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Principles of Marketing

9.6 Forms of Brand Development, Brand Loyalty, and Brand Metrics

Principles of Marketing9.6 Forms of Brand Development, Brand Loyalty, and Brand Metrics

Table of contents
  1. Preface
  2. Setting the Stage
    1. 1 Unit Introduction
    2. 1 Marketing and Customer Value
      1. In the Spotlight
      2. 1.1 Marketing and the Marketing Process
      3. 1.2 The Marketing Mix and the 4Ps of Marketing
      4. 1.3 Factors Comprising and Affecting the Marketing Environment
      5. 1.4 Evolution of the Marketing Concept
      6. 1.5 Determining Consumer Needs and Wants
      7. 1.6 Customer Relationship Management (CRM)
      8. 1.7 Ethical Marketing
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Marketing Plan Exercise
      16. Closing Company Case
      17. References
    3. 2 Strategic Planning in Marketing
      1. In the Spotlight
      2. 2.1 Developing a Strategic Plan
      3. 2.2 The Role of Marketing in the Strategic Planning Process
      4. 2.3 Purpose and Structure of the Marketing Plan
      5. 2.4 Marketing Plan Progress Using Metrics
      6. 2.5 Ethical Issues in Developing a Marketing Strategy
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. What Do Marketers Do?
      13. Marketing Plan Exercise
      14. Closing Company Case
      15. References
  3. Understanding the Marketplace
    1. 2 Unit Introduction
    2. 3 Consumer Markets and Purchasing Behavior
      1. In the Spotlight
      2. 3.1 Understanding Consumer Markets and Buying Behavior
      3. 3.2 Factors That Influence Consumer Buying Behavior
      4. 3.3 The Consumer Purchasing Decision Process
      5. 3.4 Ethical Issues in Consumer Buying Behavior
      6. Chapter Summary
      7. Key Terms
      8. Applied Marketing Knowledge: Discussion Questions
      9. Critical Thinking Exercises
      10. Building Your Personal Brand
      11. What Do Marketers Do?
      12. Closing Company Case
      13. References
    3. 4 Business Markets and Purchasing Behavior
      1. In the Spotlight
      2. 4.1 The Business-to-Business (B2B) Market
      3. 4.2 Buyers and Buying Situations in a B2B Market
      4. 4.3 Major Influences on B2B Buyer Behavior
      5. 4.4 Stages in the B2B Buying Process
      6. 4.5 Ethical Issues in B2B Marketing
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. What Do Marketers Do?
      13. Closing Company Case
      14. References
    4. 5 Market Segmentation, Targeting, and Positioning
      1. In the Spotlight
      2. 5.1 Market Segmentation and Consumer Markets
      3. 5.2 Segmentation of B2B Markets
      4. 5.3 Segmentation of International Markets
      5. 5.4 Essential Factors in Effective Market Segmentation
      6. 5.5 Selecting Target Markets
      7. 5.6 Product Positioning
      8. 5.7 Ethical Concerns and Target Marketing
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Marketing Plan Exercise
      16. Closing Company Case
      17. References
    5. 6 Marketing Research and Market Intelligence
      1. In the Spotlight
      2. 6.1 Marketing Research and Big Data
      3. 6.2 Sources of Marketing Information
      4. 6.3 Steps in a Successful Marketing Research Plan
      5. 6.4 Ethical Issues in Marketing Research
      6. Chapter Summary
      7. Key Terms
      8. Applied Marketing Knowledge: Discussion Questions
      9. Critical Thinking Exercises
      10. Building Your Personal Brand
      11. What Do Marketers Do?
      12. Marketing Plan Exercise
      13. Closing Company Case
      14. References
    6. 7 Marketing in a Global Environment
      1. In the Spotlight
      2. 7.1 The Global Market and Advantages of International Trade
      3. 7.2 Assessment of Global Markets for Opportunities
      4. 7.3 Entering the Global Arena
      5. 7.4 Marketing in a Global Environment
      6. 7.5 Ethical Issues in the Global Marketplace
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. What Do Marketers Do?
      13. Closing Company Case
      14. References
    7. 8 Marketing in a Diverse Marketplace
      1. In the Spotlight
      2. 8.1 Strategic Marketing: Standardization versus Adaptation
      3. 8.2 Diversity and Inclusion Marketing
      4. 8.3 Multicultural Marketing
      5. 8.4 Marketing to Hispanic, Black, and Asian Consumers
      6. 8.5 Marketing to Sociodemographic Groups
      7. 8.6 Ethical Issues in Diversity Marketing
      8. Chapter Summary
      9. Key Terms
      10. Applied Marketing Knowledge: Discussion Questions
      11. Critical Thinking Exercises
      12. Building Your Personal Brand
      13. What Do Marketers Do?
      14. Closing Company Case
      15. References
  4. Product, Promotion, Price, and Place
    1. 3 Unit Introduction
    2. 9 Products: Consumer Offerings
      1. In the Spotlight
      2. 9.1 Products, Services, and Experiences
      3. 9.2 Product Items, Product Lines, and Product Mixes
      4. 9.3 The Product Life Cycle
      5. 9.4 Marketing Strategies at Each Stage of the Product Life Cycle
      6. 9.5 Branding and Brand Development
      7. 9.6 Forms of Brand Development, Brand Loyalty, and Brand Metrics
      8. 9.7 Creating Value through Packaging and Labeling
      9. 9.8 Environmental Concerns Regarding Packaging
      10. 9.9 Ethical Issues in Packaging
      11. Chapter Summary
      12. Key Terms
      13. Applied Marketing Knowledge: Discussion Questions
      14. Critical Thinking Exercises
      15. Building Your Personal Brand
      16. What Do Marketers Do?
      17. Marketing Plan Exercise
      18. Closing Company Case
      19. References
    3. 10 Maintaining a Competitive Edge with New Offerings
      1. In the Spotlight
      2. 10.1 New Products from a Customer’s Perspective
      3. 10.2 Stages of the New Product Development Process
      4. 10.3 The Use of Metrics in Evaluating New Products
      5. 10.4 Factors Contributing to the Success or Failure of New Products
      6. 10.5 Stages in the Consumer Adoption Process for New Products
      7. 10.6 Ethical Considerations in New Product Development
      8. Chapter Summary
      9. Key Terms
      10. Applied Marketing Knowledge: Discussion Questions
      11. Critical Thinking Exercises
      12. Building Your Personal Brand
      13. What Do Marketers Do?
      14. Closing Company Case
      15. References
    4. 11 Services: The Intangible Product
      1. In the Spotlight
      2. 11.1 Classification of Services
      3. 11.2 The Service-Profit Chain Model and the Service Marketing Triangle
      4. 11.3 The Gap Model of Service Quality
      5. 11.4 Ethical Considerations in Providing Services
      6. Chapter Summary
      7. Key Terms
      8. Applied Marketing Knowledge: Discussion Questions
      9. Critical Thinking Exercises
      10. Building Your Personal Brand
      11. What Do Marketers Do?
      12. Closing Company Case
      13. References
    5. 12 Pricing Products and Services
      1. In the Spotlight
      2. 12.1 Pricing and Its Role in the Marketing Mix
      3. 12.2 The Five Critical Cs of Pricing
      4. 12.3 The Five-Step Procedure for Establishing Pricing Policy
      5. 12.4 Pricing Strategies for New Products
      6. 12.5 Pricing Strategies and Tactics for Existing Products
      7. 12.6 Ethical Considerations in Pricing
      8. Chapter Summary
      9. Key Terms
      10. Applied Marketing Knowledge: Discussion Questions
      11. Critical Thinking Exercises
      12. Building Your Personal Brand
      13. What Do Marketers Do?
      14. Marketing Plan Exercise
      15. Closing Company Case
      16. References
    6. 13 Integrated Marketing Communications
      1. In the Spotlight
      2. 13.1 The Promotion Mix and Its Elements
      3. 13.2 The Communication Process
      4. 13.3 Integrated Marketing Communications
      5. 13.4 Steps in the IMC Planning Process
      6. 13.5 Ethical Issues in Marketing Communication
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. What Do Marketers Do?
      13. Marketing Plan Exercise
      14. Closing Company Case
      15. References
    7. 14 The Promotion Mix: Advertising and Public Relations
      1. In the Spotlight
      2. 14.1 Advertising in the Promotion Mix
      3. 14.2 Major Decisions in Developing an Advertising Plan
      4. 14.3 The Use of Metrics to Measure Advertising Campaign Effectiveness
      5. 14.4 Public Relations and Its Role in the Promotion Mix
      6. 14.5 The Advantages and Disadvantages of Public Relations
      7. 14.6 Ethical Concerns in Advertising and Public Relations
      8. Chapter Summary
      9. Key Terms
      10. Applied Marketing Knowledge: Discussion Questions
      11. Critical Thinking Exercises
      12. Building Your Personal Brand
      13. What Do Marketers Do?
      14. Closing Company Case
      15. References
    8. 15 The Promotion Mix: Personal Selling and Sales Promotion
      1. In the Spotlight
      2. 15.1 Personal Selling and Its Role in the Promotion Mix
      3. 15.2 Classifications of Salespeople Involved in Personal Selling
      4. 15.3 Steps in the Personal Selling Process
      5. 15.4 Management of the Sales Force
      6. 15.5 Sales Promotion and Its Role in the Promotion Mix
      7. 15.6 Main Types of Sales Promotion
      8. 15.7 Ethical Issues in Personal Selling and Sales Promotion
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Closing Company Case
      16. References
    9. 16 Direct, Online, Social Media, and Mobile Marketing
      1. In the Spotlight
      2. 16.1 Traditional Direct Marketing
      3. 16.2 Social Media and Mobile Marketing
      4. 16.3 Metrics Used to Evaluate the Success of Online Marketing
      5. 16.4 Ethical Issues in Digital Marketing and Social Media
      6. Chapter Summary
      7. Key Terms
      8. Applied Marketing Knowledge: Discussion Questions
      9. Critical Thinking Exercises
      10. Building Your Personal Brand
      11. What Do Marketers Do?
      12. Closing Company Case
      13. References
    10. 17 Distribution: Delivering Customer Value
      1. In the Spotlight
      2. 17.1 The Use and Value of Marketing Channels
      3. 17.2 Types of Marketing Channels
      4. 17.3 Factors Influencing Channel Choice
      5. 17.4 Managing the Distribution Channel
      6. 17.5 The Supply Chain and Its Functions
      7. 17.6 Logistics and Its Functions
      8. 17.7 Ethical Issues in Supply Chain Management
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Marketing Plan Exercise
      16. Closing Company Case
      17. References
    11. 18 Retailing and Wholesaling
      1. In the Spotlight
      2. 18.1 Retailing and the Role of Retailers in the Distribution Channel
      3. 18.2 Major Types of Retailers
      4. 18.3 Retailing Strategy Decisions
      5. 18.4 Recent Trends in Retailing
      6. 18.5 Wholesaling
      7. 18.6 Recent Trends in Wholesaling
      8. 18.7 Ethical Issues in Retailing and Wholesaling
      9. Chapter Summary
      10. Key Terms
      11. Applied Marketing Knowledge: Discussion Questions
      12. Critical Thinking Exercises
      13. Building Your Personal Brand
      14. What Do Marketers Do?
      15. Marketing Plan Exercise
      16. Closing Company Case
      17. References
    12. 19 Sustainable Marketing: The New Paradigm
      1. In the Spotlight
      2. 19.1 Sustainable Marketing
      3. 19.2 Traditional Marketing versus Sustainable Marketing
      4. 19.3 The Benefits of Sustainable Marketing
      5. 19.4 Sustainable Marketing Principles
      6. 19.5 Purpose-Driven Marketing
      7. Chapter Summary
      8. Key Terms
      9. Applied Marketing Knowledge: Discussion Questions
      10. Critical Thinking Exercises
      11. Building Your Personal Brand
      12. References
  5. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
    14. Chapter 14
    15. Chapter 15
    16. Chapter 16
    17. Chapter 17
    18. Chapter 18
    19. Chapter 19
  6. Index

Learning Outcomes

By the end of this section, you will be able to:

  • 1 Identify branding strategies.
  • 2 Describe degrees of brand loyalty.
  • 3 Discuss metrics that can be used to measure brand strength and value.

Brand Development

New products can be added to a brand at any time. There are a few ways to add products that are classified on two measures: new/existing brand name and new/existing product category (see Figure 9.8).

The brand development matrix defines products added to a new brand. It is divided into four boxes. The left is labeled brand name while the top is labelled product category. Each of these is divided into existing and new sections. A line extension is what occurs with an existing brand name and an existing product category. A brand extension is what occurs with an existing brand name but a new product category. Multibrands occurs with a new brand name and an existing product category. And new brands occur with a new brand name and a new product category.
Figure 9.8 Brand Development Matrix (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Line extensions create new opportunities for an existing product and brand to serve customers. For example, the Oreo brand adds flavors to its product line for holidays. These line extensions provide the existing brand with an extension of its current product. As a result, a line extension may sell more products to already-aware and interested customers without many risks. However, sometimes brands may overextend their product lines and products may be too similar, failing to increase sales.

Brand extensions leverage the brand name to new product categories. For example, Starbucks developed a line of bottled coffees under its corporate brand name. A brand extension uses awareness and equity in the brand to gain instant recognition and affinity for the new product, which may increase sales rapidly. However, if the new product is inferior to the brand’s known quality, the entire brand portfolio may be at risk.

Multibrands are new brand names within a company’s existing product category. For example, Nabisco manufactures various cookies within a product line but is marketed with different brand names. In this case, Chips Ahoy, Oreo, and Teddy Grahams all have brand equity on their own and do not need the benefit of the Nabisco brand. Each of these brands has a significant market share, so there is a benefit to retaining a multibranding approach. However, a multibranding approach does not work when the products have a small market share or fail to gain favorable retail shelf space to encourage sales.

New brands are an entirely different entity from the parent company. A new brand strategy can be effective if the new product or service is markedly different from the existing offering and benefits from its own branding. For example, the Starbucks brand owns Ethos Water. Ethos is in a beverage category other than Starbucks’s primary offering and retains its name. A new brand strategy works well when the new brand is distinct from the parent brand and has a defined target market and positioning; however, a marketing strategy for a new brand can be expensive to maintain over time.

Brand Loyalty Levels

As you can see, brands spend time and resources to gain loyal customers. Loyal customers are the holy grail of marketing because they will purchase your brand and advocate for the brand to others. Loyal customers become instant word of mouth, spreading the positive attributes of a brand. However, not all customers are intensely loyal to one brand. Instead, customers fit into one of four loyalty categories (see Figure 9.9).

Loyalty categories are shown in a triangle divided horizontally. As you move up the triangle, the amount of customers represented gets smaller. Started at the bottom of the triangle, the different types of customers are switchers, shifting loyals, split loyals, and hard-core loyals.
Figure 9.9 Loyalty Categories (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Switchers are customers who continually change their purchasing behaviors. Switchers may be motivated by price, convenience, or innovation. Therefore, it is essential to develop a product or service that meets the switching consumers’ needs to retain them as customers. For example, a switcher might purchase the lowest-price laundry detergent each time they are at the store.

Shifting loyals are customers who are loyal to one product or service for a time, then turn their loyalty to a different product or service for the second period. Brands can expect that shifting loyal customers will move back and forth between products and services. For example, a shifting loyal might purchase a Toyota followed by a Honda, then turn their loyalty back to Toyota for a third purchase.

Split loyals are customers who have a consideration set of two to three products or services in the category. The split loyal is willing to buy this select set of brands on any occasion without hard-core loyalty to any in the group. However, brands can convert split loyals into hard-core loyals with product/service consistency, loyalty programs, and marketing efforts. For example, customers may have loyalty to Gap, Banana Republic, and J.Crew for workwear.

Hard-core loyals are the customers that every brand wants. They are tried-and-true customers who will generally only purchase one brand in a category. For example, when purchasing from a catalog, they tend to make a purchase with less concern about price. In addition, hard-core loyals often tell friends and family about their purchases, extending word-of-mouth marketing for the brand. Brands need to retain hard-core loyal customers. For example, Dunkin’ knows that loyalty is essential to its business, so it rewards its loyal customers with free food and coffee through its DD Perks program.

Metrics to Measure Brand Effectiveness

Brand sentiment is challenging to measure. Unlike sales or revenue, sentiment is not easily quantifiable. However, brands must measure their effectiveness because organizations invest heavily in building brands. There are three ways to quantify a brand’s impact: brand lift, brand engagement, and brand preference.

Brand lift measures perception over time. To determine whether the campaign improved perceptions, brands can survey customers and noncustomers about their perception of a brand pre-campaign and again post-campaign. Keep in mind that positive perception doesn’t necessarily mean that people will make a purchase; it simply indicates a positive affect toward the brand.

Brand engagement measures how deeply the customer identifies emotionally with a brand. Deeply engaged customers typically make more purchases, advocate for the brand, and become loyal customers. Social media metrics, time spent on site, subscriptions, and bounce rate are ways to measure brand engagement.

Brand preference measures consumer behavior by determining the degree to which a brand is preferred over others in the category. Brand preference is the most accurate of the three measures in predicting sales, as its focus is on behavior over attitudes. Marketing research is the best way to assess brand preference.

Marketing Dashboard

Profit Margins

Profit margins are a widely used financial measure to determine the profitability of a business, considering the cost to manufacture and sell a product or service and measuring how much of every dollar in sales or services your company keeps from its earnings. Cost of goods sold, or COGS, describes expenses directly attributable to the product or service. It is important to deduct COGS from profitability to fully understand how much direct costs impact profitability. However, expenses don’t end once manufacturing costs are considered. Companies pay for overhead, such as office space, trucks, and warehouses. They also account for depreciation on their assets, pay taxes, and incur costs for employee salaries. All of these expenses chip away at profitability. Profit margin calculates profitability after expenses.

There are two types of profit margin on an income statement: gross profit and net profit.

Gross profit margin equates to net sales minus the cost of goods sold. The gross margin shows the amount of profit made before deducting selling, general, and administrative (SG&A) costs. The formula for gross profit margin is

Gross Profit Margin=Net Sales-COGSNet Sales× 100Gross Profit Margin=Net Sales-COGSNet Sales× 100

The calculation is expressed as a percentage.

Net profit margin takes the calculation one step further. It deducts all expenses from profitability, including administrative, sales, amortization, debt payments, taxes, income, and asset depreciation. This provides a more accurate look at profitability because it considers all the costs associated with producing and selling the product or service. The formula for net profit margin is

Net Profit Margin=Revenue-COGS-Other Taxes & ExpensesRevenue× 100Net Profit Margin=Revenue-COGS-Other Taxes & ExpensesRevenue× 100

The calculation is expressed as a percentage.

Suppose your sandwich shop is interested in its profit margins for a single order. Look at the chart and calculate the gross and net profit margins.

Total revenue $6.25
COGS $3.50
Administrative, sales $0.75
Taxes, depreciation, debt payments, amortization $0.50
Table 9.3

Which measure is more accurate?

Your business partner, Priya, wants to decrease the revenue of a single order to $5.50. How will that impact your profit margins?

Knowledge Check

It’s time to check your knowledge on the concepts presented in this section. Refer to the Answer Key at the end of the book for feedback.

1.
Domino's Pizza recently added sandwiches to its menu. This is an example of a ________.
  1. line extension
  2. brand extension
  3. multibrand
  4. new brand
2.
The North Face adds a new parka to its line of North Face–branded winter coats. This is an example of a ________.
  1. line extension
  2. brand extension
  3. multibrand
  4. new brand
3.
Bethany purchases a different bar soap every time she shops based on what is on sale. Bethany can be considered a ________.
  1. switcher
  2. shifting loyal
  3. split loyal
  4. hard-core loyal
4.
Jorge only purchases Apple computers and will not accept a substitute. Jorge can be considered a ________.
  1. switcher
  2. shifting loyal
  3. split loyal
  4. hard-core loyal
5.
Which of the following brand metrics measures intended behavior?
  1. Brand lift
  2. Brand engagement
  3. Brand preference
  4. Brand equity
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