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Brand Management Facilitation:
A Systems Dynamic Approach
For Decision Makers
A Conceptual Framework
Peter Otto / PAD 824, Fall 2001
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Today‘s Presentation
• Definition
• Key terms in brand management
• The brand management model
• Sector overview
• Behavior of the model
• The dissertation model
• Q&A
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A Brand Marks what People
Think and Feel
•
It is a rational and emotional formula
based on the sum of trust, relevance, and
significance that relates people to a firm, a
product, or a service throughout their life.
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Market Dynamics
Businesses and markets in which brands play
an important role are both highly complex:
• They are tightly coupled: there are lots of
complex interactions, interventions based on
a single action are unlikely to prove
successful in the long term
• They behave counter-intuitively – they can
behave in the opposite manner to which one
intends
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Market Dynamics cont.
• They exhibit trade-offs
• They are policy resistant – attempting to
influence the system in one direction will
often cause some reaction which minimizes
the impact of the original action
• And they are dynamic – changes occur on
many different timescales
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Brand Management
Some Key Terms
• Brand Awareness
• Brand Loyalty
• Motivation
• Desire to Buy Brand
• Perceived Quality
• Satisfaction
• Negative Product Image
• Positive Product Quality
• Brand Equity
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The Dimensions in Brand
Building
•
•
•
•
Brand identity
Brand awareness
Familiarity and knowledge of the brand
Consideration to evaluate the brand
• Purchase
• Brand loyalty (or brand equity)
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A Manager‘s Goal must be to
Build Brand Equity
• A brand can only be strong if it has a strong
supply of loyal customers
• Brand equity therefore can be defined as a
measure of strength of consumers‘
attachment to a brand.
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Brand Equity
Brand Name
Industry
Coca-Cola
Microsoft
IBM
General Electric
Ford
Disney
Intel
McDonald's
AT&T
Marlboro
Beverages
Software
Computers
Diversified
Autos
Entertainment
Chips
Fast Food
Telecom
Tobacco
Brand Value
($US m)
83,845
56,654
43,781
33,502
33,197
32,275
30,021
26,231
24,181
21,048
Brand Value as
a % of Market
Capitalisation
59%
21%
28%
10%
58%
61%
21%
64%
24%
19%
Source: Interbrand 1999, The World Biggest Brands
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Purpose and Goal of the Model
• Brand equity is a complex system and difficult
to manage and understand.
• A simulation model will be used, to identify
key leverage points to understand the
behavior of the system, thus reduce
uncertainty in decision making.
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The
Brand Management
Model
12
Effectiveness
+
B
The Brand
Awareness/Effectiveness
Sector
Competition
Influences
Investment
Influences
Competitive
pressure
+
Investment
Knowledge
+
-
R
Knowlege
is good
Brand
Management
B
+
+
Brand
Awareness
+
The Brand
Awareness/Loyalty
Sector
Attractiveness of
other brands
+
Motivation
R
It's What the
Customer Wants
Desire to
choose brand
A Conceptualized
Sector Overview
+
-
Brand
loyalty
Snowball
R
+
+/-
The Brand
Loyalty/Quality
Sector
Product
attractiveness
R
+
Perceived quality
+
-
Negative product
image
Quality is
Job One
+
Satisfaction
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The Brand
Awareness/Effectiveness Sector
Effectiveness
+
B
Competition
Influences
B
Investment
Influences
Competitive
pressure
+
Investment
Knowledge
+
-
R
Knowlege
is good
+
+
Brand
Awareness
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Vensim® Brand
Awareness/Effectiveness Sector
Above-the-line
investment
Loyalty factor
Weight on
above-the-line
investment
Net effect of BA
Fraction of potential
BA reached
Awareness
multiplier
Competitive
pressure
Below-the-line
investment
Weight on
below-the-line
investment
Brand
Awareness
Decrease in
awareness
Increase in brand
awareness
Awareness
investment
Initial
Investment
Weight on price
promotion investment
Effect from investment
in Price Promotion
Price promotion
investment
Forget impact
on awareness
Forgetting rate
Consumer
knowledge
about brand
Weight on public
relations investment
Knowledge gain
Public relations
investment
Effect on gaining
knowledge
<Brand
Awareness>
<Brand
Loyalty>
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The Brand
Awareness/Loyalty Sector
Brand
Awareness
+
+
Motivation
R
Attractiveness of
other brands
It's What the
Customer Wants
Desire to
choose brand
+
-
Brand
loyalty
Snowball
R
+
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Vensim® Brand
Awareness/Loyalty Sector
Motivation
<Brand
Awareness>
Effect on brand
choice
<Competitive
pressure>
<Perceived
Product Quality>
Brand
Loyalty
Increase in brand
loyalty
Pressure on
loyalty
<Desire to buy
brand>
<Brand
Awareness>
Investment effects on
brand loyalty
<Below-the-line
investment>
<Public relations
investment>
Attractiveness to
choose other brands
Factors to
increase desire
<Price promotion
investment>
<Perceived
Product Quality>
Desire to buy
brand
Increase in desire
Loosing interest
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Vensim® Brand
Loyalty/Quality Sector
<Brand
Loyalty>
Actual product
quality
Effect of quality on
attractiveness
Satisfaction
Price
PQ multipliers
Pressure on
PQ
Negative product
image
Perceived
Product
Quality
Effect of price on
attractiveness
Relative
Price
Acceptable price
PQ net
increase
Product
Attractiveness
<Effect from
investment in Price
Promotion>
Delivery delay
Effect of delivery delay
on attractiveness
Relative delivery
delay
Acceptable
delivery delay
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The Brand
Loyalty/Quality Sector
+
-
Brand
loyalty
+/Product
attractiveness
R
+
Perceived quality
+
-
Quality is
Job One
+
Satisfaction
Negative product
image
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The Bottom Line: Brand Equity
<Brand Awareness>
<Perceived Quality>
Brand Equity
<Brand Loyalty>
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Model Behavior
Base Run
100
100
100
1
Awareness
Loyalty
desire
Quality
0
0
0
0.4
Awareness
Loyalty
desire
Quality
Investment: 70
ATL: 0.7
BTL: 0.1
PP: 0.1
PR: 0.1
0
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Brand Awareness : base
Brand Loyalty : base
Desire to buy brand : base
Perceived Product Quality : base
12
18
24
30
Time (Month)
36
42
48
Awareness
Loyalty
desire
Quality
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Model Behavior
100
100
100
0.8
Awareness
Loyalty
desire
Quality
0
0
0
0.4
Awareness
Loyalty
desire
Quality
Investment: 35
ATL: 0.7
BTL: 0.15
PP: 0.05
PR: 0.1
0
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Brand Awareness : base2
Brand Loyalty : base2
Desire to buy brand : base2
Perceived Product Quality : base2
12
18
24
30
Time (Month)
36
42
48
Awareness
Loyalty
desire
Quality
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Weakness of the Model
• Does not consider „people“ in the system
• Missing link to capture growth and decline of
market share
• Key leverage point: „investment“ rather than
„consumers“
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The new Approach: Brand
Equity as Resource System
Inflow
Loyal Customers
0
3
6
9
12
Outflow
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Objectives
• To gain insides in how to control a desired
level of loyal customers, thus support
resource allocation decisions of a firm
• To test and compare alternative strategies to
improve the management of brand equity
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What is the contribution to the
body of knowledge?
Theory:
• By creating a generic model to investigate the
effect of resource allocation which influences
the brand equity of a firm
Praxis:
• Providing recommendations for improving
brand strategies
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Causal Loop Diagram
Investment
+
Familiarity &
knowledge
of the
+
brand
R1
Effect from invstment
+
Brand awareness
Competitive +
pressure
R2
Awareness from
Investment
+
B1
+ Evaluation ofalternatives
Investment control
Word of mouth
R3
Competitor
determins choice
+
Consideration to
- +evaluate brand
+
Brand loyals
+
Quality
R4
Word of mouth effect
Price
Attractiveness of
products
+
Desire to buy +
brand
+
R5
Purchase +
Effect from price
value relation
+
Perceived quality
of brand
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Stock and Flow Structure
Investment
Potential
customers
Unaware
Potentials
Relevance (advantage
Loosing awareness over competitor)
Aware
Becoming aware
Gaining knowledge
Familiarity &
Knowledge
Population
Word of mouth
Attractiveness
Satisfaction rate in
category
Ownership
experience
Loyalty
Attractiveness of
product
Consideration
Desire to buy
Purchase
Price sensitivity
Evaluation of
alternatives
Evaluation
Loosing interest
Preceived quality
Attractiveness of
other brands
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R
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End of Slide Show
Press “Esc” to Exit
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