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Posts Tagged ‘Brand Equity’

Our sweet delight for the day is the macaron. In basic terms, a macaron is made of two rounded meringue-based biscuits that hold between them, like a sandwich, a creamy filling. Macarons may come in various flavours (e.g., lemon, coffee, strawberry, caramel-fleur-de-sel) and appear each in a colour associated with its flavour. But from here on, the whole difference lies between a good-quality Macarons by Ladureemacaron and a mediocre one: How brittle are the top and bottom biscuits, finished with sugar glazing on surface and crispy edges? How soft and tasty is the filling in match with the biscuits? And how well does the whole composition melt in your mouth? A fine colourful arrangement of macarons on display in-store can be a visual celebration to our eyes; and the choice of flavours for making them is an excellent ground for creativity and ingenuity.

Macarons were developed in the form we know them today in the 1950s and 1960s. However, they have become so popular and ubiquitous in just the past five to ten years. The macarons are French in origin; according to some differing narratives they have gone through a few forms since the 18th century and until reaching the one most familiar now. The traditional fillings were ganache, buttercream or fruit jam, but the range of flavours currently available is much broader.

Much of the credit for the rise in demand for macarons in recent years, so it appears, belongs to the French patisserie and confectionary maker Ladurée whilst being under the ownership and leadership of the Holder family since 1993. Louis-Ernest Ladurée originally founded his tea room and patisserie in Paris of the late 19th century; the founding Ladurée family developed its successful recipe of macarons sometime before or around the mid-2oth century. Their single venue was located on rue RoyaleLaduree flagship shop and cafe, Champs Elysees, Paris near Place de la Concorde. The acquiring Holder family relocated its flagship venue in 1997 to the Champs Elysées and established under one roof a shop, a café next to it, and a restaurant (on its second floor). Moreover, the new owner has been investing with dedication in elevating the Ladurée brand. Their international expansion started in 2005 with London and have since spread to cities in Europe (e.g., Milano, Dublin, Zürich), the United States (New-York), Middle East (e.g., Beirut, Doha), Asia (e.g., Seoul, Hong-Kong, Shanghai) and Australia (e.g., Sydney), covering nearly 30 countries aside from France. They have, furthermore, a strong presence on the Internet in a fine brand-designed group of websites with vending functionalities.

It would do unjust, however, to suggest that good macarons in Paris come only from Ladurée. Fine and tasty macarons may be easily found in numerous venues across the city, particularly at chocolatiers and patisseries (e.g., Pierre Hermé, Fauchon, Maison du Chocolat). Some are better known confectionary and pastry makers, others may be less specialised vendors, so one has to try a few macarons to find out which he or she likes best. The increase in popularity, nevertheless, has motivated bakeries and confectionary makers in other countries to produce locally their own macarons, and there indeed consumers should take greater care to find truly good-quality macarons. There is also a bundle of recipe suggestions for macarons on the Internet.

  • Macarons have become particularly trendy in the United States. It is said that Americans welcome them as a replacement for cupcakes that went out of favour. But then the question is: Are macarons adopted in the US just as a hip that will fade away after a couple of years or are they there to stay. Macarons are most likely to stay popular in their home country, France, and probably also in some of the European countries, depending on how deeply such treats are rooted in those countries’ culinary cultures.

What probably makes Ladurée different, except for the high-quality of its macarons, pastries and other treats, is the carefully built strength or equity of its brand. It is created and maintained around the prestigious decorated flagship venue, the selection of its physical locations, and its websites. People stand in line outside its main shop to buy their macarons. Alternately, connoisseurs may sit in its café on Champs Elysées, enjoy some of their delicious pastries, and order a take-away pack of macarons, chosen from a special menu card, to be carefully packaged and brought to the table. They have a boutique shop-in-shop at Printemps upscale department store. Ladurée also collaborated in the past few years with well-known fashion designers to enhance its prestige image, especially during fashion week fairs (e.g., in New-York and Milano).

There is yet a variant form of macarons, famous of its own merit, known as Luxemburgerli by the Swiss chocolate specialist and patisserie Sprüngli. Their recipe was brought-in in the late 1950s from a confectionary maker originated, as the name suggests, in Luxemburg, who collaborated with Confiserie Sprüngli. The Luxemburgli is somewhat taller than the classic macaron with more filling — it feels like a richer combination of biscuit and cream. Like many of Sprüngli’s chocolate and bakery treats, their Luxemburgerli is an artisan delight. It would be interesting to find out how Ladurée succeeds against Swiss veteran makers of chocolate confections or pastries like Sprüngli, Teuscher or Läderach.

Consumers often do not feel comfortable to indulge themselves with products or services that are discretionary, and furthermore a luxury, whether it is specialty chocolate pralinés, a dinner at a top-class or luxury restaurant, or a holiday on a cruise ship. People want to feel they deserve it beforehand. In some cases, when heavier spending is required on a luxury, consumers appear to have a greater difficulty permitting themselves to enjoy an expensive luxury than resisting such temptation; they may need to precommit themselves to make the indulgence (e.g., going on a cruise for vacation versus replacing an old dishwasher)(1). The contemplation over smaller indulgences, like a sweet treat, is less demanding, yet people want to feel somehow entitled, so as not to suffer guilt and regret after the act.

Consumers may consider spoiling themselves in different circumstances. The occasion may simply arise when people are on vacation, indulging on premium chocolate or macarons as a way of enhancing their enjoyment, making the best of the holiday. But for many consumers such an occasion may not account for a reason concrete or good enough to indulge. (Celebrating a public holiday or a birthday make a notable exception.) Consumers are likely to expect indulgences to be more appropriate as a reward for an achievement or good performance (e.g., completing a tough assignment, a high-grade in an exam). Conversely, it may be justified as a consolation for bad or disappointing performance (e.g., failing an entry exam, losing a client). There is also an expectation of consumers that an indulgent experience will be more enjoyable when it comes as a reward than as a consolation. However, all this effort of justification may be an outcome of misconception and insufficient learning by the consumers. Xu and Schwarz show that consumers indeed have such expectations, that may drive their decisions, but they are inconsistent with what they reportedly feel during the experience episode or shortly after it. Differences in emotions expressed in their predictions (expectations) were not reflected in their episodic memories. (2)

  • More elaborately, the evidence indicated that consumers feel similarly positive (e.g., enjoyable) about an indulgent experience, and incur similarly negative feelings (e.g., guilt), whether they have had a “legitimate” reason or not, and whether it occurred as a reward or as a consolation. Furthermore, as consumers get more distant in time from affective episodes they report on, such reports are more in accordance with their predictions than with their episodic memories. The prior expectations and the late reconstructed reports of consumers similarly draw or rely on global beliefs and general knowledge, unlike reports of episodic memories when consumers have “lively” access to specific memories of attributes of the product or event they indulged on and their evoked feelings. Nonetheless, people are not very good at reconciling their beliefs, predictions and experiences and hence their learning is impaired.

Consequently, for indulgences that are not really luxurious, rather discretionary, consumers seemingly worry too much about being “justified” or “deserving”to indulge, and what would be their feelings thereafter, as these concerns do not coincide with how they really feel while indulging; hence they may be encouraged just to enjoy the indulgence (e.g., macarons) as it happens.

Consumers may rightfully wish to relish their hedonic experiences later in time, beyond the momentary pleasure, but it may turn out to be more effortful. When they are engaged with the product of indulgence, their attention is focused on its attributes and how they enjoy them (e.g., texture, taste and appearance of the macarons). But as time passes after the hedonic experience, its details fade in memory and so the benefits may also be lost. (Hedonic experiences may have to be more profound, with stronger emotions, than having chocolate truffles or macarons, to have a more lasting effect on happiness.)

The smaller types of indulgence usually do not have significant financial consequences as a barrier, but they could have other negative consequences like damaging health implications — in the case of chocolate or macarons, it could be related to high sugar levels. A consumer considering this kind of indulgence may be stopped by concern for his or her health and seek a reason to justify this “irresponsible” behaviour.

Feeling sadness due to a previous event can especially attenuate such a concern before committing the indulgence, and thereof avoid it. However, not in all cases of sadness it should impede indulgence. If one’s goal is explicitly to indulge for the sake of it (e.g., having a festivity on a generous steak or a pack of chocolate truffles), sadness is more likely to highlight to the consumer the potential damages; in desire to prevent further losses to one’s well-being, the consumer is more likely to cancel the intended indulgence. If on the other hand the consumer had no such hedonic eating goal at the time he or she became sad, the indulgence is likely to be applied as a tool for moderating emotions. Specifically, it allows indulgence (e.g., eating macarons) as a consolation, helping to make one feeling better, less sad (3).

Facilitating or even encouraging consumers to indulge, as in buying and eating macarons, could mean making them feel more comfortable, reduce pressure from them that could make them feel in conflict — by using messages like “enjoy the moment”, “do it just for fun”, “carpe diem”, and “it is OK to indulge even without a reason”. Yet there are additional factors that can give an advantage to a particular brand. A strong brand of fame, as demonstrated by Ladurée, has the power to cause consumers to perceive that its macarons taste even better than they may objectively be judged (notwithstanding that Ladurée’s macarons are of high-quality, nice looking and tasty). There are social effects to account for, as when people stand in-line in front of a shop, visible to others who may join them. Furthermore, an artistically impressive display of colourful macarons, in-store or better in the front window, can create the visual inducement necessary to persuade consumers to accept the temptation.

Actually, having chosen the right macarons, you will not regret it.

Ron Ventura, Ph.D. (Marketing)

Notes:

1. Self-Control for the Righteous: Toward a Theory of Precommitment to Indulgence; Ran Kivetz and Itamar Simonson, 2002; Journal of Consumer Research, 29 (Sept.), pp. 199-217.

2. Do we Really Need a Reason to Indulge?; Jing Xu and Norbert Schwarz, 2009; Journal of Marketing Research, 46 (Feb.), pp. 25-36.

3. Hedonic Eating Goals and Emotion: When Sadness Decreases the Desire to Indulge; Anthony Salerno, Juliano Laran, & Chris Janiszewski, 2014; Journal of Consumer Research, 41 (June), pp. 135-151

Further reading on pleasure and hedonic consumption:

Pleasure Principles: A Review of Research on Hedonic Consumption; Joseph W. Alba and Elanor F. Williams, 2012; Journal of Consumer Psychology, 23 (1), pp. 2-18 (http://dx.doi.org/10.1016/j.jcps.2012.07.003).

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The concept of brand attachment has become a frequent, almost integral component of attitudinal models of brand equity in commercial studies since the late 1990s. It has been introduced to represent an emotional bond that is expected to build between a brand and consumers to allow for their sustainable loyalty to the brand. Perceived quality and other assessments of a rational nature about branded products and services are generally not regarded as sufficient to connect a consumer with a brand. In addition, brand attachment is meant to represent a disposition towards a brand that is more solid and enduring regarding consumer-brand relations than brand attitude. However, what signifies and distinguishes that construct has not been properly and agreeably defined.  In a recent seminal article (2010), Park and MacInnis of the University of Southern California and their colleagues (*) offer an approach to fill this caveat coherently. The researchers define the construct of brand attachment, test and demonstrate how it differs from brand attitude strength.

We may find a spectrum of relationships between consumers and brands at different levels of depth and strength. What creates, for example, the deep attraction, to an extent of passion, of consumers to brands like Nike or Apple? On the contrary, the brand Nokia of mobile phones has for the past few years lost its favour with consumers. Last month it was revealed that Microsoft, which had acquired the mobile division from the Finnish mother company, intends to abolish the Nokia brand name but retain the “Lumia” name for new models of smart-mobile devices (e.g., phones, tablets, and whatever comes next); if indeed brand attachment by consumers to Nokia has diminished, no one would shed a tear. Coca Cola almost ruined its brand equity in 1985 due to its New Coke ordeal — apparently consumers were insistent on their attachment to the brand and what it represented to them to force the company to step back and save the brand. Brand attachment captures the affective linkage that is created between a brand and its customers.

A brand equity model may start from awareness of and basic familiarity with the brand of interest at its ground. On top of which should come associations of product attributes and functional benefits (tangible product assets) next to “softer” associations of feelings or personality traits assigned to the brand (intangible assets). After accounting for these building blocs, a bridge of attachment can be erected between the consumers and the brand, leading to commitment (a manifest of attitudinal loyalty). Several facets can be proposed based on pervious academic and applied research in the field to represent brand attachment: (a) respect for the brand and its leadership; (b) personal identification with the brand; (c) favourability of brand legacy and values; and possibly also (d) appreciation of how the brand treats its customers.

Park and MacInnis et al. develop a scale of brand attachment that formally specifies aspects of brand-self connection — it emphasises identification of the consumer with the brand; yet to this factor they add a second factor of brand prominence in memory. Thus, they suggest a scale constructed from two factors; they show that treating the scale as a composition of the two components has better validity than a single-unified scale. Furthermore, the authors demonstrate the effect of brand attachment on behavioural intentions as well as actual behaviour (self-reported and as registered in customer database records).  They cover a range of activities or actions that differ in their level of difficulty.  It is shown that brand attachment is able to predict the intention to perform the more difficult types of behaviour that brand attitude strength cannot.

Brand attitude strength is measured by the valence of an attitude (positive-negative) weighted by the confidence with which the consumer holds that attitude. However, research repeatedly has shown that attitudes get to impact behaviour when the valence is more extreme in either direction and confidence is strong. Attitudes do have an affective basis but it is generally sublime and concerned primarily with valence. That is, brand attitude alone does not contain a scope of emotions people may exhibit; it is very limited in its emotional capacity. Brand attachment, on the other hand, is more emotionally charged and can tell a better story about the relation of the consumer to the brand. Park and MacInnis et al. conceptually define brand attachment as “the strength of the bond connecting the brand with the self” (p. 2). This bond materializes when it is supported by a rich and accessible network of positive thoughts and feelings about the brand in the consumer’s memory.  A brand-self connection ascribes to the extent to which a consumer identifies with a brand as if they could merge together. In other words, the self (concept) of the consumer is extended so as to absorb the brand and make it part of his or her own self (image or goals). While the representation is cognitive, the researchers note, the brand-self linkage is inherently emotional. Brand prominence indicates in addition the ease and frequency with which  thoughts and feelings (underlying the connection) are brought to the consumer’s mind. The brand-self connection can “come to life” more readily when brand prominence is greater, hence the consumer experiences a stronger brand attachment.

  • The researchers first constructed a scale with five items for each of the two components. However, they sought to make the scale more parsimonious and practical to implement, and proposed a reduced scale of two items for brand-self connection and two items for brand prominence. Looking at the factor loadings suggests that it would be justified to keep four items for the first component and three items for the second. But in the researchers’  judgement parsimony should win over. For example, the item “feel emotionally bonded” could be discarded in favour of “feel personally connected”.

In their analyses, Park and MacInnis and their colleagues confirm that brand attachment and brand attitude strength are related yet empirically distinct constructs — while correlation between them is moderate-high they cannot be confounded. This supports the convergent and discriminant validity of brand attachment. The authors provide further support for the validity of attachment by showing an interesting relation to separation distress, a negative emotional state that may occur when losing a relationship with an entity people felt close to (e.g., feelings of depression, anxiety and loss of self). Brand-self connection and prominence each independently “contribute to the prediction of separation distress as indicators of brand attachment” (p. 8). The research additionally substantiates that brand attachment is distinct from attitude strength, the former being more strongly associated with separation distress.

Eventually, marketers would want to know how brand attachment is linked to behaviour. Three categories of difficulty are distinguished: (1) Among the most difficult forms of behaviour are buying always the new model of brand X, waiting to buy brand X versus an alternative brand, and spending money, time and energy to promote brand X (e.g., in pages and forums of social media and in blogs). (2) Moderately difficult forms of behaviour include paying a price premium for brand X and defending it when others speak bad of it. (3) The least difficult modes of behaviour include, for example, recommending brand X to others and buying the brand for others. Notably, recommending a brand to relatives or friends involves a certain personal risk for the endorser because one puts his or her own reputation or credibility on-line by suggesting to others to buy and use the particular brand. Yet, this alone is not considered hereby as a major cause of difficulty vis-á-vis the investment of time, money or energy to promote the brand (e.g., tell a story in a blog post, add photos).

With respect to intention to behave in ways that favour a brand (reflecting brand commitment) it is found that brand attachment predicts the intention to engage in behaviours regarded as the most difficult remarkably better than brand attitude strength. Brand attachment also better predicts intention to behave in moderately difficult ways but the difference from attitude strength, although also statistically significant, is rather small. There is no significant difference between attachment and attitude strength in predicting intention of performing the least difficult behaviours — they do equally well.  These findings bolster the importance of addressing brand attachment as a driver of brand commitment, particularly via more demanding modes of behaviour.

  • An additional test suggests that brand prominence is less essential than the brand-self connection component in predicting intentions. (Intentions were tested with respect to Nike.)
  • In a different set of analyses of actual behaviour (banking-investments), the researchers found furthermore that brand attachment is a better predictor of past purchases than brand attitude strength. In this case, however, brand attachment represented by both brand-self connection and brand prominence is predicting behaviour better than the former alone. That is, with regard to actual behaviour, brand prominence is an essential component.

Many brand owners would find utility in applying this scale of brand attachment (in a full or reduced form): from food (e.g., Nestlé) or toys (e.g., Lego) to banking (e.g., Royal Bank of Scotland) or carmakers (e.g., Peugeot). Take for instance Microsoft that now holds four brand names they may apply for marketing mobile devices: their own corporate name, Surface, Nokia or Lumia. Microsoft could use the aid of such a scale to decide which brand proves as better ground to build upon and which name is better eliminated. It may be a major factor in the contest of brand equity for mobile-smart devices of Microsoft versus Apple, Samsung Electronics, and Lenovo (Motorola).

Although the brand strength construct may capture a brand’s mind share of a consumer, attachment is uniquely positioned to capture both heart and mind share (p. 14).

The scale of brand attachment constructed by Park and MacInnis and their colleagues emphasises consumer identification with a brand, representing an emotional connection, and actualised through its prominence in memory. It does not cover other possible sources of attachment, but the approach taken is focused, concrete and well-substantiated. The researchers provide a valid scale for practitioners in brand management and research for measuring brand attachment, stand-alone or as part of a brand equity model.

Ron Ventura, Ph.D. (Marketing)

(*) Brand Attachment and Brand Attitude Strength: Conceptual and Empirical Differentiation of Two Critical Brand Equity Drivers; C. Whan Park, Deborah J. MacInnis, Joseph Priester, Andreas B. Eisingerich, & Dawn Iacobucci, 2010; Journal of Marketing, 74 (November), pp. 1-17.

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One of my greater pleasures is to walk around in a bookshop and browse books in topics of personal interest, picking a book from a shelf for a short read, then choose another one, etc. If fortunate, I would find a book or two that are worth purchasing for a full read. A bookshop should be a place where one feels comfortable to examine leisurely books he or she considers buying . Even if one enters a bookshop only to purchase a book he found in an earlier visit or on the Internet, he would likely take the opportunity to look around for some other books before exiting.

Steimatzky is a leading chain of bookshops in Israel, established as a family business in 1925. It operates more than 130 stores across the country. Like a solid rock, nothing would seem to be able to shake or break it. The chain of bookshops appeared to hold firmly even in the face of competition from a new chain (“Tzomet Sfarim”) in recent years. Steimatzky could usually brush off new independent bookshops and small chains quite easily. Therefore, when Steimatzky announced it was in dire financial difficulties last month, the news were received with surprise. Not that challenges were missing, but the chain was tackling them (e.g., renovating shops and changing the concept of its front window displays), and there were no visible indications of a fatal threat to the business.

However, another important event occured in the past decade. In 2005 the family sold its bookshop retail chain to an investment fund, Markstone Capital Group. Difficulties were building up with the rise of online shopping and changes in the behaviour patterns of younger generations for passing time, plausibly convincing the veteran owner and CEO Ari Steimatzky not only to retire personally (after 40 years in management) but also to hand over the business to new owners. The new CEO appointed came from the insurance industry, highly experienced in that field, but, like the people at Markstone, she was not familiar with the book market. Hereon, it is suspected that  the problems with the chain’s management have started, or aggravated.

Markstone and Steimatzky both contributed to the crisis in their actions. It appears that Steimatzky has had cash liquidity difficulties for quite a while and relied on cash infusions from Markstone for financing their high operational costs. It is estimated that the losses of the retail chain accumulated to 84 million shekels (~$24 million) in 2011 and 2012 together. Markstone, on its part, used to take loans and register companies it owns as beneficiaries that would share the debt; for example, Steimatzky was in debt of $20 million as part of a $65 million loan Markstone took from Deutsche Bank, on which Markstone’s executives may have not properly updated the retailer’s management(1). The difficulties were somewhat complicated following a tragic road accident in which one of Markstone’s co-owners was killed while riding his bike. Thereafter, the last cheque from Markstone bounced and the debt of the retailer was exposed.

A deal was made in April with Keter publishing house and the office supply and stationary retailer Kravitz to buy Steimatzky in equal shares (pending approval by the antitrust state regulator). Markstone reportedly bought Steimatzky for about 200m shekels (~$50-55m) whereas it is expected to receive for it around 40m shekels (~$11-12m). Negotiations with another publisher failed earlier. It may be noted that Steimatzky took part in establishing Keter in 2005 but the new management decided shortly to quit its partnership in the publisher.

The relatively young chain of bookshops, Tzomet Sfarim, was founded in 2002. It is owned by two publishing houses (Kineret-Zmora-Bitan and Modan) and its CEO (Avi Shumer). If the acquisition of Steimatzky goes ahead, it would mean that high stakes in the two major chains of bookshops in the country will be held by publishing houses. Steimatzky was known for aggressive dealing with publishers; its tactics were often viewed unfavourably. The negative experience of publishers with Steimatzky is considered a key driver for those two publishing houses to start their own chain of bookshops, as they no longer wanted to be dependent on the dominant book retailer. It soon raised, however, new concerns about the privileges Tzomet Sfarim might give books they publish on display and in advertising and promotions. A new law on the publication and trade of books introduces a measure to correct such unfairness by prohibiting a bookshop from allocating more than 45% of shelf space to books from publishers it is linked to.

Tzomet Sfarim has turned within a few years into a serious challenger. It paved its way into the market primarily through discounts it offered on books. Deals like “two for the price of one” or “3 for 2” are not strange to chains of bookshops worldwide. But Tzomet Sfarim provoked everyone when it offered for instance “four books for 100 shekels” (i.e., each book for about £4). The discount is not necessarily deeper than the 50% one gets per book in a deal of “2 for 1” yet it induces consumers to buy many books, more than they may probably have time to read, and thus boosts sales volume quickly. Steimatzky responded angrily but nevertheless reciprocated with similar deals. This readily started a vicious price war. In contrast to expectations that Steimatzky as the senior and dominant retailer and brand will win, it was at disadvantage. The board of administration of the new competitor was modest whereas that of Steimatzky was expansive, and hence expensive, eventually less fit to tolerate the loss of income from extensive discounts. The deficits and cash flow problems of Steimatzky have been attributed in the business press to the price war on the one hand and its excessive administrative and operational expenses on the other hand.

  • The pervasive discounts evoked criticism about lowering the value of literary work. They outraged authors who complained their income (royalties) from their new books was squeezed and diminished. The law on books recently legislated in response sets new limits on discounts for new books during an “introduction period” and afterwards.

The retail chain of Steimatzky grew mostly in the 1980s and 1990s. New bookshops often replaced independent ones, taking them in as franchisees, and by forcing them out of business. But since 2006 the number of their bookshops actually decreased from 150 to 134. The size of the chain may have created a burden of supervision and operational costs that contributed to its difficulties, requiring to close some of them, but it does not seem to be an immediate cause of the recent crisis. Meanwhile, during the same period Tzomet Sfarim expanded from 42 to 87 bookshops and became a much more significant player in the book market (annual revenue of 300m shekels vis-a-vis 380m shekels for Steimatzky). This time it was Tzomet Sfarim that through their discounts grew at the expense of independent bookshops. Now the two retailers control, about equally between them, 70%-80% of the market.

Steimatzky and Tzomet Sfarim sell books online on their websites, as well as some publishers do. The retailers may have lost some of the local market to overseas online booksellers like Amazon, but that is likely to be only for books in foreign languages, especially in English. First, Amazon and others like it have very little if any to offer in Hebrew. Second, both retailers already concentrate their business on Hebrew books, which Israelis read the most, and offer a relatively small selection of books in English (e.g., some bestsellers, history and politics, art and design). Thus, the overlap between the Israeli retailers and foreign e-tailers should be relatively small. There is a need for Steimatzky, however, to develop and enhance the linkage between its online store and physical bookshops (e.g., buy online, collect in-store; celebrating the design of bookshops with photographs on the website) in order to protect both channels locally but primarily secure traffic of customers in its physical stores.

Under its current management, Steimatky bought a music and video chain of stores (“Tzlil”). Soon after, however, the stand-alone music and video stores were eliminated and their products (mainly CDs and DVDs) were incorporated as a sub-category or department within existing bookshops, though in a small-scale and -scope of offerings. The music & video branch of retail is knowingly in trouble around the world and one may question the justification of adding these product categories to their main business. Yet, joining books with music and video and other entertainment products has become an accepted logic by retailers in different countries to compensate for loss in demand in one category or the other, and expand their variety of products under the same roof (e.g., the French retailer Fnac that offers a range of culture and entertainment products, including books, CDs & DVDs, and electronics like mobile devices and related gadgets). That move can work in favour of Steimatzky rather than against it in this era.

Joining the businesses of books and music & video within the same company can bear risks. The most remarkable story in this regard belongs to the British chain of bookshops Waterstone’s. In that case it was the music & video chain HMV that bought the bookshop chain and put its survival into great risk. The stores of these chains were kept separate but the financial difficulties of HMV in its original business inflicted on Waterstone’s, and certainly did not help it to tackle its own challenges. At first they started closing bookshops to finance some of HMV’s debt and to lower costs, but that was not enough. Eventually, and mainly in hope to save HMV, the Waterstone’s chain was sold  in May 2011 to Russian investor Alexander Mamut. Notably, the new owner appointed as its managing director the owner of a small chain of traditional Edwardian-style bookshops (James Daunt) who has been well entrenched in the book retail business. The bookshop chain appears to be doing well in its process of recuperating and is thinking forward about the design of bookshop environments for the future. It is opening these days its first new bookshop since 2008.

Steimatzky does not have today a flagship library-like bookshop as found in many Western cities. These are usually multi-storey, multi-category bookshops that occupy buildings on main streets or in central shopping districts. Even cities similar in size to Tel-Aviv have such a bookshop (e.g., Waterstone’s bookshop on Deansgate St. in Manchester). A flagship bookshop in Tel-Aviv could occupy two or three floors (e.g., 200-300sqm each) and offer a variety of book titles in Hebrew and English, and perhaps in French, along with a section for music and video (particularly classical and jazz music). The scope of book selection across categories and variety within categories is crucial to the quality of customer-reader experience and increasing the likelihood that shoppers don’t leave without purchasing or ordering books. Operating such large bookshops can be expensive, but a flagship bookshop of this type should also be viewed as an investment in the retailer’s brand equity. It demonstrates prowess of the retailer, richness and professionalism. Tzomet Sfarim recognised the importance of such an asset and opened its “Library” bookshop in the centre of Tel-Aviv, although it occupies only one level and is “hidden” in a shopping centre rather than visible on main street.

The final issue addresses the new form of electronic books (e-books) that can be read on e-reader devices. It has been predicted that the future of reading lies there, and thereof it poses a major threat to physical books. Steimatzky has invested and participated in the launch of an e-reader that specially supports also the display of books in Hebrew (called “e-vrit”) but left the venture in just a year. Book retailers in other countries offer their own-branded e-reader: Barnes & Noble (Nook), Fnac (Kobo), as well as e-tailer Amazon (Kindle).

Tim Waterstone, founder of the British bookshop chain, recently criticised and even ridiculed the projections about the expected death of physical books; he supported his claim that physical books are here to stay on figures that suggest that e-books may be reaching saturation and his confident belief that people in the UK who love reading will continue to prefer books in print. He noted that consumers in Britain spent in 2013 £300m on 80m e-books but £2.2bn on 320m physical books (2). Managing director Daunt agrees and relies on a report by Enders Analysis and Bain & Co. which predicts that the share of e-books out of total book sales will reach 35% in two years but will grow “very slowly” after that. Daunt comments: “An equilibrium has been reached. The place of e-reader within people reading patterns has been established. That figure leaves us perfectly able to survive with the 65%.” He further expressed his belief that the physical book is more pleasurable to hold and read (3).  Steimatzky’s decision to quit its engagement with a Hebrew-support e-reader may have been pre-mature but it is plausible that they won’t need it. Still, they should re-examine their approach to e-readers because e-books will continue to hold a substantial stake in consumer reading.   

The conduct of top executives at Steimatzky and Markstone in the past eight years exhibits a mixture of complacency, over-confidence, and nonetheless confusion. They took upon themselves to improve and develop a business in a domain in which none had deep familiarity and experience. The CEO wanted to make changes in the company, and show the way to the whole market, without the endorsement of a credible and respected figure in the field and industry. Consequently, it was easier to attack and dismiss her as an outsider. Steimatzky under her leadership initiated strategic moves, and then abandoned them after a relaively short period. It also appears that she has set the wrong priorities for the company to deal with. The actions of Markstone at the same time suggest that they treated Steimatzky as a “financial asset” in their portfolio with disregard to the substance of the business in which they invested.

The future of Steimatzky would not be guaranteed without confronting a crucial question: What should the bookshop of the future look like in order to be inviting and attractive to book readers to hang around? Steimatzky may concentrate on books and reading or take the broader view that spans culture, education and entertainment. Three routes to enhancing shopper experience should be examined: (1) a space that makes patrons feel comfortable to stay and explore the shop; (2) a place to meet and socialize (incl. an in-store coffee shop); (3) connecting physical and digital products and services in a larger space: physical (bookshop) and virtual (Internet and mobile).

Ron Ventura, Ph.D. (Marketing) 

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Consumers like to talk about the brands in their lives. Brands may be connected to their personal history or to a narrative which describes their current lifestyle; people can tell others about a variety of brand experiences they have had, for better or worse. Consumers use likewise word-of-mouth information they receive from friends and relatives, but not only from them. They refer to product reviews, user-generated blogs, as well as stories, opinions and suggestions conveyed in forums of digital social networks from people they may not know so well but consider convincing or trustworthy. The proliferation of user-generated content through Web 2.0 and mobile applications did a great deal to facilitate the spread of word-of-mouth (WOM) and increase consumer reliance on this type of information. However, it does not preclude the still dominant transfer of brand-related WOM offline between people more closely connected in face-to-face meetings and phone conversations.

But brands do not exert WOM to the same extent. Some brands get more of such informal publicity than others. The question thence becomes: What characteristics of a brand make it more interesting, important or relevant to consumers to talk about with friends, family and others? In such discourse consumers could be mainly in the role of providers or receivers of information, and they may share personal experiences, viewpoints, and recommendations, or conversely warnings, regarding any brand.

Researchers Lovett, Peres, and Shachar (2013) took the challenge of investigating the relations of brand characteristics to stimulation of WOM shared among consumers, and they offer some interesting insights, especially on the differences between offline and online channels. At start, it should be clarified that drivers for engaging in WOM are originated in the consumers for satisfying their personal needs; the brand characteristics may be seen as operational instruments that link with the drivers that stimulate brand-related WOM. The researchers identify three main drivers in their guiding theoretical framework:

  • Social driver — Concerned with a need of consumers to express themselves to others, showing their uniqueness, for self-enhancement, and out of desire to socialize with others;
  • Emotional driver — Associated with excitement and pleasure of satisfaction (emotional sharing);
  • Functional driver — Related to the need to obtain information and the tendency to provide information to others, moderated by aspects such as complexity and knowledge.

The researchers collated information on over six hundred US national brands of products and services as well as corporate and retailer names (covering the period of 2008-2010). The brands spanned across 16 broad product categories (e.g., beverages, children’s’ products, clothing, department stores, cars, media and entertainment).

  • Data sources on brand characteristics included a consumer survey in the US (primary source) and several datasets of proprietary research programmes (secondary sources), the major of them is the Young and Rubicam Brand Asset Valuator (characteristics corresponding to brand equity “pillars”:  Differentiation, Relevance, Esteem, and Knowledge).
  • The level of WOM generated about a brand (operated as count of mentions of a brand) was modelled and analysed separately in offline conversations and online settings or forums. Data of brand mentions in face-to-face and in phone conversations were obtained from the TalkTrack project of Keller and Fay (a diary-based survey) whereas data on online WOM were adopted from the Nielsen McKinsey Incite tool (a search engine that can retrieve brand mentions in settings such as discussions groups, blogs and microblogs). [The count of brand mentions was modelled under the assumption that it follows a Negative-Binomial distribution.]

We will take here a quick look at results and insights from the research that I find the more revealing and interesting, with an emphasis on distinctions between offline and online channels:

The Social Driver — A brand that is better differentiated from competitors can make an easier and more effective vehicle for a consumer to express his or her own uniqueness to others. Greater brand differentiation contributes to more brand mentions offline and online. Yet, the positive effect on WOM online is stronger. There could be greater motivation for consumers to utilise brands for highlighting their uniqueness when communicating online because they can address much larger audiences than offline, and a reference to the relevant brand can efficiently deliver the message, particularly when cues of visual appearance or sound cannot be used. Brand differentiation is a newly studied characteristic in relation to WOM in this research project.

The volume of brand WOM also increases with higher perceived quality of the brand’s products, and is larger for more prestigious, premium brands. Associating with brands of higher quality products (represented by Esteem) can serve to demonstrate the consumer’s expertise in a category — it has a positive effect on WOM offline and online, but the effect online is twice as large.  A premium brand characterization, that reflects a higher social status, has a significant effect only in an online channel. Enhancing one’s self-image through expertise or social status, as with highlighting personal uniqueness, is possibly felt more needed by consumers in the less intimate interactions that take place online with people whom they are less familiar with than those they interact with face-to-face or on the phone. A consumer may have more to “prove” to or impress “friends” who are known primarily and even solely as members in his or her virtual social network.

The Emotional Driver — Being excited about a brand seems as a very plausible motive to arouse consumers to talk about it. Lovett and his colleagues indicate that excitement, a brand personality trait, has not been studied yet in the context of WOM.  As expected, brands that evoke more excitement lead consumers to engage more in WOM about the brand, both offline and online. While the effects of excitement are similar between the channels, there is a distinction between them, as addressed below, with respect to the emotional driver in general.

The researchers expected that a higher level of WOM would be generated when satisfaction with a brand is very high or very low. Their model results showed, however, that only very low satisfaction yields a peak in WOM, and that as satisfaction rises the level of WOM drops (i.e., a relationship described by a monotonic descending concave curve). The finding that very low satisfaction induces consumers to talk (critically) more about a brand is frequently supported in other studies.

  • The proposition about the effect of very high satisfaction may have not been supported, according to the researchers, because it has confounded with the effects of esteem and excitement included in their model and not in previous research. But one cannot ignore that the dataset included satisfaction scores for just a third of the brands analysed, as reported, and scores for the remaining 2/3 of brands with missing data were imputed based on the distribution of the available scores. Consequently, it is hard to conclude based on the evidence whether the effect of high satisfaction indeed exists.

The Functional Driver — This driver has two dimensions: obtaining information and providing information through WOM. Consumers often require assistance when learning complex product information (e.g., prior to purchase) or dealing with complex technical details and instructions (e.g., for correct product utilisation). Complexity matters primarily to those who wish to obtain information. This research reveals that greater complexity is related to more brand mentions only in offline conversations. That is, more immediate, direct and intimate interactions offline between consumers are adopted as more suitable for discussing together and clarifying information that is complex and more difficult to comprehend about products. It may be added that such conversations are also more likely to be held between consumers who know each other better, and that allows for a better flow of interaction. Less complex information can be obtained from online forums. Online conversations, as the authors argue, tend to be asynchronous, and entail longer delays in responding to questions that may hinder clarification of confusing matters and information exchange. Complexity is another characteristic included in this study yet not in previous research in the context of WOM.

Interestingly, consumers also engage more in WOM on younger (i.e., newer) brands when communicating offline but not online —  brands possibly perceived as innovative, intriguing, exciting or still ambiguous appear also to be more appropriate to talk about in person.

From the perspective of those who provide information, producing and disseminating WOM on brands would depend on how knowledgable consumers feel they are on the subject.  The results confirm that brands that are perceived to be more familiar to consumers and better known are more likely to be talked about, similarly offline and online.

The researchers further extracted and compared the relative importance of each main driver between the two settings of offline and online channels. The social driver is the most important stimulant of online WOM followed by the functional and lastly the emotional driver. In contrast, in offline conversations the emotional driver is the most important, followed by the functional driver, and relatively the least important driver is social. Notably, while the emotional driver has a positive effect in both types of channels, it is more prominent in driving brand mentions in conversations offline. These differences exemplify the difference in nature between offline and online interactions — offline interactions are more intimate and open between people, more accommodating to share excitement and satisfaction, whereas online interactions are less personal, tend to promote “broadcasting” information to many people and social signalling with verbal cues.

  • The different nature of offline and online channels may also be evident in an almost complete separation between lists of leading brands (top 1o) in number of their brand mentions between those two settings: Offline we find Coca-Cola, Verizon, Pepsi, Wal-Mart, Ford, AT&T, McDonald’s, Dell Computers, Sony, and Chevrolet. Online, on the other hand, arrived on top the brands of Google, Facebook, iPhone, YouTube, Ebay, Ford, Yahoo, Disney, and Audi. Only Ford is on both lists. The contrast between “new” and “old” or “physical” and “virtual” brands speaks for itself.

The models furthermore demonstrate the positive role of brand equity in encouraging consumers to talk more about a brand. Stronger brands — more encompassing in their areas of activity and influencing many more people — command more conversation (e.g., information exchange and sharing opinions). First, we may recognize an implicit effect of brand equity on WOM through factors represented in the models such as perceived quality, differentiation, knowledge, and visibility that contribute to enhancing the equity of a brand. Second, nonetheless, the researchers included in their two models a control variable of brand equity, represented as the inclusion of brands in the list of 100 top brands constructed by Interbrand. It is thereby confirmed that brands on this list enjoy higher WOM. One should keep in mind, however, that being more frequently the subject of conversation, offline or online, is evidence of greater importance and relevance of a brand, and in turn may increase its equity further, when WOM is positive, but may also decrease its equity when the WOM is negative.

The authors acknowledge some limits of their research. In particular: (1) The brands included are the most talked about in the US (i.e., covering reduced variation in level of WOM over brands); (2) The models refer to “offline” and “online” in wholesome as types of channels — more research is needed to investigate effects on WOM in separate online spaces like the blogosphere and social media networks; (3) Since the units of information are brands rather than individual consumers, the ability to describe and explain the processes in which consumers exchange, produce or obtain WOM information on  brands is impaired, inviting more research in this respect.

Marketing communication managers may use the results (effect estimates) and insights from these models of WOM to identify characteristics of brands in their responsibility that can be expected to yield more WOM and learn of gaps between actual and expected levels of WOM when planning where and how to invest their effort for evoking more WOM on their brands. However, it is most important for marketers, as Lovett, Peres, and Shachar stress in their article, to keep offline and online channels distinguished and plan their measures for each environment separately — what may work well in an online environment can prove ineffective offline, and vice versa. In each environment it is necessary to emphasise different aspects and goals and take appropriate measures.

Ron Ventura, Ph.D. (Marketing)

Reference:

On Brands and Word-of-Mouth; Mitchell Lovett, Renana Peres, & Ron Shachar, 2013; Journal of Marketing Research, 50 (August), pp. 427-444.

The authors won a grand award for their research project in a joint-competition of the Wharton Customer Analytics Initiative and the Marketing Science Institute.

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Since the late 1990s we have been trained to expect better opportunities to make money by investing in companies that have to do with technology: computers, Internet, information (IT), software, mobile devices, telecom, and so on. Despite some hurdles (e.g., the burst of the Internet bubble in 2000), interest remains very high in these areas from entrepreneurs, equity fund managers, private investors, and the media. In a special investors issue last month, Fortune magazine (2 July, 2012) chose to bring-up a different perspective, reminding us that much potential for growth over years can be found in strong consumer brands of the more casual and traditional types of products. These products include food, drinks, and household maintenance goods — grocery or staples — that everyone bascially needs to run his or her everyday lives, and enjoy a little beyond.

Brands of foods and drinks, for instance, may not produce yields rising as fast and handsomely as in digital technology but they tend to grow more steadily and persistently over multiple (e.g., 2o or 30) years, which makes them better targets for investment to save for our retirement stage in life. Yields may be understood as both dividends paid by the brand-owner companies and the gradual increase in share prices over the years. Relative to 1990, the Standard & Poors (S&P) Consumer Staples Index returned 854% while the general S&P Index rose 536%. However, two particular episodes are noteworthy: (1) During 1998-2000 the S&P consumer index fell from 400 to 250 while the S&P general index kept rising mildly, but then in 2000-2002 the consumer index recovered as the general index fell by 50% to 200 and kept producing lower returns; (2) Even more dramatically in 2007-2008, the general index suffered much worse (falling from ~500 to 200) than the consumer index (falling from 600 to 400), leaving a gap larger ever since 1990 between the two indices.

One of the advantages of the consumer brands of staples, as explained by Fortune’s writer Cendrowski, is higher predictability — managers can make safer and more accurate forecasts on how their branded products will perform between two and five years, compared with the technology products (i.e., “good luck guessing, say, which brand — or type — of computing device will be hot in five years?”). No one argues that forecasts for staples can be made err0r-free, yet analyses of past sales and research on consumer trends can make it easier to tell how consumers will use those products and their brands in comparison with the frenzy consumer technology categories. According to selected veteran investors cited by Fortune, strong brands might prove as more solid anchors for investment; although the chances of winning a fortune on them in a short-term are relatively low, keeping to the stocks of their companies will pay-off as the stocks climb inch-by-inch (re-investing dividends can add up to even higher returns later on). The advice to trust the stronger brands and patiently hold to them is well-appreciated. Two cautious reservations are in order, though: the article does not distinguish clearly enough whether the type of product or the status of the brand is the main source of this policy’s benefits, and it seems to brush aside the fact that corporations that own and manage the more familiar and favourable brands run sometimes hundreds of brands (e.g., Unilever, Nestle, Procter & Gamble, Johnson & Johnson) but stocks don’t distinguish between successful and much less successful brands — one invests in the whole portfolio. One does rely, nevertheless, on the expectation that a company that manages a bundle of strong brands does overall far better than competitors that have fewer or no such brands in their portfolio.

As we appraise the prospects of strong consumer brands, we should take into consideration that many of the developed and affluent countries are currently in recession or slow-down of their economies, which adversely affects the purchasing power of consumers (i.e., due to high unemployment rates, more half-time and temporary jobs, eroding real wages and salaries, financial losses on savings). While companies that own strong brands are more likely to have deeper pockets to help them go through such difficult periods with less harm, consumers may be much less willing to pay the high price premiums those brands often charge. These premiums are key expression of the brands’ higher equity and lever of revenue. As a recession extends longer, consumers may become more accustomed to modified decision strategies and purchasing behaviour patterns that farther distance them from the advantageous and higher priced brands.

On the other hand, there is the danger of inflation. A risk of inflation is looming in developed countries because of their very low interest rates (around 1% in 2012).  Fortune’s article highlights the pricing power of strong brands to overcome inflation. Rightfully, consumers are more tolerant to price rises undertaken by stronger brands. But this known propensity is not guaranteed to survive well during inflationary price hikes that continue over and over again. The power to overcome inflation is attributed in the article to a life-time commitment of customers to those brands. Two aspects are confounded here. First, loyalty to a brand means its customers are more willing to accept a price rise as an occasional adjustment by a strong and favoured brand, and are willing to pay a higher price for the brand they better appreciate and cherish. Second, enduring commitment to a brand suggests that its customers are likely to make greater efforts to hold to it through harsh times. The problem is that price differentials are more difficult to maintain through inflation, as prices change more quickly and thus the premiums that signal higher brand equity can quickly lose their efficacy in consumers’ minds. Loyal customers are expected to forgive the strong brand for continuous price hikes yet they are gradually likely to fail making sense of the “price premiums” it commands. An unstable inflationary process poses more complex challenges even to strong brands, and customer loyalty may not provide a sound protection from inflation.

Brands offer several advantages to consumers. Using brand names as information cues can help simplify and shorten the decision process. Strong brands provide confidence to consumers who are using their products; they may instill a sense of stability and certainty in their daily lives. In addition, brands often are employed as means of self-expression, helping consumers define their self-image and social image. But consumers have also become more demanding, expecting better customer experiences with brands, their products and services. The conditions under which consumers promise their loyalty to brands and companies get tougher, and even loyal customers expect to receive monetary and other rewards. Consumers are becoming better informed through different online media channels and enquire more about prices. The advantages mentioned above to consumers in using strong brands may translate less frequently into willingness to pay large price premiums. International research firm of consumer trending, trendwatching.com, identified earlier this year a trend of “deal-chic” among consumers: Consumers are looking more eagerly for opportunities and deals not just to save money but out of the thrill of pursuit, need for control, and the perceived smartness that goes with finding the best deals. It is about changing attitudes towards deals and discounts that is fueled by expanding sources of information online and the immediacy of information (e.g., by using mobile devices) which may consequently lead to the squeezing of strong brands. In recent years brands have entered more testing times and the implications of new tendencies in consumer behaviour are yet not fully revealled.

The positive approach of the investment experts to invest in companies that manage strong brands of the more frequently and regularly used consumer products is difficult to dispute and is overall commendable. The emphasis has to be on investment for the long run, trusting those companies and their brands to build-up high returns through time. This approach can be justified by the extent to which their products are rooted in consumers’ day-to-day lives, their longevity, and foremost the usually high-skilled level of marketing and brand management. They should be allowed the time, however, to come out and recuperate from either rough economic times that affect everyone or hardship and crises that specifically hit a given company before they get back on track. It is also important to keep in mind the changing and intensifying challenges that strong brands are facing, challenges that may require more patience and loyalty from investors.

Ron Ventura, Ph.D. (Marketing)

Reference:

“Bet on the Brands”, Scott Cendrowski, 2012, Fortune (European Edition), Volume 166, Number 1 (2 July), pp. 60-65.

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Measuring the value or equity of a retailer name from a customer’s point-of-view is usually challenging because of the diversity of products from various brands retailers offer on display and additional dimensions of performance that are specific to the retail store environment. For a long time retailers are not merely distributors that bring forward products to the consumers but offer products in their own names; furthermore, experiences of shoppers on-site of the store have a stronger influence on their purchase decisions. Thus, assigning customer values to retail names is often not a simple matter.

A similar problem with respect to the diversity of products may arise when trying to measure the value of a manufacturer corporate name to consumers, if the manufacturer uses its corporate name as an umbrella or even as a higher-level endorser for a wide range of products of different types. In this condition consumers may become confused as to which type of product they should refer and find it difficult to generalise their value judgements too broadly. Particularly, when trying to translate the subjective value to monetary terms, as often exercised with conjoint models of preference, one cannot plainly specify a price range that will be relevant to various types of products (e.g., TVs, stereo systems, washing machines, etc.) because the over-arching corporate name is too abstract. One has to conduct an evaluative study for each product category separately to obtain valid and relevant evaluations. The evaluation problem becomes several times more complex for a retail chain by accounting for the internal competition between manufacturers’ brands and a retailer’s own brand, and the other facets of the shopper experience in store (e.g., design and atmosphere, convenience, service).

  • As a case in example consider the branch of fashion retail. Castro, a leading Israeli homegrown fashion retail chain, has expanded greatly over the past 15 years (operating around 100 stores) and is a well-known and favourable name in many homes. According to a survey by Israeli business daily paper TheMarker with market research firm “Meida Shivuki” (27 Jan. 2012 (1)), Castro is the most familiar fashion retailer in Israel, remaining stable in this position six years in a row. Nearly half of adult Israelis have purchased an item or two in one of Castro’s stores in the past year. Fox, a low-cost retailer, is second, and Zara, a global Spanish-originated retailer, is in the third place (fourth year in a row). However, newly coming international retailers like H&M and Gap are tailing Castro, and more international brands like American Eagle or Banana Republic are expected to arrive soon. H&M climbed in awareness from 18.5% to 27% in six months, while Castro withdrew a little from 68% to 64%. Competition in the local fashion arena is becoming fierce, maintains TheMarker. In this setting, we may ask how well the value of Castro, from a consumer perspective, fares against rival international retail brands. One may also question what is the “attraction power” of Castro in terms of willingness-to-pay, and does it have to drag itself into a price war with the rivals to win?

In a conjoint analysis or choice study, brand is usually defined as one of the attributes describing a product, with several different brand names suggested as options (e.g., a choice set with four alternative products, each from another brand). This approach provides a single-numeric measure of value for each brand that some criticize as of too limited scope. Hence, further analyses on the subjective brand-equity values are advised, such as translating them also to monetary values of brand premiums by accounting also for consumers’ price sensitivity.

Moreover, in order to learn about the sources of brand values, we can analyse variation in brand values at the individual level vis-a-vis brand perceptions on several relevant dimensions of brand image (e.g., performance, reliability, or courteous service). Several techniques allow that, including with discrete choice modelling. It is worth mentioning in that context an unusual approach suggested more than 20 years ago of a brand-anchored model for evaluating the images of retailer brands (2). In that conjoint model, rather than including retailer names as options in a single brand attribute, retailer names are represented as options in each of several retail image attributes: For example, convenience of shopping is like at store of retailer “A”, “B”, or “C”.  This model does not offer overall values for each retailer, but it does suggest the relative values of a retailer name on each dimension of image. It’s like combining two-stage analyses proposed at the top of this paragraph in a single analysis. One conspicuous weakness of this approach is that respondents who do not know what would be the level of performance of an existing retailer on any of the dimensions will face difficulty in making reliable judgements of the retailer “portfolios” suggested to them or make a choice between them (the researchers have shown that consumers are likely to recall better the brands that score higher).

In the remaining of this post-article I suggest three alternative approaches for evaluating customer-based brand equity of retail chains in the framework of conjoint models, the first two apply a monetary currency whereas the third proposes distance as the currency of cost.

A Common Set of Products (“basket”) — In this approach we present to respondents-shoppers a well-defined set of products and ask them to suppose that they are going to shop for this set in stores of several optional retailers. Since retailers frequently offer on display a large variety of products, this set should serve as a common reference for comparison with regard to price levels. In some domains, such as food and grocery, we may be able to construct a “basket” of particular product items, including specific brands, because most stores hold the same product brands. Yet, in other domains like fashion this task could be more daunting because retailers choose to offer more differentiated clothing designs and specialise in bringing clothing items from different designer names. In the case of fashion we may have to describe in more general terms an outfit composed of several items but be specific enough about the quality and style of the items (e.g., think of dressing a mannequin with an outfit).

Applying this approach, therefore, is more domain-contingent. Our aim is to estimate the price premium that shoppers are willing to pay in order to purchase a set of products from a particular retailer. However, there is greater risk in this approach of confounding the value of a retailer with the values of products included in the set of reference.

Retailers’ Qwn Brands — Many retail chains in various domains offer products in selected categories carrying their own retail name as brand or their unique private labels available only at their chain-stores. Emphasizing the retailer’s own brand of products helps to better focus attention on the retailer on all aspects of shopping from its chain-stores. It may be seen as a special case of the first approach, only that here respondents-shoppers are advised that all product items included in the set are carrying the retailer’s name or private label. Thus, the differences in quality between retailers with respect to their own branded products can be taken into consideration by the respondents-shoppers.

This method represents a more round-up approach for assessing the monetary premium shoppers are willing to pay when buying at a particular retail chain on ground of both products identified with the retailer and the experience of shopping at its stores. Yet, it is applicable only if all retailers proposed have salient brands of their own for comparison.

Distance from a Retailer’s Nearest Store — Taking on a different perspective, this approach breaks with the common use of monetary price as the currency of cost. As implied in the first two methods described above, the monetary currency may introduce quite difficult complications in the context of retailer evaluation. Nonetheless, there are types of cost consumers are likely to incur while making purchase decisions such as time and psychic effort or stress. Particularly in the context of retail, Sorensen relates to time and angst in addition to money as the three currencies of cost shoppers may incur while looking for products they require or desire in-store (3). However, even before entering the store, another type of cost may be the distance the shopper has to make to reach his or her favourite store. Distance is often suggested also as a measure of loyalty: How far are you willing to go in order to find your favourite brand or to shop in a store of your favourite retailer?

According to this approach, a “cost” attribute would inform respondents-shoppers, for instance that “the nearest store of Retailer A is 500 meters away from you”. This type of conjoint application measures the retailer’s brand premium in terms of extra distance shoppers are willing to go to reach one of its stores (relative to a competing retail chain). It is possible that some consumers would want to go further actually to find lower prices or better value, but that perception could also be engrained in the retailer’s image. Indeed, the conjoint model alone may not tell us whether a retailer’s brand is preferred due to price/value perceptions or shopping experience aspects. On the other hand, it provides a measure of loyalty that may fit more smoothly in the context of choosing a retailer and poses no pre-conditions on the specific products each consumer may wish to buy at the store.

Each of these three approaches to measuring customer-based brand equity of retailers may be more appropriate, sensible, and easier to apply in some domains rather than others. The third approach appears for example the more suitable in the domain of fashion. However, if pricing issues arise, the  first or second approaches may be more practical albeit with some greater difficulty. That is where experience and good judgement of managers and researches comes in.

Ron Ventura, Ph.D. (Marketing)

Notes:

(1) Hebrew readers may find the original article of TheMarker at http://www.themarker.com/consumer/1.1627373.

(2) “Reliability and Validity of the Brand-Anchored Conjoint for Measuring Retailer Images, Jordan J. Louviere and Richard D. Johnson, 1990, Journal of Retailing, 66 (4). pp. 359-382.

(3) “Inside the Mind of the Shopper (The Science of Retailing)”, Herb Sorensen, 2009, Pearson Education.

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The attitudinal approach to measuring brand equity is highly common in marketing research. It essentially aims to reflect the subjective disposition of consumers towards a brand as a concept which goes beyond the physical product or functional services offered under its name and symbols — how much power a brand has in attracting a consumer before he or she considers the features of any particular product item from that brand? In an attitudinal approach we broadly include constructs such as beliefs, evaluations, attitudes, intentions or inclinations to behave in a given way that favours the brand (though not evidence of actions themselves as measured and analysed in a behavioural approach). Our goal is to understand and assess how consumers hold brands in their minds. Most appropriately, the brand equity of a focal brand should be assessed relative to its competing brands in the same product or service category.

However, when companies track measures of brand equity to monitor and evaluate how brands they own evolve and strengthen over time, managers often find out that brand equity, from the customer perspective, rises in a rather slow pace or not at all. And even when some measures of brand equity show a sharp increase (e.g., following a TV advertising campaign), the improvement upwards often dissipates after a short while, partially or completely. Therefore, a trend of growth can be difficult to detect in a short time span, and for some brands it is not possible. This may be quite disappointing or frustrating for managers, particularly if they do not understand the measures and don’t know how to work with them.

Attitudinal models of brand equity normally are composed of multiple measures that correspond to aspects or layers like brand image, emotional attachment to the brand, and committment. These are frequently regarded as contributors to greater customer-based brand equity. In a hierarchical model, one may concentrate on ‘commitment’ as the highest and ultimate level of brand equity where a customer can reach his or her strongest bonding with a brand. But this solution may not be appropriate for all brands. A brand owner should choose the appropriate metrics considering the product/service type, its own business strategy and objectives, and the company’s resources.

For the following discussion suppose our focus is on brand attachment, reflecting how closely a consumer feels connected with a brand, a linkage that is mostly affect-laden. The metric may be a summate scale (an average score) based on statement items such as:

  • “I truly like [brand X]”
  • “I feel that [brand X] is the right brand for people like me”
  • “[Brand X] best fits my lifestyle and personality”
  • “I identify with values and ideas that [brand X] supports and promotes”
  • “[Brand X] is my favourite brand of [product/service A]”

(Assume responses on a 1 to 7 scale where 1 means “strongly disagree” and 7 means “strongly agree”)

The chart below suggests three scenarios as to how this metric of brand equity may evolve over a period of five years (monthly). The curve lines presented here are hypothetical (i.e. simulated) but are based on experiences of real-world phenomena.

Attitudinal Brand Equity Over Time

Scenario 1 suggests a stairway-like path of the attachment metric. In this scenario a favourable shift in attitude towards the brand relies on discrete events, particularly image-building advertising campaigns.  It is likely to rise in a lag or delay after a campaign commences while its effect usually weakens several weeks after the campaign ends. The metric either flattens or descends back to a level between prior to the campaign and the recent peak in the brand equity metric. If a company aims to boost its brand like that, it  has to launch an advertising campaign once every few months to refresh and enforce the brand’s image in consumers’ minds. Trying to achieve a more continuous climb in brand attachment would require more frequent ad campaigns which can be too expensive and exhaustive for many companies. With time the impact of such campaigns is also likely to dampen. Actually the stronger brands do not need to advertise too often to retain their top stature.

Yet consumers in recent decades obtain information about brands from more sources (e.g., Internet content of various types, friends, media reports), they are increasingly alert to stimuli they are exposed to in retail outlets, and are more sensitive to their direct service experiences when interacting with companies. In other words, events are happening all the time and customer relationships with brands and companies are continuous. That implies that growing the brand’s equity more continuously and smoothly over time, as depicted by Scenario 2, demands brand managers to be attentive all the time to events, especially episodes involving customers, and to be proactive. Management has to respond promptly with corrective measures to negative events that become public, and on the other hand initiate events and activities that remind customers of the positive things the company can do and thus solidify the relationships with them.

A brand may reach a certain high level on a metric of brand equity where it has little room to grow much further. This is the case of Scenario 3. First, objectively it becomes more difficult to improve further when a brand is already at the top in its field. Second, however, it may also be an outcome of a property of the measure, and that is typical in consumer survey-based measures: the measure as described here is bounded between the lower end of the scale (1) and its upper end (7). In particular, as the metric value gets closer to the upper end of the scale, increments and decrements get smaller, and the slope of the curve is more subtle, as the metric converges towards or near the maximum value. For a brand that has reached this position, this does not mean in any way that its management can rest and become complacent. The mission at this stage turns from forming and changing attitudes to sustaining those positive attitudes it has achieved. Much of the demands described regarding growth in Scenario 2 are still valid. Although those activities may be pursued less intensively and frequently, they are still required, and the brand equity metric should still be monitored to ensure that it continues to travel in a top band on the chart (because remember it is bounded from above but it does have a lot of room to fall down…)

The three scenarios discussed illustrate the different turns that attitudinal measures of brand equity can take, up and down. Furthermore, it should clarify how such scenarios can be associated with different strategies and quality of management, as well as lessons that can be learned from each scenario in order to enhance the brand’s equity. Tracking metrics of brand equity is an essential managerial tool, but the metrics used should be well understood to employ them effectively. Measures should be taken at a reasonable and practical frequency (e.g., quarterly, bi-monthly, monthly). In addition, brand equity metrics should be evaluated for different segments and compared between them, particularly distinguishing between more regular (‘loyal’)  brand users and other consumers, or between recognized customers and non-customers of service providers like banks and telecom companies.

Ron Ventura, Ph.D. (Marketing)

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