Brand and Firm Associations: Key Factors and Value Creation
1.6. Brand or Firm Associations
Brand Value (BV) is a difficult key factor to measure in an economic way. This indicator directly reflects a ‘differentiation’ strategy built in the long term by Pull and Push actions, between direct competitors. So this is an intangible factor that directly affects company or business consideration by consumers. Two direct competitor companies can operate in the same business but be considered so differently by the consumer that it necessitates different positioning strategies and roughly affects the 4 P’s tactics and buying perceptions. Brand Value and perception are really different, and strategies developed by competitors must be very different to be successful in the market (considering different opportunities and positioning on the market curve and industry phase).
Some companies are evaluated as assets in the company balance sheet, but normally for big firms, that will not reflect the real value. Following T. Proctor’s definitions, ‘Branding’ for consumers represents the mark of a given level of quality and value that helps them choose between one offering and another.
The development of a range of brands to cover different consumer segments enables a firm to benefit from changing consumer wants. From a marketer’s point of view, brands allow the producer, and more recently the retailer, to target different groups of consumers or segments of the market, with different labels and product offerings. In fact, developing more than one brand enables a firm to segment a market and target different consumers.
Moreover, as long as brands add more value than cost for these new segments, an improvement in overall profitability can ensue. The development of a portfolio of discrete brands permits a firm to insulate the problems of one product from the rest of the range, and it can allow it to divest less profitable brands.
An important asset of a brand or firm is what customers think of it: its associations and perceived quality. The latter, of course, may be different from actual quality. It can be based on experiences with past products or services and quality cues such as retailer types, pricing strategies, packaging, advertising, and typical customers. The product may be associated with expertise in a particular technological area or with innovativeness. Such associations can be an important strategic asset for a brand or firm.
Associations can be monitored through the regular use of questions posed in focus groups to describe user experiences. The identification of changes in important associations will likely emerge from such research. Further tracking information can be obtained through surveys.
Just went on with T. Proctor analysis suggested, this may be considered as an additional factors:The customer loyalty management. The average order/purchase value. The ‘expected value’ of a transaction period. The cost of attracting customers. The cost of retaining customers. Co-productivity—the involvement of suppliers and customers in creating value. Co-operational gearing. Financial gearing and corporate control. Strategic and operational cash flow. Capacity management availability and utilization. It is arguable that each of these factors influences sales and/or costs, and should be considered within either sales growth rate or operating margin analysis. However, an equally justifiable case can be made for considering them as specific factors. Their inclusion in this way acknowledges their importance, together with the further acknowledgement that for specific organizations their influence can be significant. Customer loyalty management is reflected in average order/purchase value and the distribution of order/purchase value sizes. It has to be borne in mind that the costs of order management and handling is not usually size related and a profile of order size across the current and potential customer base is a better indicator of value creation. The average period of customer loyalty and the expected value of the loyalty transaction may be a significant factor. This might be quantified by calculating the net present values of costs of acquiring and retaining customers. Such analysis is an important consideration in shareholder value creation; there can be quite different value results from similar levels of revenue. Normann and Ramirez (1993) identify the importance of customer and supplier involvement in the ‘value creating system’. They use the example of Ikea to illustrate the role the customer may take in creating value. They highlighted a number of tasks assumed by customers that are usually undertaken by the retailer. The approach can be used with suppliers and distributors using transaction cost analysis. Hence, customers, suppliers and distributors become involved in value creation and this co-productivity is an important value driver. Remember the Value equation for consumer: adv.prod/cost>1