BRAND MANAGEMENT

Assignment

Prepared by: Md. Rahil Kirmani

Isha Gothwal

Yusra Jamal

Samarjeet Kaur

Tabrez Khan
L’Oréal India Private Limited is a wholly owned subsidiary of L’Oréal S.A. Headquartered in
Paris, L’ORÉAL is the global leader in cosmetics with 5 key expertise in hair care, hair color,
skin care, make-up and fragrances. L’Oréal’s leadership is achieved through cutting-edge
technology with a portfolio of well-known brands that answer all beauty needs and are
distributed in all channels.

Each brand benefits from considerable investments in research made by the L'Oréal Group.
The Group's research efforts, unique in the beauty industry, permit each brand to benefit
from formulas specifically adapted to the needs of men and women worldwide, within each
market or distribution circuit that is present.

L'Oréal India has over 600 employees and has a strong track record with consistent double
digit sales growth yearly.

Group profile
 A century of expertise in cosmetics

 € 17.5 billion consolidated sales in 2009

 23 global brands*

 130 countries

 64 600 employees

 674 patents filed in 2009.

o These brands' annual sales are superior to 50 million euros

Finance
- Sales: € 17.5 billion

- Operating profit: € 2.5 billion

- Net earnings per share (1): € 3.42

- Dividend (2): € 1.55

(1) Diluted net earnings per share based on net profit excluding non-recurrent items after
minority interest.

(2) Dividend to be proposed to the Annual General Meeting of Shareholders on April 27th
2009

Operations
  38 factories around the world

 4,9 billion units manufactured in 2009

 97% of factories are ISO 14001and OHSAS 18001 or ISO 14001 and VPP certified

 100% of L'Oréal's industrial sites audited with standard SA 8000.

PRESENT SCENARIO IN INDIA

Total beauty care market Beauty
services
Rs 5,070 crores 87%
Current Annual growth rate
25%
 L’Oreal currently markets L’Oreal professional, Matrix and kerastase all three offering
hair care products. It covers over 15000 salons, with L’Oreal professional having tie-
ups with over 600 salons.

 All kerastase salons are exclusive since it’s a luxury brand.

 Matrix is most widely distributed brand with most accessible pricing , there are no
exclusive partnerships.

 During next three years, L’Oreal will target entering 30000-40000 salons as India is
the fastest growing market.
CUSTOMER BASED BRAND
EQUITY
BUSINESS STRATEGY

their strategy for leadership is based on continuous investment in rigorous scientific research
and development. This enables the brands to deliver products which are innovative, highly
effective, practical and pleasant to use, and which are manufactured to the most demanding
standards of quality and safety. L’Oreal aim for excellence, and constantly challenge
ourselves and our methods. They place great value on honesty and clarity: their consumer
advertising is based on proven performance and scientific data. L’Oreal are committed to
building strong and lasting relationships with their customers and our suppliers, founded on
trust and mutual benefit. L’Oreal do business with integrity: L’Oreal respect the laws of the
countries in which L’Oreal operate and adhere to good corporate governance practices.
L’Oreal maintain high standards in accounting and reporting, and support the fight against
corruption. L’Oreal deliver long-term, sustained shareholder value by protecting and making
the most effective use of company assets.

ETHICS
THE CODE OF BUSINESS ETHICS

Our Code of Business Conduct is the reference document for ethics within L'ORÉAL and helps
employees implement THE L’ORÉAL SPIRIT in their day-to day activity. The Code of Business
Ethics applies to all employees of the L'ORÉAL Group and its subsidiaries worldwide. It also
concerns all Officers and Directors of the L'ORÉAL Group and its subsidiaries. Each employee
receives a personal copy.

The Code of Business Ethics was drafted with the help of employees from 22 countries who
took part in international working groups in Asia, Europe, North America and Latin America.
The Code was then validated by 50 internal experts and reviewed by each Country Manager,
Human Resources Manager and local legal counsel.
MISSION:
At L’ORÉAL, L’Oreal believe that everyone aspires to beauty. Our mission is to help men and
women around the world realise that aspiration, and express their individual personalities to
the full. This is what gives meaning and value to our business, and to the working lives of our
employees.
L’Oreal are proud of our work.

Customer- based brand Equity pyramid:

Two questions often arise regarding brands: ‘What makes a brand strong?’ and ‘How do you
build a strong brand?’ To answer these questions, this section introduces the customer-based
brand equity (CBBE) model. This model incorporates theoretical advances and managerial
practices in understanding and influencing consumer behaviour. Although useful perspectives
concerning brand equity have been put forth, the CBBE model provides a unique point of view
as to what brand equity is and how it should be built, measured and managed. The CBBE
model approaches brand equity from the perspective of the consumer – whether this be an
individual or an organization. Understanding the needs and wants of consumers and
organizations and devising products and campaigns to satisfy them are at the heart of
successful marketing. In particular, two fundamental questions faced by marketers are: ‘What
do different brands mean to consumers?’ and ‘How does the brand knowledge of consumers
affect their response to marketing activity?’

The basic premise of the CBBE model is that the power of a brand lies in what customers
have learned, felt, seen and heard about the brand as a result of their experiences. In other
words, the power of a brand lies in what resides in the minds of customers. The challenge for
marketers in building a strong brand is ensuring that customers have the right type of
experiences with products and services and their accompanying marketing campaigns so that
the desired thoughts, feelings, images, beliefs, perceptions and opinions become linked to the
brand. Customer-based brand equity is defined as the differential effect that brand knowledge
has on consumer response to the marketing of that brand. A brand is said to have positive
customer-based brand equity when consumers react more favourably to a product and the
way it is marketed when the brand is identified than when it is not (eg, when the product is
attributed to a fictitious name or is unnamed). Thus, a brand with positive customer-based
brand equity might result in consumers being more accepting of a brand extension, less
sensitive to price increases and withdrawal of advertising support or more willing to seek the
brand in a new distribution channel. On the other hand, a brand is said to have negative
customer-based brand equity if consumers react less favourably to marketing activity for the
brand compared with an unnamed or fictitiously named version of the product.

There are three ingredients to this definition:

• differential effect;
• brand knowledge;
• consumer response to marketing.
First, brand equity arises from differences in consumer response. If no differences occur, then
the brand name product is essentially a commodity. Competition, most likely, would then be
based on price. Second, these differences in response are a result of consumers’ knowledge
and experience of the brand. Thus, although strongly influenced by the marketing activity of
the firm, brand equity ultimately depends on what resides in the minds of consumers. Third,
the differential response by consumers that makes up the brand equity is reflected in
perceptions, preferences and behavior related to all aspects of the marketing (eg, choice of a
brand, recall of copy points from an ad, actions in response to a sales promotion or
evaluations of a proposed brand extension). Brand Briefing 2.5 provides a detailed account of
these. The simplest way to illustrate what is meant by customer-based brand equity is to
consider some typical results of product sampling or comparison tests. For example, with
blind taste tests, one group of consumers samples a product without knowing which brand it
is, whereas another group samples the product knowing which brand it is. Invariably,
differences arise in the opinions of the two groups even though they are consuming the same
product. For example, Larry Percy reports the results of a beer-tasting that showed how
discriminating consumers could be when given the names of the well-known brands of the
beer.

LOREAL’s CBBE MODEL.

BRAN SALIENCE:

Created in France, L'Oréal Paris brings the sophistication and elegance derived from its
French heritage to women and men all over the world. L'Oréal Paris offers leading-edge
products that out-perform the competition to people who care more about the way they look.
Our passion for innovation, performance, style and a sense of premium is encapsulated in the
'because you're worth it' philosophy. Our core values are supported by our strong investment
in scientific research and technology.

Over a third of the L'Oréal Group's total turnover in this country is generated by L'Oréal Paris,
making it the company's largest division in the UK. Today there are strongly established
L'Oréal Paris brands across all of the key areas of the beauty market, including the Plenitude
skincare range, Elvive haircare and Studio Line styling products. Other brands include L'Oréal
Paris Colour Cosmetics, Elnett, Rcital, Excellence, Fria, Perfect Blonde, Open, Casting and
L'Oréal Kids.

BRAND PERFORMANCE:
Branding Strategy of L'Oreal has enabled the company to spread its' business not only in
Europe but also in Asia and Latin America. In the year 2005, the Brand L'Oreal was ranked
first among all the cosmetics companies of the world.

L'Oreal Branding Strategy has achieved success throughout the world. Over the years, the
company is successfully producing and selling different cosmetic products, haircare and
skincare products in almost 150 countries of the world. This has been possible because of the
well established Brand Name and Brand Image of L'Oreal.

L'Oreal has been successful in generating a worldwide Brand Identity only because of the
company's powerful and efficient Branding Strategy. This successful Global Branding Strategy
of L'Oreal helped the company to earn significant levels of revenue in the past years In the
year 2005, L'Oreal was valued as a $18.89 billion company. In 2004, total value of the
L'Oreal Brand was $5902 million. In 2003, the company recorded a value of $5600 million.
In fact, from the year 1989, the Brand L'Oreal experienced continuous growth. The company
recorded double digit growth rate in consecutive years and in the year 2005, it became the
largest cosmetic company of the world.

BRAND IMAGERY:

L’Oréal has been one of the most reputed brands in the cosmetics field. The brand has made
its presence felt in more than 100 countries, thanks to its numerous acquisitions worldwide.
With several brands in its kitty, L’Oréal has carved a niche for itself with its unique strategies
and stands out from the other cosmetics brands.
The L’Oréal group develops several important communication campaigns every year that
underline the ability and the growth of the group. It is omnipresent across several media
channels and the constant presence enables the brand to retain its reigning position in the
market despite stiff competition from numerous cosmetic brandThe commercial
communication of the group is made at a world level. The group proposes the same products
and leans on the same advertising campaigns. In that case, visuals are the same, the text
identical, the slogan is unchanged, and the ads are only translated with respect to countries.
However, in spite of its global presence, the group realized that it could not sell the same
product to all its consumers. The group knew how to diversify towards American, Asian or
Latin brands.

BRAND JUDGEMENT

Few of the women in the admiring crowd realize that the trendy ''New York'' Maybelline brand
belongs to French cosmetics giant L'Oreal. In the battle for global beauty markets, $12.4
billion L'Oreal has developed a winning formula: a growing portfolio of international brands
that has transformed the French company into the United Nations of beauty. Blink an eye,
and L'Oreal has just sold 85 products around the world, from Redken hair care and Ralph
Lauren perfumes to Helena Rubinstein cosmetics and Vichy skin care.

Thanks to this strategy, masterminded by L'Oreal Chief Executive Lindsay Owen-Jones, the
French company has not only enjoyed a decade of double-digit growth but has pioneered new
ground rules for staying on top in a fiercely competitive industry. L'Oreal's net profits rose
12% in 1998, to $768 million, while its stock has soared 900% in the '90s.

L'Oreal's success is proof that when done right, global branding can speed growth in mature
consumer-products companies even when global markets themselves are shaky. Asia's
economy is a mess, Latin America is tottery. Other worldwide marketers, such as Procter &
Gamble Co., are suffering partly as a result. But L'Oreal is surging in markets stretching from
China to Mexico. Its secret: conveying the allure of different cultures through its many
products. Whether it's selling Italian elegance, New York street smarts, or French beauty
through its brands, L'Oreal is reaching out to more people across a bigger range of incomes
and cultures than just about any other beauty-products company in the world. That sets
L'Oreal apart from one-note marketers such as Coca-Cola Co., which has just one brand to
sell globally.

L'Oreal's strategy positions it beautifully to profit even further when the middle class begins
to grow again in emerging markets. Says Veronique Adam, analyst at J.P. Morgan Securities
Inc. in Paris: ''L'Oreal is the only real global leader in every segment of the industry.''

For Owen-Jones, the trick will be staying ahead in the game as his powerful rivals seek to
play the global branding game. From giant P&G to niche players such as Los Angeles-based
cosmetics maker Stila, L'Oreal's competitors are hustling to catch up. ''L’Oreal want to
become more of a global company like L'Oreal,'' says Yoshikuni Miyakawa, a general manager
of the cosmetics-marketing division of Shiseido Co., Japan's No. 1 cosmetics company.
Already, Shiseido is dominant at home and now expanding around the world. Meanwhile, the
French company is No. 10 in Japan, trailing rivals such as Clinique and Estee Lauder.

BRAND FEELINGS:

it is customers emotional responses and reaction with respect to the brand. “L’Oreal” formed
in France, Paris, brings the sophistication and elegance consequent from its French heritage
to women and men all over the world. L’Oreal Paris offers leading-edge products that out-
perform the competition to people who care more about the way they look. The passion for
innovation, performance, style and a sense of premium is sum up in the customers money
spending worth and also it’s' philosophy. The core values are supported by strong investment
in scientific research and technology.

The L’Oreal Group total turnover by the Paris franchise making it the company's largest
division in the world. Today there are strongly established L’Oreal Paris brands across all of
the key areas of the beauty market, including the Plnitude skincare range, Elvive hair care
and Studio Line styling products. Other brands include L’Oreal Paris Color Cosmetics, Elnett,
Rcital, Excellence, Fria, Perfect Blonde, Open, Casting and L’Oreal Kids. The Consumer
Products Division in the Europe is dedicated to offering consumers innovative, high
technology beauty products from global brands at competitive prices. This is delivered
through a global strategy combined with a local understanding of the needs of women and
men of all ages.

BRAND RESONANCE:

The L’Oreal Group has three international brands named as L’Oreal Paris, Garnier and
Maybelline that offer hair care, sun care, hair coloring, skin care and make-up products. All of
these available from mass market retail outlets such as supermarkets, drugstores and leading
chemists throughout the world. L’Oreal Paris remains the finest mass-market brand. It is
offering consumers reachable luxury for skin care through providing its consumers leading-
edge products that outshine the competition. “Garnier”, on the other hand, Europe's no1
brand for natural beauty products in hair care category that offers a complete collection for
healthy hair. Similarly, Maybelline offer world class quality for on screen requirements. The
L’Oreal Group performance is marvelous due to its distribution channel too. The company
focuses on “go native” strategy mean hire local firms in every country to distribute its
products. Secondly, “First landing” strategy that is first commercialization is bad thing if the
product is not available in a particular place. It has two bad impacts on the company: one
would be if product is not at a particular place and company runs there commercials the
negative word-of-mouth generate due to the consumers effortless struggle to search the
product. The other is the huge advertising budget shatter due to pointless direction. The
company by itself monitor, control and evaluate its channel performance especially
distributors. The company follow same marketing mix foe the whole world with a little bit
variation according to the economic conditions of a certain country. L’Oreal is known for its
strong control over its promotion, place, price and packaging strategy, which is decided from
the headquarters. For these points, only minor product adaptations are made in different
countries such as labels’ languages. All controls are very frequently checked to comply with
prices and selling places of the group marketing strategy.

STRATEGIC BRAND MANAGEMENT

PROCESS
Competitive frame of reference::

Loreal Paris:

POP: L'Oréal Paris provides affordable luxury for people who demand excellence.

POD: L'Oréal Paris, one of the world's top beauty care brands, offers men and women on
every continent beauty and personal care products that incorporate the latest scientific
advances. Visionary formulas, upscale presentation and products that are a pleasure to use

Loreal Professionals:

POP: Fashion

POD: The brand’s hair colour products are cutting edge. In 2009, L’Oréal Professionnel
launched INOA, a revolutionary odourless, ammonia-free hair colour for optimised respect of
the hair and scalp. The Série Expert, Série Nature and L’Oréal Professionnel Homme lines
offer quality professional haircare products suitable for all stylists and consumers. The
Tecni.art, Play ball and Texture Expert styling ranges are hugely popular with hair designers
and the Série Expert line offers precision professional haircare products. X-Tenso, a long-
lasting hair straightener, is also one of L’Oréal Professionnel’s most successful innovations.

Core Brand Values:

Loreal Paris  L'Oréal Paris provides affordable luxury for people who demand excellence.

Loreal Professionals  Creativity, innovation and partnership – three reasons that prompt
leading hair stylists to choose L’Oréal Professionnel and its products

Lancome Paris  Years of experience and unique expertise allow the brand to develop high-
technology products that combine performance, pleasure, safety and creativity.

Vichy Laboratories the brand has imposed a new vision of cosmetics through its founding
idea: target beauty by making health the focal point of our approach, in addition to advances
made by applying the rigour of a medical approach to enhance healthy skin.

The Body Shop only one way to beautiful, nature’s way

Brand Mantra:

Loreal Paris  because you are worth it

Loreal Professionals Dream, Excel and Succeed together

Lancome Paris  NOTHING MOVES ME MORE THAN BEAUTY BY LANCÔME

Vichy Laboratories HEALTH IS BEAUTIFUL

Mixing and matching of brand elements:

The most common punchline is “Because you are worth it”. It is easily recognizable as soon
as you come across this punchline that what brand you are talking about.

Integrating brand marketing activities:

The products from Loreal promise beauty in the most natural and affordable way. Lancome
has another element of Luxury in it.

Leverage of secondary associations:

Company: Loreal

Country of origin: Paris

BRAND VALUE CHAIN

Brand Audits:-

A Brand Audit is a comprehensive assessment of an organization’s brand, in which it’s

strengths and weaknesses are assessed and opportunities are determined. The purpose of a
brand audit is to capitalize on the opportunities in efforts to improve the various elements of
an organization’s brand in both management and marketing perspectives.

Brand Tracking

Understanding the three dimensions of brand health What is your brand's penetration? How
successful is your brand's differentiation in the marketplace? What is the likely future trend of
your brand? All can be revealed by Brand Tracker a unique and comprehensive framework
created for pbrands which reveals the three dimensions of brand health: penetration,
differentiation and relationship. Brand Tracker also incorporates innovative brand equity
model, Brand Value Creator, a market-validated system that gauges brand equity and market
barriers.

Brand Equity Management System

Brand equity is defined and a comprehensive framework is described that incorporates recent
theoretical advances and managerial practices in understanding and influencing consumer
behavior.1 This framework identifies sources and outcomes of brand equity and permits
tactical guidelines as to how to build, measure, and manage brand equity, as will be
developed further in other sections of the paper. Customer-based brand equity.
Understanding the needs and wants of consumers and customers is at the heart of
marketing. A brand equity framework should therefore recognize the importance of the
customer in the creation and management of brand equity. Accordingly, customer-based
brand equity is defined as the differential effect that brand knowledge has on consumer
response to the marketing of that brand. A brand is said to have positive customer-based
brand equity when customers react more favorably to a product and the way it is marketed
when the brand is identified as compared to when it is not (e.g., when it is attributed to a
fictitiously named or unnamed version of the product). Accordingly, the key to branding is
that consumers perceive differences among different products in a category. As noted above,
brand differences often are related to attributes or benefits of the product itself. In other
cases, however, brand differences may be related to more intangible image considerations.

There are three key ingredients to this definition -- "differential effect," "brand knowledge,"
and "consumer response to marketing." First, brand equity arises from differences in
consumer response. If no differences occur, then the brand name product can essentially be
classified as a commodity or generic version of the product. Second, these differences in
response are a result of consumer's knowledge about the brand. Thus, although strongly
influenced by the marketing activity of the firm, brand equity ultimately depends on what
resides in the minds of consumers. In other words, “customers own brands and your brand is
what customers will permit you to have." Third, the differential response by consumers that
makes up the brand equity is reflected in perceptions, preferences, and behavior related to all
aspects of the marketing of a brand (e.g., product evaluations or choice, recall of copy points
from an ad, actions in response to a sales promotion, or evaluations of a proposed brand
extension).

Sources of brand equity

What causes customer-based brand equity to exist? Customer-based brand equity occurs
when the consumer has a high level of awareness and familiarity with the brand and holds
some strong, favorable, and unique brand associations in memory. The latter consideration is
critical. For branding strategies to be successful and brand equity to be created, consumers
must be convinced that there are meaningful differences among brands in the product or
service category. The key to branding is that consumers must not think that all brands in the
category are the same.

Thus, establishing brand awareness and a positive brand image in consumer memory -- in
terms of strong, favorable, and unique brand associations -- produces the knowledge
structures that can affect consumer response and produce different types of customer-based
brand equity. In some cases, brand awareness alone is sufficient to result in more favorable
consumer response, e.g., in low involvement decision settings where consumers are willing to
base their choices merely on familiar brands. In other cases, the strength, favorability, and
uniqueness of the brand associations play a critical role in determining the differential.

Benefits of brand equity

Customer-based brand equity occurs when consumer response to marketing activity differs
when consumers know the brand from when they do not. The actual nature of how that
response differs will depend on the level of brand awareness and how favorably and uniquely
consumers evaluate brand associations, as well as the particular marketing activity under
consideration. A number of benefits can result from a strong brand, both in terms of greater
revenue and lower costs for the firm, including the following:

1. Greater customer loyalty,

2. Less vulnerability to competitive marketing actions,

 3. Less vulnerability to marketing crises,

4. Larger price margins,

5. More inelastic consumer response to price increases,

6. More elastic consumer response to price decreases,

7. Greater trade cooperation and support,

8. Increased marketing communication effectiveness,

9. Possible licensing opportunities, and

10. Additional brand extension opportunities.

Measuring sources of brand equity

The indirect approach to measuring customer-based brand equity attempts to assess

potential sources for customer-based brand equity by measuring brand knowledge structures,
i.e., consumers' brand awareness and brand associations. The indirect approach is useful in
identifying what aspects of the brand knowledge may potentially cause the differential
response that creates customer-based brand equity. Because any one measure typically only
captures one particular aspect of brand knowledge, multiple measures need to be employed
to account for the multi-dimensional nature of brand knowledge. Brand awareness can be
assessed through a variety of aided and unaided memory measures that can be applied to
test brand recall and recognition. The strength, favorability, and uniqueness of brand
associations can be assessed through a variety of qualitative and quantitative techniques
Measuring outcomes of brand equity. The direct approach to measuring customer-based
brand equity, on the other hand, attempts to more directly assess the impact of brand
knowledge on consumer response to different elements of the marketing program for the
firm. The direct approach is useful in assessing the possible outcomes and benefits that arise
from the differential response that makes up customer-based brand equity. The two main
ways to measure the outcomes and benefits of brand equity are comparative methods and
holistic methods, as follows. Comparative methods are a means to better assess the effects of
consumer perceptions and preferences on specific aspects of the marketing program.
Comparative methods involve experiments that examine consumer attitudes and behaviors
towards a brand and its marketing activity that arise from having a high level of awareness
and strong, favorable, and unique associations.

1) Brand-based comparative approaches typically involve experiments where one group

of consumers responds to an element of the marketing program or some marketing activity
(e.g., the product) when it is attributed to the brand and another group of identically
matched consumers responds to that same element when it is attributed to a competitive or
fictitiously named version of the product or service.

2) Marketing-based comparative approaches typically involve experiments where

consumers respond to changes in elements of the marketing program or marketing activity
for the target brand or competitive brand (e.g., different prices for a brand).

Comparing responses of different groups of consumers (with the former approach) or

different responses from the same consumers (with the latter approach) provide insight into
how brand knowledge affects response to marketing activity. Holistic methods, on the other
hand, are an attempt to place an overall value for the brand in either abstract utility terms or
concrete financial terms. Thus, holistic methods attempt to "net out" various considerations
to determine the unique contribution of the brand. The residual approach attempts to
examine the value of the brand by subtracting out consumers' preferences for the brand
based on physical product attributes alone from their overall brand preferences. The valuation
approach attempts to extend such analyses to place a financial value on the brand for
accounting purposes, mergers and acquisitions, or other such reasons. For example,
Interbrand has developed a two-step method of calculating brand value: 1) identifying the
“true” brand earnings and cash flow and 2) capitalizing the earnings by applying a multiple to
historic earnings as a discount rate to future cash flow. Both steps involve a number of
different calculations, e.g., the discount rate that is applied to brand earnings is based on an
assessment of brand strength as a result of a detailed review of factors related to the brand,
its positioning, the market in which it operates, competition, past performance, future plans,
risks to the brand, etc.

To identify and monitor sources of brand equity, it is necessary to design and implement a
brand equity measurement system.

A brand equity measurement system is a set of activities and procedures that is

designed to provide timely, accurate, and actionable information and guidelines for marketers
so that they can make the best possible tactical decisions in the short-run and strategic
decisions in the long-run. Designing and implementing such a system involves four steps, as
described in detail below: 1) Conducting brand audits, 2) analyzing brand positioning and
brand planning, 3) employing brand tracking studies, and 4) creating a brand equity
management system.

Conducting brand audits. A brand audit is a comprehensive examination of a brand

involving activities to assess the health of the brand, uncover its sources of equity, and
suggest ways to improve and leverage that equity. The brand audit can be used to set
strategic direction for the brand. Are the current sources of brand equity satisfactory? Do
certain brand associations need to be strengthened? Does the brand lack uniqueness? What
brand opportunities exist and what potential challenges exist for brand equity? As a result of
this strategic analysis, a marketing program can be put into place to maximize long-term
brand equity. A brand audit should be conducted whenever important shifts in strategic
direction are contemplated. Moreover, conducting brand audits on a regular basis (e.g.,
annually) allows marketers to keep their "fingers on the pulse" of their brands so that they
can be more proactively and responsively managed. As such, they are particularly useful
background for managers as they set up their marketing plans.

A brand audit requires understanding sources of brand equity from the perspective of both
the firm and the consumer. From the perspective of the firm, it is necessary to understand
exactly what products and services are currently being offered to consumers and how they
are being marketed and branded. From the perspective of the consumer, it is necessary to
dig deeply into the minds of consumers and tap their perceptions and beliefs to uncover the
true meaning of brands and products. Specifically, the brand audit consists of two activities:

1) Brand inventory: The purpose of the brand inventory is to provide a complete, up-to-
date profile of how all the products and services sold by a company are marketed and
branded. For each product, the relevant brand elements must be identified, as well as the
supporting marketing program. This information should be summarized visually and verbally.
Although primarily a descriptive exercise, some useful analysis can be conducted as to the
consistency of branding and marketing efforts.
2) Brand exploratory:The brand exploratory is research activity designed to identify
potential sources of brand equity. The brand exploratory provides detailed information as to
what consumers think of and feel about the brand. Although reviewing past studies and
interviewing relevant personnel inside or outside the company provides some insights,
additional research is often required. To allow a broader range of issues to be covered and
also to permit those issues to be pursued in-depth, the brand exploratory often employs
qualitative research techniques. To provide a more specific assessment of the sources of
brand equity, a follow-up quantitative phase is often necessary. Analyzing brand
positioning and brand planning:

Determining the desired brand knowledge structures involves positioning a brand in the
minds of consumers. According to the customer-based brand equity model, deciding on a
positioning requires determining a frame of reference -- by identifying the target market and
the nature of competition - and the ideal point-of-parity and point-of-difference brand
associations. Deciding on these four ingredients will then determine the brand positioning and
dictate the desired brand knowledge structures. Points-of-difference are those associations
that are unique to the brand that are also strongly held and favorably evaluated by
consumers. Points-of-parity, on the other hand, are those associations that are not
necessarily unique to the brand but may in fact be shared with other brands. Category point-
of-parity associations are those associations that consumers view as being necessary to be a
legitimate and credible product offering within a certain category. Competitive point-of-parity
associations are those associations designed to negate competitor's points-of-differences.

Once the brand positioning is decided on as part of the brand audit or in some other way, a
marketing program can be put into place to build the desired brand knowledge structures and
maximize the potential benefits that may result. Brand planning involves designing marketing
programs to create the desired brand knowledge structures and sources and outcomes of
brand equity. Once marketers have a good understanding from the brand audit of current
brand knowledge structures for their target consumers and have decided on the desired
brand knowledge structures for optimal positioning, additional research still may be necessary
to test out the viability of alternative tactical programs to achieve that positioning. As part of
the brand planning process, there may be a number of different possible marketing programs
that, at least on the surface, may be able to achieve the same goals, and additional research
may be useful to assess their relative effectiveness and efficiency. Employing brand tracking
studies. To check the success of the marketing program that emerges from the brand plan,
tracking studies are often conducted. Whereas the brand audit is done on a non-recurring
basis to help sharpen or change the brand positioning, tracking studies involve information
collected from consumers on a routine basis over time. Tracking studies can achieve three
major objectives. First, tracking studies can monitor consumer brand knowledge and brand
awareness and the strength, favorability, and uniqueness of brand associations that represent
key sources of brand equity. Second, tracking studies can also measure relevant outcomes of
brand equity such as overall attitudes or preference for the brand, reported past usage and
intended future usage, and price sensitivity. Finally, tracking studies can also analyze the
marketing program with respect to its effects on the current brand image and how it can help
to achieve the desired brand image. In summary, tracking studies can provide useful
information as to how a brand is doing as well as why. Creating a brand equity management
system. To fully benefit from the research findings that emerge from brand audits and brand
tracking studies and to provide proper control and direction, a brand equity management
system needs to be implemented within the firm. Such a system would include minimally the
following three ingredients:
1) Brand Equity Charter, 2) Brand Equity Report, and 3) Brand Overseers.

Brand Equity Charter:The company view of brand equity should be formalized into a
document, the Brand Equity Charter that provides relevant guidelines to marketing
managers. This document should: 1) Define the brand equity concept and explain its
importance; 2) specify what the assumed equity is for all relevant brands (e.g., in terms of
key associations); 3) explain how brand equity is measured by the firm in terms of the
content and structure of tracking studies and the resulting Brand Equity Reports (described
below); and 4) suggest how brand equity should be managed in terms of general principles.
The Charter should be updated annually to identify new opportunities and risks and to fully
reflect information gathered by the brand inventory and brand exploratory as part of any
brand audits.

Brand Equity Report: The results of the tracking survey and other relevant outcome
measures for the brand should be assembled into Brand Equity Reports that are distributed to
management on a regular basis (monthly, quarterly, or annually). The report ideally would
combine relevant tracking information with other internal information and effectively
integrate all these different measures into an interpretable and actionable form. In this way,
the Brand Equity Report would provide descriptive information as to what is happening within
a brand as well as diagnostic information as to why it is happening. With advances in
computer technology, it will be increasingly easy for firms to place the information that
makes up the Brand Equity Report "on-line" so that it can be accessible to managers through
the firm's intranet or some other means. Brand Overseers. Finally, a group headed by
Director(s) or Vice-President(s) of Brand Management or Brand Equity should be appointed
within the organization. This group would be responsible for overseeing the implementation of
the Brand Equity Charter and Brand Equity Reports. Their task would be to make sure that,
as much as possible, product and marketing actions across divisions and geographical
boundaries are done in a way that reflected the spirit of the Brand Equity Charter and the
substance of the Brand Equity Report to maximize the short-term performance and long-
term equity of brands

Brand-product matrix:The brand-product matrix is a graphical representation of all the

brands and products sold by the firm. The matrix or grid has the brands for a firm as rows
and the corresponding products as columns: The rows of the matrix represent brand-product
relationships and capture the brand extension strategy of the firm with respect to a brand;
the columns of the matrix represent product-brand relationships and capture the brand
portfolio strategy in terms of the number and nature of brands to be marketed in each
category, as follows.

Brand-product relationships capture the brand extension strategy of the firm. Brand
extensions are when firms use existing brand names to enter new categories (e.g., Diet Coke,
Swiss Army watches, and Ivory Shampoo). Potential extensions must be judged by how
effectively they leverage the existing brand equity to the new product, as well as how well
they, in turn, contribute to the equity of the existing brand. In other words, what is the level
of awareness likely to be and what is the expected strength, favorability, and uniqueness of
brand associations of the particular extension product? At the same time, how does the
introduction of the extension affect the prevailing levels of awareness and strength,
favorability, and uniqueness of brand associations of the existing products associated with the
brands? In general, the closer the “fit” or similarity of an extension, the more likely it is that
parent brand associations “transfer” to an extension but, at the same time, the more likely it
is that any unfavorable reactions to the extension will produce negative feedback effects to
the parent brand.

Product-brand relationships capture the brand portfolio strategy in terms of the number and
nature of brands to be marketed in each category. A firm may offer multiple brands in a
category to attract different -- and potentially mutually exclusive -- market segments. Brands
can also take on very specialized roles in the portfolio -- as flanker brands to protect more
valuable brands, as low-end entry level brands to expand the customer franchise, as high-end
prestige brands to enhance the worth of the entire brand line, or as cash cows to milk all
potentially realizable profits. As part of the long-term perspective in managing a brand
portfolio, it is necessary that the role of different brands and the relationships among
different brands in the portfolio be carefully considered over time. In particular, a brand
migration strategy needs to be designed and implemented so that consumers understand
how various brands in the portfolio can satisfy their needs as they potentially change over
time or as the products and brands themselves change over time (e.g., BMW’s 3, 5, and 7
series). Brand hierarchy. The brand hierarchy reveals an explicit ordering of brands by
displaying the number and nature of common and distinctive brand components across the
firm's products. By capturing the potential branding relationships among the different
products sold by the firm, a brand hierarchy is a useful means to graphically portray a firm's
branding strategy. One simple representation of possible brand components and levels of a
brand hierarchy, from top to bottom, are:

1. Corporate or company brand (e.g., Beiersdorf),

2. Family brand (e.g., Nivea),

3. Individual brand (e.g., Visage),

4. Individual item or model modifier (e.g., Facial Nourishing Lotion),

5. Product descriptor (e.g., facial skin creme).

Brand elements at each level of the hierarchy may contribute to brand equity through their
ability to create awareness and foster strong, favorable, and unique brand associations. The
challenge in setting up the brand hierarchy and arriving at a branding strategy is: 1) To
design the proper brand hierarchy in terms of the number and nature of brand elements to
use, if at all, at each level and 2) to design the optimal supporting marketing program in
terms of creating the desired amount of brand awareness and type of brand associations at
each level.

In terms of designing a brand hierarchy, the number of different levels of brands that will be
employed and the relative emphasis or prominence that brands at different levels will receive
when combined to brand any one product must be defined. In general, the number of levels
employed typically is at least two or even three. For example, sub-brand strategies combine
brands from two different levels. One particularly useful sub-branding strategy is where an
existing brand name (either the company or family brand name) is combined with a new
brand name (e.g., Levi’s Dockers). Such a strategy offers two potential benefits in that it can
both: 1) allow for leverage of secondary associations by facilitating access to perceptions and
preferences toward the existing brands (e.g., the quality and credibility perceptions of Levi’s),
and 2) allow for the creation of specific brand beliefs (e.g., that Dockers are psychologically
and physically comfortable 100% cotton pants). When multiple brand names are used, as
with a sub-brand, the relative prominence of a brand name as compared to other brand
names determines its strength of association to the product. Brand visibility and prominence
will depend on factors such as the order, size, color, and other aspects of physical appearance
of the brand name.

In terms of designing the supporting marketing program in the context of a brand hierarchy
and sub-branding situation, the desired awareness of a brand at any level will dictate the
relative prominence of the brand and the extent to which associations linked to the brand will
transfer to the product. In terms of building brand equity, determining which associations to
link at any one level should be based on principles of relevance and differentiation:
Associations should be created that are relevant to as many brands nested at the level below
(e.g., Sony, 3M, and Microsoft with “innovation”) and any brands at the same level should be
clearly distinguished. Corporate or family brands can establish a number of valuable
associations that can help to differentiate the brand such as common product attributes,
benefits, or attitudes; people and relationships; programs and values; and corporate
credibility (i.e., perceived expertise, trustworthiness, and likability). A corporate image will
depend on a number of factors, such as: 1) the products a company makes, 2) the actions it
takes, and 3) the manner with which it communicates to consumers. Communications may
focus on the corporate brand in the abstract or on the different products making up the brand
line.

Reinforcing brands: Managing brand equity involves reinforcing brands or, if necessary,
revitalizing brands. Brand equity is reinforced by marketing actions that consistently convey
the meaning of the brand to consumers in terms of: 1) What products the brand represents;
what core benefits it supplies; and what needs it satisfies; and 2) How the brand makes those
products superior and which strong, favorable, and unique brand associations exist in the
minds of consumers. The most important consideration in reinforcing brands is the
consistency of the marketing support that the brand receives both in terms of the amount
and nature of that support. Consistency does not mean that marketers should avoid making
any changes in the marketing program -- many tactical changes may be necessary to
maintain the strategic thrust and direction of the brand. Unless there is some change in the
marketing environment, however, there is little need to deviate from a successful positioning.
In such cases, the critical brand associations that represent sources of brand equity should be
vigorously preserved and defended.

Reinforcing the brand meaning depends on the nature of the brand association involved. For
brands whose core associations are primarily product-related attributes and/or functional
benefits, innovation in product design, manufacturing, and merchandising is especially critical
to maintaining or enhancing brand equity. For brands whose core associations are primarily
non-product-related attributes and symbolic or experiential benefits, relevance in user and
usage imagery is especially critical to maintaining or enhancing brand equity. In managing
brand equity, it is important to recognize the trade-offs that exist between those marketing
activities that fortify the brand and reinforce its meaning and those that attempt to leverage
or borrow from its existing brand equity to reap some financial benefit. At some point, failure
to fortify the brand will diminish brand awareness and weaken brand image. Without these
sources of brand equity, the brand itself may not continue to yield as valuable benefits.
Revitalizing brands. Revitalizing a brand requires either that lost sources of brand equity are
recaptured or that new sources of brand equity are identified and established. According to
the customer-based brand equity framework, two general approaches are possible: 1)
Expand the depth and/or breadth of brand awareness by improving brand recall and
recognition of consumers during purchase or consumption settings; and 2) Improve the
strength, favorability and uniqueness of brand associations making up the brand image. This
latter approach may involve programs directed at existing or new brand associations.
With a fading brand, the depth of brand awareness is often not as much of a problem as the
breadth -- consumer tend to think of the brand in very narrow ways. Strategies to increase
usage of and find uses for the brand are necessary. Although changes in brand awareness are
probably the easiest means of creating new sources of brand equity, a new marketing
program often may have to be implemented to improve the strength, favorability, and
uniqueness of brand associations. As part of this re-positioning, new markets may have to be
tapped. The challenge in all of these efforts to modify the brand image is to not destroy the
equity that already exists.

A number of different possible strategies designed to both acquire new customers and retain
existing ones are possible. Different possible strategies are also available to retire those
brands whose sources of brand equity have essentially "dried up" or who had acquired
damaging and difficult-to-change also must be considered. Enhancing brand equity over time
also requires that the branding strategy itself may have to change somewhat. Adjustments in
the branding program may involve brand consolidations (where two brands are merged),
brand deletion (where brands are dropped), and brand name changes.