1
Brand Management Facilitation:
A Systems Dynamic Approach
For Decision Makers
A Conceptual Framework
MIT 20 April 2001
Peter A. Otto
J. Robert Bois
2
Why Do We Care About
Brand Management?
• Complex task, unstructured, involves a lot of
different variables
• Dynamic
• Outcome of decisions often unknown,
“Voodoo marketing”
• Financial implication of decision making
3
Definition of a Brand?
“A brand is a complex symbol. It is the
intangible sum of a product’s attributes,
its name, packaging, and price. Its
history, reputation, and the way it’s
advertised. A brand is also defined by
consumers’ impressions of the people
who use it, as well as their own
experience.”
David Ogilvy
4
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
5
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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The
Brand Management
Model
7
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
8
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>
9
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
10
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 Bottom Line: Brand Equity
<Brand Awareness>
<Perceived Quality>
Brand Equity
<Brand Loyalty>
12
Brand Management:
A Vensim® Demo
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Where To Next
• Simulation of Effectiveness with
real data:
• Above the Line
• Below the Line
• Price Promotion
• Public Relations
• Testing Brand Strategy
Implications against other
DSS tools
14
R
15
End of Slide Show
Press “Esc” to Exit
16
The Brand
Awareness/Effectiveness Sector
Effectiveness
+
B
Competition
Influences
B
Investment
Influences
Competitive
pressure
+
Investment
Knowledge
+
-
R
Knowlege
is good
+
+
Brand
Awareness
17
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
+
18
The Brand
Loyalty/Quality Sector
+
-
Brand
loyalty
+/Product
attractiveness
R
+
Perceived quality
+
-
Quality is
Job One
+
Satisfaction
Negative product
image
19