the value of the brand. However, expenses such as promotional costs must be taken into account when using this method to measure brand equity.
A successful brand can be used as a platform to launch related products. The benefits of brand extensions are the leveraging of existing brand awareness thus reducing advertising expenditures, and a lower risk from the perspective of the consumer. Furthermore, appropriate brand extensions can enhance the core brand. However, the value of brand extensions is more difficult to quantify than are direct financial measures of brand equity.
Strong brand equity provides facilitates a more predictable income stream, increases cash flow by increasing market share, reducing promotional costs, and allowing
premium pricing. Knowing what the brand means to consumers is important, but having the knowledge of its equities can help companies create much more of an impact and compete against rival companies. Through customer and category understanding, as well as having a deft approach to consumer research, companies can better understand the aspects of their product brands that drive value to the consumer. (George, 2008)
3.0 Building a strong brand equity In managing brand equity, brand equity is defined as the brand assets or liabilities which can be grouped into four dimensions such as brand awareness, perceived quality, brand associations, and brand loyalty. These four dimensions play important role as a guide to brand development, management and measurement. (Jackson, 2003)
Brand awareness is an often undervalued asset. However, awareness has been shown to affect perceptions and even taste. Consumer like the familiar and are prepared to ascribe all sorts of good attitudes to items that are familiar to them. For example, The Intel Inside campaign has dramatically transferred awareness into perceptions of technological superiority and market acceptance. (Jackson, 2003)
Perceived quality is a special type of association, partly because it influences brand associations in many contexts and partly because it has been empirically shown to affect profitability (as measured by both return of investment (ROI) and stock return.
Brand associations can be anything that connects the consumer to the brand. It can include user imagery, product attributes, use situations, organizational associations, brand personality and symbols. Much of brand management involves determining what associations to develop and then creating programs that will link the associations to the brand. (George, 2008)
Brand loyalty is at the heart of any brand’s value. The concept is to strengthen the size and intensity of each loyalty segment. A brand with a small but intensely loyal consumer base can have significant equity.
A strong brand increases the consumer's attitude strength toward the product associated with the brand. Attitude strength is built by experience with a product. This importance of actual experience by the customer implies that trial samples are more effective than advertising in the early stages of building a strong brand. The consumer's awareness and associations lead to perceived quality, inferred attributes, and eventually, brand loyalty. (Jackson, 2003) Table One explains the relationship between strong brand and demand made by the consumer.
Table One: Strong Brand Will Shift the Curve Demand
3.0 Case study: Apple Inc. Apple is a brand that is always defying the odds. The company commands global market share of just 3%, almost went out of business after a financial turnover in the mid 1990s and its main products compete with the ubiquitous IBM compatible PC. Yet despite the difficulties it has faced and continues to face, it remains an amazing success.
The brand was voted brand of the year in 2001, came a close second to branding Google in 2002 and continues to command amazing loyalty amongst users. The value of the brand to a company such as Apple is almost incalculable, so much so that it prompted to the claim that ‘without the brand, Apple would be finish. The power of branding is all that keeps Apple alive.
Why has Apple been so successful? It is because Apple always concentrated on building a powerful brand based on emotional rather than functional values. Apple may have produced a range of powerful computers and innovative products such as the iPod and the iMac but by far their greatest success has been in enticing customers in forging deep bonds and encouraging them to fall in love with the brand.
Apple has always played on the emotions which is different compare to IBM. Apple aims are to give power to the people through technology and seek to build communities around its products. The brand has become synonymous with creativity, the choice for designers everywhere, and has communicated itself as funky, quirky and colorful, a vibrant alternative to its drab and business like competitors.
The equity produced by this powerful branding is without a doubt Apple’s key asset. Competitors such as Commodore and Amstrad were slain by the growth of the PC but the loyalty and affection that the Apple brand commanded allowed it to keep its head above water and become the success it is today. In a faceless market, Apple showed character and built an image.
The idea of Apple as a technology marketing company is true. It was the marketing company of the decade (Jackson, 2003). This kind of thinking built the brand equity Apple enjoys today, as the brand equity that both kept Apple afloat and promises future profits. This asset may be intangible but it is also truly invaluable.
4.0 Conclusion Brand equity determines a brand’s health and strength as well as its financial value. Consistent measures of brand equity can help understand a brand’s progress towards its goals. Brand evaluation is vital to the success of the brand. It enables brand owners to see where the brand’s strengths and weaknesses lie and what forces are driving these, which in turn points to the nature and level of investment needed to fulfill the brand’s potential.
1.0 How a firm can implements frontal and flank attack Frontal attack and flanking attack are some examples of offensive strategy. When using the offensive strategy in marketing warfare, there are three offensive principles which include a) the main consideration is on the strength of the leader’s position, b) to find weakness in the leader's strength and c) attack must be aim at that point and narrow the front as possible (Ries, 1986).
Frontal attack occurs when a company takes all of their forces and faces them directly opposite of the opponent (Kotler, 1981). In order to be successful with this type of an attack, statistics show that a factor of five to one is needed for a successful frontal attack (Kotler 1981). For example, in the 1970's three electronic giants tried to attack IBM head on against Each electronic
their stronghold on the mainframe computer market (Kotler, 1981).
corporation failed because they used a pure frontal attack against IBM's massive stronghold.
There are many types of frontal attacks including:
a pure frontal attack, a limited frontal
attack, price based frontal attack, and research and development based frontal attack (Kotler, 1985). A pure frontal attack involves matching a competitor’s product in all areas of The product is matched price versus price, promotion versus Basically, a pure frontal attack is
marketing (Kotler, 1985).
promotion, characteristic versus characteristic and so on.
taking a "look alike" or "me too" strategy (Kotler, 1985). When using a pure frontal attack, companies should be prepared to expend large sums of money.
The next type of frontal attack is the limited frontal attack. A limited frontal attack focuses on specific customers and tries to lure them away from competitors (Kotler, 1985). One
example of a limited frontal attack may occur when a new product enters the market such as a new type of paint. The paint company would pursue a select number of their competitor's customers and bring them in on a whole number of product dimensions simultaneously (Kotler, 1985).
Another type of frontal attack is the price based frontal attack. In priced based frontal attack,
the aggressor focuses mainly on the price of a product to gain more customers. Every product characteristic is matched; however, the competition beats his competitor on price (Kotler, 1985).
Finally, research and design is a fourth type of frontal attack. This is a more difficult type of attack to employ. The competitor tries to reduce production costs, improve the product, and other characteristics which would enhance product value (Kotler, 1985). With this type of attack, more creative ideas are implemented which allow for a better product.
There are three conditions that need to be met by a firm before it embarks in a frontal attack (Kotler, 1985). First, the firm needs an adequate amount of resources to support the attack (Kotler, 1985). Second, the firm must be able to create and sustain a competitive advantage over its competitors (Kotler, 1985). Finally, the company must be able to persuade their
competitor's customers to try their product and become their loyal customer. In the frontal attack, it is important that everyone in the firm and those who purchase the product perceive a competitive advantage (Kotler, 1985). In a flanking strategy, a company focuses its forces on the weaker sides of its competitor (Kotler 1981). A good flanking move must be made in
an uncontested area with tactical surprise ought to be an important element of the plan. The pursuit is as critical as the attack itself (Ries, 1986). Usually this offensive strategy is used by a company that does not have overwhelming superiority, but may have an advantage in one particular area. For example, in the mid 1970's Xerox owned eighty-eight percent of the plain-paper copier market; however, almost ten years later the Japanese based Canon Copier took over half of Xerox's market (Kotler 1981). The main reason Canon took over such a large portion of Xerox's market was by use of the flanking strategy. Canon focused
on the small size copier market that could not afford Xerox's larger copiers. This attack was successful because it put the attacker’s strength against the defenders weakness (Kotler 1981).
There are two types of flanking strategy; geographical and segmented flanking (Kotler, 1985). Geographical flanking occurs when a firm attacks different areas within the world or country where competitors are nonexistent or not very strong (Kotler, 1985). Company uses this type of marketing strategy. international areas where competition is not as fierce. The Coca-Cola
Coca-Cola's profits come from the
A second type of flanking involves identifying market areas or needs not being served by competitors within a geographical area (Kotler, 1985). Segmented flanking potentially can be more powerful than geographical flanking attacks because they satisfy market needs the competitor has ignored (Kotler, 1985). The Japanese have used segmented flanking when entering the United States market (Kotler 1985). They brought products that were different and aimed them at neglected market segments (Kotler, 1985). These products were smaller or stripped down versions of established products, and they had more features for the same or lower price (Kotler, 1985). The overall idea of flanking strategy is to bring a broader coverage of a markets varied needs (Kotler, 1981).
2.0 Other attacking strategies a) Marketing warfare through encirclement
When using this type of strategy a company must have superiority in all areas. Encirclement attacks the competitor from all sides simultaneously (Kotler, 1981). The basic idea of encirclement is to force the competitor to protect their product from all sides. For example, Smirnoff Vodka used encirclement strategy when another product was introduced and positioned itself directly against Smirnoff, but at a lower price (Kotler, 1981). Smirnoff counterattacked by first raising its prices, which preserved their quality image. After raising
their prices, they introduced another brand, marketed it at the same price as the competition, and introduced another brand at a lower price (Kotler, 1981).
There are two types of encirclement strategy: product encirclement and market encirclement (Kotler, 1985). Product encirclement introduces products with many different qualities, Many
styles, and features that overwhelm the competition's product line (Kotler, 1985).
Japanese firms have encircled U.S. products such as televisions, radios, hand-held calculators, watches, and stereo equipment (Kotler, 1985). Market encirclement goes Seiko is one
beyond the end user, and focuses on the distribution channels (Kotler, 1985). example of market encirclement.
By gaining every available distribution channel for
watches, Seiko took over as much shelf space as possible (Kotler, 1985). There are some risks to be aware of when employing the encirclement strategy. Having the substantial
resources and organizational commitment are two factors needed before using encirclement strategy. Because it is necessary to have these two requirements; winning a battle through
encirclement takes a great deal of time.
Marketing warfare through bypass
A bypass attack wins the battle through attacking areas not defended (Kotler, 1981). There are basically three types of bypass strategy: develop new products, diversify into unrelated products, and expand into new geographical markets for existing products (Kotler, 1981). Developing new products is a fairly easily understood bypass method. Rather than copying
the leader, the competitor creates entirely new products thus gaining a larger market share of untapped customers.
Diversifying into unrelated products is a second type of bypass strategy.
remaining in a single-industry business the firm will venture out into product lines that are different from their one single product. For example, Sony Inc. has employed this bypass One
strategy through entering the restaurant and construction business (Kotler, 1985).
reason companies may use the bypass strategy is the large amount of congestion in the competitive battleground (Kotler, 1985). If a company produces a new product, the
company basically moves the new product to a new level within the same product market area (Kotler, 1985).
Moving into digital and electronic watches may bypass the mechanical watch market; however, the company is still fighting for a position within the watch industry (Kotler, 1985). Conversely, movement into an entirely new geographical market usually allows a company to bypass competitors completely.
Guerilla marketing warfare
Guerilla warfare basically involves winning small victories that can over time amount to a large gain in market share (Kotler, 1981). This attack works because it is very
unconventional which makes it difficult for the defender to counter-attack, and because they are aimed at small, weak, and unprotected market positions (Kotler, 1981). One example of guerilla warfare occurred when IBM won a lawsuit against Hitachi on the grounds that Hitachi stole IBM software. Because IBM won this small battle, Japanese computer manufacturers
had to become defensive by investing large sums of money into scarce software research and development personnel who had to re-write old programs and develop new programs which did not interfere with IBM's intellectual property rights (Kotler, 1981). This type of guerilla warfare pushed Japanese computer makers back many years.
Guerilla strategy is usually implemented by companies who are smaller in market position and resource base than the firm they attack. This strategy has usually been used by the Japanese on U.S. firms which have caused a large drain on the resources used by the U.S. firms (Kotler, 1985).
As conclusion, the appropriate marketing warfare strategy depends on the firm's position relative to its opponents. In developing its strategy, the firm must objectively determine its position in the market. Once this is done, a defensive, offensive, flanking, or guerrilla strategy can be selected depending on the firm's position relative to the competition.
REFERENCES George, Ray. (2008). Understanding Your Brand – Aligning Brand Equity to Drive Business Value. NY: Cummins Communication. Jackson, Mariette. (2003). Measuring Brands and Their Performance. The Chartered Institute of Marketing Journal. 12 (7): 5-7 Paulina Papathahopoulu and George J Avlontis. (2005). Product and Management. Thousand Oaks, California: Sage Publications Quick MBA. (Mac 9, 2008). Brand Equity. Retrieved 12 Mac, 2008, from the world wide web: http://www.netmba.com/brand_equity/brand equity.html
William C. Finnie. (2006). Basic Of Business Warfare. Competitive Intelligence Review. Volume 3, Issue 3-4: 10 - 15