The Relationship between Online Customer Reviews and Brand Equity

March 4, 2014 § Leave a comment

The Relationship between Online Customer Reviews and Brand Equity.

The Relationship between Online Customer Reviews and Brand Equity

March 3, 2014 § Leave a comment

Products with low brand equity require different strategies than products with high brand equity.

Online Customer Reviews

Online Customer Reviews

A recent study showed that encouraging customers with positive experiences to post online reviews can be a powerful strategy for driving customer acquisition. However, such a strategy may not be equally effective for all products. For products with low brand equity, such as new or emerging brands, there is a significant correlation between cumulative online customer reviews (positive or negative) and sales impact. But for products with high brand equity, such as category leaders and well-established brands, cumulative online customer reviews (positive and negative) do not have a significant effect on sales. The study concluded that different strategies are needed for each group.[i]

Low Brand Equity Products

A proactive strategy should be adopted that focuses on generating positive online reviews for product models with low brand equity. This is because they can benefit sales of that particular model directly as well as strengthen equity for the brand overall. This can enable weaker brands to compete more successfully against stronger brands by “flipping the funnel” (Spending less on traditional advertising and more effort on increasing satisfaction and loyalty to drive word of mouth and customer acquisition).

An essential requirement for this strategy to succeed, of course, is a truly superior product offering. One that is relevant, differentiating and, ideally, has the potential to become a category changer. Tactics that can be used to encourage positive online customer reviews include:

  • Make detailed information about products available and easily accessible online.
  • Establish brand communities and early adopter clubs. Members of these clubs can buy products with incentives before launch to spark the feedback process. Management can also use positive feedback as seeds and negative feedback to modify and improve their products before launch.
  • Provide samples to expert review websites. (Anecdotal evidence suggests that customers often refer to expert reviews in their own reviews.)
  • Send reminders and incentives to customers to encourage posting reviews.

High Brand Equity Products

Product models with high brand equity, however, have little to gain by pursuing a concentrated strategy designed to garner and leverage positive online customer reviews. That said, “These products models still receive a significant sales boost from being part of a strong brand; therefore, their resistance to positive reviews does not disadvantage them and they are protected to a degree from negative review.”[ii] And, although models of a strong brand are not affected directly by their own online customer reviews, they can be adversely affected by positive customer reviews for models of weak brands, allowing these competitors to draw consumers away from them. Furthermore, while controlling negative online customer reviews may not be as important for strong brands, brand managers are well advised to monitor them and take corrective actions. This is because the cumulative body of negative reviews overtime can become increasingly important if these brands lose category relevance and strength.[iii]

So, to avoid risk of losing category relevance, strong brands have more to gain by being vigilant in their efforts to create barriers to competition instead of on generating online customer reviews. Two leading strategies to consider include:

  • Invest to create superior product models that leapfrog the competition by improving performance around common features, adding new features or eliminating major limitations. Such a leapfrog strategy can dramatically reduce incidences of positive online customer reviews on product models of weaker brands and essentially make these competitors irrelevant.
  • Create energy through branded sponsorships (e.g., Valvoline motor oil and its NASCAR sponsorship) or branded social programs (e.g., Avon Walk for Cancer).  Brand energizers, such as these, can dramatically strengthen brand loyalty and negate the impact of positive reviews on product models of weaker brands.

Summary

Brand equity plays a significant role in moderating the relationship between online customer reviews and sales. Products with low brand equity have much to gain by directly pursuing strategies to capture and leverage positive online customer reviews. While products with high brand equity have more to gain by being on the offensive and continually raising the bar through innovation or creating brand energy to strengthen customer loyalty and reduce the impact of positive reviews on competitors’ products.


[i] “The Effects of Positive and Negative Online Customer Reviews: Do Brand Strength and Category Maturity Matter?” by Nga N. Ho-Dac, Stephen J. Carson and William L. Moore, Journal of Marketing, Volume 77: pages 37-53, 2013

[ii] Ditto i

[iii] Ditto i

The End of Your Brand Story

February 13, 2014 § Leave a comment

R. Jay Olson:

Tell your story from the heart. Find those interesting threads that connect your brand purpose and values. This is the art of brand story telling.

Originally posted on Talk & Engage:

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Every story has a beginning, a middle and an end.

And you know what? You already know the end of your brand story.

View original 230 more words

Today’s Biggest Business Challenge

February 11, 2014 § Leave a comment

Today’s Biggest Business Challenge.

Today’s Biggest Business Challenge

February 11, 2014 § Leave a comment

These days, disruption happens at lightning speed. Companies must continually reinvent themselves or risk brand irrelevancy – the biggest problem facing most businesses today.

The simple truth is that most organizations are either unaware of the looming signs that their business models are under siege or, unfortunately, underestimate the magnitude. Digital disruption can drive dramatic changes in market dynamics, such as the emergence of new categories/subcategories that raise the bar on consumer preferences, as well as the onslaught of new and non-traditional competitors. It has been estimated that companies are now forced to redefine their business models about every six years on average or face brand irrelevancy.

The problem is exacerbated by the fact that many organizations do not see it coming until it’s too late. Or, they are unable to confront these formidable realties with forward-looking, game-changing strategies. Brand irrelevancy occurs when consumers choose a target category or subcategory to buy and a particular brand (even if it was once the category leader) has slipped from the consideration set, resulting in shrinking margins and market share.

Antiquated organization structures, silo thinking, traditional mindsets and fierce P&L pressure to defend existing turf are among the chief barriers that prevent business model reinvention. Many corporate leaders choose to take the easy path by making incremental enhancements to their core competencies instead of driving category-changing transformation. They argue that it is better to “stick to our knitting,” “keep our focus,” “avoid diluting our energies. However, traditional thinking such as this can be riskier today!

So how do organizations create/renew brand relevance in today’s volatile business climate?

Transformational Innovation

Innovation 2 One strategy, according to David Akker in his book titled Brand Relevance, is to create transformational offerings that form new categories/subcategories and make the competition irrelevant. He argues that creating a new category/subcategory can result in a first-mover advantage and the potential of earning significant ROI because, with little or no competition, margins can be very attractive. Tenure of this marketing position depends on the barriers the firm creates, including customer loyalty, an image of authenticity, scale economies, preemptive strategies and competitor inhibitions to name a few.

Akker’s book, which I highly recommend reading, provides a powerful framework for finding new concepts, picking the winners, defining and managing new categories/subcategories, and creating barriers to ensure sustainable differentiation. It also offers an array of in-depth case studies on companies, such as Best Buy, Toyota, Zipcar and Apple. These companies have won the brand relevance battle by boldly creating breakthrough offerings that form new categories/subcategories, and effectively managing them to become the undisputed exemplars.

Brand Equity

A second strategy for creating or maintaining brand relevance is to look beyond the offering and focus on specific brand equity attributes that make your brand unique from all others and drive consumer choice. Frankly, for companies in many types of service industries or in highly commoditized business segments where it is easy for competitors to copy the features of your offering, this is the only sensible strategy that can be pursued to drive sustainable competitive advantage. This can make competitors irrelevant because they lack these “essential” elements.

Brand equity attributes that build trust and/or deliver powerful self-expressive benefits include:

  • Shared interests that are as meaningful to customers as the offering itself (e.g., Pampers, which has positioned its brand’s category to be associated with baby care as well as being a disposable diaper brand)
  • A distinctive and enduring brand personality (e.g., Asahi Super Dry, which has a western, young and modern personality that contrasts sharply to its archrival, Kirin, which is the classic  “your father’s brand”
  • Organization values and culture, such as innovation (3M), customer-driven (Nordstrom’s), quality-driven (Cadillac) and concern for the environment (Toyota Prius)
  • Passion (e.g., Apple because of its passion for design and commitment to delivering innovation and an over-the-top user experience)
  • Social programs (e.g., The Body Shop through its visible endorsement of third-world ecology and workforces and Lay’s SunChips through its visible use of solar power and compostable packaging)

5 Steps for Creating Powerful Branded Service Encounters

February 2, 2014 § Leave a comment

5 Steps for Creating Powerful Branded Service Encounters.

4 Key Questions to Guide Brand Architecture Decisions

February 2, 2014 § Leave a comment

In truth, a pure brGE Logoanded house structure seems to be rare these days. Take GE, for example. It brilliantly uses a market-driven strategy to organize its branded house architecture – GE Commercial Finance, GE Consumer Finance, GE Healthcare, GE Industrial and GE Infrastructure. But, additionally, GE owns a commanding 80% share of NBC Universal and this business group is presented as a separate, standalone brand with no connection to GE.

While a branded house strategy is arguably the most effective overall for enhancing clarity, synergy and leverage, brand portfolio structures must also be fluid and flexible. Like GE, separation is sometimes needed to adjust for new brand acquisitions that don’t neatly fit within the current brand structure. Market expansion and fragmentation, audience segmentation strategies, channel dynamics and global realities can also create pressure on the need for changing existing brand structures.

So, when does it make sense to strategically organize new brands or existing subbrands outside of your branded house umbrella/shift them toward the house of brands end of the brand relationship spectrum? According to David A. Aaker, the need for brand separation can be determined by answers to four key questions when introducing a new brand. Keep in mind, of course, that these same issues also arise when evaluating an existing brand architecture to identify needed adjustments.

Does the Master Brand Contribute to the Offering?

In a branded house scenario, the master brand must be able to add value by becoming attached to a new product offering (regardless of whether it is acquired or developed organically). Value can be added by the master brand through associations that contribute to the new product’s value proposition, by providing credibility, by sharing visibility and/or by generating communication efficiencies. All aspects of brand building involve significant fixed costs that can be spread across the marketing mix (i.e., advertising, promotion, PR, packaging, POS, collateral, web, mobile, etc.). So, synergies that can be created by media spillover into adjacent markets and increase economies of scale are always an important consideration.

Let’s suppose for a moment, though, that the USPS should decide to expand its footprint beyond postal and parcel delivery service in the residential delivery market by acquiring a new brand, such as Peapod (America’s leading internet grocer and home delivery service). In this hypothetical example, it could be argued that the brand image for USPS is so powerfully aligned to its core business (postal delivery) that this association might limit its ability to contribute to the new offering. Similar to GE with its acquisition of NBC Universal, a sensible strategy might, therefore, be to present Peapod as either a shadow endorsed brand or as a separate standalone brand with no connection to USPS.

Will the Master Brand Be Strengthened?

The potential impact of a brand extension on the master brand’s equity should also always be a primary consideration. If overlooked, real brand equity damage can occur. For example, if Healthy Choice were to expand into a non-healthy food category, say soft drinks or candy, this could severely undercut integrity of the master brand (whose name and core identity are synonymous with healthy foods).

This is exactly why Marriott International adopted an endorsed brand scenario for its Courtyard and Fairfield Inn & Suites properties. Because the Marriott’s core identity was historically linked to high-end hotels and resorts, the name Courtyard by Marriott, for example, eliminates confusion and reduces the potential for negative brand equity impact to its premium Marriott brand. In fact, Marriott International’s hybrid brand structure is, indeed, highly flexible, thus enabling brand extensions in virtually every segment of the hospitality industry – Iconic luxury (The Ritz-Carlton), luxury (JW Marriott), lifestyle/collections (Renaissance Hotels), signature (Marriott), modern essentials (Courtyard and Fairfield Inn & Suites), Extended Stay (Residence Inn) and Destination Entertainment (Gaylord Hotels and Marriott Vacation Club).

Is There a Compelling Need for a Separate Brand?

The development and support of a new, separate brand is expensive and difficult. Using an established brand in a branded house strategy, where equity accrues to the master brand, reduces the investment required and enhances synergy and clarity across the offering. Thus, a separate brand should be developed or supported only when a compelling need exists such as:

  • The potential to create or own a key association or a product class
  • When a new brand name can help tell the story of a truly new and different offering
  • When linkage to an existing brand creates a potential liability
  • The need to retain the name of an acquired brand
  • When channel conflicts preclude using an established brand

When Toyota Motor Corporation expanded into the luxury automobile market in 1989, there was a compelling need for a separate brand – Lexus – because Toyota’s brand identity was inextricably linked to mid-market automobiles. Creation of a separate brand (with added credibility by Toyota as a shadow endorser), provided the freedom and opportunity for growth with no pre-conceived associations attached to the Toyota name. Today, Lexus has become the undeniable leader in the luxury automobile category.

Zappos.com

Zappos.com

Amazon’s acquisition of Zappos.com illustrates the need to retain an acquired brand’s name. Zappos.com was acquired by Amazon in 2009 and has continued to operate as an independent brand. Changing the name to Amazon would have likely contributed minimally to the new offering. Zappos.com was and remains a powerhouse brand in its own right because of its unique culture and “Powered by Service” mantra in the footwear and related apparel products retail e-commerce industry.Will the Business Support a New Brand Name?

The “will” is especially important. It is futile to plan brand building efforts to support a new brand if funding will be inadequate to fuel brand construction and maintenance.

A major reason for Kodak’s failure was a lack of willingness by its leadership team to build a balanced portfolio of business models. According to Kay Plantes in an article published on her blog titled “Do you have a strong portfolio of business models?,” Kodak’s leaders chose to take the path of least resistance  by “riding the easy horse while delivering their Wall Street numbers and avoiding the far harder task of squeezing today’s cash cow businesses to build tomorrow’s growth engines.” Unfortunately, “the most powerful voices at the table were the leaders running the cash cow businesses.” To maintain their lucrative film business, they prevented investment in growing and/or emerging business segments driven by digital technology.

But imagine the possibilities. What if Kodak had organized its digital photography business as a separate standalone brand with its own funding, so that this smaller disruptive team would have had the freedom to innovate and grow? Could this have saved the day for Kodak? Guess we’ll never know.

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