Brand value spotlighted in the 1980s
To many people, the word “brand” brings to mind luxury brand goods such as expensive bags or wristwatches. However, “brand” is a general term for names and marks which are created to differentiate products or services from the competitors. In such sense, this means that almost all products and corporations are included as brands, not only special ones.
In the latter half of the 1980s, branding began to attract attention from companies all over the world as an important management resource.
At that time, consumer goods firms in the United States faced severe price competition. This cut-throat competition, also known as destructive or ruinous competition, causes a cycle of retaliation and never stops. Consequently, the condition leads to a decrease in revenue. Thus, as a means to avoid price competition, branding was spotlighted.
International M&As also began in the 1980s. Many of these M&As intended to obtain brands which were well-known, popular and enjoyed repeat purchases by consumers, and didn’t aim to obtain the technology or property of the companies. For example, Nestlé, the world famous confection corporations in Switzerland, acquired Rowntree in the UK to obtain the chocolate brand “KitKat,” which Rowntree had been selling.
After such acquisitions, companies around the world began to focus on brand building and researchers around the world began to research brand value.
David Aaker, Professor Emeritus of Marketing at UC Berkeley, organized brand value conceptually. He presented a concept known as “brand equity” in 1991. Since then, a brand strategy has been regarded as an important management issue for companies around the world.
At that time, many Japanese companies began to develop a brand strategy by setting up a division specializing in brand management. However, some companies recognized brand strategy just as the management of trademark rights because of insufficient understanding of the concepts.
Brand commitment development–an issue for Japanese companies
One of the factors of brand equity David Aaker showed is brand awareness. This indicates how well consumers know a brand. Basically, a brand cannot be effective if it is not known to consumers.
The next is perceived quality. This refers to the superiority of quality that consumers recognize in a brand. The quality mentioned here is not objective quality shown in specifications, but what consumers feel when they use a product.
The third is brand associations. This refers to the image consumers have of a brand. It includes not only positive impressions likes stylish or luxury, but also negative ones such as being uncool or cheap.
Consumers begin to purchase brand goods repeatedly when the brand becomes well known and obtains a good reputation for quality and a positive image. This is brand loyalty. Brand equity is the integrated concept of these factors.
Aaker intended to evaluate brand value from the consumers’ point of view. There is another idea: that of evaluating brand value by price. For example, Interbrand conducts monetary evaluations of brand value and announces the rankings as “Best Global Brands” every year.
In 2019, Apple was ranked as the highest-priced company, followed by other US companies, Google, Amazon, Microsoft, and Coca-Cola (2nd through 5th respectively). Samsung, the South Korean company, was placed 6th, the highest among Asian companies. Toyota was ranked 7th, which was the highest rank among Japanese companies. Regrettably, only seven Japanese companies, including Toyota, reached the top 100.
Brand value development has been a genuine issue for Japanese companies for a long time.
In the 1980s, Japanese companies dominated the world and once even won the admiration of “Japan as number one.” At that time, a consumer survey of product evaluation in Finland showed that Japanese products were well regarded for reasonable prices and durability. However, the scores which indicated whether consumers were satisfied with possession were lower than for products made in other countries.
Although Japanese products were thought to be highly reasonable, they didn’t gain affection or fans. Loyalty with affection is “loyalty” literally. In comparison with Western companies, it seems that real loyalty for products of Japanese companies failed to be developed.
As seen above, brand value development is an issue for Japanese companies which has been pointed out for a long time. Nowadays, it is more important for Japanese companies to develop brand value because South Korean companies and Chinese companies provide highly reasonable products.
Brand value development is related to the development of profitability. It should be noticed here that a key element of this theory is the willingness to pay (WTP).
One person may want to purchase a certain brand product for 5,000 yen but another may pay 30,000 yen for it. The price a person is willing to pay is WTP. The WTP gap is brought by the degree of brand commitment, the affection for the brand. If a retail price of the brand is raised when its brand commitment is low, consumers may switch to another brand. Various costs are increasing, and it is difficult to absorb the increased costs by corporate efforts for cost reduction. For these reasons, it can be necessary to push up WTP by developing brand value in order to increase revenue.
The low brand value of Japanese companies seems to be due to strong technology orientation, in other words, there is the thought that just making good products is enough to gain purchase intention. Although it is obviously necessary to make products with superior technology, perceived quality and objective quality are different as mentioned above. However high-specification products developers make, consumers are not always happy with them. To develop brand commitment and adopt such a point of view as the main concept of management, that is to say, brand value management, is an issue for Japanese companies. Considering that this has been pointed out for a long time, brand value management is a genuine issue for Japanese companies.
Developing proper brand value strategy for each company
What should be done to increase brand commitment, and then act? How should brand value management be conducted?
First of all, move away from excessive technology orientation. It is surely necessary to provide products of high performance and objective quality. In addition to this, it is also necessary to provide pleasure and enjoyment from using them.
Here is an example of brand commitment developing, the marketing campaign of Subaru, a car manufacturer, in the US market.
When distributing in the US, Subaru at first pushed its selling points such as all-wheel drive technology and road handling ability.
However, Subaru changed its strategy of attraction from the cars’ performance to the pleasure of car possession and the connection between Subaru and car owners. This is called “the Love Campaign.”
Before that, Subaru appealed consumers only an objective quality, such as specification in its marketing communication. This campaign changed the quality into the perceived quality that a car provides comfort by creating and securing a good time with loved ones, and this resulted in developing good brand association for Subaru. Of course, this good brand association raised the number of car sales.
Although the way to increase brand commitment differs by company, all related people, including managers, developers, sales staff and staff of advertising agencies should seek a means to achieve it. This means brand value development is an issue not only for marketing departments but for entire companies, that is to say, brand value management.
Nowadays, various companies try to conduct brand value management. Primarily, managers need to determine the direction of brand strategy and share it with all employees. Developers and sales staff have their own role in a brand strategy. It seems therefore that the key to success is to think about the shared strategy from each department’s viewpoint, and then continue consistent efforts.
* The information contained herein is current as of July 2020.
* The contents of articles on Meiji.net are based on the personal ideas and opinions of the author and do not indicate the official opinion of Meiji University.
* I work to achieve SDGs related to the educational and research themes that I am currently engaged in.
Information noted in the articles and videos, such as positions and affiliations, are current at the time of production.
