Brand Management is also necessary for industrial goods. Thomas Dmoch describes several market Research techniques to grasp the brand Image of industrial goods
4. Dmoch/06/12/14/Page 4
Industrial Goods
Objects of branding
Industrial goods Consumer goods
Industrial durables Expandable goods
Component parts Not component
Raw
materials
Auxiliary
materials
Ingredient
parts
Destination
Consumption
Integration
Manufacturing level
5. Dmoch/06/12/14/Page 5
Industrial buying behaviour
Customers are organisations
– Formalised decision making
– Buying Centre
–Demand depends on
downstream markets
Specific solutions found in
interactive process
Market transparency
Long-time relationships
Misunderstandings
–Always highly involved
–Rational and calculative
–Not susceptible to emotions
–Don’t care about brand names
6. Dmoch/06/12/14/Page 6
Subjectivity in industrial buying behaviour
Test with industrial buyers
Select the best industrial product
Different products, thereof 2 with
– Equivalent functionality
– Equivalent quality
– Equivalent price
– But: one with standard design, one with
appealing design
Result:
First choice for 61,6%
Source: Yamamoto/Lambert 1994.
7. Dmoch/06/12/14/Page 7
Relevance of industrial Brands
59%
54%
57%
76%
47%
37%
44%
50%
Relevance today Relevance in 5 years
Mechanical
Engineering
Electrical
Engineering
Chemicals
Industry
Automotive
Supplier
Source: Baumgarth, 2010
8. Dmoch/06/12/14/Page 8
Brand Strength
Brand controlling
Diagnosis and therapy
Brand strength
Brand equity
Evaluation
Why is the brand strong or weak?
Which measures are useful to
raise brand value?
How much a brand is worth?
9. Dmoch/06/12/14/Page 9
Rose tattoo Candle-light dinner
Freixenet
erotic advertising
beautiful woman
erotic
seductive
fiery
full of spirits
Spanish
passionate
exclusive
precious
golden letters
fashionable
frosted bottle
golden label
Rüttgers
cheap
typical bottle
red label
German origin
Brand Strength
sparkling
wine
Prosecco
Champagne
exclusive
tangy
sparkling
good taste tingly
stimulatory inspiring
Champagne
glass
romantic
festive occasion
joy
Festivity
Party
celebrate
10. Dmoch/06/12/14/Page 10
Imagery Measurement
The picture I imagine is
as clear and vivid as in reality
clear and quite vivid
moderately clear and vivid
vague and hazy
I don‘t have any mental image.
Please
tick
13. Dmoch/06/12/14/Page 13
Specific Requirements in B-to-B sector
No expensive market research
Benchmarking with industrial goods
Brand image is primarily people
driven, not by mass communication
Popularity of the model
– to overcome scepticism of sales
people
– to convince brand unaware top
management
14. Dmoch/06/12/14/Page 14
GfK Brand Simulator
Period t-1 Period t
Marketing Mix
Product
Price
Promotion
Place
Only for FMCG
Panel data are hardly available in B-to-B context.
No explanation why brand strength is high or low
No suggestion which measures are useful to raise brand strength
No assessment of visual part of brand knowledge
Competitors
Brand strength
Market
share
Marketing Mix
Product
Price
Promotion
Place
Competitors
Brand strength
Market
share
15. Dmoch/06/12/14/Page 15
Y&R Brand Asset Valuator
Brand Asset
Valuator
Brand strength
Clear and simple
Only a rough estimate
Variables not sufficiently operationalised
No assessment of visual part of brand knowledge
Differentiation Relevance
Brand’s growth potential
Brand stature
Esteem Knowledge
Brand’s current power
16. Dmoch/06/12/14/Page 16
GfK Brand Potential Index
Brand
Awareness
Perceived quality
Price
premium
Brand Uniqueness
sympathy
Brand
recommendation
Identification
with the brand
Brand
Confidence
Brand
loyalty
Purchase
intention
Brand
Potential
Index
17. Dmoch/06/12/14/Page 17
GfK Brand Potential Index
Brand
awareness
Simple and pragmatic
Applicable in B2B
Benchmarking possible
BPI and FCB not independent
BPI items are interdependent
No assessment of visual part of brand knowledge
Perceived quality
Price
premium
Uniqueness
Brand
recommendation
Identification
with the brand
Brand
loyalty
Purchase
intention
Brand
sympathy
Brand
confidence
Brand
Potential
Index
22. Dmoch/06/12/14/Page 22
Icon Iceberg Model
Norm
87
27
65
37
38
53
38
31
12
Brand Credit Brand Imagery
Aided brand Awareness
Perceived advertising
pressure
Memorability of advertising
Brand uniqueness
Vividness of brand imagery
Appeal
Brand likeability
Brand Confidence
Brand loyalty
Product range Logo
Branding Sales
Corporate Design Price
Internet Product design
Advertisement Public relations
User Customer service
22
21
8
2
-9
-5
16
20
12
23. Dmoch/06/12/14/Page 23
Icon Iceberg Model
Norm
87
27
65
37
38
53
38
31
12
Brand credit Brand imagery
Aided brand Awareness
Perceived advertising
pressure
Memorability of advertising
Brand uniqueness
Vividness of brand imagery
Appeal
Brand likeability
Brand Confidence
Brand loyalty
Product range
Logo
Branding Sales
Corporate Design
Internet Product design
Advertisement Public relations
Customer service
User
Price
22
21
8
2
-9
-5
16
20
12
24. Dmoch/06/12/14/Page 24
Icon Iceberg Model
Norm
87
37
38
53
38
31
12
Brand Credit Brand Imagery
Aided brand Awareness
Brand uniqueness
Vividness of brand imagery
Appeal
Brand likeability
Brand Confidence
Brand loyalty
Product range
Logo
Branding Sales
Corporate Design
Internet Product design
Advertisement Public relations
Customer service
User
Price
22
8
2
-5
16
20
12
25. Dmoch/06/12/14/Page 25
Icon Iceberg Model
Norm
Brand Credit Brand Imagery
Aided brand Awareness
Contact frequency
Brand uniqueness
Vividness of brand imagery
Appeal
Brand likeability
Brand Confidence
Brand loyalty
10
87
66
37
38
53
38
31
12
22
8
2
-5
16
20
12
Product range
Logo
Branding Sales
Corporate Design
Internet Product design
Advertisement Public relations
Customer service
User
Price
26. Dmoch/06/12/14/Page 26
Icon Iceberg Model
Norm
Brand Credit Brand Imagery
Contact frequency
Supplier uniqueness
Vividness of Supplier imagery
Appeal
Supplier likeability
Confidence to supplier
Loyalty to supplier
10
8
2
-5
16
20
12
66
37
38
53
38
31
12
Product range
Logo
Branding Sales
Corporate Design
Internet Product design
Advertisement Public relations
Customer service
User
Price
Theory based concept
Repeatedly validated model
Adapted and validated for B2B
Imagery taken into account
Simple operationalisation
Widely known and acepted in practice
Brand imagery and brand credit are not independant
27. Dmoch/06/12/14/Page 27
Icon Iceberg Model
Norm
87
27
65
37
38
53
38
31
12
Brand credit Brand imagery
Aided brand Awareness
Perceived advertising
pressure
Memorability of advertising
Brand uniqueness
Vividness of brand imagery
Appeal
Brand likeability
Brand Confidence
Brand loyalty
Product range
Logo
Branding Sales
Corporate Design
Internet Product design
Advertisement Public relations
Customer service
User
Price
22
21
8
2
-9
-5
16
20
12
32. Dmoch/06/12/14/Page 32
Heidelberg Brand Strength Development
HD-Customers
HD-Customers
Reference value of technical durables B2B
Brand imagery
Reference value
of technical
durables B2B
Brand credit
1999
2006
Market leader
Customers Willingness to pay Premium Prices
Better financial Rating for Customers ready to buy HEIDELBERG
Superior Resale Value
High Demand for used HEIDELBERG Printing Machines
33. Dmoch/06/12/14/Page 33
Industrial buying behaviour is more formalised
as in B-to-C
Industrial buyers are however susceptible to
strong brands
Brand strength = psychological value
–Diagnosis: Why is the brand strong or weak
–Therapy: Which measures can raise brand
value?
Iceberg model is the most suited
measurement tool
– Adapted and validated
–Taking imagery effects into account
Editor's Notes
Good afternoon, ladies and gentlemen,
I am pleased to talk about the measurement of brand strength of industrial goods.
May I give you an overview which topics I am going to address today.
First, I will define what one understands by industrial goods. I will explain why branding for industrial goods becomes more and more important.
Then, I will define the term brand strength.
After that it comes to four market research tools for measuring brand strength. I will describe these methods in the B-2-B-context which is quite different from consumer marketing. Above all, it makes the adaptation of these methods necessary.
I will finish my lecture with an example which shows how research results entered in building a strong B-to-B-brand.
If there are any questions please interrupt me.
We will start with defining industrial goods and brand strength.
A capital good, also called industrial good, is a means of production. Capital goods are used in the production of other goods or services.
According to the criterion “destination”, capital goods differ from consumer goods in the fact that the latter are directly purchased by consumers for personal or household use.
Furthermore, depending on the consumption or non-consumption of the good one can distinguish industrial durables from expandable goods. An industrial durable is f.ex. an assembly line. An example for an expandable good is a pencil used in the office.
In the next step, integration in other products makes the differences. Expandable goods can be distinguished in component parts and Non-component parts. A component f.ex. is the powertrain. A non component part is a f.ex. a tool which helps to fix the power train.
Finally, depending on the manufacturing level, we have within the class of component parts raw materials like oil, auxiliary parts like screws and bolts, and ingredient parts, f.ex. an electronic engine control unit.
As you can see, in the B-to-B context, we have very heterogeneous products.
Industrial buying behaviour differs from final customers buying behaviour. The customers of industrial products are in most cases organisations. Differences exist in terms of the process leading to buying decisions. In companies decision making is formalised.
Many people are involved, e.g. form the purchasing department and operating department. They act in a buying centre.
Demand often depends on downstream markets, e.g. if an engineering company constructs a solar power plant in the desert specific parts and services are required.
Because of these specific requirements, there are often only few suppliers and market transparency is high. Industrial buyers know the usual suppliers and have sometimes long-time relationships.
Actually, industrial buying is people business. However, there are some misunderstandings concerning industrial buyers.
The traditional wisdom says that industrial buyers are more rationally concerned with determinants like product performance, quality, delivery, service and price than end consumers. The are not susceptible to emotions and don’t care about brands.
But: industrial workplaces comprise ordinary people who are no different from anyone else in how they make judgments, suffer from work load, have arguments, try to simplify their life, fall in love or dislike people and things.
Subjectivity is as much a factor in business-to-business decisions as it is in the consumer-facing world.
Actually, there is a lot of subjectivity in industrial buying behaviour as an simple test realized by Yamamoto and Lambert in 1994 shows.
They tested the decision making of purchasers for dispense pumps, multimeters, gear motors, valves, DC motors, oscilloscopes and a stepper motor controller.
The task was to select the best product in terms of price, technical performance and appearance. In this context, the industrial buyers received written descriptions of products. Most of them were absolutely equivalent in terms of price and performance, but differed in their design.
Results are that the attractive products in most cases outperformed the less attractive. For 61,6% of the decisions to make the more attractive product was the first choice.
This research provides evidence that pleasing product design has an impact on product evaluation.
We have to accept that business decision makers are also humans with human emotions. The emotional character of a product plays some role.
Branding can no longer be considered the exclusive domain of consumer marketing. For example Doka, who is a manufacturer of formworks for construction sites. They changed their very rational advertising approach to a emotional one. They dropped rational arguments and emphasised the brand as you can see in the advertisement on the left.
One of the reasons for the important role of industrial branding is the commoditization of many industrial products. Offes become exchangeable. The brand makes the difference.
Therefore, in many other industrial branches managers focus on the brand. According, to a recent inquiry of Baumgarth, the brand will even be more relevant within the next 5 years.
Of course, the brand is far away to become a decisive factor in industrial buying. However, conditions are said to exist under which industrial buyers appear to make a purchase decision on the basis of the brand instead of price or other factors. This may occur when
When product failure would have negative consequences for the buyer’s company
or for the buyer personally
- when the product requires substantial service or support;
- when the product is complex; or
- when the buyer is under time constraints.
The brand is an specific image of a product, a supplier or a service which is anchored in the mind of the consumer and which is a result of perceived performance.
Brand controlling examines the brand’s contribution to the company’s success. According to a study of Richter in 2007, brand controlling has a significant influence on the company’s success in terms of brand loyalty.
There are many methods to measure the success of a brand. Unfortunately, there is a mess with regard to the definition of brand success in literature. There are notions like brand power, brand strength, brand value and brand equity. They have sometimes similar, sometimes different meaning.
However, one can summarize two basic approaches: the assessment of brand strength and of brand equity.
The focus of Brand equity is on evaluating the monetary value, so from a financial and economic perspective. By brand equity, one understands the monetary quantification of the brand’s use for the brand owner. It answers the question: How much a brand is worth? This is important for purchasing of brand rights, the financial assessment of the company, for calculating licensing fees or the franchise value.
The term brand strength concerns the psychological value of the brand. The measurement of the brand strength has two functions:
Diagnosis: Why is the brand strong or weak?
Therapy: Which measures are to be taken to raise the brand value?
I said before that a brand is anchored in the mind of the consumer and is the result of perceived performance.
One way to illustrate the image of brand consumers have in mind is the display of the mental associations. This can be done by drawing associative networks. These networks the properties of a brand and the relations between these properties. It is said that those properties close to each other are also near in mind.
The starting point of such a network is a very general and basis representation of a product category. It reflects the general and unchanging properties of a product which are valid for all brands of the category. For example, the product category “sparkling wine” is generally represented in mind by properties like “sparkling”, “typical bottle”, “festive occasion”.
A specific brand bears all these properties, but adds some specific items. For example, Rüttgers Club is a sparkling wine which bears all the properties of the product category like sparkling, typical bottle, festive occasions and so on. However, the brand Rüttgers club is also represented by additional properties like “German origin”, “red label” and – unfortunately “cheap”.
The more additional properties a brand evokes in the mind of the consumer the stronger is the brand. If these mental brand associations are unique compared to others the brand has a strong positioning. This is the case for Freixenet.
In this context, visual associations are of particular importance. This is one finding of Imagery Research. Imagery Research deals with the origin, the storage and behavioural effect of mental images in the human mind. By mental images, one understands those images which are visible in absence of the real object. According to Imagery Research the left hemisphere of the human brain is steering the logical and analytic thinking. The right hemisphere is the picture brain. It works rather comprehensively and follows a visual grammar. The visual brain is more powerful than the abstract brain. Therefore, it makes sense to distinguish between abstract information and visual information. An important finding of Imagery Research is that mental images strongly influence buying behaviour.
According to the dual coding theory, if information addressing both hemispheres are better memorized. Therefore, it make sense to communicate the brand's use, values and advantages not only in words but also in concrete, visual or other sensory information. This leads to clear and vivid mental images. The clearer a mental image of the brand is, the more it influences buying behaviour.
According to imagery research, the vividness of the mental image is a key factor of brand image. It has a strong impact on buying behaviour.
May I show you how one can measure the vividness of a mental image. This is the Marks-scale which is verbal instrument. After the instruction to think of the mental image of an object, f.ex. a brand, people are asked to describe the quality of this image by these items.
Given that mental images are processes in the “picture” brain it seems more suitable to access them directly in the same modality and not via the left hemisphere. Verbalisation is not necessary and transfer losses from language to image are avoided. Therefore, picture scales are more adapted to the assessment of mental images.
This is the picture scale for the assessment of mental images validated by Ruge (1988).
How can we assess brand strength? Let’s talk about market research methods for brand strength measurement.
First of all, there are no B-2-B specific models for the measurement. So one has to adapt the existing consumer driven models taking into account the specific requirements of the B-to-B area.
These requirements are:
Traditionally marketing budgets are smaller in B-2-B that in consumer markets. So expensive primary research is to avoid. Standard tools are welcome.
Second, a benchmarking with industrial goods should be possible.
Third, as I said B-2-B is people business, not mass communication as in consumer business. In B-2-B, Customer and supplier often interact directly and frequently. So brand image is more driven by people than by exhaustive advertising campaigns. Brand strength assessment has to take into account this brand driver.
Last not least, the popularity of the model helps to establish brand measurement in the company. By tradition, B-to-B-Managers are not familiar with brand management. B-to-B is often driven by salesmen and engineers. A commonly agreed method helps to overcome scepticism.
The brand simulator is a model developed by the market research company GfK. It‘s focus is on the economic assessment of the brand. So it’s more a brand equity model.
According to this model, the brand value can be determined by comparing costs and revenues. It is based on a consumer panel.
The model assumes that market share depends on short notice on the companies marketing mix in the context of competitors’ activities. The effect which cannot be explained by the marketing mix is supposed to be caused by brand strength. Brand strength is a residual value.
By comparing several periods, one can recognise how brand value is changing which delivers an evaluation of relative brand value.
The brand value results from the difference between yield (share of the market) and costs for the marketing mix.
Critiques are:
It’s a tool for FMCG
In B-to-B context, Panel data are rarely available.
No explanation why brand strength is high or low
No suggestion which measures are useful to raise brand strength
No assessment of visual part of brand knowledge
The BrandAsset Valuator is a database created by the advertising agency Young & Rubicam. This data base consists in consumer perceptions of brands.
The Brand asset Valuator measures the value of a brand along four dimensions: "Differentiation," "Relevance,“ "Esteem” and "Knowledge." Differentiation and Relevance build up to "Brand Strength. "Esteem” and “Knowledge” are used to calculate "Brand Stature." The Brand asset Valuator defines these terms as follows.
"Differentiation" quantifies the brand's point of difference.
"Relevance" how appropriate the brand is to you.
"Esteem" how well regarded the brand is.
"Knowledge" an intimate understanding of the brand.
"Brand Strength" describes the brand's growth potential.
"Brand Stature" describes the brand's current power.
BAV's database is based on data on 30,000 brands across 400,000 consumers in 48 countries through 240 studies.
Critiques are:
Clear and simple
Only a rough estimate
Variables not sufficiently operationalised
No assessment of visual part of brand knowledge
The next tool is the Brand Potential Index. Brand strength is operationalised by 9 variables: Brand loyalty, purchase intention, brand awareness, premium price acceptance, uniqueness, brand sympathy, brand trust, brand identification, Brand recommendation.
These variables are theoretically founded on consumer research an validated for many branches and product. Reliability is high. There is also evidence that BPI can forecast market share and the proportion of first choice buyers. First-Choice-Buyer = a customers who ranks a brand top on his shopping list and buys the product.
On the basis of this model, a brand strength can be condensed into one single value.
But this compilation to one single value is a problem because BPI-variables are not independent: Brand awareness and brand confidence influence brand sympathy. Brand sympathy influences brand loyalty. Brand loyalty has influence on readiness to pay a price premium and on brand recommendation. Therefore, Pros and cons are:
BPI variables are interdependent.
BPI and FCB not independent. They partially have the same variables: brand loyalty and purchase intention
No assessment of visual part of brand knowledge
Simple and pragmatic
Applicable in B2B
Benchmarking possible
The iceberg model has been developed by the market research institute ICON Added Value. It’s a behavioral-science model to measure brand strength.
The model is based on an analogy from psychological personality research. According to Sigmund FREUD one can describe human personality by analogy with an iceberg by a visible part and an invisible part. The latter is bigger than the first. The invisible part lies under the surface and is marked by the past experiences.
As in personality research one can describe brands by a visible part and an invisible part, the variable image and the substance: We distinguish between:
Brand image: How does the customer currently perceive the brand?
Brand credit: This shows rather long-term changes of customer settings
Both factors form the brand strength. The brand picture consists of the following variables:
Aided brand Awareness, perceived advertising pressure, memorability of advertising, uniqueness of the brand, vividness of the brand, brand appeal.
brand credit is measured by brand sympathy, brand trust and brand loyalty.
In the iceberg model imagery effects of marketing are taken into account by “brand vividness”.
In a short term perspective, the brand image is marked by marketing activities. In contrast, brand credit can only be changed on the long run and in an indirect way. It is by an unique, clear and attractive brand image. Both factors have a proven effect on sales.
Brand image and brand credit are measured via the variables on the right..
Brand Image and brand credit can be compared to branch or product specific benchmarks.
Mental images are the result of the whole range of marketing activities. That means product, packaging, Corporate design, Product design, and not only by the advertisement as in B-to-C-markets.
The Iceberg model is suited the B-to-B context, where advertising doesn’t plays an important role.
Empirical evidence shows that in B-to-B-context brand strength is mostly determined by physical product attributes, employees and by customer service attributes.
Because mass communication is less important as in B-to-C markets the advertising related items are eliminated in a B-to-B adapted version of the Iceberg Model.
A favourable impression of the sales man will much more than advertising help the company to create a strong brand. Apparently industrial buyers associate the service they receive with the company. Therefore in this especially for small B-to-B markets adapted version of the Iceberg Model the item “perceived advertising pressure” is replaced by contact frequency of the sales staff.
If the research is realized among a sample of existing industrial clients, one can even remove the item “aided brand awareness”.
Moreover, the notion “brand” is replaced by “supplier” because in B-to-B area it might be irritating for managers not familiar with brand management.
Reliability of this adapted model has been confirmed by Benckebanck in 2006.
Pros and Cons are:
Theory based concept
Repeatedly validated model
Adapted and validated for B2B
Imagery taken into account
Simple operationalisation
Widely known and acepted in practice
Brand imagery and brand credit are not independant
How can we apply the findings from the Iceberg Model into practice?
Let me give you an example of Heidelberger printing machines. The figures of this iceberg display the status of the Heidelberg brand in the early nineties.
As you can see Brand credit is good but brand imagery is low due to bad figures in vividness and uniqueness. Let me explain you why and what Heidelberg successfully has done to improve this figures.
In the late 80ies, the situation of Heidelberger Printing machines was characterises by very heterogeneous communication. There was a clutter of different advertising campaigns by the different business units of Heidelberg.
Here we have some advertisement which appeared in the same time and even in the same magazine.
In order to solve this problem, marketing people at Heidelberger Printing machines first structured the different products and services and created a strong corporate design.
Thus, they focussed on the corporate brand which serves as umbrella for all products and services.
Because of the importance of personal communication in the B-to-B sector Heidelberg focussed on those situations were the brand became visible to the customer: The product itself, the employee and the direct communication by events and trainings in the headquarters.
They focussed on behavioural branding. Therefore, for some months they realized brand workshops and made employees even visit and work at Ritz Carlton in order to adopt a stronger service orientation. These activities were made to make sure that all employees understand the brands character, are involved in the brand and transmit this image in their communication with the customers consistently.
Today the result is that Heidelberg significantly raised their brand strength in terms of brand image and brand credit.
They are still market leader instead of heavy competition
Customers are ready to pay Premium prices
Customers receive a better financial rating by banker when buying Heidelberger products
The reason is the superior resale Value
There is a high demand for used HEIDELBERG printing Machines
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Industrial buying behaviour is more formalised as in B-to-C
Industrial buyers are however susceptible to strong brands
Brand strength = psychological value, mental image
Helps for Diagnosis: Why is the brand strong or weak
Helps for Therapy: Which measures can raise brand value?
Iceberg model is the most suited measurement tool:
Adapted and validated
Considering imagery effects and personal communication