Managing the marketing mix 301
choice process by confirming the functional or
emotional associations of the brand. Increas-
ingly, it is the emotional or experience associa-
tions that a successful brand promises that
creates the consumer value.
The added value successful brands offer
usually fall into one of four headings:
Confirmation of attributes. Here the brand’s
image conveys confidence in its functional
claims. For example, Volvo’s added values were
a belief that it was a safe car to drive.
Wal-Mart focused on a brand image confirming
it offered the lowest prices. Persil focused on a
message that it ‘washes whiter’.
Satisfying aspirations. Some brands focus on
associations with the rich and famous. They
offer customers perceptions of status,
recognition and esteem. BMW offers ‘the
ultimate driving experience’; Rolex is ‘the
watch the professionals wear’.
Shared experiences. Some brands build added
values by offering a vision of shared
associations and experiences. Examples are
Nike with its ‘just do it’ attitude; Microsoft
suggests the sky’s the limit with its ‘where do
you want to go today?’ slogan; Coca-Cola’s
brand proposition is about sharing the
experiences and values of the young, hip
generation.
Joining causes. A new trend has been to
associate brands with noble social causes, such
as fighting Third World poverty, environmental
degradation and joining other charitable
concerns. In buying a brand, consumers
perceive themselves as making a social
contribution. Body Shop’s championing of
action against Third World poverty was a
pioneer of this cause-related marketing
phenomenon. Pizza Express championed
‘Venice in peril’, Tesco ‘computers for schools’,
etc.
The above discussion has focused on brands as
leveraging the customer relationship business
process. But there is much evidence that strong
brand names also facilitate the new product
development process. New products launched
under a strong brand name are more likely to
be trusted by consumers and to achieve faster
market penetration. Strong brands also contrib-
ute to more efficient supply chains. Suppliers
are more confident in forging partnerships with
established brand names and making the
investments to maintain these associations.Valuing brands
Brands require investment in communications
and other resources if they are to achieve
recognition and the added values that generate
customer preference. But creating customer
preference is not enough, brands also have to
create value for investors. Managers need to
assess whether the brand investment pays off.
As with any other asset, brands create
shareholder value if they positively affect the
four levers of value – increasing the level of
cash flow, accelerating cash flow, extending the
differential period, and reducing risk. There is
considerable research that brands do have these
positive effects (see Doyle, 2000, pp. 229–232).
In recent years, many companies have
sought to value their brands to assess their
strength and value to investors. The most
effective valuation method involves three steps.
First, cash flows have to be forecast, as in the
standard shareholder value analysis shown in
Table 11.1. Second, the fraction of additional
earnings due to the brand name has to be
calculated. This involves first deducting the
return due on tangible assets to arrive at
earnings due to intangible assets. Then the
percentage of these earnings on intangibles due
to the brand name has to be estimated. Finally,
a discount rate has to be chosen to discount
future cash flows to a present value (for a
detailed account, see Doyle, 2000, pp. 248–
254).
This approach is illustrated in Table 11.3.
The first two rows show the forecast of a
brand’s sales and its operating profit. Then
economic value added is calculated after
deducting a charge for the use of tangible