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

Student ID: 282826

Supervisor: Jan Friis

Bachelor Thesis

Effective Brand Building
A Case Study of McDonald’s Corporation

Jaroslaw Sliwka

Aarhus School of Business
Aarhus University
2010


Abstract
The changing world has encouraged big companies to create more personal connection with
customers. In addition, the constant sustaining of this relationship is required. The concept
which is used by the companies and prove to be successful is brand building. Even though
companies 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 be
provided with various concepts in the field of branding. After that, the case of McDonald’s
Corporation 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 knowledge
what 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 drivers
and function they carry out for brand equity are described. At the end of this chapter, after
knowing 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 effective
brand 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’s
are described one by one, together with the function they perform for brand equity. Then the
overview 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 brand
management and constant control over its image. By implementing various elements
company 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 Brand
Asset 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 are
many times better then the ones of competitors. After this summary the future of McDonald’s
is speculated.

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Thesis shows it is important for companies to have a well thought our branding strategy
and 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.

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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
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business is not the same as forty, fifty years ago. Companies have to adapt to the changing
world in order to survive or keep the position on the market. These changes are especially
profound for fast-food sector. Looking at the market leader provides good understanding of
this process. And where should we look for this leader if not in the United States, the market
where fast-food become part of national culture. There are many outstanding fast-food
providers 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 the
Golden Arches. But how it is possible? What happened, that children when hear this magic
word, instantly know what stands behind it? The interesting problem of McDonald’s brand
will be researched at in this thesis.

Problem Statement
The main goals of the thesis are to explain what is a brand, and by applying this
knowledge 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 is
written 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 situations

unharmed. This was possible because of the strong brand it has. Using the case of
McDonald’s the thesis describes what a strong brand is. What is the role of the brand? How
does the process of brand building looks like? What is brand equity and what are brand equity
elements? The thesis focuses on getting fair view of how to build and keep the strong brand
alive, 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 theoretical
background about brand building. At the beginning the general idea is presented, and as text
proceeds, more details about brand building are introduced. The first chapter starts by
explaining the idea of the brand and its role. Next part in about the process of building the
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brand. Different theories are presented in order to show there are many ways of describing
brand building process. After that some theories about brand equity, which differ in categories
are 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 which
are helpful in assessing stage the brand is currently in, and position it occupies in consumer
minds. Second chapter is about brand building done by McDonald’s. First subsection is a brief
history and essential fact which help is further analysis of the brand. Analysis of the brand
starts with description of McDonald’s brand equity drivers and functions they perform. After
that the process of building McDonald’s brand is explained by focusing on problems the
Golden Arches faced throughout the years of existence. Applying knowledge gained in
previous 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 the
end of the practical part of the thesis future of the brand, McDonald’s has build throughout the
years, is briefly assessed.

Method

Literature about the brand and process of building it is very broad. There are many
theories in this field. Theories presented in this paper and way of doing analysis are believed
to provide a fair view on the process of building successful brand. The thesis does not use
all possible theories, that is why conclusion may be concentrated only around approaches
presented. However the aim of the thesis was to provide theoretical background for further
studies, which will collectively supplement each other and make up whole entity. Although
there are numerous sources on brand building theory, the case studies for specific companies
are rather rare. There are not many articles discussing McDonald’s as a brand. Even those
articles focus mainly on financial aspect of the brand. This situation encouraged more detailed
research related to brand building theory and its application to McDonald’s Corporation.

Delimitations and Assumptions
Theories that are used for the discussion of McDonald’s case are commonly used and
mentioned in literature when the concept of the brand is brought up. Even though they have
some flaws and they sometimes are criticized, they provide a good understanding of how to
build a successful brand. The thesis will not focus on criticizing individual theories, but on
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combining them in one entity in order to obtain a fair method for description and analysis of
the chosen brand, which in case of this paper is McDonald’s. Throughout the thesis some
theories are limited by focusing on case relevant approach. Since the marketer approach was
chosen in writing the thesis, the financial aspect of the brand is limited to the minimum. The
practical part, which is applying the theory to the case, is limited only to the McDonald’s in
the United States. If McDonald’s international activities were taken into consideration the
conclusion might be slightly different, however since this subject is too broad, it is limited to
the national market of the company. Even though the general idea of McDonald’s brand is the
same throughout the world, brand operations in specific countries differ according to the
consumers. That is why, in order to provide a fair understanding of building a brand, the deep
analysis of national market is done. What is more, since building a successful brand is more

about developing relationship with customers by using brand building methods by the
company, 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 years
was growing in importance and along with the scope of branding. Nowadays brand building is
the process that every company has to take into consideration. When looking at market
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leaders like Google, Nike or Coca-Cola we notice not only the name of the company but also
the whole idea behind it. This chapter will focus on a brand as crucial element of connecting a
company 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 it
performs 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 be
presented, secondly three main sets of drivers that help in creating brand equity will be
described and at the end factors that influence those drivers. The next thing that chapter will
focus 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 the
word brand. But when did it get the meaning it has now? Originally brand was “a mark
burned 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 discuss
which meaning was the first and wonder which one is more important. The fact is that both
interpretations are relevant. Even these days, in the era of globalization, there are different

definitions of a brand. Everything depends on the perspective we are looking from. In the past
the 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 the
products with logo of the producer so if there was a need to complain, repair or suggest
buying the product to third party the manufacturer could be easily traced. For the judiciary
branch word brand meant to mark a criminal and inform society of his past and what
behaviour 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. After
explanation of the idea of the brand, theories of brand equity and brand equity drivers are
introduced. The chapter includes also an assessment of the position of the brand in consumer
minds and life cycle the brand follows.

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2.1.1. What is the brand
The definition of what a brand is depends on how deep and from what perspective it is
described. The Oxford Dictionary of Economics describes brand as “a name used to identify
the 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 of
sellers and to differentiate them from those of competitors”(Kotler 2006: 276). From the
marketing perspective brand consists of some specific elements and carries out some function.
From the perspective of the branding consultancy - Interbrand – brand is “a mixture of
tangible 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 and
services of the competition which are designed to satisfy the same needs. This dimension may

contain 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 the
producer 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 the
pressure the competitors put on branding and because everybody do it? What is the reason of
branding and what is the purpose? We simply may say because there are valuable functions
which brand performs for a company as well as for customers. This chapter will explain main
functions of branding by dividing it into two destination groups. For contractors the three
important roles will be presented, and after that the implications for the consumers and
benefits of branding will be explained.
The brand plays significant role in a performance of a company. From the marketer
perspective the main advantages of branding are legal protection, identity and loyalty.

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The first role is legal protection. Having a brand helps in protecting the unique
features or quality of the product, process or any other aspect of the company. Kotler
and Keller explain how each type of intellectual property rights can be used, by distinguishing
into parts, “the brand name can be protected through registered trademarks; manufacturing
process can be protected through patents; and packaging can be protected through copyrights
and 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 money
can be safely invested in brand building process. Large amounts of money spend on
advertising 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 important

feature 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, like
the 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 be
influenced by brand awareness. For a company having identity means having image which
can be managed. Even though once it is established it is difficult to change, it is worth an
effort 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 that
satisfied 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. Repeatable
choosing of the same product has advantages for both a seller and a buyer. Brand loyalty
assures also “the tendency for consumers to prefer familiar names”(Black 2003: 38). Having
certain number of customers helps sellers to plan the investment and development of the
company. It is a predisposition that every marketer wishes to achieve. In other words having
loyal 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 to
Kapferer there are eight functions that create value in the eyes of consumers. (Table 1)

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These eight functions could be divided into three groups: recognition, reduction of the
perceived risk and the pleasure side of the brand. Identification and practicality
are 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 gain
value”(Kapferer, 1997). Guarantee, optimisation and badge are responsible for reducing
perceived 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 presents

play an important role in the decision making process. Continuity, hedonistic and ethical
functions have “a more pleasurable side”(Kapferer, 1997). Continuous satisfaction with the
brand which may lead even to enchantment is the goal of every marketer. Nowadays more and
more emphasis is placed on the ethical function of the brand since customers feel more
connected 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 performs
all this functions.

2.1.3. Extend of branding.
Every company strives to establish a brand as strong as possible, since it makes doing
business 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
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(Reisenbeck, 2007). The good example is Apple brand. It is possible due to successful
branding 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 why
consumers should care by creating “mental structures that help consumers organize their
knowledge 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 significant
differences among brands offering the product. But how to create a brand that will perform
such 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 building
process. 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 Model
consider brand building as a series of steps, whether Brand Orientation and Brand Leadership

are focused on building interconnected models.

2.2.1. Brand Building Theories.
Millward Brown, the marketing research consultant, is the one who developed the
model of brand strength called BRANDZ. The main idea is the BrandDynamics pyramid
presented in Figure 1. which argues that brand building is the process.

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As Kotler captures it “brand building follows a sequential series of steps, each
contingent upon successfully accomplishing the preceding one” (Kotler 2006: 283). The main
point is the distribution of the consumers. The most consumers could be found on lower levels
and it is the job for marketers to increase the number of programs and activities that will help
consumers move to higher levels.
There is assigned enquiry to each level of the pyramid. The weakest relationship and
low share of category expenditure is at Presence level “Do I know about it?”. At Relevance
level 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 which
considers 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 is
Bonding. It is the best and the most awaited level of bond with the consumer. They make a
choice 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 Brand
Resonance 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 building
blocks are put into place”(Kotler, 2006: 285).

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The first step, Brand Salience, considers how often and how easily do customers think of
the 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 specific
product class of customer need. The second step consists of two blocks: Brand Performance
which considers if the customers’ functional needs are met by the product or service and
Brand 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 second
step 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 the
brand that are strong, unique and favourable are necessary to keep brand competitive. For the
third tier of the pyramid Kotler proposes two blocks: Brand Judgements and Brand Feelings.
Judgements emerge from Performance and Imagery associations and are focused on personal
opinions and evaluations like perceived quality of the brand, credibility, consideration and
superiority. Feelings, on the other hand, are the emotional responses and reactions to the brand
like social approval, self-respect, excitement, fun. It is important to obtain a proper positive
response in the consumer mind in terms of judgement and feelings. The last block of the
pyramid is Brand Resonance which refers to nature of the relationship and psychological bond
that 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 target
customers with the aim of achieving lasting competitive advantages in the form of
brands”(Urde, 1999). Basically the model focuses on the brand by considering it as strategic
resources. Urde argues that when building the brand one should “first create a clear
understanding of the internal brand identity. The brand becomes strategic platform that

provides 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 the
strategic 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 any
given 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

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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 the
core values lies at the central point of the model. The emotional functions (Corporate name
and Brand name) are reflected in the left side of the model. The rational view (Product
Category and Product) is presented at the right side of the model. The way in which target
consumers interpret the brand (Target Audience) is at the upper side, while intensions of the
brand (Vision and Mission) are situated at the lower part of the model.
The last brand building theory presented is Brand Leadership model. This model
differs 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 top
marketing professional in the organization. “The brand manager in the brand leadership
paradigm is strategic and visionary rather than tactical and reactive. He or she takes control of
the brand strategically, setting forth what it should stand for in the eyes of the customer and
others relevant parties and communicating that identity consistently, efficiently and

effectively”(Aaker, 2000: 350). Brand leadership model’s main concept is that the brand
strategy should be influenced by the business strategy and should reflect the same strategic
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vision and corporate culture. Organizational challenge considers the creation of brand
building 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 and
recognition among consumers. The last challenge for company is refining brand building
programs to be efficient and effective so customer perceptions, attitudes and loyalty could be
shaped. 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 and
processes 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 the
brand”(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 the
communication and management process to share experience, information, insights and
initiatives.
Another challenge of Brand Leadership approach concerns brand architecture. It is about
identification of the brands, sub-brands that will be supported, their relationships and
respective roles. If managed properly, the effect will include clarity of customer offerings,
synergies in communication programs and ability to leverage brand assets. Another key
function of brand architecture are decisions about extending brands: should company use subbrand, endorse brand or create a new one. “The relative role of each brand in the portfolio
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should be determined”(Aaker 2000) in order to make proper decision about assigning

adequate 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 brand
identity – “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-building
program. However if there is ambiguity and confusion in brand identity, the chances of
effective brand building are strongly reduced.
The last challenge company faces are brand building programmes and communication
activities which are necessary to develop the brand identity. They are useful not only in the
implementation of brand identity but also in brand defining process. Accessing multiple media
helps being noticed and remembered, helps in changing customer perceptions, reinforcing
attitudes and creating loyalty.

2.2.2. What is brand building for?
Even though the four models of brand building, presented in previous section, differ in
approach, they all have the same goal: lead the brand to a point where omnipotence and
recognisability 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 taken
into consideration. Building successful brand requires putting a lot of effort into this process
and constant monitoring of the situation. If the brand building process is without supervision
and left on their own there is little chance it will create desired loyalty, associations and
attitudes toward company and its products. But what exactly are those differences created in
consumers’ minds that brand building tries to achieve? Next section will focus on finding out
what 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 what
influences the way the product or service is perceived? What processes can be influenced and
endowed 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

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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 chapter
will 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 the
company as a result of owing a brand”(Knowles 2008: 23). Such a definition resulted from
the financial attitude towards equity. There is also accounting concept, which as author writes
would use the term “trademark and associated goodwill”(Knowles 2008: 23). This definition
results from the perspective that accountants perceive assets. The marketing concept, on the
other hand does not describe brand equity in terms of money. Knowles’ definition of a brand
equity from marketing perspective is similar to Kotler’s which describes it as “the added value
endowed on products and services”(Kotler 2006: 280), since that is the job of marketers. But
what are those values and where are they added? What aspect of company are influenced by
the 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 equivalent
branded 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 about

finding what are the associations in consumer mind connected to the brand. The marketing
definition of the brand equity and customer-based brand equity measurement method will
be used in the thesis.

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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 the
best 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 briefly
explained together with included parameters.
The first and most commonly cited author is Kevin Lane Keller. He defines customerbased brand as “differential effect that brand knowledge has on consumer response to the
marketing of that brand. A brand is said to have positive customer-based brand equity when
consumers react more favourably to a product and the way it is marketed when the brand
is identified than when it is not identified”(Keller 2004: 60) Keller identifies three key
ingredients that constitute brand equity:
-

brand knowledge: consists of all the thoughts, feelings, images, attributes, awareness,
experiences, beliefs, attitudes and benefits that become associated with the
brand(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 five

dimensions. 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 “includes
two sets of market behavior measures that represent information obtained from market-based
information rather than directly from customers.” Each dimension defined by Aaker consists
of measures and there are ten measures totally which are grouped into categories: loyalty
measures, perceived quality, associations, awareness, market behaviour. The Brand Equity
Ten (Aaker 1996: 105) include:
- loyalty measures:
•

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

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•

satisfaction/loyalty – a direct indication of customer satisfaction applied to customers
who 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 must
have 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 customers
whether value received for the money is good when comparing to competing brands,

•

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

•

organizational associations – brand as the corporate entity consisting of people, values
and 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 sold
and distribution coverage
The third model of brand equity is one of the most recent ones. Atilgan, Akinci, Aksoy

and Kaynak studied global brands in culturally dissimilar countries. From the empirical
evidence they deducted that “The brand equity for global brands can be measured under four
basic dimensions: perceived quality, brand loyalty, brand associations, and brand
trust.”(Atilgan, 2009: 115)” The new dimension discovered (trust) seems to suit very well
when talking about the brand in the present time, especially when very little about the
performance of the brand could be hidden from the media.

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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 other

Brand associations

brands offering similar benefits).
Anything linked in memory to a brand(product attributes, brand name,

Brand trust

benefits and attitudes associated with brand).
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 are
strong references made, implicitly and explicitly, to the existence and importance of trust not
only in the brand equity literature but also in global branding and global consumption
studies”(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 to

start thinking about expertise and trustworthiness when delivering what has been promised by
the company.
The theories of brand equity presented in this section differ in parameter mix which
they consist of and groups they are assigned to. However, there are similarities between them
and 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 knowledge
structures 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, marketing
activities and indirect associations. Each group of brand equity drivers consist of various
elements which require specialist techniques in order to be successful.
The first group are brand elements, “those trademarkable devices that identify and
differentiate the brand”(Kotler 2006: 286). It is worth mentioning that multiple brand
elements contribute to the development of strong brand much faster then the same elements
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individually. Kotler describes them as “the initial choices for the brand elements or identities
making 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 of
these elements is what consumers would think or feel about the product if the brand element
were 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, capture
intangible 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 different
meanings 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 brand
elements 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 be
legally registered and protected internationally.

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

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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 and
opportunities.
The second group of brand equity drivers are “product and service and all
accompanying 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 this
paper 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, a
customer or prospect has with the brand, the product category, or the market that relates to the
marketer’s product or service”(Schultz 2003). The contacts and touch points like: payment
transaction, telephone or online experience, word of mouth, interaction with personnel or
simply personal use and observations show that strategy and tactics behind marketing are no

longer as simple as they were in the past. The study of interconnection and interdependence of
various factors emphasize there are three important themes when designing marketing
programs of brand building. The three ideas are: personalization, integration and
internalization.
“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 every
customer is treated individually customers desire more attention. In order to adapt to this
requirement marketers have embraced different methods: experiential marketing, one-to-one
marketing and permission marketing.
Experiential marketing was the concept developed by Schmitt in 1999. The main idea was
that “if you want to win and keep customers, you must offer them an experience that is tied to
the purchase of your goods and services”(Kinni 1999: 132). Schmitt in his model used five
strategic 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 facing
today"(Schmitt 1999: 12). The engagement and interaction with the brand, products and
services create experiences which drive sales, create image and awareness of the brand.
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The aim of personalized marketing is to establish the connection with the consumer which
will 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 you
and what else you know about that customer”(Peppers 1999: 151). Peppers and Rogers
outlined 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, and
proves to be successful only for companies that collect plenty of information about individual
customers.
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 the
customer, who decides whether he or she wants to receive or not marketing information and
under which form. As Godin wrote in his book “marketers can develop stronger consumer
relationships by respecting consumers’ wishes and sending messages only when they express
willingness to become more involved in a brand”(Godin 1999). Leaving decision to the
potential customer makes the decision more personal and makes him or her feel more relevant
thus 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 maximize
their individual and collective effects”. In order to achieve it, variety of diverse marketing
activities is needed that will reinforce the brand promise. This kind of approach comes from
the holistic view on marketing which assumes that, “Marketing programs should be put
together so that the whole is grater than sum of the parts”(Kotler 2006: 289). Sum of the
individual marketing activities in not equal to the total outcome of marketing program. All
integrated marketing actions can be evaluated by looking at their effectiveness, efficiency, and
effect they have on brand awareness or creating and maintaining brand image. The two
important 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 a
company aims to identify or position itself or its product”. The aim of brand identity strategy
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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 the
firm's marketing communications” (Madhavaram 2005). It is important to remember that
identification 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 about
brand image is to convey properly with customers, so they will not confuse what brand stands
for. The right establishment in consumer minds requires from marketers to communicate
through all available channels. The message sent must be expressed in symbols, colors,
slogans, events, atmosphere, employee behavior, packaging and advertisements. Marketing
activities may vary in strength and can accomplish different objectives. The complementarity
and enhancement of the effects of possible marketing activities should be carefully studied. In
order to build and maintain exceptional brand equity, the engagement in a mixture of
integrated marketing activities is needed.
The last important concept applied to the second group of brand equity drivers is
internalization, also called internal branding defined as “activities and processes that help to
inform and inspire emplyees”(Kotler, 2006). This issue is especially crucial for service
companies and retailers. Employees need an up-to-date information about brand promise and
deep understanding of it. The job of marketers is to “adopt internal perspective to be sure
employees and marketing partners appreciate and understand basic branding notions and how
they can help – or hurt – brand equity”(Dunn, 2003). Motivation to work harder, faster and
better 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 turning
points are ideal opportunities for an internal branding campaigns, “employees are
seeking direction and are relatively receptive to these changes”(Mitchell 2002), that’s
why it is the unique occasion to capture their attention and imagination.
2. Link internal and external marketing – The messages sent internally and externally
must match. “Employees need to hear the same message that you send out to the
marketplace”(Mitchell 2002). The observation that different message is being sent

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

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