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“New exciting ideas and perspectives on brand building are offered that have been absent from our literature.”
Philip Kotler, S C Johnson & Sons Distinguished Professor of International Marketing, Northwestern University,
Kellogg School of Management, USA

4TH
EDITION

“New exciting ideas and perspectives on brand building!”
Philip Kotler

“Kapferer continues to be on the leading edge.”
Earl N Powell, President, Design Management Institute, Boston, USA

“The best book on brands!”
Design Magazine
“One of the definitive resources on branding for marketing professionals worldwide.”
The Economic Times, India
“One of the best books on brand management. Kapferer is thought-provoking and always able to create new insights on
various brand-related topics.”
Rik Riezebos, CEO Brand Capital and director of the European Institute for Brand Management
Adopted by leading international business schools, MBA programmes and marketing practitioners alike, The New Strategic
Brand Management is simply the reference source for senior strategists, positioning professionals and postgraduate
students. Over the years it has not only established a reputation as one of the leading works on brand strategy but has

also become synonymous with the topic itself.
This new edition builds on its impressive reputation and keeps the book at the forefront of strategic brand thinking.
Revealing and explaining the latest models used by companies worldwide, author Jean-Noël Kapferer covers all the
leading issues faced by brand strategists today, supported by an array of international case studies. With both gravitas
and intelligent insight, this book reveals new thinking on crucial topics including:
•
•
•
•
•

growth in saturated markets;
decommoditisation;
innovation in emerging markets;
brand rejuvenation and turn around;
managing brand consistency and diversity;

•
•
•
•
•

positioning private labels and store brands;
globalisation and market adaptation;
co-branding strategies;
internal branding and corporate branding;
financial evaluation of brands.

Moving beyond marketing, The New Strategic Brand Management addresses the bigger picture, integrating other

components such as business models, HR and finance into brand building. It analyses the specifics of brands in B2B,
services, distribution, the internet and the luxury sector. It extends the brand concept to celebrities, universities, towns
and nations.

£35.00
US $70.00
Kogan Page
120 Pentonville Road
London N1 9JN
United Kingdom
www.kogan-page.co.uk

ISBN: 978-0-7494-5085-4

Kogan Page US
525 South 4th Street, #241
Philadelphia PA 19147
USA
Branding / Business and management

KAPFERER

Jean-Noël Kapferer is one of the very few worldwide experts on brands. His book stands out from
others with its unique insights, its style of exhaustive analysis and its original perspectives, stemming from
his strategic vision, and his international background and experience. A professor of marketing strategy at
HEC Paris, he holds a PhD from Northwestern University (USA) and is an active consultant to many
European, US and Asian corporations. He also gives executive seminars in the US, China, Japan, Korea and
India. He is the author of six books on branding, advertising and communication, including Reinventing the Brand, also
published by Kogan Page. You can contact him at www.kapferer.com.

THE NEW STRATEGIC
BRAND MANAGEMENT

“Managing a brand without reading this book is like driving a car without your license.”
Haesun Lee, Senior Vice President of Marketing, AMOREPACIFIC Co, Korea

4TH EDITION

THE NEW

STRATEGIC

BRAND
MANAGEMENT
Creating and sustaining brand equity long term

J N KAPFERER


I

THE NEW

STRATEGIC

BRAND
MANAGEMENT


ii

‘After reading Kapferer’s book, you’ll never again think of a brand as just a name. Several exciting
new ideas and perspectives on brand building are offered that have been absent from our literature.’
Philip Kotler, Northwestern University
‘A real thought provoker for marketing and business people. Strategic Brand Management is an
essential tool to develop strong marketing strategy.’
P Desaulles, Vice President, Du Pont de Nemours Europe
‘A solid contribution written with depth and insight. I recommend it to all those who desire a
further understanding of the various dimensions of brand management.’
David A Aaker, University of California at Berkeley, and author of Managing Brand Equity
‘The best book on brands yet. It is an invaluable reference for designers, marketing and brand
managers.’
Design Magazine
‘‘One of the best books on brand management. Kapferer is thought provoking and always able to
create new insights on various brand related topics.’
Rik Riezebos, CEO Brand Capital and director of EURIB/European Institute for Brand Management
‘One of the definitive resources on branding for marketing professionals worldwide.’
The Economic Times, India
‘Jean Noel Kapferer’s hierarchy of brands with six levels of brands is an extraordinary insight.’
Sam Hill and Chris Lederer, authors of The Infinite Asset, Harvard Business School Press
‘A fresh perspective on branding that is easy to understand and inspirational. I believe it to be
the finest book on the subject in the marketplace today.’
Marsha Lindsay, President and CEO, Lindsay, Stone and Briggs
‘The treatment of brand-product strategies, brand extensions and financial evaluations are also
strengths of the book.’
Journal of Marketing
‘A “think book”. It deals with the very essence and culture of branding.’
International Journal of Research in Marketing
‘An authoritative analysis about establishing an identity and exploiting it.’
Daily Telegraph

‘A full and highly informative text… well written and brought to life through numerous appropriate
examples.’
Journal of the Market Research Society


III

THE NEW

STRATEGIC

BRAND
MANAGEMENT
Creating and Sustaining Brand Equity Long Term

JEAN-NOËL KAPFERER

London and Philadelphia


iv

Publisher’s note
Every possible effort has been made to ensure that the information contained in this book is
accurate at the time of going to press, and the publishers and authors cannot accept responsibility for any errors or omissions, however caused. No responsibility for loss or damage occasioned to any person acting, or refraining from action, as a result of the material in this
publication can be accepted by the editor, the publisher or any of the authors.
First published in France in hardback in 1992 and in paperback in 1995 by Les Editions d’Organisation
Second edition published in Great Britain in 1997 by Kogan Page Limited
Third edition 2004
Reprinted 2005, 2007

Fourth edition 2008
Apart from any fair dealing for the purposes of research or private study, or criticism or review, as
permitted under the Copyright, Designs and Patents Act 1988, this publication may only be
reproduced, stored or transmitted, in any form or by any means, with the prior permission in
writing of the publishers, or in the case of reprographic reproduction in accordance with the
terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms
should be sent to the publishers at the undermentioned addresses:
120 Pentonville Road
London N1 9JN
United Kingdom
www.kogan-page.co.uk

525 South 4th Street, #241
Philadelphia PA 19147
USA

© Les Editions d’Organisation, 1992, 1995, 1997, 2004, 2007, 2008
The right of Jean-Noel Kapferer to be identified as the author of this work has been asserted by
him in accordance with the Copyright, Designs and Patents Act 1988.
ISBN 978 0 7494 5085 4
British Library Cataloguing-in-Publication Data
A CIP record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Kapferer, Jean-Noël.
New strategic brand management : creating and sustaining brand equity long term / JeanNoël Kapferer. – 4th ed.
p. cm.
Includes bibliographical references and index.
ISBN-13: 978-0-7494-5085-4 (alk. paper) 1. Brand name products–Management. I. Title.
HD69.B7K37 2008
658.8'343–dc22

2007037849
Typeset by Saxon Graphics Ltd, Derby
Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall


V

Contents

List of figures ix
List of tables xii
Preface to the fourth edition

xiv

Introduction: Building the brand when the clients are empowered
Part One: Why is branding so strategic?

1

7

1.

Brand equity in question 9
What is a brand? 9; Differentiating between brand assets, strength and value 13;
Tracking brand equity 15; Goodwill: the convergence of finance and marketing 18;
How brands create value for the customer 19;
How brands create value for the company 23;
Corporate reputation and the corporate brand 26

2.

Strategic implications of branding 31
What does branding really mean? 31; Permanently nurturing the difference 35;
Brands act as a genetic programme 36; Respect the brand ‘contract’ 38;
The product and the brand 39; Each brand needs a flagship product 41;
Advertising products through the brand prism 42; Brands and other signs of quality 44;
Obstacles to the implications of branding 45

3.

Brand and business building 51
Are brands for all companies? 51; Building a market leader without advertising 52;
Brand building: from product to values, and vice versa 55;
Are leading brands the best products or the best value? 57;
Understanding the value curve of the target 58; Breaking the rule and acting fast 58;
Comparing brands and business models: cola drinks 59


vi

CONTENTS

4.

From private labels to store brands 65
Evolution of the distributor’s brand 66; Are they brands like the others? 69;
Why have distributors’ brands? 74; The financial equation of the distributor’s brand 75;
The three stages of the distributor’s brand 77; The case of Decathlon 79;

Factors in the success of distributors’ brands 82; Optimising the DOB marketing mix 84;
The real brand issue for distributors 85; Competing against distributors’ brands 87;
Facing the low-cost revolution 90; Should manufacturers produce goods for DOBs? 93

5.

Brand diversity: the types of brands 95
Luxury, brand and griffe 95; Service brands 103; Brand and nature: fresh produce 106;
Pharmaceutical brands 108; The business-to-business brand 113; The internet brand 119;
Country brands 123; Thinking of towns as brands 125;
Universities and business schools are brands 128; Thinking of celebrities as brands 131;
Thinking of television programmes as brands 132

Part Two: The challenges of modern markets

135

6.

The new rules of brand management 137
The limits of a certain type of marketing 139; About brand equity 141;
The new brand realities 144; We have entered the B to B to C phase 152;
Brand or business model power? 153; Building the brand in reverse? 154;
The power of passions 155; Beginning with the strong 360° experience 156;
Beginning with the shop 158; The company must be more human, more open 158;
Experimenting for more efficiency 159; The enlarged scope of brand management 160;
Licensing: a strategic lever 164; How co-branding grows the business 166

7.

Brand identity and positioning 171
Brand identity: a necessary concept 171; Identity and positioning 175;
Why brands need identity and positioning 178; The six facets of brand identity 182;
Sources of identity: brand DNA 188; Brand essence 197

Part Three: Creating and sustaining brand equity

201

8.

Launching the brand 203
Launching a brand and launching a product are not the same 203;
Defining the brand’s platform 204; The process of brand positioning 207;
Determining the flagship product 209; Brand campaign or product campaign? 210;
Brand language and territory of communication 210;
Choosing a name for a strong brand 211;
Making creative 360° communications work for the brand 214;
Building brand foundations through opinion leaders and communities 215

9.

The challenge of growth in mature markets 219
Growth through existing customers 219; Line extensions: necessity and limits 222;
Growth through innovation 227; Disrupting markets through value innovation 230;
Managing fragmented markets 232; Growth through cross-selling between brands 234;
Growth through internationalisation 234


CONTENTS

10. Sustaining a brand long term 237
Is there a brand life cycle? 238; Nurturing a perceived difference 240;
Investing in communication 243; No one is free from price comparisons 245;
Branding is an art at retail 247; Creating entry barriers 248;
Defending against brand counterfeiting 250; Brand equity versus customer equity:
one needs the other 252; Sustaining proximity with influencers 260;
Should all brands follow their customers? 262; Reinventing the brand: Salomon 263
11. Adapting to the market: identity and change 269
Bigger or better brands? 270; From reassurance to stimulation 271;
Consistency is not mere repetition 272; Brand and products: integration and
differentiation 273; Specialist brands and generalist brands 275;
Building the brand through coherence 279;
The three layers of a brand: kernel, codes and promises 290;
Respecting the brand DNA 292; Managing two levels of branding 293
12. Growth through brand extensions 295
What is new about brand extensions? 296; Brand or line extensions? 298;
The limits of the classical conception of a brand 300;
Why are brand extensions necessary? 303;
Building the brand through systematic extensions: Nivea 306;
Extending the brand to internationalise it 309; Identifying potential extensions 310;
The economics of brand extension 312; What research tells us about brand
extensions 316; What did the research reveal? 324;
How extensions impact the brand: a typology 324; Avoiding the risk of dilution 326;
Balancing identity and adaptation to the extension market segments 330;
Assessing what should not change: the brand kernel 332;
Preparing the brand for remote extensions 333; Keys to successful brand extensions 336;
Is the market really attractive? 340; An extension-based business model: Virgin 342;
How execution kills a good idea: easyCar 345
13. Brand architecture 347

The key questions of brand architecture 347; Type and role of brands 349;
The main types of brand architecture 356;
Choosing the appropriate branding strategy 372; New trends in branding strategies 376;
Internationalising the architecture of the brand 379; Some classic dysfunctions 379;
What name for new products? 381; Group and corporate brands 385;
Corporate brands and product brands 388
14. Multi-brand portfolios 391
Inherited complex portfolios 392; From single to multiple brands: Michelin 393;
The benefits of multiple entries 395; Linking the portfolio to segmentation 396;
Global portfolio strategy 401; The case of industrial brand portfolios 402;
Linking the brand portfolio to the corporate strategy 405;
Key rules to manage a multi-brand portfolio 406;
The growing role of design in portfolio management 409;
Does the corporate organisation match the brand portfolio? 410;
Auditing the portfolio strategically 411; A local and global portfolio – Nestlé 413

vii


viii

CONTENTS

15. Handling name changes and brand transfers 415
Brand transfers are more than a name change 415; Reasons for brand transfers 416;
The challenge of brand transfers 418; When one should not switch 419;
When brand transfer fails 420; Analysing best practices 421;
Transferring a service brand 426;
How soon after an acquisition should transfer take place? 428;
Managing resistance to change 431; Factors of successful brand transfers 433;

Changing the corporate brand 435
16. Brand turnaround and rejuvenation 437
The decay of brand equity 438; The factors of decline 439; Distribution factors 442;
When the brand becomes generic 443; Preventing the brand from ageing 443;
Rejuvenating a brand 445; Growing older but not ageing 450
17. Managing global brands 455
The latest on globalisation 456; Patterns of brand globalisation 459; Why globalise? 461;
The benefits of a global image 466; Conditions favouring global brands 468;
The excess of globalisation 470; Barriers to globalisation 471;
Coping with local diversity 473; Building the brand in emerging countries 478;
Naming problems 479; Achieving the delicate local–global balance 480;
Being perceived as local: the new ideal of global brands? 483;
Local brands can strike back 485; The process of brand globalisation 487;
Globalising communications: processes and problems 495;
Making local brands converge 498
Part Four: Brand valuation

501

18. Financial valuation and accounting for brands 503
Accounting for brands: the debate 504; What is financial brand equity? 507;
Evaluating brand valuation methods 513; The nine steps to brand valuation 525;
The evaluation of complex cases 528;
What about the brand values published annually in the press? 529
Bibliography
Index 545

531

IX

Figures

1.1
1.2
1.3
2.1
2.2
2.3
2.4
2.5
3.1
4.1
5.1
5.2
5.3
5.4
6.1
6.2
6.3
6.4
7.1
7.2
7.3
7.4
7.5
7.6
8.1
8.2

The brand system
The levers of brand profitability
Branding and sales
The brand system
The cycle of brand management
The product and the brand
Product line overlap among brands
Brands give innovations meaning and purpose
The two models of brand building through time
Relative positioning of the different distributors’ brands
The pyramid brand and business model in the luxury market
The constellation model of luxury brands
History-based and story-based approaches to luxury
How brands impact on medical prescription
Limits of traditional marketing
From brand values to brand value
Brand equity
The extension of brand management
Identity and image
Positioning a brand
The McDonald’s positioning ladder
Brand identity prism
Sample brand identity prisms
Example of brand platform: Jack Daniel’s
Transfer of company identity to brand identity when company and brand
names coincide
From brand platform to activation

12

25
26
34
36
41
42
43
56
68
98
100
101
112
140
143
144
162
174
176
180
183
188
199
206
210


x

FIGURES

8.3
9.1
9.2
9.3
9.4
10.1
10.2
10.3
10.4
10.5
11.1
11.2
11.3
11.4
11.5
11.6
11.7
11.8
11.9
11.10
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
12.9

12.10
12.11
12.12
13.1
13.2
13.3
13.4
13.5
13.6
13.7
13.8
13.9
13.10
13.11
13.12
14.1
15.1

Consumer empowerment
Increasing volume per capita
Segmenting by situation
Brands’ dual management process
A disruptive value curve: Formule 1 hotels
Innovation: the key to competitiveness
Paths of brand growth and decline
Penetration of distributors’ brands and advertising intensity
Sources of price differentiation between brands and hard-discount products
Brand capital and customer capital: matching preferences and purchase behaviour
The identity versus diversity dilemma
The double role of brand integration and differentiation

Differentiate what is variable from what is non-negotiable in the brand identity
Generalists and specialists
The different relationships between brands and products
How brands incorporate change: kernel and peripheral traits
Product lines must embody the core facets and each adds its own specific facets
Organisation of Mars masterbrand and products
How the brand is carried by its products
Identity and pyramid models
The Nivea extensions galaxy
Perimeters of brand extension
Rate of success of new brands vs brand extensions (OC&C)
The impact of brand extension on the consumer adoption process (OC&C)
Ayer model: how a family name impacts the sales of a new product
Comparative sales performance during the first two years (Nielsen)
The brand extension decision
The consequences of product and concept fit and misfit
Type of brand and ability to extend further
The process of extension
Framework for evaluating extensions
The Virgin extension model
Positioning alternative branding strategies
The six brand architecture strategies
The product-brand strategy
Range brand formation
Range brand structured in lines
Endorsing brand strategy
Umbrella brand strategy
Source brand or parent brand strategy
A case of brand proliferation or dilution of identity
3M branding options review

Which brand architecture is suitable for brand innovation?
Corporate and product branding at ICI
Segmenting the brand portfolio by price spectrum
When rebranding fails: from Fairy to Dawn (P&G)

217
221
222
229
231
241
242
244
246
255
271
274
276
278
285
287
288
289
290
291
307
311
313
313
314

315
317
322
334
335
336
343
352
354
356
360
362
363
364
367
371
376
382
390
400
421


FIGURES

15.2 A stepwise approach to brand transfers (relating the type of transfer to the
image gap)
16.1 Analysing the potential of an old brand
16.2 Sustaining brand equity long term : dual management in practice
17.1 Managing the globalisation process between headquarters and subsidiaries

18.1 What is ‘brand equity’?
18.2 The issue of fair valuation of brands
18.3 Positioning brand valuation methods
18.4 A multi-step approach to brand valuation
18.5 The Interbrand S-curve – relation between brand strength and multiple
18.6 Stepped graph showing relationship between brand strength and multiple

xi

431
446
451
498
504
505
513
518
521
524


xii

Tables

1.1
1.2
1.3
1.4
1.5

1.6
2.1
3.1
4.1
4.2
4.3
4.4
4.5
5.1
5.2
5.3
5.4
6.1
6.2
6.3
7.1
7.2
7.3
7.4
8.1
8.2

From awareness to financial value
Result of a brand tracking study
Brand financial valuation, August 2006
How brand awareness creates value and image dimensions
The functions of the brand for the consumer
Brand functions and the distributor/manufacturer power equilibrium
The brand as genetic programme
Consumer price (in euros/litre) of various orange-flavour drinks in Europe

Brand attachment: the 10 winning brands
Determinants of attachment to distributors’ and producers’ brands
How copycat resemblance influences consumers’ perceptions
In which sectors do big brands resist trade brands and where are they defeated?
Percentage of consumers who intend to buy the distributor’s product
Consumers’ four concepts of luxury
Brand personality is related to prescription levels
The brand influence in medical prescription
The top ten European business schools
Evolution of brand indicators over 10 years
Evolution of brand capital for Coca-Cola and Danone
Strategic uses of co-branding
How to evaluate and choose a brand positioning
Sub-brand and master brand positioning
The most typical products of two mega-brands
Brand laddering process: the Benetton case
Underlying the brand is its programme
Comparing positioning scenarios: typical positioning scenarios for a new
Cuban rum brand

14
17
19
21
22
23
36
59
72
73

79
84
85
97
110
111
129
142
142
170
177
182
191
193
205
208


TA B L E S

9.1
10.1
11.1
12.1
12.2
12.3
12.4
13.1
13.2
16.1

17.1
17.2
17.3
17.4
17.5
17.6
17.7
17.8
18.1
18.2
18.3

Addressing market fragmentation
Advertising weight and trade brands’ penetration
From risk to desire: the dilemma of modern branding
Relating extensions to strategy
Brand extension impact on launching costs
Success rate of two alternative branding policies
Extension strategic evaluation grid
‘House of brands’ or ‘branded house’
Shared roles of the corporate and product brand
How brand equity decays over time
From global to local: eight alternative patterns of globalisation
Globalisation matrix
How Absolut copes with the grey market: corridor pricing
How global and local brands differ
What differences between countries would compel you to adapt the
marketing mix of the brand?
Which facets of the brand mix are most often globalised?
Barilla’s international and domestic range

How to make local brands converge
A method of valuing brand strength
Another estimate of the financial value of brands (2007)
Assessing brand strength: strategic diagnosis

xiii

233
245
271
296
315
318
341
353
389
439
459
461
466
468
472
473
489
499
520
524
527

xiv

Preface to the fourth edition
Integrating brand and business
This is a book on strategic brand management. It capitalises on the success of the former three
editions. As far as we understand from our readers worldwide (marketers, advertisers, lawyers, MBA
students and so on), this success was based on six attributes which we have of course maintained:

l Originality. Strategic Brand Management is quite different from all the other books on brand
management. This is due to its comprehensiveness and its unique balance between theory
and cases. It also promotes strong and unique working models.

l Relevance. The cases and illustrations are new, unusual, and not over-exposed. They often
represent business situations readers will relate to and understand more readily than over used
examples using Coke, Starbucks, Cisco, Fedex, BMW and other great classics of most books
and conferences on brands.

l Breadth of scope. We have tried to address most of the key decisions faced by brands.
l Depth of treatment. Each facet of brand management receives a deep analysis, hence the size
of this edition. This is a book to consult.

l Diversity. Our examples cover the fast-moving consumer goods sector (FMCG) as well as
commodities, business-to-business brands, pharmaceutical brands, luxury brands, service
brands, e-brands, and distributors’ brands – which are brands almost like the others.

l International scope, with examples from the United States, Europe and Asia.
This fourth edition is much more than a revision of the previous one. It is a whole new book for
understanding today’s brands and managing them efficiently in today’s markets. Sixteen years
after the first edition, so much change has happened in the world of brands! This is why this new
edition has been thoroughly updated, transformed and enriched. Of course, our models and

methodologies have not changed in essence, but they have been adapted to reflect current
competition and issues.


P R E FA C E

xv

This edition concentrates on internationalisation and globalisation (how to implement these
in practice), on portfolio concentration (managing brand transfers or switches), on the creation
of megabrands through brand extensions, on the development of competitive advantage and
dominant position through an adequate brand portfolio, and on the efficient management of
the relationships between the brand, the corporation and the product (the issue of brand architectures).
There are many other significant new features in this edition, which reflect the new branding
environment:

l Because distributors’ brands (often wrongly described as private labels) are everywhere and
often hold a dominant market share, they need their own chapter. In addition, in each
chapter we have addressed in depth how the recommendations do or do not apply to distributors’ brands.

l Significantly, this edition develops its new section on innovation. Curiously, the topic of
brands and innovation is almost totally absent from most books on branding. This seems at
odds with the fact that innovation and branding has become the number one topic for
companies. In fact, as we shall demonstrate, brands grow out of innovation, and innovation is
the lifeblood of the brand. Furthermore, contrary to what is often said or thought, the issue of
innovation is not merely about creativity. It is about reinventing the brand.

l This new edition is also sensitive to the fact that many modern markets are saturated. How
can brands grow in such competitive environments? A full chapter on growth is included,
starting with growth from the brand’s existing customers.

l The issue of corporate brands and their increasing importance is also tackled, as is their relationship with classic brand management.

l We also stress much more than previously the implementation side: how to build interesting
brand platforms that are able to stimulate powerful creative advertising that both sells and
builds a salient brand; how to activate the brand; how to energise it at contact points; and how
to create more bonding. We provide new models to help managers.
This book also reflects the evolution of the author’s thought. Our perspective on brands has
changed. We feel that the whole domain of branding is becoming a separate area, perhaps with a
risk of being self-centered and narcissistic. Too often the history of a company’s success or even
failure is seen through the single perspective of the brand, without taking into account all the
conditions of this success or failure. A brand is a tool for growing the business profitably. It has
been created for that purpose, but business cannot be reduced to brands. The interrelationship
between the business strategy and the brand strategy needs to be highlighted, because this is the
way companies operate. As a consequence, we move away from the classic partitioning of brand
equity into two separate approaches. One of these is customer-based, the other cashflow-based.
It is crucial to remember that a brand that produces no additional cashflow is of little value,
whatever its image and the public awareness of it. In fact, it is time to think of the brand as a
‘great shared idea supported by a viable economic equation’. In this fourth edition, we try regularly to relate brand decisions to the economic equation of the business.
Today, every business now wants to have its own brand, not for the sake of possessing it, as one
possesses a painting or statue, but to grow the business profitably. We hope this book will help
readers significantly, whether they are working in multinationals or in a small dynamic business,
developing a global brand or a local one.


xvi

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1

Introduction:
Building the brand when the
clients are empowered
It is surprising to see how brands continue to stimulate interest although so many prophets and
experts have recently claimed they have no future. Today, all business managers are supposed to
have attended conferences on CRM, ECR, customer equity, relationship marketing, customer
database management, e-relationships and proximity marketing: all these new tools criticise the
old brand concept and focus on the most efficient techniques to serve the most profitable
customers. They claim that conquering new clients is of no value any more: profitability will
come from mastering databases and loyalty programmes. Despite this, managers keep on
attending conferences on brand management. Why haven’t they been convinced that brand
management is an outdated tool? They have learnt that all these useful techniques soon lose
their potential to create a lasting competitive advantage. The more they are diffused and shared,
the more they become a standard, used by all competitors. What is customer equity without
brand equity?
There are very few strategic assets available to a company that can provide a long-lasting
competitive advantage, and even then the time span of the advantage is getting shorter. Brands
are one of them, along with R&D, a real consumer orientation, an efficiency culture (cost
cutting), employee involvement, and the capacity to change and react rapidly. This is the mantra
of Wal-Mart, Starbucks, Apple and Zara.
Managers have also rediscovered that the best kind of loyalty is brand loyalty, not price loyalty
or bargain loyalty, even though as a first step it is useful to create behavioural barriers to exit.
Finally, A Ehrenberg (1972) has shown through 40 years of panel data analysis that product
penetration is correlated with purchase frequency. In other words, big brands have both a high
penetration rate and a high purchase frequency per buyer. Growth will necessarily take these two
routes, and not only be triggered by customer loyalty.

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In our materialistic societies, people want to give meaning to their consumption. Only brands
that add value to the product and tell a story about its buyers, or situate their consumption in a
ladder of immaterial values, can provide this meaning. Hence the cult of luxury brands.

Pro logo?
Today, every organisation wants to have a brand. Beyond the natural brand world of producers
and distributors of fast-moving consumer goods, whose brands are competing head to head,
branding has become a strategic issue in all sectors: high tech, low tech, commodities, utilities,
components, services, business-to-business (B2B), pharmaceutical laboratories, non-governmental organisations (NGOs) and non-profit organisations all see a use for branding.
Amazingly, all types of organisations or even persons now want to be managed like brands:
David Beckham, the English soccer star, is an example. Los Angeles Galaxy paid US$250 million
to acquire this soccer hero. It expects to recoup this sum through the profits from licensed
products using the name, face or signature of David Beckham, which are sold throughout the
world. Everything David Beckham does is aimed at reinforcing his image and identity, and thus
making sales and profits for the ‘Beckham brand’.
Recently, the mayor of Paris decided to define the city as a destination brand and to manage
this brand for profit. Many other towns had already done this. Countries also think of themselves in brand terms (Kotler et al, 2002). They are right to do so. Whether they want it or not,
they act de facto as a brand, a summary of unique values and benefits. India had a choice
between allowing uncontrolled news and information to act (perhaps negatively) on world
public opinion, or choosing to try to manage its image by promoting a common set of strategic
values (its brand meaning), which might be differentiated by market. Countries compete in a
number of markets, just as a conventional brand competes for profitable clients: in the private
economic and financial investments market, various raw materials and agricultural markets, the
tourism market, the immigration market and so on.

It takes more than branding to build a brand

Companies and organisations from all kinds of sectors ask whether or not a brand could consolidate their business or increase its profitability, and what they should do to create a brand, or
become a corporate brand. What steps should be followed, with what investments and using
what skills? What are realistic objectives and expectations? Having based their success on
mastering production or logistics, they may feel they lack the methods and know-how to
implement a brand creation plan. They also feel it is not simply a matter of communication.
Although communication is necessary to create a brand, it is far from being sufficient. Certainly
a brand encapsulates in its name and its visual symbol all the goodwill created by the positive
experiences of clients or prospects with the organisation, its products, its channels, its stores, its
communication and its people. However, this means that it is necessary to manage these points
of contact (from product or service to channel management, to advertising, to Internet site, to
word of mouth, the organisation’s ethics, and so on) in an integrated and focused way. This is the
core skill needed. This is why, in this fourth edition of Strategic Brand Management, while we look
in depth at branding decisions as such, we also insist on the ‘non-branding’ facets of creating a
brand. Paradoxically, it takes more than branding to build a brand.


INTRODUCTION

3

Today clients are empowered as never before. It is the end for average brands. Only those that
maximise satisfaction will survive, whether they offer extremely low prices, or rewarding experience or service or performance. It is the end of hollow brands, without identity. The trader is
also more powerful than many of the brands it distributes: all brands that do not master their
channel are now in a B to B to C situation, and must never forget it.

Building both business and brand
Hit parades of the financial value of brands (brand equity) are regularly published in business,
financial and economics magazines. Whatever doubts one may have on their validity (see
Chapter 18), they do at least stress the essentially financial intentions behind building a brand.
Companies do not build brands to have authors write books on them, or to make the streets

livelier thanks to billboard advertising. They do it to grow the business still more profitably. One
does not make money by selling products, but brands: that is to say a unique set of values, both
tangible and intangible. Even low-cost operators need to compete on trust.
Our feeling is that, little by little, branding has been constructed as a separate field. There is a
risk however of the branding community falling in love with its own image: looking at the
considerable number of books published on brands, and at the list of most recent brand equity
values, one could think that brands are the one and only issue of importance. Indeed branding
professionals may become infatuated and forget the sources of brand equity: production, servicing, staffing, distributing, innovating, pricing and advertising, all of which help to create value
associations and effects which become embedded in clients’ long-term memory.
Looking at one of the stars of this hit parade, Dell, whose brand is valued so highly, one
question arises: is Dell’s success due to its brand or to its business model? It could be argued that
it was not the Dell brand but Dell activities in a broader sense that allowed the company to
announce more price cuts in 2006, putting Hewlett-Packard in a difficult position between two
‘boa constrictors’, Dell and IBM.
The brand is not all: it captures the fame but it is made possible by the business model. It is
time to recreate a balance in accounting for success and failures. It is the end of fairy tales; let’s
introduce the time of fair accounts.
Throughout this new edition of Strategic Brand Management, we relate the brand to the
business, for both are intimately intertwined. We regularly demonstrate how branding decisions
are determined by the business model and cannot be understood without this perspective. In fact
in a growing number of advanced companies, top managers’ salaries are based on three critical
criteria: sales, profitability and brand equity. They are determined in part by how fast these
managers are building the strategic competitive asset called a brand. The goal of strategy is to
build a sustainable advantage over competition, and brands are one of the very few ways of
achieving this. The business model is another. This is why tracking brands, product or corporate,
is so important.

Looking at brands as strategic assets
The 1980s marked a turning point in the conception of brands. Management came to realise that
the principal asset of a company was in fact its brand names. Several articles in both the

American and European press dealt with the discovery of ‘brand equity’, or the financial value of
the brand. In fact, the emergence of brands in activities which previously had resisted or were


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foreign to such concepts (industry, banking, the service sector, etc) vouched for the new importance of brands. This is confirmed by the importance that so many distributors place on the
promotion of their own brands.
For decades the value of a company was measured in terms of its buildings and land, and then
its tangible assets (plant and equipment). It is only recently that we have realised that its real
value lies outside, in the minds of potential customers. In July 1990, the man who bought the
Adidas company summarised his reasons in one sentence: after Coca-Cola and Marlboro, Adidas
was the best-known brand in the world.
The truth contained in what many observers took simply to be a clever remark has become
increasingly apparent since 1985. In a wave of mergers and acquisitions, triggered by attempts to
take up advantageous positions in the future single European market, market transactions
pushed prices way above what could have been expected. For example, Nestlé bought Rowntree
for almost three times its stock market value and 26 times its earnings. The Buitoni group was
sold for 35 times its earnings. Until then, prices had been on a scale of 8 to 10 times the earnings
of the bought-out company.
Paradoxically, what justified these prices and these new standards was invisible, appearing
nowhere in the companies’ balance sheets. The only assets displayed on corporate balance sheets
were fixed, tangible ones, such as machinery and inventory. There was no mention of the brands
for which buyers offered sums much greater than the net value of the assets. The acquiring
companies generally posted this extra value or goodwill in their consolidated accounts. The
actual object of these gigantic and relentless takeovers was invisible, intangible and unwritten:
they were aimed at acquiring brands.
What changed in the course of the 1980s was awareness. Before, in a takeover bid, merger or

acquisition, the buyer acquired a pasta manufacturer, a chocolate manufacturer or a producer of
microwave ovens or abrasives. Now companies want to buy Buitoni, Rowntree (that is, KitKat,
After Eight), Moulinex or Orange. The strength of a company like Heineken is not solely in
knowing how to brew beer; it is that people all over the world want to drink Heineken. The same
logic applies for IBM, Sony, McDonald’s, Barclays Bank or Dior.
By paying very high prices for companies with brands, buyers are actually purchasing positions in the minds of potential consumers. Brand awareness, image, trust and reputation, all
painstakingly built up over the years, are the best guarantee of future earnings, thus justifying
the prices paid. The value of a brand lies in its capacity to generate such cashflows.
Hardly had this management revolution been born than conflicting arguments arose regarding
the reality and the durability of brand equity. With the systematic rise in distributors’ own brands
it was argued that the capacity of brands had been exaggerated. The fall in the price of Marlboro
cigarettes in the USA in April 1993 created panic on Wall Street, with the share prices of all
consumer goods firms falling. This mini-Pearl Harbor proved healthy. At the height of recession
we realised that it was not the brand – registered trademark – as such that created value, but all the
marketing and communication done by the firm. Consumers don’t just buy the brand name, they
buy branded products that promise tangible and intangible benefits created by the efforts of the
company. Given time, the brand may evoke a number of associations, qualities and differences,
but these alone do not comprise the whole offer. A map alone is not the underlying territory.
In the 1990s, because of recession and saturated markets, the emphasis shifted from brands to
customer equity. New techniques, based on one-to-one targeting, replaced the emphasis on
classic media advertising. They could prove their effectiveness and targeted heavy buyers.
Just as some have exaggerated the overwhelming power of brands, so the opposition to brands
has been short-lived. The value of brands comes from their ability continuously to add value and


INTRODUCTION

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deliver profits through corporate focus and cohesiveness. Another question is, who is best placed

to make use of brands? Is it the producer or the distributor?
You must be very wary as regards ideological preferences; for example, there are very few
manufacturers’ brands on the furniture market other than those of Italian designers, yet
everybody talks about Habitat or Ikea, two distributors. They are seen as agents offering strong
value-added style in the first case and competitive prices and youth appeal in the second.
With manufacturers integrating their distribution, and distributors thinking of themselves as
brands, the world of brands is moving permanently, looking for new brand and business models,
sources of sustainable advantage and added value for clients. We shall explore these new models
that define the winning brands of today and tomorrow.


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7

Part One

Why is branding so
strategic?


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