Facebook @Dethivaonganhang www facebook com/dethivaonganhang www ThiNganHang com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang 1 Effective Brand Building A Case Study of McDonald’s Corporation 2 Abstr[.]
Facebook: @Dethivaonganhang www.facebook.com/dethivaonganhang Effective Brand Building A Case Study of McDonald’s Corporation www.ThiNganHang.com S Á C H – T À I L I Ệ U T H I T U Y Ể N Trang Abstract The changing world has encouraged big companies to create more personal connection with customers In addition, the constant sustaining of this relationship is required The concept which is used by the companies and prove to be successful is brand building Even though companies establish the brand, not all of them are using it properly and make a good use of it Maximum utility and using all aspects of the brand is the key to success In order to that, the knowledge about the brand is necessary Thesis will present how to effectively build a strong brand by taking theoretical and practical perspective At the beginning reader will be provided with various concepts in the field of branding After that, the case of McDonald’s Corporation will be studied Analysis of McDonald’s brand building process will help in understanding how this extraordinary brand was created In the theoretical part there will be five main issues brought up First various concepts of what a brand is and what are the function of the brand will be described After gaining knowledge what a brand is, different approaches how to build a brand are presented After that the idea of brand equity and valuable functions it perform of the brand is explained The process of creation of brand equity is possible thanks to brand equity drivers Different kind of drivers and function they carry out for brand equity are described At the end of this chapter, after knowing the basic element of the brand, all is summarized by showing various models useful in assessing brand and its equity All theories are useful in assessing and describing effective brand building process The second part of the thesis focuses on McDonald’s Analysis starts with brief presentation of some essential to the case facts After that brand equity drivers of McDonald’s are described one by one, together with the function they perform for brand equity Then the overview of McDonald’s struggle with the brand is presented in chronological order Both of this sections show, that McDonald’s is a successful company thanks to proper brand management and constant control over its image By implementing various elements company can be safe that even if one of them fail, there are others to compensate for it Last section of practical use of branding knowledge present McDonald’s on Brand Asset Valuator Model and the financial value of the brand Even though McDonald’s has a minor loss of brand equity values it stand for towards competition, the financial result are many times better then the ones of competitors After this summary the future of McDonald’s is speculated Thesis shows it is important for companies to have a well thought our branding strategy and knowledge of brand building processes Knowing role the brand performs and the process of brand building allow the company to control how it is assessed in consumers’ minds Careful studying McDonald’s brand building process shows that the company knows how to deal with its brand and proper brand management is their competitive advantage Table of Contents Introduction Theoretical background of brand building 2.1 The Brand 2.1.1 What is the brand 2.1.2 Role of the brand 2.1.3 Extend of branding 12 2.2 Brand building 12 2.2.1 Brand Building Theories 12 2.2.2 What is brand building for? 17 2.3 Brand Equity 18 2.3.1 What is brand equity? 18 2.3.2 Brand equity theory (elements of brand equity and their function) 19 2.3.3 Brand equity drivers (building brand equity) 22 2.4 Brand life cycle, expansion and position on the market 28 2.4.1 Product/Brand life cycle 29 2.4.2 Brand Growth Direction Matrix 30 2.4.3 Brand Asset Valuator 33 McDonald’s strategy for building a successful brand 35 3.1 Historical background of McDonald’s Corporation 36 3.2 McDonald’s Brand Equity drivers 38 3.2.1 McDonald’s Brand Elements 38 3.2.2 McDonald’s marketing activities related to brand building 40 3.3 Historical developments in McDonald’s brand building 46 3.4 Perspectives for McDonald’s 49 Conclusion 53 Bibliography 55 Introduction The world has changed thoroughly in last few decades, especially because of the impact of globalization Frequent migration of individuals, the tremendous acceleration of information exchanges as well as the enhanced geographical expansion and trade of goods and services, have transformed the economic and social environment in many ways Doing business is not the same as forty, fifty years ago Companies have to adapt to the changing world in order to survive or keep the position on the market These changes are especially profound for fast-food sector Looking at the market leader provides good understanding of this process And where should we look for this leader if not in the United States, the market where fast-food become part of national culture There are many outstanding fast-food providers in the USA, but one of them is beyond the competition, McDonald’s Corporation (McDonald’s) It is difficult to find a person who will not know basic information about the Golden Arches But how it is possible? What happened, that children when hear this magic word, instantly know what stands behind it? The interesting problem of McDonald’s brand will be researched at in this thesis Problem Statement The main goals of the thesis are to explain what is a brand, and by applying this knowledge to McDonald’s Corporation, the answer to the question why has McDonald’s been a successful brand, will ne given The goal is also to describe brand building strategy in order to get understanding why having a strong brand is important for the company The paper is written from marketing perspective Market of fast-food is changing together with the world, and despite many attacks McDonald’s was able to come out of the various situations unharmed This was possible because of the strong brand it has Using the case of McDonald’s the thesis describes what a strong brand is What is the role of the brand? How does the process of brand building looks like? What is brand equity and what are brand equity elements? The thesis focuses on getting fair view of how to build and keep the strong brand alive, and how to create, maintain and defend its position in consumer minds Content The thesis is divided into two chapters The first one contains the theoretical background about brand building At the beginning the general idea is presented, and as text proceeds, more details about brand building are introduced The first chapter starts by explaining the idea of the brand and its role Next part in about the process of building the brand Different theories are presented in order to show there are many ways of describing brand building process After that some theories about brand equity, which differ in categories are described Brand equity drivers together with their role and how to manage them properly is the theme of another subsection The last part of the chapter shows different models which are helpful in assessing stage the brand is currently in, and position it occupies in consumer minds Second chapter is about brand building done by McDonald’s First subsection is a brief history and essential fact which help is further analysis of the brand Analysis of the brand starts with description of McDonald’s brand equity drivers and functions they perform After that the process of building McDonald’s brand is explained by focusing on problems the Golden Arches faced throughout the years of existence Applying knowledge gained in previous sections and comparing it with the models used in describing the brand is the theme of next part Current position of McDonald’s brand and it’s performance is estimated At the end of the practical part of the thesis future of the brand, McDonald’s has build throughout the years, is briefly assessed Method Literature about the brand and process of building it is very broad There are many theories in this field Theories presented in this paper and way of doing analysis are believed to provide a fair view on the process of building successful brand The thesis does not use all possible theories, that is why conclusion may be concentrated only around approaches presented However the aim of the thesis was to provide theoretical background for further studies, which will collectively supplement each other and make up whole entity Although there are numerous sources on brand building theory, the case studies for specific companies are rather rare There are not many articles discussing McDonald’s as a brand Even those articles focus mainly on financial aspect of the brand This situation encouraged more detailed research related to brand building theory and its application to McDonald’s Corporation Delimitations and Assumptions Theories that are used for the discussion of McDonald’s case are commonly used and mentioned in literature when the concept of the brand is brought up Even though they have some flaws and they sometimes are criticized, they provide a good understanding of how to build a successful brand The thesis will not focus on criticizing individual theories, but on combining them in one entity in order to obtain a fair method for description and analysis of the chosen brand, which in case of this paper is McDonald’s Throughout the thesis some theories are limited by focusing on case relevant approach Since the marketer approach was chosen in writing the thesis, the financial aspect of the brand is limited to the minimum The practical part, which is applying the theory to the case, is limited only to the McDonald’s in the United States If McDonald’s international activities were taken into consideration the conclusion might be slightly different, however since this subject is too broad, it is limited to the national market of the company Even though the general idea of McDonald’s brand is the same throughout the world, brand operations in specific countries differ according to the consumers That is why, in order to provide a fair understanding of building a brand, the deep analysis of national market is done What is more, since building a successful brand is more about developing relationship with customers by using brand building methods by the company, the influence of competition on this process is omitted Theoretical background of brand building The process of building a strong brand and gaining competitive advantage is not an invention, that at some point of time was made It was the process that throughout the years was growing in importance and along with the scope of branding Nowadays brand building is the process that every company has to take into consideration When looking at market leaders like Google, Nike or Coca-Cola we notice not only the name of the company but also the whole idea behind it This chapter will focus on a brand as crucial element of connecting a company with its customers At the beginning the concept of the brand will be explained, together with its role and implications Then the idea of brand building and functions it performs will be explained together with steps vital to the creation of significant brand equity After that the great focus will be placed on brand equity First different theories will be presented, secondly three main sets of drivers that help in creating brand equity will be described and at the end factors that influence those drivers The next thing that chapter will focus on is the life cycle of the brand 2.1 The Brand There are many definitions of what a brand is There are as well many origins of the word brand But when did it get the meaning it has now? Originally brand was “a mark burned on the hide of an animal to identify its owner, or on the person of a convicted criminal to warn the public of theirs character”(Black 2003: 38) Mark Ritson writes that “the origin of the term brand comes from brandr, the Norse word for fire It means to burn the mark of the producer onto the product that they made.” (Ritson 2006: 17) It is not the time to discuss which meaning was the first and wonder which one is more important The fact is that both interpretations are relevant Even these days, in the era of globalization, there are different definitions of a brand Everything depends on the perspective we are looking from In the past the owners of animals used the word brand which meant for them claiming their property and in case of theft, easy identification For producers of tools the same word meant marking the products with logo of the producer so if there was a need to complain, repair or suggest buying the product to third party the manufacturer could be easily traced For the judiciary branch word brand meant to mark a criminal and inform society of his past and what behaviour could be expected There were many functions which brand had in the past, and so it is nowadays The first chapter includes a brief discussion of brand building theory After explanation of the idea of the brand, theories of brand equity and brand equity drivers are introduced The chapter includes also an assessment of the position of the brand in consumer minds and life cycle the brand follows 2.1.1 What is the brand The definition of what a brand is depends on how deep and from what perspective it is described The Oxford Dictionary of Economics describes brand as “a name used to identify the maker or distributor of a good” For the economists this simplified explanation is enough to understand what a brand is and it is sufficient for the perspective they look at a company The American Marketing Association defines brand as “a name, term, sign, symbol, or design, or a combination of them, intended to identify the goods or services of one seller or group of sellers and to differentiate them from those of competitors”(Kotler 2006: 276) From the marketing perspective brand consists of some specific elements and carries out some function From the perspective of the branding consultancy - Interbrand – brand is “a mixture of tangible and intangible attributes symbolised in a trademark, which, if properly managed, creates influence and generates value” (Interbrand 2007: 4) As it could be expected, consultancy firm is focused more on output, when explaining what a brand is A brand is thus a dimension that differentiates products or services from products and services of the competition which are designed to satisfy the same needs This dimension may contain differences that communicate what brand represents or may be related to the product or service performance This is the definition that will be used in the thesis 2.1.2 Role of the brand In the past the idea of branding was used mostly in terms of marking property or people The function was to inform about the ownership, assign workmanship to the producer or signal the reputation of the individual In today’s world many diversified products or services are branded But why companies decide to brand them? Is it because of the pressure the competitors put on branding and because everybody it? What is the reason of branding and what is the purpose? We simply may say because there are valuable functions which brand performs for a company as well as for customers This chapter will explain main functions of branding by dividing it into two destination groups For contractors the three important roles will be presented, and after that the implications for the consumers and benefits of branding will be explained The brand plays significant role in a performance of a company From the marketer perspective the main advantages of branding are legal protection, identity and loyalty The first role is legal protection Having a brand helps in protecting the unique features or quality of the product, process or any other aspect of the company Kotler and Keller explain how each type of intellectual property rights can be used, by distinguishing into parts, “the brand name can be protected through registered trademarks; manufacturing process can be protected through patents; and packaging can be protected through copyrights and proprietary designs”(Kotler 2006: 277) Legal protection has many implications It ensures that no one beside the company will have the benefits and it guarantees that money can be safely invested in brand building process Large amounts of money spend on advertising campaigns prove a success only if the company can reap benefits from them Identity is the second vital role the individual brand performs for a company The important feature of having a brand is being identified by consumers Having identity allows customers to differentiate the company from the competition It helps them assign past experiences, like the consequences of using the product, to specific manufacturer or distributor What is more, by using brand building the consumer evaluation process of identical items may be influenced by brand awareness For a company having identity means having image which can be managed Even though once it is established it is difficult to change, it is worth an effort since consumers often perceive image as representation of quality and performance Image together with reputation are important issue in brand building process Another function that brand performs is loyalty Brands signal a certain level of quality so that satisfied buyers can easily choose the product again.(Erdem 1998) The certain level of satisfaction that is signalled by a brand like quality has major impact on loyalty Repeatable choosing of the same product has advantages for both a seller and a buyer Brand loyalty assures also “the tendency for consumers to prefer familiar names”(Black 2003: 38) Having certain number of customers helps sellers to plan the investment and development of the company It is a predisposition that every marketer wishes to achieve In other words having 10 loyal customers results in better earnings, which allow to invest money in brand building and in result having a strong brand and better product behind it On the other hand brand performs valuable functions also for consumers According to Kapferer there are eight functions that create value in the eyes of consumers (Table 1) Function Consumer benefit Identification To be clearly seen, to quickly identify the sought-after products, to structure the shelf perception Practicality To allow savings of time and energy through identical repurchasing and loyalty Guarantee To be sure of finding the same quality no matter where or when you buy the product or service Optimisation To be sure of buying the best product in its category, the best performer for a practical purpose Badge To have confirmation of your self-image or the image that you present to others Continuity Satisfaction created by a relationship of familiarity and intimacy with the brand that you have been consuming for years Hedonistic Enchantment linked to the attractiveness of the brand, to its logo, to its communication and its experiential rewards Ethical Satisfaction linked to the responsible behaviour of the brand in its relationship with society (ecology, employment, citizenship, advertising which doesn’t shock) Table The Functions of the Brand for the Consumer (Source: Adapted from Kapferer 1997) These eight functions could be divided into three groups: recognition, reduction of the perceived risk and the pleasure side of the brand Identification and practicality are mechanical and concern the essence of the brand According to Kapferer their role is “to function as a recognised symbol in order to facilitate choice and to gain value”(Kapferer, 1997) Guarantee, optimisation and badge are responsible for reducing perceived risk Finding the same quality every time when making purchase, being sure of buying the best product in its category and knowledge about the image the product presents play an important role in the decision making process Continuity, hedonistic and ethical functions have “a more pleasurable side”(Kapferer, 1997) Continuous satisfaction with the brand which may lead even to enchantment is the goal of every marketer Nowadays more and more emphasis is placed on the ethical function of the brand since customers feel more connected to the brand and expect responsible behaviour in exchange of making the purchase However, all these functions are not achieved automatically, and not every company performs all this functions 11 2.1.3 Extend of branding Every company strives to establish a brand as strong as possible, since it makes doing business easier and smoother For customers brand offers easiness of product choice There is no need to test, challenge or classify to a great depth because of familiar brand, which if properly managed, leaves the hints what this brand stands for and what could be expected (Reisenbeck, 2007) The good example is Apple brand It is possible due to successful branding which is “endowing products and services with the power of a brand” (Kotler, 2006: 278) It is the marketers role to teach consumers about the product, what it does and why consumers should care by creating “mental structures that help consumers organize their knowledge about products and services in a way that clarifies their decision making process” (Kotler, 2006: 278) Crucial role of the brand is to convince customers there are significant differences among brands offering the product But how to create a brand that will perform such functions? It could be done through brand building 2.2 Brand building In order to build a successful brand a lot of effort has to be devoted to brand building process There are many models and each of them focuses on different aspects of the brand There will be presented four different theories BRANDZ and Brand Resonance Model consider brand building as a series of steps, whether Brand Orientation and Brand Leadership are focused on building interconnected models 2.2.1 Brand Building Theories Millward Brown, the marketing research consultant, is the one who developed the model of brand strength called BRANDZ The main idea is the BrandDynamics pyramid presented in Figure which argues that brand building is the process 12 ... the brand 2.1 The Brand There are many definitions of what a brand is There are as well many origins of the word brand But when did it get the meaning it has now? Originally brand was ? ?a mark... of brand building theory After explanation of the idea of the brand, theories of brand equity and brand equity drivers are introduced The chapter includes also an assessment of the position of. .. one of them fail, there are others to compensate for it Last section of practical use of branding knowledge present McDonald’s on Brand Asset Valuator Model and the financial value of the brand