Power of brands comes from two perspectives

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This chapter focuses on a review of literature regarding brands, brand equity, branding and the process for building brand equity. It also discusses the motor cycle / two industry structure and dynamics, major market players and manufacturers. The source of all the discussion in this chapter is secondary data from research articles, books and web references.

What is Brand?

A brand is a name or symbol used to identify the source of the product/service. A brand name distinguishes a company's particular product or service from competing products/services in the marketplace. A brand could be a symbol, mark, sentence, name, color or a combination of all these things. (Michael J. Etzel, 2007)

If a brand name creates a positive connection, association or sentiment among its target customers then it is said that the corporation has a brand equity. Some examples of companies having a strong brand equity are Microsoft, Coca-cola, Pepsi and Nokia. What comes in our mind when we think of the above mentioned brand names? Every person has a perception that the above mentioned brands are symbols of quality and perfection. This is because these brands have created a positive association or image of brand in the mind of target customers and therefore these brands have a strong brand equity. (Michael J. Etzel, 2007)

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A brand can be considered as a promise of quality, performance, price and service by a company to its customers. It other words, brand is not just a name but it is broader than that. A brand is a commitment by an organization to deliver superior performance, quality and service to its customers relative to competitors. A brand is a promise to deliver value to target customers. To be a viable concern, coorporations have to develop strong brand names otherwise their self will be perished in the dynamic business environment. The creation of a strong brand is something the company is going to have to commit to, in order to make it work. (Michael J. Etzel, 2007; Best, 2008; James C. Anderson, 2003)

Power of Brands

Power of brands comes from two perspectives: Customer and Company. A brand has power if the customers perceive that the brand provides value and meaning. If a brand has power from customers' perspective, then it enjoys a large number of benefits in the form of intentional repeat purchase, customers' recommendations to others and low marketing channels costs. It is important to for brands to have power from customers' perspective because these days customers live a hectic and busy life and people have to make a lot of important choices in their daily life. A brand having a power from customers' perspective wins the battle of competition because it saves a lot of customers' time which is spent in search for products and also enjoys long-term financial and non-financial returns. A strong brand power enables a product to make brand extensions in the form of flanker brands which then serves the customers at an extended level and thus build more trust and positive associations with the target customers. (Barbara Loken, 2010)

The other perspective of brand power is company efforts. It is true that brand do have personalities. Brand is able to self-express itself. The main power of the brand depends on efficient product positioning strategy. Four elements of marketing mix product, price, place and promotion play a very important role to implement a product's positioning strategy. From company's perspective, if a brand is efficiently positioned in the minds of target customers it becomes a power of the brand and also a sustainable competitive advantage leading towards long-term financial and non-financial returns for the company. This power of brand can be easily translated into brand equity and enables an organization to charge price premiums on its products relative to competition. Also it builds more trust and positive associations with the target customers. (Best, 2008)

It is important to note that brands which are powerful from both perspectives build customer loyalty. It becomes easy for corporations to position its brand as superior relative to competition in the market and it also becomes easy for customers to purchase the product with a lot of time saving if a brand captures power from both perspectives. A powerful brand provide means for further product line extensions to serve more diversified needs of target customers. (Fan, 2006)

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Power of brands provides both long-term financial and non-financial returns. The above examples of product line extensions, loyalty, positive association, and trust are non-financial returns. These non-financial benefits are then further transferred to financial terms for example product line extensions enable the firms to target more customers and increases returns by expanding the customer base. A loyal customer recommends the product to others and also purchases the product repeatedly and intentionally which results in increased returns for the organizations. Costs associated with marketing communications and marketing channel management are low in for powerful brands because of customer loyalty and awareness. A strong brand is available to charge price premiums etc. (Michael J. Etzel, 2007)

Consumer Behavior

It is important to understand the concept of consumer behavior before discussing brand equity because consumer behavior and brand equity has a direct relationship. Belch (2004) described consumer behavior as a set of activities or a process in which people are engaged when searching, buying, using and disposing of product and services to satisfy their needs and wants.

Consumer behavior plays are very important role in the process of building brand equity. Today, the consumer behavior has dramatically changed because of the recent advancement in information technology and business dynamics. For example, consumers can now buy online instead of visiting a brick and mortar store. Organizations have discovered innovative ways to sell goods and services to consumers by analyzing the changes in consumer behavior and the recent advancement in technology and business dynamics. This innovative thinking of analyzing consumer behavior plays an important role in the process of building brand equity. Leon G. Schiffman (2006) described a simplified model for consumer decision making process which is as follows:

Input Stage. In this stage, the consumer's recognition of product needs and wants is influenced by two main sources of information which are: the company's marketing efforts (Product, price, place and promotion) and the external sociological influences on consumers such as family, friends, social class and opinion leadership etc. The above mentioned two sources of information play a key role in motivating a consumer to buy a particular product or service. (Leon G. Schiffman, 2006)

Process Stage. This stage focuses on the process of decision making of consumers. It is important to note that there are some psychological factors such as motivation, perception, attitude and personality etc inherent in all humans which affect how the consumer recognition of a need, pre-buying search for information and alternatives evaluations are influenced by the external inputs in the input stage. Customer experience plays a key role in this stage of decision making process. (Leon G. Schiffman, 2006)

Output Stage. The two closely related post decision activities are the main components of output stage of consumer decision making which are: purchase behavior and post purchase evaluation. For example, a consumer who is price-conscious can be influenced more with a coupon promotion to buy a low-involvement product like a shampoo. This price consciousness is the purchase behavior of that particular consumer. If the consumer feels satisfied by using the shampoo then he would intent to re-buy the product again and this process is known as post purchase evaluation. (Leon G. Schiffman, 2006)

Brand Equity

Strong brand equity of a product/service is always the result of an efficient marketing strategy of an organization. Some examples of efficient marketing strategies which built strong brands are: Coca-Cola and Nike and their brand names are recognized in every part of the world. (Michael J. Etzel, 2007)

The concept of brand equity has been described by different schools of thought in different ways. Feldwick (1996) described brand equity by harmonizing a variety of approaches to in a simple way as follows:

Total financial worth or value of the brand when it is sold or recorded in the balance sheet.

A measure of the strength of attachment of customers to a brand.

A description of customers' associations and perceptions about a brand.

The first point can be regarded as brand value and it is the concept held by accountants or financial analysts about brand equity. The second point can be stated as brand strength because it measures the strength of customer's attachment with a brand. The final point is often called brand image or brand distinction (as called by Feldwick, 1996) because it is an image of brand in the mind of customers in the form of perceptions and associations. Marketers normally mean brand strength and brand image when they discuss about brand equity. Brand strength and brand image are collectively referred as consumers' brand equity for distinguishing it from accountants or financial analysts' concept of brand value. Brand value and brand strength are normally in quantitative form while brand image is normally estimated qualitatively. The focus of brand value is on business transactions while the focus of brand image and strength is on consumers. (Wood, 2000)

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According to Feldwick (1996), Brand Equity equations can be stated as: Brand description

This equation explains that brand image is first tailored to match needs and wants of target market by adopting an efficient marketing mix strategy of product, price, place and promotion. In case of success, the brand description or brand image increases the brand strength in the marketplace because of increase in customer loyalty. Then this customer loyalty can be en-cashed in the form of brand value it ensures a long-term stream of cash flows for the company.

According to Davis (1995), a brand equity can be considered as a potential strategic contributions and benefits of a brand for its company. This decription focuses on strategic importance of brand equity rather relying solely on brand value. Davis (1995) also believes that brand value is resulted from consumers' brand equity as mentioned in Feldwick (1996) paper.

Keller (1993) also defined brand value as a resultant from brand distinction and brand strength. Moreover, a tailored brand distinction according to needs and wants of customers creates positive brand associations and increases customer loyalty. But Keller (1993), added that there was a differential impact of brand knowledge on consumer reaction to the marketing of a brand.

According to Winters (1991), brand equity relates to added value of the product. He suggests that value addition to a product or service, by consumer associations and perceptions about a brand name, is the brand equity. This description again supports the above diagram that brand value comes from brand strength and brand distinction.

Leuthesser (1988) described the concept of brand equity very broadly. He believes that a brand equity is the set of associations and behaviors on the part of customers, marketing channels, and the company itself which allows to earn great profit margins or larger sales volumes and these could not be earned in the absence of the brand name for the product.

It is important to note that a strong brand equity confirms long term financial and non-financial benefits and returns for the corporations. Pitta (1995) stated that a strong brand equity increased the chances for a brand for being selected by consumers relative to competiton. Brand equity also increases customer loyalty and saves a brand from competitive threats. Aaker (1991) argues that strong brands provide means for better profitability and distribution channels. Moreover, Strong brands act as a platform for new product line and brand extensions.

All the business experts like Dacin (1994), Aaker (1993), Loken (1993) and Keller (1993) agreed that strong brand equity provided means for brand and product line extensions. But poor brand extensions can destroy the equity of the brand as well.

How can we create and manage a strong brand?

There are two sources for building strong brand equity for a product or service: Brand Associations and Brand awareness. If customers are more aware about a brand and its specifications then definitely the consumers will prefer the brand on competitors' brand for saving their time and money in the quest for need satisfaction. Associations are links of customers with the brand. Some examples of brand associations are attributes of the product, usage situations, and brand personality. Therefore, strong brand equity can be created by capitalizing the marketing efforts on brand awareness and brand associations. (Keller K. L., 1998)

For managing the brand equity, one of the most influential association is the percieved quality of a brand by customers. Percieved quality of the brand is the most important driver of profitability and brand loyalty because it influences customers at a very deep level. For brand equity management, corporations have to shape the perceptions of consumers about the quality of the brand in the right direction. (Keller K. L., 1998)

Another important thing for managing brand equity is the brand loyalty. Brand loyalty consists of intentional repeat purchase by customers and their recommendations to others. The corporations have to develop a strong customer focus to meet the dynamic needs and wants of customers innovatively to for customer satisfaction. Customer satisfaction is the most significant source for brand loyalty. (Best, 2008)

Summarizing the above discussion, the process of building and managing brand equity involves:

Increasing awareness of the brand among the target customers

Creating positive associations of the brand with the customers

Having strong customer focus for brand loyalty

Shaping customer perceptions in the right directions.

Brand Awareness

To be a viable concern, a corporation has to create "top of mind awareness" about the brand among the target market and customers. It is important because customers want to be aware of the brand before buying it. Brand awareness plays a very crucial role in purchase decision making process of customers. Brand awareness is the most efficient tool for shaping customer perceptions in the right directions for building and managing brand equity. Brand equity depends on brand awareness which can be further re-divided into brand recalls and brand recognition by the customers. Recalls refer to remembrance of brand by customers. Recognition refers to the identification of brand among competing products by the customers in the marketplace. It is important to note here that brand awareness plays an important role for building brand equity because:

It places the brand in consumers' minds.

It serves as barrier for new entrants and brands in the market

It assures customers about the best quality and performance by the product or service.

It adds value for the marketing channels and enhances the supply chain management system for the product or service. (Emma Macdonald, 1996)

Brand Associations

For choosing efficient brand associations, there types of analysis are needed to get the true picture: Customer Analysis, Competitor Analysis and Company Analysis. Customer analysis covers all the aspects related to customers such as customer needs, wants, perceptions, values and philosophy. By analyzing the target customers, positive associations for a brand can be created to build and manage strong brand equity. (Nadim Jahangir, 2009; Campbell, 2002)

Competitor analysis is important because it provides a strategic view of market direction for creating brand associations. Competitor analysis can provide some useful insights about their competitive strategies, and strategic planning. (Campbell, 2002)

Finally the company analysis is important for building strong brand associations because it helps corporations to identify their core competencies and capabilities to develop a sustainable advantage in the marketplace. Moreover, industry analysis (Porter five forces) and Strengths, Weaknesses, opportunities and threats (SWOT) analysis can provide some useful insights for creating positive brands associations to build brand equity. (Campbell, 2002)

The above three processes are important because these analyses will determine which associations are positive and relevant to target customers and market. For example, Competitor analysis can provide means for differentiation advantage in which customers can be targeted by using unique set of product attributes different from competitors that are also relevant to customers too and obviously this kind of associations will have a positive effect on brand equity. (Campbell, 2002) A normal process for creating brand associations looks like the following diagram.

associations

Source: (Korchia, No Date)

Brand Loyalty

The Aaker (1991) stated brand loyalty as the attachment of customer with the brand. Yoo (2001) described brand equity as a tendency of being loyal to a brand by purchasing it repeatedly and intentionally. Oliver (1999) conceptualized brand equity as a firmly held belief or practice to re-purchase and recommend a product/service consistently in the future. Moreover, this brand loyalty adds significant value and repetition to brand in the marketplace and marketing efforts of an organization play a key role in evoking this practice of customers.

According to Odin (2001), there are two kinds of brand loyalty which are: behavoral or attitudinal. Behavoral brand loyalty is characterized by intential repeat purchase of the brand and it is easy to measure because it measures observable behaviors rather than self-assumed or reported intentions.

Chaudhuri A. (2001) stated the difference between behavoral or attitudinal brand loyalty. According to him, attitudinal brand loyalty could be referred as the extent of dispositional promises with respect to some particular advantages connected with the brand while behavioral loyalty had to do with the intention to repeat a purchase. It is imperative for corporations and organizations to focus their marketing efforts in building brand loyalty because the focus on brand loyalty will automatically play its part in building brand equity.

Aaker (1991) presents a classification of brand loyalty which contains: Non-customers, Price Switchers, Passive loyal and Fence Sitters, Committed. Non-customers are actually our competitors' customers. Price Switchers are usually brand switchers and price conscious customers. Passive loyal intentionally repeat purchase the product because they have a habit to use the product rather than a reason. Fence Sitters are indifferent between different brands. Committed customers are the honestly loyal customers of the brand.

Perceived Quality

According to Keller (1998), the core dimension for customer based brand equity is perceived quality because it is related of customers willingness to price premium, brand preference, and intentions to repurchase the brand. Low (2000) argued that the perceived quality of a brand was the perception of superiority to brand relative to competitors' brands. Zeithamal (2000) stated perceived quality as customers perception and judgement about the performance and superiority of the brand relative to competition. Positive marketing communications, customer satisfaction, past experiences with the brand and recommendations by peer groups play a vital in the perceived quality of a particular brand. Perceived quality has the most significant role in building brand equity. Perceived quality directly affects the customer decision making process as discussed in the consumer behavior section. (Seongdo Cho Seongmin Jeong, No Date)

Building brand equity: The process

The process of building brand consists of developing a favorable, consistent and memorable image for the brand which is a very difficult task. Efficient marketing mix (Product, Price, Place and Promotion) plays a very important role for building brand equity (Michael J. Etzel, 2007). Moreover, customer experience with the product or service is directly correlated with the process of building brand equity. Great customer experiences with the product add positive associations with the brand and ultimately build brand value and brand equity. (O'Toole, No Date)

Customer experiences like purchase, usage and replacement are very important for building brand loyalty and intentional repeat purchase which are the most significant indicators for strong brand equity. By adding value to customer experiences, an organization can increase the customer loyalty and recommendations to others. These three occasions of purchase, usage and replacement are collectively called customer's overall experience and provide chances for customer check points. These points can be capitalized to enhance customer experiences (Best, 2008). O'Toole (No Date) described different steps for building brand equity which are as follows:

Clarify and identify competitive position. Firstly, we have to understand our positioning which can be stated as "what customer perceives as advantages and disadvantages of our product or service relative to competition" (Minette E. Drumwright, 1992). The positioning is actually a unique place which a firm wants to acquire in the minds of target customers and it is normally based on one unique thing for example price, quality etc (Sarvary, 2006).

To understand our position, we need to identify our core competencies, capabilities and benefits which makes us different, better and unique relative to competition. Strategic positioning for sustainable competitive advantage is always based on performing different activities from rivals and performing similar activities in different ways (Porter, 1996). Therefore, a firm has to understand itself in terms of its uniqueness to competition and should capitalize on this uniqueness to establish a strong competitive position in the market for building a strong brand.

Match product with customer unique unmet needs. After identifying the positioning of the organization, the next step is to match product needs with customer needs by efficient marketing communications to achieve that competitive position. The value proposition for the product should be enriched with a long-term solution to customer unmet needs. This process will create brand awareness and brand associations with the target customers and will add value to brand equity in return. (O'Toole, No Date)

Enhance and shape customer experience to sustain position. The next step for a firm is to enhance and shape the customer experience by meeting customer expectations and providing value in the form of product life-time value and company/brand benefits translation into overall customer benefits (Best, 2008). Some other efforts like customer services, pricing strategies and channel management adds value to customer experience and in return to brand equity as well.

Evaluate the performance: The final step to evaluate the performance is important because it would not help the firm to identify successes or failure but also a roadmap for future. There are different ways through which an organization can evaluate its performance but the best way is to ask the customers. Customer surveys questionnaires, observations and feedbacks are the most efficient way to evaluate our performance. For example, Honda observed actual experience of customers to understand the difficulties they face in loading their car trunks. Honda assigned his crews to parking lots of shopping malls and observed the real-time customer experience by filming customer experience. After this analysis, Honda enhanced customer experience by providing a better car trunk shapes for Honda Cars. [1] (Best, 2008; O'Toole, No Date)

Benefits of building brand equity:

Different long-term financial and non-financial benefits are associated with the brand equity. Some of these benefits are:

Increased market share

Customer Loyalty

Price Premiums

Competitive edge (Increased Barriers to Entry, International Expansion and Differential advantage)

Product line extension

Change Management. (Michael J. Etzel, 2007)

Global Motorcycle Industry:

Global Motorcycle market can be divided into two large parts: Developed Countries and Developing Countries. Demand for motorcycles in both markets is dramatically different and is dependent on different factors and variables. (Nam, 2007)

Developed Countries. In developed countries, using motorbikes for transportation is a hobby while automobiles such as cars are used for transporation. The trend of motorcycles varies from country to country among developed nations. (Nam, 2007)

European motorcycle industry is facing the issue of recession and declined sales of motorcycles despite that fact that Eurpean motorcycle industry is very old and experienced. Some of the most famous european motorcycle manufacturers are BMW, Piaggo and Peugeot etc. Eurpean production for motorcycle was 1.4 million units of motorcycles in 2005 and it was accounted for 3.4 percent of the world volume. Europe itself consumed 4 percent of the world volume as of 2005 (Nam, 2007). According to the updated statistics 2008, 2009 and 2010, the European production of motorcycle declined to 1,730,821 units vs. 1,281,296 of previous year which is a 33 percent decrease. (Web Bike World, 2010)

Motorcycles have large sizes and capacities in North America and motorcycles are mostly used in highways. The prices for motorcycles in North America range from thousand to millions of dollars. The most famous US motorcycle brand is Harley-davidson. US production for motorcycle was 1.8 million units of motorcycles in 2005 and it was accounted for 4.2 percent of the world volume. US consumption for motorcycles is 5 percent of the world volume as of 2005 (Nam, 2007). Harley-Davidson stated that it shipped 112,720 units of motorcycles in 2010 (first six months), which is a 15.2 percent decrease in shipping relative to the last year's 132,849 units for the period. (Web Bike World, 2010)

It is important to note that motorcycles produced in US and Europe have specific features like Stylish look, high Engine Capacity, Premium Price with limited production. Also, motorcycles are produced mainly for local market and small part of production is exported to other countries. (Nam, 2007)

Motorcycles produced in Japan are low-priced and motorcycles are produced in different styles. In Japan, motorcycles are mostly produced for export purposes rather than to meet local market demand. The most famous manufacturers of motorcycles in Japan are Yamaha, Honda, Suzuki and Kawasaki etc which produce motorcycles mostly for meeting export demands of other Asian countries rather than local demands. Japanese corporations produced 10 million units of motorcycles in 2005. (Nam, 2007)

Japan, Motorcycle Production 2010

Honda (in Units)

Suzuki (in Units)

Yamaha (in Units)

Kawasaki (in Units)

Jan 2010-Mar 2010

48,904

35,259

53,357

26,447

Apr 2010-Jun 2010

35,694

32,105

41,286

22,722

Jul 2010-Sep 2010

32,239

28,072

42,265

28,136

(Source: Free Bike World, 2010)

Developing Countries. In developing countries, motorcycles are the most commonly used means of transportation in daily life. The market represents the low income and largest population countries of the world with weak infrastucture and under-development. (Nam, 2007)

This market consumes total 90 percent of the total world motorcycle production. Due to low incomes and less resources such as infrastructure, only small capacities (50-150cc) motorcycles are mainly consumed relative to high capacities. The prices of motorcycles range from several hunderd to several thousand dollars in this market. (Nam, 2007)

China is the largest producer for motorcycles for Asian consumption and it produces 17 million units of motorcycles per year which are accounted for 50 percent of the total Asian production. Some other countries which produce motorcycles are Indonesia and India (5 million per year). More importantly, Pakistan has started production of motorcycles as well. Motorcycle consumption in developing countries is expected to decline after 2010. (Nam, 2007)

The Structure of World Motorcycle Production - China being the largest manufacturer (2005)

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(Source: Nam, 2007)

The Structure of World Motorcycle Consumption - Asia being the largest consumer (2005)

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(Source: Nam, 2007)

Forecasted demand of Motorcycles in Pakistan after 2006:

Pakistan's economy was growing from 2001 to 2007 at a steady rate 14 percent annually approximately. As a result, the per capita income of Pakistan also increased from 2001 to 2007. This increase in per capita income dramatically increased the demand for motorcycles in Pakistan. In an annual report from Competitiveness Support Fund supported by USAID and Ministry of Finance Government of Pakistan (2006), demands for motorcycles were projected as follows:

Forecasted Demand of New motorcycles in Pakistan

Year

Per Capita Income in US dollars (Projected)

Population 000's (Projected)

Population Per New Motorcycle (Projected)

Forecasted Total Annual Demand

2006-07

966

159,573

179

890,000

2007-08

1,100

162,924

154

1,050,000

2008-09

1,255

166,345

132

1,250,000

2009-10

1,430

169,839

113

1,500,000

2010-11

1,645

173,405

97

1,780,000

(Source: Competitiveness Support Fund supported by USAID and Ministry of Finance Government of Pakistan, 2006)

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(Source: Competitiveness Support Fund supported by USAID and Ministry of Finance Government of Pakistan, 2006)

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(Source: Competitiveness Support Fund supported by USAID and Ministry of Finance Government of Pakistan, 2006)