This assignment selects current approaches, and thinkings in the field of brand strategy and analyzes the implementation of these at Apple Inc.. In the first part, the author starts with a short description of brand strategy and immediately switches over to the analysis of certain methods, always focussing on the computer and consumer electronics market to prepare the application on the company in the second part.
The first approach to be mentioned is brand extension. The author shows that the introduction of new products under the umbrella of a parent brand is a popular decision nowadays because the new product can hugely benefit from the established brand loyalty. The author then states that brand architecture within a company has to be planned and organized in detail as it has a huge impact on success or failure of products or brands. Practical methods for increasing brand equity can be, for instance, improving perceived quality, enhancing a product with services and focussing on design. Establishing and using a brand community is also an appropriate way of strengthening a brand.
After identifying the mentioned brand strategy approaches at Apple Inc. the author comes to the conclusion that Apple uses these methods in a very efficient and effective manner. This is generally because the company puts the customer in the centre of all action and, hence, it is considered as the main example in the field of branding. Only the fact that Apple as a parent brand could damage the individual brands in case of a worst-case scenario of the parent brand, could be figured out. If Apple remains its current brand strategy with continuous adjustments to the customer, the brand will still do fine in the future. Current Thinking in Brand Strategy:
Brand management and its strategies became more important in the past. At first, the author will explain recent strategic approaches of how companies nowadays act when it comes to introducing a new product and how companies need to manage several brands. Then some new strategies of increasing brand equity will be discussed. The mentioned strategies are only few of many recent strategies in branding. The author chose them in regards of Apple Inc. and its recent strategies.
"A branding strategy for a firm identifies which brand elements a firm chooses to apply across the various products it sells." (Kotler and Keller, 2009: 304). All brand identities have to be linked to customer needs, but always being consistent with the capabilities of the company and its branded products. (Boatwright et al., 2009: 1)
A main method for introducing new products to the market, which proliferated over the last decade (Han, 1998: 1), is brand extension. Kotler and Keller (2009) say, that brand extension means to use an already established brand to launch new products. Brand extension is divided into two main categories: line extension and category extension. Line extension means that the already established brand (parent brand) covers a new product which is being released in an already served product category. "Most new products are in fact line extensions - typically 80% to 90% in any one year" (Kotler and Keller, 2009: 298) Category extension means to release the new product apart from all established product categories of the company by creating a new one.
New products can immediately benefit from the already established brand loyalty. Comparing to the introduction and development of a new brand for a product, the company lowers the risk of failing to link a new brand with certain, desired perceptions of the customer and, at the same time, it saves costs for the development of the brand (Buil et al., 2009: 1301; de Chernatony and McDonald, 2003: 51).
Recent researches found that benefits of brand extension depend on the brand equity of the parent brand. Buil et al. (2009: 1304) say, the higher the brand equity of the parent brand is, the higher is the positive effect of brand extension.
Other researches show that new products which have no close relation to typical brand products can cause a negative consumer perception of the product brand image. The worst case, called 'brand dilution', is when a product decreases the consumer's perception of the parent brand by having too less connection to it (Kotler and Keller, 2009: 300). To avoid this, it is advisable to focus on communicating the general brand image when introducing little related new products (Martinez and de Chernatony, 2004: 46 - 47; Han, 1998: 10).
Successful, global companies are likely to use a multi-brand approach rather than a mono-brand approach (Chailan, 2009: 174 - 175). Nowadays, according to Chailan (2009: 173), "Many firms are more and more concerned by the definition of the relationship between brands within the company as parts of a whole. This change leads to the development of new queries regarding multi-brand strategies and to the search for the best management of the relationship between brands." Multiple brands of the same company are not independent.
Hence, a company has to develop its brand portfolio to coordinate every single brand in order to avoid conflicts between the brands and strengthen each of them to cover market segments in the most efficient way (Kapferer, 2008: 408; Kotler and Keller, 2009: 301).
In terms of brand architecture, a company needs to plan and analyze how a brand is related to one or more specific products or product categories (Chailan, 2009: 175). Brand architecture is mainly divided into three types. In the monolithic structure a company uses its own name in all product lines to spread a consistent culture across all products and departments. Endorsed structure means, that a company has brands for specific product groups or lines and often combines them with the company name. In a branded structure, the company's name is almost invisible. Products and product lines have no relation to either each other or to the name of the company (de Chernatony and McDonald, 2003: 396; Chailan, 2009: 176).
Kapferer (2008: 351 - 352) says, that brand architecture deals with the hierarchical levels of brands, connections between brands and the visibility of the corporate/parent brand in a company. Furthermore, he determines two main strategic direction types nowadays: 'house of brands' and 'branded house'. Very briefly described, a 'house of brands' strategy means that the products of a company gain most of their brand equity through the brand of the product itself or the product line. In this case, all brands are more independent. In contrast, 'branded house' means that all products or services of a company are mainly covered by the company's corporate brand. Consequently, all brands of the company are strongly coherent (Kapferer, 2008: 353).
It seems that introducing new products under an established brand of the company is the way with the smallest risk. The new product can benefit from the brand equity and, hence, gain market share more quickly. Furthermore, the company saves costs for developing a new brand. Indeed, using brand extension should be analyzed deeply in advance. A new product could fail and consequently also damage the established brand. Moreover, releasing a product to the market which does not fit enough to the typical brand products could lead to brand dilution of the established brand.
In terms of having or developing several brands, a company has to define clearly what its brand strategy is. Brands have to be managed and coordinated in the brand portfolio to cover different markets or market segments which don't overlap. The brand architecture might be the most important part of a brand strategy, as it determines the fundament of it. According to Kapferer (2008: 375 - 377), most companies nowadays move towards a branded house strategy as it bundles a company's values and customer communication. Companies have realized that brands are their true capital and they should focus on sustaining them with new products.
According to Aaker (1991: 16), brand equity consists of assets which all together add or subtract customer value. Moreover, better added value leads to more confidence in customers in buying products of this brand and to customer satisfaction. Hence, every company should try to increase its brand equity.
One main asset of brand equity is the quality customers perceive of a brand. A customer perceives quality when the product he buys fits or exceeds his expectations (Kotler and Keller, 2009: 169). This is not result of recent research but nowadays even more important for companies. The reason is the risen quality in the last decade. Evans (2002: 134) states, that we have been through a 'quality revolution' which led to higher quality expectation levels of customers.
"Brands are barely keeping up with consumer expectations now. Every day consumers adopt and devour the latest technologies and innovations, and hunger for more." (Passikoff, 2009: 32) Perceived quality does not need to focus on the performance of the brand and its products - it can also concern environmental or society issues (de Chernatony and McDonald, 2003: 60).
Perceived quality is a benefit which a customer receives with the product. Therefore, it is useful to add more benefits to a product than competitors do. A recent development is the combination of products and services, so called hybrid solutions. This can generally be done by offering products and services which are either dependent or independent and at least somewhat complementary (Venkatesh et al., 2009: 95 - 97). Kotler and Keller (2009: 411) define these services as value-augmenting services which extend a product beyond its core purpose. Indeed, a company should also deliver good 'traditional' services along with its products, like e.g. repair services or explanations for using a product. According to Lantieri and Chiagouris (2009: 81), quality of services has declined nowadays. Less human beings are in contact with the customer which often leads to upset or desperate customers and, thus, to worse customer value. Companies have to redevelop those services so that customers feel more valued again.
Customer loyalty is another crucial asset which affects brand equity. A recent approach of increasing customer loyalty which came up in the last decades was to focus on design (Anonymous, 2007: 6). Design is an emotional value of a brand. It is not only about brand or product design, also the role of packaging design is increasing. The chosen design needs to be specific and clearly defined (Kapferer, 2008: 409 - 410). Many companies ignored this aspect. Accordingly, products with better performance, technology and price can fail because they are not as 'cool' as a well designed product of a competing company is (Anonymous, 2007: 6).
Apart from, for instance, continuously delivering good quality at good prices and making customers identify with the brand, a new approach of increasing customer loyalty is by building a customer community of the brand. Brand communities deliver benefits for both, the company and the customer. A company is able to communicate its values to the customer and react quickly to customers' response. Furthermore, customers feel valued by the company listening to their ideas and they meet other customers of the brand (de Chernatony, 2006: 197 - 198). On the other hand, brand communities on the internet can also leverage the circulation of bad experiences with a brand. Hence, a company has to be aware of what is happening on the internet to react quickly. Often online brand communities emerge just due to customers' desire to exchange their experiences and without any intention of the company. E.g. currently one of five 'tweets' on twitter is brand related (Passikoff, 2009: 33).
Brand Strategy applied to Apple Inc.
Apple Inc. is a successful company producing highly qualitative, innovative and design oriented consumer electronics and computer systems for appropriate prices. Apple basically offers desktop computers, laptops, mp3-players, computer peripherals and different types of software, including its own operating system. Currently, Apple is placed on rank #6 of top 100 most valuable global brands 2009 with an estimated brand value of $63,113m (Figure 2, appendix). What is Apple's strategic way regarding to the recent approaches mentioned in part one? Why is this company so successful?
Apple uses not only brand or line extension as a brand extension strategy - it uses both. Till 2001, Apple was basically active in the computer sector and already popular due to its easy-to-use products (Linzmayer, 2004: 33). In 2001 the company developed the famous iPod. This was a huge act of category extension as portable music devices had not been part of Apple's product lines before. The introduction of the iPhone in 2007 was also a category extension of the company's product categories, as Apple had never been active in the cell phone market. Furthermore, the company introduced several new products in each category, e.g. the iPod shuffle, which belongs to a line extension.
Additionally Apple released Mac OS X, its first multi-threaded, protected memory operating system and introduced Apple retail stores (O'Grady, 2009: 13). This was the time when Apple started to grow and become popular drastically. Generally, since Apple's biggest success with the iPod, new products and categories benefited hugely from the perceived values of the parent brand, which stands for high performance quality and especially extraordinary style (Kotler and Keller, 2009: 363).
Marketing Minds (2008) mentions, that Apple has a monolithic brand structure as it uses the Apple brand across all product lines. In fact, this is not the whole truth. Apple owns several brands, e.g. the iPhone, the iPod, the iMac and the MacBook. Any of these brands is well known and consumers perceive specific emotions and aspects with them. Though, the name of the company is a brand itself. Hence, Apple uses an endorsed brand architecture (shown in Figure 3, appendix) as it releases product or product line brands under the roof of the parent brand of the company (de Chernatony and McDonald, 2003: 396; Chailan, 2009: 176).
According to Kapferer's six brand architecture strategies, the author concludes that Apple uses the 'source brand strategy' which belongs to the house of brands category. Apple products embody two brand levels, which have some kind of family spirit among them (Kapferer, 2008: 367 - 368). This family link might have allowed Apple to introduce new product categories, like the iPod, without brand dilution of the parent brand. Moreover, the laptop and desktop computer lines benefited from the success of the iPod, which is called the 'Halo effect' (O'Grady, 2009: 59).
Besides its innovative products Apple tries to stimulate the customer loyalty by focussing on design (O'Grady, 2009: 13; Anonymous, 2007: 5 - 6) The company realized this after Jonathan Ive designed the iPod which became such a big success. Since then, Apple concentrated to create a distinctive design for each product to increase customer value and customer loyalty. Apple's product have this specific level of 'coolness' which many customers are looking for (Anonymous, 2007: 6). Even the design of all packagings of Apple products is extraordinary and very appealing to customers (O'Grady, 2009: 43).
In terms of customer perceived quality, Apple delivers highly qualitative products of each brand. "The second-best desktop brand after Apple, Dell, is 25 percent more likely to experience some kind of hardware failure than a Mac. Gateway and Compaq laptops are 50 percent more likely to fail than Macs." (Cruikshank, 2006: 82)
Another aspect which contributes to perceived quality is that Apple realized that customers increasingly think 'green'. According to de Chernatony and McDonald, brand strategists need to scan the macro-environment for current political, environmental or social developments (2003: 60). Thus, Apple developed new power saving devices and uses materials which can be recycled (Burrows and Hesseldahl, 2009: 68 - 69; Reuters, 2009: 1). Now, Apple claims to produce the 'world's greenest lineup of notebooks' (Figure 4, appendix).
A short time after the iPod it developed iTunes, which was supposed to contain everything to make downloading music and podcasts as easy as it could be (Cruikshank, 2006: 170). Nowadays, iTunes is not just a music portal, but it offers full HD movies, TV series, lectures from famous schools and, indeed, the AppStore, which like iTunes for the iPhone. In figuring out the customer's needs, Apple made a big deal with offering these hybrid solutions. Only after nine months, the App Store, which offers applications for the iPhone and the iPod Touch, counted about 1 billion downloads (Conneally, 2009).
According to traditional services, Apple launched its own retail stores in 2001. Each of this stores sells exclusively Apple products and has a 'Genius Bar' where customers get technical support for their products. Furthermore, customers have the opportunity to attend workshops and presentations to learn about Apple's products (Kotler and Keller, 2009: 465).
Apple has built a massive brand community. E.g. Apple engages customer by establishing local Apple-user groups which enable them to share ideas and learn about Apple products. On the other hand, Apple gets feedback from these user groups in order to adjust the company and its products to customer needs (Kotler and Keller, 2009: 180).
To come to a conclusion, Apple has achieved a branding goal most companies never achieve. Basically since the beginning of the 21st Century, the company created a special Apple brand experience which comes along with all of its products and services. Customers feel valued and, thus, brand equity raise amazingly. Apple's brand strategy is often mentioned as an example nowadays and is one of the main reasons for its success (Shea, 2008). The only weakness the author could identify is that the endorsed brand architecture could lead to a decline of many individual brands in case of a huge scandal for the parent brand. But the risk for this is too small as Apple has too many enthusiasts and continuously listens to its customers.
Although Apple was not ever such a successful company, after the impact of the iPod the company started focussing on customer value and customer needs. Nowadays, the 'special Apple experience' is so huge and Apple's fans are such enthusiastic that people film themselves unpacking their newly bought Apple products and post the videos at websites like YouTube (Figure 5, appendix). In a recent survey, a man who collects all boxes of Apple products he has has bought in his life, said "I can't imagine throwing them away. It's more than a record of a serial number; it's a record of a good event that happened in my life." (Mortensen, 2009)
- Aaker, D. A. (1991): 'Managing Brand Equity: Capitalizing on the Value of a Brand Name', MacMillan, New York
- Cruikshank, J. L. (2006): 'The Apple Way', McGraw-Hill, New York
- De Chernatony, L. (2006): 'From Brand Vision to Brand Evaluation - The strategic process of growing and strengthening brands', 2nd Edition, Butterworth-Heinemann, Oxford
- De Chernatony, L. and McDonald, M (2003): 'Creating Powerful Brands', 3rd Edition, Butterworth-Heinemann, Oxford
- Kapferer, J.-N. (2008): 'The New Strategic Brand Management - Creating and Sustaining Brand Equity', 4th Edition, Kogan Page, London
- Kotler, P. and Keller K. (2009): 'Marketing Management', 13th Pearson International Edition, Pearson Prentice Hall, New Jersey
- Linzmayer, O. W. (2004): 'Apple Confidential 2.0: 'The Definitive History of the World's Most Colorful Company', No Starch Press, San Francisco
- O'Grady, J. D. (2009): 'Apple Inc. - Corporations that changed the world', Greenwood, Westport
Journals & Articles:
- Anonymous (2007): 'IBM, Procter & Gamble and Deloitte Touche are putting design at the heart of the things - How looks can kill competition', Strategic Direction, Vol. 23, No. 1, pp. 5 - 8, Accessible at www.emeraldinsight.com/10.1108/02580540710716518
- Buil, I., de Chernatony, L. and Hem, L. (2009): 'Brand Extension Strategies: perceived fit, brand type, and culture influences', European Journal of Marketing, Vol. 43, No. 11/12, pp. 1300 - 1324, Accessible at www.emeraldinsight.com/0309-0566.htm
- Burrows, P. and Hesseldahl, A. (2009): 'Finally, a Big Green Apple?', BusinessWeek; 10/5/2009, Issue 4149, pp. 68 - 69, Accessible at http://search.ebscohost.com.proxy.grenoble-em.com/login.aspx?direct=true&db=bth&AN=44313424&site=bsi-live
- Chailan, C. (2009): 'Brand architecture and brands portfolio: a clarification', EuroMed Journal of Business, Vol. 4, No. 2, pp. 173 - 184, Accessible at www.emeraldinsight.com/1450-2194.htm
- Evans, G. (2002): 'Measuring and managing customer value', Work Study, Vol. 51, No. 3, pp. 134 - 139, Accessible at http://www.emeraldinsight.com/0043-8022.htm
- Han, J. (1998): 'Brand Extensions in a Competitive Context: Effects of Competitive Targets and Product Attribute Typicality on Perceived Quality', Academy of Marketing Science Review, Vol. 1998, No. 01, Accessible at http://www.amsreview.org/articles/han01-1998.pdf
- Lantieri, T. and Chiagouris, L. (2009): 'Brand Trust in an Age without Trust: Expert Opinions', Journal of Consumer Marketing, 26/2, pp. 78 - 86, Accessible at www.emeraldinsight.com/0736-3761.htm
- Martinez, E. and de Chernatony, L. (2004): 'The effect of brand extension strategies upon brand image', Journal of Consumer Marketing, Vol. 21, No. 1, pp. 39 - 50, Accessible at www.emeraldinsight.com/0736-3761.htm
- Passikoff, R. (2009): '10 branding trends for 2010: Value is the new black', Functional Ingredients Magazine, November 2009, Issue 92, pp. 32 - 33, Accessible at http://search.ebscohost.com.proxy.grenoble-em.com/login.aspx?direct=true&db=bth&AN=44916973&site=bsi-live
- Reuters (2009): 'Computer Makers Dell, HP and Apple push Green', Channel Insider, 6/15/2009, Accessible at http://search.ebscohost.com.proxy.grenoble-em.com/login.aspx?direct=true&db=bth&AN=43516715&site=bsi-live
- Shankar, V., Berry, L. L. and Dotzel, T. (2009): 'A Practical Guide to Combining Products and Services', Harvard Business Review, November 2009, pp. 94 - 99, Accessible at http://search.ebscohost.com.proxy.grenoble-em.com/login.aspx?direct=true&db=bth&AN=44752270&site=bsi-live
- Apple (2009): 'Apple - MacBook Pro - The world's greenest lineup of notebooks', 27 Nov 2009, Accessible at http://www.apple.com/macbookpro/environment.html
- Conneally, T. (2009): 'Apple counts 1 billion app store downloads', 27 Nov 2009, Accessible at http://www.betanews.com/article/Apple-counts-1-billion-app-store-downloads/1240528021
- Marketing Minds (2008): 'Apple's Branding Strategy', 28 Nov 2009, Accessible at http://www.marketingminds.com.au/branding/apple_branding_strategy.html
- Mortensen, P. (2009): 'Meet the Apple Pack Rats', 27 Nov 2009, Accessible at http://www.wired.com/gadgets/mac/commentary/cultofmac/2005/09/68810
- Shea, R. (2008): 'Apple's Branding Strategy Delivers Superior Results', 27 Nov 2009, Accessible at http://seekingalpha.com/article/74064-apple-s-branding-strategy-delivers-superior-results
- YouTube (2009): 'Search results of unboxing videos on YouTube', 27 Nov 2009, Accessible at http://www.youtube.com/results?search_query=apple+unboxing&search_type=&aq=f
- MillwardBrown Optimor (2009): 'Brandz Report Top 100 Most Valuable Global Brands 2009', Accessible at http://www.brandz.com/upload/brandz-report-2009-complete-report%281%29.pdf