Brand Management in the Hotel Industry and its Potential for Achieving Customer Loyalty

Diplomarbeit , 2005 , 119 Seiten , Note: 1,0

Tourismus - Hotelmanagement

Brands are a phenomenon that has been in existence already for centuries. From its original purpose of marking livestock, the concept was later adopted by manufacturers for their products and further developed and adapted to changes in business environments. The original idea of using marks to indicate ownership and origin, however, can be traced back even for millennia to ancient Greek and Rome and early Chinese dynasties.

These days, the number of brands is greater than ever. More and more businesses have come to realize the power of brands, and the concept of brand management has consequently gained considerable interest in recent years. Every year the number of new brands registered increases. Fortune magazine suggests that "In the 21st century, branding ultimately will be the only unique differentiator between companies."

Initially, the use of brands, or marks respectively, was limited to physical products only. Service brands are comparatively new in the long history of branding. The hotel industry – along with many other services – is lagging behind manufactured goods by decades. For this reason, research on brand management mainly concentrates on this type of products. Literature on service brands is comparatively scarce. Nonetheless, there are great potentials for brand management in the service industry in general and the hotel industry in particular.

Hotel services differ from physical goods in many ways. For this reason, research findings and approaches to building and managing brands cannot simply be transferred. The major goal of this work is therefore to examine the concept of brand management, to adapt and apply it to hotel services.

In today’s ultra-competitive business environment, customer loyalty is a hot topic. The hotel industry has turned into a buyer’s market. Competition keeps intensifying at steady pace, resulting in a surplus of capacities. As a consequence, the importance of making guests return becomes a critical issue. It is said that brands provide the opportunity to encourage the creation of loyalty among consumers. In comparison to generic products, they are believed to have an advantage in achieving this goal. A second objective of this work is to determine the connection between these two concepts and to investigate the beneficial effects of branding hotel services for the process of establishing loyalty.

TABLE OF CONTENTS

Table of Figures

List of Abbreviations

INTRODUCTION

PART A

1 The Concept of Brands
1.1 Definitions
1.2 Brand Functions
1.2.1 Company Benefits
1.2.2 Consumer Benefits
1.3 Product Requirements
1.4 Evolutionary Eras of Brand Management

2 Branding in the Hotel Industry
2.1 The Industry of Hotel Services
2.1.1 Economic Position
2.1.2 Industry Trends
2.1.2.1 Customer Trends
2.1.2.2 Suppliers Trends
2.2 Characteristics of Hotel Services
2.3 The Need for Branding In the Hotel Industry
2.4 Unfavorable Conditions for Branding Hotel Services
2.4.1 Difficulties Resulting From Involvement of People
2.4.2 Difficulties Resulting From Intangibility
2.5 Favorable Conditions for Branding Hotel Services
2.6 Creating a Hotel Brand
2.6.1 Strategic Brand Analysis
2.6.2 Brand Identity
2.6.2.1 The Brand as a Product
2.6.2.2 The Brand as an Organization
2.6.2.3 The Brand as a Person
2.6.3 Brand Name
2.6.4 Brand Symbol
2.6.5 Brand Slogan and Stories: The Brand in Words
2.6.6 Hotel Employees as a Brand Element
2.6.6.1 Brand Culture
2.6.6.2 Additional Efforts

INTERIM RESULTS

PART B

3 Conceptual Framework
3.1 Benefits of Customer Loyalty
3.2 Expressions of Customer Loyalty
3.3 The Achievement of Customer Loyalty

4 Establishing Customer Loyalty
4.1 Consumer Behavior
4.2 Customer Buying Process
4.3 Loyalty Elements and the Power of Brands
4.3.1 Customer Satisfaction
4.3.2 Brand Image
4.3.3 Sympathy
4.3.4 Trust

RESULTS & CONCLUSION

REFERENCES

INDEX

Table of Figures

Figure 1-1: Brand Asset Categories

Figure 1-2: Functions of a Brand

Figure 1-3: Brand Management Evolution Eras

Figure 2-1: Hotel Services as an Economic Segment

Figure 2-2: Trends in the Hotel Industry

Figure 2-4: Dominance of Tangible and Intangible Elements in Goods and Services

Figure 2-5: Dominance of Tangible and Intangible Elements in the Service Industry

Figure 2-6: Brand Identity Structure

Figure 2-7: Brand Personality Scale

Figure 2-8: Examples of Brand Logos

Figure 3-1: Qualities of Customer Loyalty

Figure 4-1: Customer Behavior

Figure 4-2: Maslow's Hierarchy of Needs

Figure 4-3: Customer Buying Process

Figure 4-4: The Origins of Customer Satisfaction

Figure 4-5: SERVQUAL Dimensions

Figure 4-6: Positioning Map of Service Level versus Price Level

Figure 4-7: Positioning Map of Location versus Physical Luxury

List of Abbreviations

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INTRODUCTION

Problem Formulation and Research Objectives

Brands are a phenomenon that has been in existence already for centuries. From its original purpose of marking livestock, the concept was later adopted by manufacturers for their products and further developed and adapted to changes in business environments. The original idea of using marks to indicate ownership and origin, however, can be traced back even for millennia to ancient Greek and Rome and early Chinese dynasties.¹

These days, the number of brands is greater than ever. More and more businesses have come to realize the power of brands, and the concept of brand management has consequently gained considerable interest in recent years. Every year the number of new brands registered increases.² Fortune magazine suggests that “In the 21st century, branding ultimately will be the only unique differentiator between companies.”³

Initially, the use of brands, or marks respectively, was limited to physical products only. Service brands are comparatively new in the long history of branding.⁴ The hotel industry – along with many other services – is lagging behind manufactured goods by decades.⁵ For this reason, research on brand management mainly concentrates on this type of products. Literature on service brands is comparatively scarce. Nonetheless, there are great potentials for brand management in the service industry in general and the hotel industry in particular.⁶

Hotel services differ from physical goods in many ways.⁷ For this reason, research findings and approaches to building and managing brands cannot simply be transferred. The major goal of this work is therefore to examine the concept of brand management, to adapt and apply it to hotel services.

In today’s ultra-competitive business environment, customer loyalty is a hot topic. The hotel industry has turned into a buyer’s market. Competition keeps intensifying at steady pace, resulting in a surplus of capacities.⁸ As a consequence, the importance of making guests return becomes a critical issue. It is said that brands provide the opportunity to encourage the creation of loyalty among consumers. In comparison to generic products, they are believed to have an advantage in achieving this goal.⁹ A second objective of this work is to determine the connection between these two concepts and to investigate the beneficial effects of branding hotel services for the process of establishing loyalty.

Research Proceedings

The work will be divided into two major parts. The first part is concerned with brand management in the hotel industry, and the second one deals with customer loyalty.

First, the general concept of brands will be investigated and later applied to hotel services. To understand the importance of brands, the author will analyze the benefits they provide. This investigation will be conducted from different perspectives in order to comprehend the advantages from a customer as well as from an organizational point of view. If brands have such a high value by offering the multitude of benefits they are believed to provide, the question arises why there are still unbranded products on the market. One reason can certainly be found in a lack of financial resources on part of the companies. Branding a product always involves additional costs.¹⁰ However, this cannot be the only reason since it is possible to notice that certain product categories are more concerned with the absence of brands than others. For some types of products, only a small number of brands are known (e.g. Dole and Chiquita for fruits) and the majority is sold anonymously. In even other categories, brand names are completely unknown (e.g. for produce). For this reason, it will be researched, which product attributes are favorable to the creation of a brand. Due to continuous innovations, inventions, and other changes in business environments, the requirements of brands have been changing over time. Also the introduction of service brands is a comparatively new practice in the long history of branding. For this reason, investigations will include a historical review and a description of the evolvement of professional brand management.

After having investigated the major concepts of branding, the author will analyze the industry of hotel services. For being able to establish guidelines for creating a hotel brand, information will first be collected about the current market situation. In this connection, industry trends on both the supply and demand side will be analyzed. Then, the particularities of hotel services will be compared with the previously investigated factors that facilitate branding in order to determine favorable characteristics and obstacles. Finally, steps and tasks involved in branding a product will be applied to the lodging industry. Important brand elements will be described and discussed in order to serve as a guideline.

The second part of the work begins with some general concepts of customer loyalty. It starts with an investigation of organizational benefits resulting from loyal guests. Literature offers a wide range of definitions of loyalty, some of which are supportive of each other, others contradictory.¹¹ For this reason, it will be investigated whether it is possible to distinguish between different levels or qualities of loyalty.

Nowadays, suppliers of hotel services have to deal with difficult market conditions.¹² As a result, many companies have adopted the idea of offering so-called “loyalty programs,” which were originally invented by the airline industry.¹³ However, this approach to achieving loyalty is controversial and not generally agreed upon.¹⁴ As a consequence of disagreement upon definition of a loyal consumer, literature also provides different options concerning the causing factors of loyalty. These different viewpoints will be analyzed in order to establish a set cause-and-effect chain of loyalty for the continuation of this work.

With the overall goal of customer loyalty in mind, the author will then examine consumer behavior. In order to attempt influencing the components of the cause-and-effect chain, it is first necessary to understand the traveler and the factors that determine his/her behavior. The behavioral analysis will be followed by a description of the buying process that customers go through when booking a hotel stay. Creation of loyalty is a complex task and therefore requires attention to and knowledge about each of the steps involved. Furthermore, it will be researched if and to what extent branding may affect consumers during each of the stages. Finally, each loyalty element will be investigated separately in terms of its development. In order to determine the potentials of hotel brands for achieving customer loyalty, the author will analyze possible impacts on these elements as a result of branding hotel services.

PART A:

BRAND MANAGEMENT IN THE HOTEL INDUSTRY

1 The Concept of Brands

Today’s economy is characterized by enormous competition between companies and an overload of choices for consumers.¹⁵ There is a huge variety of products on the market, and consumers have to face the difficult task of selecting the “right” ones that fulfill their specific needs and wants. Continuous globalization and high advertising efforts only add to the clutter and make it more and more difficult to see through. The results are bewildered customers and struggling companies.

Brands play an important role in organizing the market; they make it easier for products to stand out and for consumers to better understand the benefits of each specific good, thereby helping them to make decisions. Many companies have come to realize the significance of brands, and the previous decades have been characterized by an explosion of new names. During the time from 1988 to 1998 registrations of new brands in Germany have more than doubled.¹⁶

This first chapter serves as an introduction to the complex subject of brand management. It defines what a brand is and considers the functions and benefits of it for both, organizations and customers. The chapter analyses the requirements for a product in order to be branded and provides an insight into the different evolutionary stages of brand management.

1.1 Definitions

Brand

Despite the great amount of interest that is being granted to the concept of branding and brand management in today’s business environment, the practice itself is an old one: In ancient times, brands were used to mark and punish criminals, and owners of livestock traditionally brand their animals to identify them and establish ownership.¹⁷ As can be seen, the original purpose of a brand was to allow quick and easy identification of the branded item. The adoption of the branding concept in business management has allowed companies to mark their products in order to make them distinguishable from others. Further elaboration of this topic has lead to a more comprehensive understanding of what a brand implies as will be described later in this work.

Generally speaking, a brand can be understood as the opposite of a generic product. When introducing a new product on the market, companies need to decide whether to offer it anonymously or as a brand.¹⁸ However, this general characterization does not give enough understanding of the complexity that a brand implies. Literature offers a great variety of definitions that broadly or more narrowly explain the meaning of a brand. Following the ideas of the American Marketing Association (AMA), a brand is a “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competition.”¹⁹ Other definitions emphasize the comprehensiveness of brands, characterizing them as being “much more than names or logos” but “living entities complete with personalities” and “a way of doing business.”²⁰ This leads to the assumption that “brands are more than just products and services. They ... are also what the company does and more importantly, what the company is. ... A brand is a critical component of what the company stands for. It implies trust, consistency, and a defined set of expectations.”²¹

Developing on the above mentioned approaches to defining a brand, the author suggests the following definition of the term:

A brand is a product enriched with a unique identity in order to create a meaningful point of differentiation from competing products that are designed to satisfy the same need. It mirrors the company’s values, mission, and vision, and uses verbal and graphic tools for representation and facilitation of identification.

Branding

Branding, as derived from the verb “to brand,” describes the process of marking a product. It comprises all measures that are necessary for establishing a brand, including the development of a “mark (logo), symbol, set of words, or combination of these to differentiate ... (a product, the author) from others.”²² The purpose of branding is “to teach consumers ‘who’ the product is ... as well as what the product does and why customers should care.”²³

Hence, branding provides consumers with better knowledge of the product and consequently facilitates their decision making process. It equips a good with important differentiating qualities judged from a customer-perspective. These qualities can either be rational or irrational, but they are likely to be a mixture of both.²⁴

Brand Equity

The concept of brand equity describes the reason that gives purpose to branding. It is the desired outcome of distinguishing a product by turning it into a brand. The Marketing Science Institute defines brand equity as “The set of associations and behaviors on the part of the brand’s customers, channel members, and parent corporations that permits the brand to earn greater volume or greater margins than it could without the brand name and that gives the brand a strong, sustainable, and differentiated advantage over competitors.”²⁵ Brand equity can thus be described as the added value to a product due to mental and behavioral changes caused by branding. In that sense, brand equity represents a combination of major assets owned by the brand. As illustrated in Figure 1-1, the major asset categories are:

- Brand awareness
- Brand associations
- Perceived quality
- Brand loyalty²⁶

As can be seen, loyalty is an important asset of a brand and therefore a determining factor of brand strength and value. How exactly branding a product can reinforce customer loyalty will be examined in chapter four of this work as well as the function of the other brand asset categories in accomplishing this goal.

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Figure 1-1: Brand Asset Categories²⁷

1.2 Brand Functions

In the previous section, the definition of brand equity has shown that value increases with branded products. The detailed functions of a brand, however, are manifold and will therefore be discussed separately in the following. They can be categorized into benefits for consumers and those for the company itself. Figure 1-2 provides an overview of the different roles that brands play for these two parties.

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Figure 1-2: Functions of a Brand²⁸

1.2.1 Company Benefits

Brands provide a number of valuable benefits to companies. Perhaps the most fundamental one is that a brand helps distinguish the product from those of competitors by endowing it with unique associations.²⁹ Even products that are practically identical by objective assessment can be perceived differently by the audience as a result of branding.³⁰ This function also helps the company to segment the overall market and attract larger shares of specific target markets by catering to particular customer needs.³¹ It can even be said that to some extent a branded product helps the company avoid customer dissatisfaction because of the consumers’ association of the brand with a certain type of problem solution and quality level; so when purchasing the product, they already have an idea about what to expect from it and are therefore less likely to be disappointed.

In addition to that, brands also provide a means of identification within the company. By carefully defining the characteristics of a brand, the employees are given a better understanding of the purpose the brand serves and their role in delivering it. Hence, branding a product establishes clear internal performance outlines, allowing staff members to better carry out their jobs. This in turn will lead to more satisfied, motivated, and therefore more productive personnel.³² Furthermore, the better the employees’ understanding of their individual purpose and importance for the company, the more likely they will be to develop feelings of belonging and commitment towards their employer. It has been researched that the employee turnover rate is negatively related to a firm’s profit margins.³³ In other words: A lower staff turnover allows the company to realize higher profits, for example because of reduced training costs.

Depending on the intensity of customer contact, a satisfied and loyal staff may eventually lead to a more satisfied and loyal clientele.³⁴ The achievement of customer loyalty has been largely simplified here to fit this context. Employee satisfaction and turnover do indeed have an influence on customer retention; however, it needs to be said that the establishment of loyalty is much more complex. An in-depth analysis of the relationship between brand management and customer loyalty as well as the benefits resulting from loyal patrons will be conducted at a later point of this work.

Another function of a brand is that it can influence consumer behavior. At the critical point of decision making brands helps trigger and aid recall. Moreover, they add an emotional pull to otherwise rational choices.³⁵ This is due to the mental picture that the buyer holds about the brand, which may be shaped by a range of factors, including advertising campaigns, information obtained by word of mouth, or prior experiences with it.³⁶ Successful brands will improve the company’s reputation and broaden its customer base. As a result of that, sales numbers will increase, leading to higher business profits. In addition to that, it is possible to realize more upscale prices because customers are willing to pay more for leading brand names as compared to weaker ones. This will strengthen the economic value of the brand and the organization as a whole.³⁷

Summarizing the functions of brands and the benefits they can bring to a company, it can be said that a brand may serve as an important source of competitive advantage for a business.

1.2.2 Consumer Benefits

Companies are not the only ones to draw benefit from branded products. There are also a range of positive functions that are provided to the customers.

First of all, a brand helps consumers to identify the product with all its associated information.³⁸ Hence, it also allows them to assign responsibility to the respective manufacturer or provider. Knowing where the brand belongs to or comes from may then imply a certain level of security for the buyer because of his or her associations or prior experiences with the brand or company. Customer security further increases because brands can be described as a signal of quality. They represent promises about what to expect from the product.³⁹ Because brands are characterized by a certain level of consistency, clients can easily trust this brand promise. As a consequence, during the decision making process a branded product reduces the perceived risk of making the wrong choice and being disappointed. There are different types of risks that customers need to evaluate when making their buying decision:

Functional risk: Product performance does not fulfill customer expectations

Physical risk: Product affections of the physical well-being of the user or others

Financial risk: Poor price/quality ratio

Social risk: The product is not accepted by others

Psychological risk: Product affections of the user’s mental well-being

Time risk: Opportunity cost of alternative seeking due to product failure⁴⁰

Depending on the type of product, its price, relevance for the consumer, and existence in the customer’s buying set, as well as the resulting importance and consequences of the purchase decision, users may perceive brands as an enormously comforting risk reducer. Furthermore, certain types of products are more difficult to assess than others. In that case, the importance of brands even increases. The categories, into which products can be classified, are: search goods, experience goods, and credence goods. With search goods, clients may easily evaluate product attributes prior to purchasing them (e.g. the size, color, and price), while the assessment of experience goods requires actual product trial and experience. Examples of features of the latter category are durability and service quality. In contrast to that, attributes of credence goods may rarely be learned not even after purchase and consumption (e.g. the quality of medical attendance).⁴¹ A brand’s function of being a signal of quality and therefore reducing customer risk is particularly important for experience and credence goods. In these product categories, a well-recognized brand makes shopping easier for the purchaser.

As mentioned before, consumers hold a defined set of expectations towards the brand concerning its quality and function. They already have some knowledge about it, meaning that they do not need to engage in extensive information seeking. This knowledge usually consists of a simplification and summarization of all product attributes. It can therefore be said that a brand facilitates customer orientation and decision making because it helps focus attention on selected product attributes.⁴² Depending on the type of product the relevance of this function increases or decreases. In order to exemplify this theory it is necessary to classify products into categories other than the ones mentioned above. The new product categories are: convenience goods, shopping goods, and specialty goods. With convenience goods, the purchase is made quickly and with little effort. Customers are not willing to spend high amounts of time or energy shopping for them. Due to regular or habitual buying, they already have extensive knowledge about the product.⁴³ In this case, branding may not bring the desired benefit because of low customer involvement and a minimized decision making process. In contrast to that, consumers are more willing to invest time and effort when purchasing shopping goods. Competing products are evaluated and compared,⁴⁴ so a brand in this product category can very well serve its functions as a search cost reducer for its buyers. Specialty goods are products that require extremely high decision making efforts on part of consumers. Because of their high prices they are not bought very often, in some cases only once in a lifetime. The importance of the buying decision is consequently high. For this reason, also customer involvement rises and high amounts of time and energy are spent in order to obtain information.⁴⁵ Here, branded products can serve the most by reducing search cost and risk. In case a brand has succeeded in becoming the absolute leader in its segment, search cost may even be minimized for specialty goods. For this reason, Perreault states that successful brands that customers insist on by name also fall into this product category. According to his definition, specialty goods are those specific products that consumers really want. They are not interested in comparing different alternatives because they are aware of the benefits they obtain from buying or using this good. He agrees that specialty goods have a high value in the eyes of their purchasers; however, he explains customer involvement by their insistence on this very product and their willingness to make special efforts finding it.⁴⁶

By purchasing certain brands, some people want to express their individuality or communicate their belonging to a particular group of users. They use brands as personality statements to others or even to themselves.⁴⁷ Harley Davidson drivers, for example, are easily recognized by their outer appearance. They communicate their feeling of group identity in a very strong way, and most people probably do not drive a Harley Davidson because of the durability of its material or the quality of its motor. Instead, being a Harley Davidson driver implies being a tough and independent person; it is an expression of personal freedom.⁴⁸ In this sense a brand serves as a symbolic device, communicating certain characteristics of its owners or users.

1.3 Product Requirements

Considering the wide range of benefits that brands offer to both, consumers and organizations, it could be assumed that branding is a desirable tool for any company to apply in order to make their business thrive. However, for certain kinds of products it seems to be more difficult to establish respected brands than for others. For example, it will probably be difficult for most people to recall brand names for products like produce, candles, or electric extension cords. Hence, there must be certain requirements for a product to fulfill in order to be successfully branded. It is not the author’s intention to suggest that branding will be entirely impossible with the absence of any of these attributes. Yet, there are conditions that are favorable to branding:

- Demand for product class is high and differentiated
- The product is easy to identify
- Product quality is easy to maintain
- The product is perceived as the best value for its price
- Existence of economies of scale
- Ubiquity of the product

High and Differentiated Demand for Product Class

In order for a product to be sold profitably there has to be sufficient demand. The company needs to verify that it is worth investing in developing and launching a new good and that it will eventually lead to organizational profits.

Branding implies further investments besides mere product development. It is necessary to create a brand name, logo, slogan etc. and to equip the brand with differentiating characteristics.⁴⁹ Some companies make use of the services of professional brand management consulting organizations, such as Interbrand, which results in further financial expenses. These firms help doing brand research, identify and build brand strategies, and so on.⁵⁰ Considering the fact that establishing a brand demands even higher investments than it is necessary for generic products, high demand for the general product class is crucial for generating profit and justify these additional efforts.

A high differentiated demand is important for the company because the purpose of branding is to create uniqueness and thus distinguish the product from others.⁵¹ With the existence of a discriminating demand, it becomes easier for organizations to set their brand apart from competition by catering to particular customer needs.

The Product Is Easy to Identify

Customers are confronted with a huge variety of products paired with an information overload due to mass advertising efforts. Thousands of advertisements are competing for attention, and even when simply going to the supermarket, they are exposed to the impressive number of around 25,000 items.⁵² The clutter is high, making it difficult for a product to be noticed.

Companies need to ensure that their brand is easy to identify in order to stand out of the competition. The most important identification features are brand name and symbol.⁵³ Developing these elements is an important part of brand building. If well-chosen, they can help achieving customer awareness of the brand and facilitate recognition and recall.⁵⁴ The Body Shop is an example of a good brand name. It suggests the brand purpose and is easy to remember. The colors green and white indicate purity and closeness to nature. People from all over the world recognize the golden-arches symbol of McDonald’s restaurants and relate them to American-style fast food.

It is important to legally protect brand name and logo by trademark in order to prevent competitors from copying. The importance of registration becomes even more obvious considering the fact that even with protection companies in the USA loose billions of dollars every year due to unauthorized use of copyrights, trademarks and patents.⁵⁵

In order to brand a product successfully, it is important to ensure constant delivery of quality. One of a brand’s purposes is to facilitate customer orientation and decision making. The buyer holds a defined set of expectations concerning product benefits.⁵⁶ If quality standards cannot be maintained at the same level or above, the brand looses its function as a risk reducer and a signal of quality because consumers are not able to rely on what they have learned about it. When a brand is not able to fulfill its promise of quality delivery, a loss of reputation will subsequently follow. Unsatisfied customers or even rejection of the brand will result in decreasing profits for the company. Once the brand has a negative image in the eyes of consumers it can be very difficult and expensive to change that situation.⁵⁷ Moreover, a negative image does not only harm the product itself. Being the brand’s parent corporation, the reputation of the company as a whole will suffer, which in turn may influence other brands of the organization as well as its professional business relations.

With the creation of a brand, a company wants to emphasize certain attributes and thus distinguish their product from competing ones.⁵⁸ However, the best points of differentiation will be ineffective if product quality lacks consistency. Only if consumers can rely on the brand, it will be able to provide security; and only by providing security it will be possible for a brand to offer the benefits mentioned in section 1.2 to both, companies and customers.

The Product Is Perceived the Best Value for Its Price

As pointed out before, a consistent level of quality is crucial for the success of a brand. However, quality alone is not enough. Customers do not necessarily want the highest of standards; neither do they always look for the cheapest of prices. What buyers want is “value for money.”⁵⁹ However, the problem with value is that it is defined subjectively. While a certain standard is perceived as valuable for some customers, it might not be appreciated in the same way by others. There are people who pay high prices for fine dining, and $200 per person for eating at a 3 star-Michelin restaurant will be perceived as valuable by them. Others connect value with moderately-priced services, such as a pizza delivery service.

In order to solve this problem, companies need to know the expectations and attitudes of their major target markets. Product quality and price can then be matched so that customers feel that the brand offers a valuable price/quality ratio, which at the same time is better than other existing choices.⁶⁰

Branding a product involves a lot of efforts, including financial expenses for labor and advertising. The organization needs to develop brand standards, strategies, and quality insurance programs.⁶¹ In order to justify these costs and realize additional profits as a result of branding, the product should provide economies of scale, meaning that with an increase in production the cost of each produced item decreases.⁶² Fixed costs will be the same regardless of the number of manufactured items. When production outcome rises, the amount of fixed expenses can be divided by a larger number of products. Examples of fixed costs include development costs, rental fees for buildings, fixed employee salaries, and advertising costs. Because these expenses are not directly caused by the product itself they can also be referred to as indirect costs.⁶³

The concept of economies of scale implies taking advantage of the benefits of mass production. However, not all products can be produced in masses or with economies of scale. Scarce goods such as diamonds do not exist in huge quantities so that products containing them cannot be manufactured in countless amounts. Productivity gains are also difficult to achieve in labor-intensive services and creative jobs like book-writing. Other services, such as research, only rise in cost with increasing activities and therefore do not provide economies of scale.

Ubiquity of the Product

Dependable and widespread availability is a key factor for establishing successful brands. First of all, it is important to create customer awareness, which can be achieved through extensive exposure of the brand at the points of sale. If consumers have frequent visual contact with a brand at many different locations, they will be more likely to remember it.⁶⁴ In that sense, ubiquity serves as a promotional tool for the brand.

An important function of a brand is to serve as a purchase stimulus.⁶⁵ This can only be the case if it is present at the critical moment of customer decision making. While truly committed consumers might be willing to walk an extra mile in order to find a specific brand, others will buy a competing product instead if the brand is not present.⁶⁶ As a result of that, it may never be included in the buyer’s evoked set. And even if the brand has become part of it, repeat purchase is still not yet guaranteed. When customers are satisfied with a particular brand, they generally want to continue using it.⁶⁷ However, if the product is not available or difficult to find they may get disappointed and switch to a more accessible one.

1.4 Evolutionary Eras of Brand Management

The practice of branding, in one form or another, has been around for a long time. Marks have been found on pottery from ancient Greek and Rome, on early Chinese porcelain, and on Indian artifacts dating back to about 1300 B.C.⁶⁸ However, the purpose of branding as well as the approaches to managing brands have been continuously changing over time.

This section provides some historical background of the subject. Professional brand management has evolved during six distinct eras: (1) manufacturer, (2) product, (3) customer, (4) image, (5) strategy, and (6) identity orientation (Figure 1-3). Each of these epochs uses a different approach to managing brands in order to respond to technological advances, changes in the economic environment, and other factors.

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Figure 1-3: Brand Management Evolution Eras⁶⁹

Manufacturer-Orientation Era

The period from 1840 to 1899 set the foundation for the beginning of modern branding concepts. Major reasons for this were developments and changes caused by the Industrial Revolution.⁷⁰ Due to improvements in production processes, it became possible to manufacture large quantities of consistent quality and at lower costs. Advances in communication and transportation facilitated the distribution of products in larger areas. As a result of that, retail institutions emerged in order to sell this mass-produced merchandise, which, thanks to improvements in packaging, was now individually packaged as opposed to bulk containers. Because of loss of contact between manufacturer and customer and growing competition between products, it became necessary for companies to mark their goods. Advertising became increasingly popular so that the new brands could easily be promoted.⁷¹ With more and more brands emerging on the market, also the practice of imitation and counterfeiting gained popularity. By the end of the 19th century, most countries had included trademark acts in their legislation in order to legally protect brands.⁷²

During the manufacturer-orientation era, brand management exclusively referred to the mere marking of products. Because manufacturer name and reputation were the key factors to ensure business success, brands were created for and defined by their function of indicating origin.⁷³

Product-Orientation Era

In this period from the beginning of the 20th century until the mid-1960s, focus shifted and brands were increasingly used as sales instruments.74 Since prices were fixed and products had become more and more exchangeable, indication of origin was no longer perceived sufficient in order to distinguish a brand. Other means of differentiation were necessary. Manufacturers wanted to gain customer trust.⁷⁵ In order to achieve this goal they began to add new dimensions to their brands and set explicit and fixed brand standards. For the first time, a brand had been officially defined, and certain product attributes were required from a good in order to be named a brand.⁷⁶ Another innovation of this time was the permission to register service marks. So far, registration of brands had been restricted to physical goods.⁷⁷

Despite the shift from using brands merely as an indication of origin to its function as a sales instrument, the strong economic development ensured a sales guarantee. Manufacturers’ focus was subsequently on the product. Customer needs and wants were of secondary importance.⁷⁸ The brand concept of this time was a very static one. Companies did not react to changing outside conditions, and they did not adapt their brands to new requirements resulting from them.

Customer-Orientation Era

From the mid 1960s on, companies had to face a range of important changes that seriously affected their profitability and business future. A continuously advancing technology paired with economic recession had lead to more intense competition, causing a shifting from a seller’s to a buyer’s market.⁷⁹ Supply exceeded demand; the market was saturated, and companies had to face sales problems. This development had been augmented by the liberalization of prices and the growing emergence of me too-products.⁸⁰

Customers had more choices than ever before. They could compare a range of products and buy the one that best fulfilled their needs. If they wanted to stay afloat, manufacturers had to realize that they needed to change their approach to doing business. As a consequence, consumers got into the focus of brand management, and brands were seen as complete concepts rather than a bundle of product attributes.⁸¹ Management started to consider the effect that brands have on patrons. It now became a dynamic, customer-oriented process. Marketing activities such as market research, product development, pricing and distribution strategies were included in the management process.⁸² This development, resulting from a weakening manufacturer’s position, lead to a new brand definition. In the customer-orientation era, it was the consumers’ awareness of a product and its fixed picture in the clients’ minds that turned an otherwise generic product into a brand. This new understanding of brands now also included the purchasers’ emotions, motivations, attitudes, and social behavior.⁸³

Image-Orientation Era

With organizations now considering the effects of brands on customer behavior, a new approach to managing them emerged in the mid 1970s. Companies began to regard brand image as the central component of a brand’s success.⁸⁴

Research had led to the conclusion that all marketing parameters have an influence on brand image. As a result, brand management was considered equal to marketing, and brands were thus managed exclusively by the marketing department.⁸⁵ The importance of brands within an organization increased considerably, and so did the amount of attention that was being granted to managing them. It has to be criticized though, that assigning full responsibility for managing brands to marketing implies some major disadvantages. Divisions other than the marketing department are excluded, and companies work hard on creating favorable images. As a consequence, customers start dictating brand management, and brands tend to change frequently, trying to adapt to recent trends.⁸⁶ These changes subsequently result in inconsistent images and a loss of uniqueness.

Strategy-Orientation Era

This era’s approach to managing brands also concentrates on the importance of images for the consumer, but in this case brand value encompasses more than just the image of the product itself. It is described as the sum of product, user, and producer image.⁸⁷

The strategy-orientation developed parallel to the image-orientation approach, trying to compensate some of its major deficits. Instead of reacting to short-term changes in customer preferences, this epoch is characterized by a strongly strategic approach to brand management. Brands were now considered an organization’s most important asset, and managing them thus became the responsibility of general management instead of the marketing department alone.⁸⁸ This change allowed for prompt reactions to occurring problems but also this approach has disadvantages. General management often lacks experts in specific fields of management. The consequence may be a too schematic approach to managing brands. Another disadvantage of the approaches during both, the image-orientation as well as the strategy-orientation era, is their strictly external orientation, completely neglecting the internal view.⁸⁹

Identity-Orientation Era

With the beginning of the 1990s, another major component was added to the concept of brand management when brands were believed to be able to have human characteristics. This approach resulted from the failure of the two precedent ones in including the internal view and thus providing consistency. Managers now developed the idea that it was possible to create a unique and consistent brand personality and therefore a complete entity similar to a human being. This way, they wanted to gain back customer trust, which had previously been lost to a great extent.⁹⁰

Products had become increasingly similar without showing noticeable differences in quality. Competition was high. Globalization added numerous products to the already highly competitive market.⁹¹ As a consequence, consumers had to face an overflow of advertising messages, leaving them insecure and puzzled. In order to re-establish customers trust, brand managers attempted to equip their products with a unique identity. They wanted to provide consistency and, as a result, a certain level of security for their patrons. Brand identity now became the basis of strategic brand management.⁹²

[...]

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¹ Keller, D.L. (2003), p. 3, 52-55.

² Compare to Meffert et al. (2001), p. 3.

³ Fortune magazine, cited in Esch, F.-R. (2003), p. 1.

⁴ Strauss, B. (2004), p. 97.

⁵ Compare to Morrison, A.M. (2002), p. 10.

⁶ Compare to Fassnacht, M. (2004), p. 2163; Lambertz, M.; Meffert, C. (2002), p. 587.

⁷ Henschel, U.K. (2001), p. 80-83.

⁸ Barth, K.; Theis, H.-J. (1998), p. 3.

⁹ Compare to Hankinson, G. (2000), p. 484 and Kotler, P. et al. (2003), p. 316.

¹⁰ Kotler, P. et al. (2003), p. 318

¹¹ See for example Weinberg, P.; Diehl, S. (2001), p. 26; Esch, F.-R. (2003), p. 78; Hennig-Thurau, T.; Hansen, U. (2000), p. 6-7 and Sander, I. et al. (2004), p. 276-278.

¹² Compare to Henschel, U.K. (2001), p. 43.

¹³ Compare to Lovelock, C.; Wright, L. (1999), p. 128-129.

¹⁴ Compare to Morgan, R.M. et al. (2000), p. 71.

¹⁵ Compare to Keller, D.L. (2003), p. 2.

¹⁶ Compare to Meffert, H. et al. (2001), p. 3.

¹⁷ Barlow, J.; Stewart, P. (2004), p. 24.

¹⁸ Scharf, A.; Schubert, B. (2001), p. 124.

¹⁹ American Marketing Association, cited in Keller, D.L. (2003), p. 3.

²⁰ Barlow, J.; Stewart, P. (2004), p. 17+20.

²¹ Davis, cited in: Kotler, P. et al. (2003), p. 312.

²² Morrison, A.M. (2002), p. 586.

²³ Keller, D.L. (2003), p. 13.

²⁴ Gotta, M. (2004), p. 1162.

²⁵ Marketing Science Institute, cited in Keller, D.L. (2003), p. 43.

²⁶ Compare to Aaker, D.A. (1991), p. 16.

²⁷ Source: Own design.

²⁸ Source: Own design

²⁹ See Section 1.1, p. 6-7 of this work.

³⁰ Compare to Davis, S.M. (2002), p. 4.

³¹ Morrison, A.M. (2002), p. 280.

³² Barlow, J.; Stewart, P. (2004), p. 126.

³³ It has been observed that in the fast-food industry, companies with an employee turnover rate of only 2/3 of those of competitors were able to realize 50% higher profit margins (compare to Barlow, J.; Stewart, P. (2004), p. 34).

³⁴ Liljander, V. (2000), p. 162.

³⁵ Esch, F.-R (2003), p. 10.

³⁶ Schmidt, K.; Ludlow, C. (2002), p. 1.

³⁷ Compare to Bruhn, M. (2004), p. V.

³⁸ Compare to Roth, P.; Schrand, A. (2003), p. 106.

³⁹ Pringle, H.; Gordon, W. (2001), p. 3.

⁴⁰ Keller, D.L. (2003), p. 10.

⁴¹ Lovelock, C.; Wright, L. (1999), p. 67-68.

⁴² Barlow, J.; Stewart, P. (2004), p. 25.

⁴³ Perreault, W.D. Jr.; McCarthy, E.J. (2003), p. 189.

⁴⁴ Scharf, A.; Schubert, B. (2001), p. 6.

⁴⁵ Scharf, A.; Schubert, B. (2001), p. 6-7.

⁴⁶ Perreault, W.D. Jr.; McCarthy, E.J. (2003), p. 190.

⁴⁷ Ries, A.; Ries, L. (2000), p. 98.

⁴⁸ Aaker, D.A. (1996), p. 141.

⁴⁹ See Section 1.1, p. 7 of this work.

⁵⁰ N.a. (2005), Internet, www.interbrand.com

⁵¹ Barlow, J.; Stewart, P. (2004), p. 96.

⁵² Compare to Davis, S.M. (2002), p. 4 and Bruhn, M. (2004), p. V.

⁵³ Compare to Gee, C.Y. (1994), p. 432 and Esch, F.-R. (2003), p. 173.

⁵⁴ Compare to Keller, D.L. (2003), p. 182, 183, 193, 195.

⁵⁵ Keller, D.L. (2003), p. 180.

⁵⁶ See Section 1.2.2, p. 12 of this work.

⁵⁷ Perreault, W.D. Jr.; McCarthy, E.J. (2003), p. 195.

⁵⁸ See Section 1.1, p. 7 of this work.

⁵⁹ Morrison, A.M. (2002), p. 518.

⁶⁰ Kotler, P. et al. (2003), p. 314.

⁶¹ Kotler, P. et al. (2003), p. 318.

⁶² Perreault, W.D. Jr.; McCarthy, E.J. (2003), p. 17.

⁶³ Compare to Morrison, A.M. (2002), p. 601.

⁶⁴ Keller, D.L. (2003), p. 69.

⁶⁵ See section 1.2.1, p. 10 of this work.

⁶⁶ Compare to Sander, I. et al. (2004), p. 278.

⁶⁷ Perreault, W.D. Jr.; McCarthy, E.J. (2003), p. 194.

⁶⁸ Keller, D.L. (2003), p. 52.

⁶⁹ Source: Own design.

⁷⁰ Compare to Teare, R.; Olsen, M. (1992), p. 200.

⁷¹ Keller, D.L. (2003), p. 53.

⁷² Keller, D.L. (2003), p. 54.

⁷³ Compare to Meffert, H.; Burmann, C. (1996), p. 4.

⁷⁴ Kelava, M.; Scheschonka, J.F. (2003), p. 47.

⁷⁵ Domizlaff, cited in Kelava, M.; Scheschonka, J.F. (2003), p. 47.

⁷⁶ Compare to Meffert, H. et al. (2001), p. 1.

⁷⁷ Keller, D.L. (2003), p. 55.

⁷⁸ Morrison, A.M. (2002), p. 5.

⁷⁹ Compare to Meffert, H. et al. (2001), p. 2.

⁸⁰ Me too-products are those that are created by market followers to imitate a very popular one designed by an innovator (Imber, J.; Toffler, B.-A. (2000), p. 360).

⁸¹ Compare to Meffert, H.; Burmann,C. (1996), p. 10 and Kelava, M.; Scheschonka, J.F. (2003), p. 49.

⁸² Meffert, H.; Burmann,C. (1996), p. 8.

⁸³ Linxweiler, cited in Kelava, M.; Scheschonka, J.F. (2003), p. 49.

⁸⁴ Compare to Meffert, H. et al. (2001), p. 2.

⁸⁵ Compare to Goodyear, cited in Kelava, M.; Scheschonka, J.F. (2003), p. 50.

⁸⁶ Compare to Aaker, D.A. (1996), p. 69-71.

⁸⁷ Kelava, M.; Scheschonka, J.F. (2003), p. 51.

⁸⁸ Adjouri, cited in Kelava, M.; Scheschonka, J.F. (2003), p. 51.

⁸⁹ Compare to Kelava, M.; Scheschonka, J.F. (2003), p. 50-51.

⁹⁰ Compare to Kelava, M.; Scheschonka, J.F. (2003), p. 51.

⁹¹ Compare to Meffert, H. et al. (2001), p. 2.

⁹² Meffert, cited in Kelava, M.; Scheschonka, J.F. (2003), p. 52.

• Hochschule: Hochschule Harz Hochschule für angewandte Wissenschaften
• Note: 1,0
• Autor: Jessica Salver (Autor:in)
• Erscheinungsjahr: 2005
• Seiten: 119
• Katalognummer: V137288
• ISBN (eBook): 9783640445202
• ISBN (Buch): 9783640445516
• Sprache: Englisch
• Schlagworte: brand management, tourismus, tourism, hotel, hotellerie, hotel industry, hotel business, markenführung, customer loyalty, customer retention, kundentreue, loyalität, kundenbindung, branding, marketing