CREATING BRAND EQUITY | CHAPTER 9 269

6. A branding strategy identifies which brand elements a 7. Brands may expand coverage, provide protection,
firm chooses to apply across the various products it extend an image, or fulfill a variety of other roles for
sells. In a brand extension, a firm uses an established the firm. Each brand-name product must have a well-
brand name to introduce a new product. Potential ex- defined positioning to maximize coverage, minimize
tensions must be judged by how effectively they lever- overlap, and thus optimize the portfolio.
age existing brand equity to a new product, as well as 8. Customer equity is a complementary concept to
how effectively they contribute to the equity of the brand equity that reflects the sum of lifetime values of
parent brand in turn. all customers for a brand.

Applications
Marketing Debate Marketing Discussion
Are Brand Extensions Good or Bad? Brand Equity Models
Some critics vigorously denounce the practice of brand How can you relate the different models of brand equity in
extensions, because they feel that too often companies lose this chapter to each other? How are they similar? How are
focus and consumers become confused. Other experts they different? Can you construct a brand-equity model that
maintain that brand extensions are a critical growth strategy incorporates the best aspects of each model?
and source of revenue for the firm.
Take a position: Brand extensions can endanger
brands versus Brand extensions are an important
brand-growth strategy.

Marketing Excellence the doors to new product categories. Among these were
Richardson-Vicks (makers of personal care products like
Pantene, Olay, and Vicks), Norwich Eaton Pharmaceuticals
>>Procter & Gamble (makers of Pepto-Bismol), Gillette, Noxell (makers of
Noxzema), Shulton’s Old Spice, Max Factor, and the Iams
Company.
Today, P&G is one of the most skillful marketers of
consumer packaged goods in the world and holds one of
the most powerful portfolios of trusted brands. The com-
pany employs 138,000 people in more than 80 countries
worldwide and has total worldwide sales of more than
$79 billion a year. It is the leader in 15 of the 21 product
categories in which it competes, has 23 billion-dollar
global brands, spends more than $2 billion annually on
R&D, and serves more than 4 billion people in 180 differ-
ent countries. Its sustained market leadership rests on a
number of capabilities and philosophies:
• Customer knowledge. P&G studies its customers—
both end consumers and trade partners—through
Procter & Gamble (P&G) began in 1837 when brothers-in- continuous marketing research and intelligence
law William Procter and James Gamble, whose wives were gathering. It spends more than $100 million on over
sisters, formed a small candle and soap company. From 10,000 formal consumer research projects every
there, P&G innovated and launched scores of revolutionary year and generates more than 3 million consumer
products of superior quality and value, including Ivory soap contacts via its e-mail and phone center. It also
in 1882, Tide laundry detergent in 1946, Crest toothpaste emphasizes getting its marketers and researchers
with fluoride in 1955, and Pampers disposable diapers in out into the field, where they can interact with con-
1961. P&G also acquired a number of companies to open sumers and retailers in their natural environment.
270 PART 4 BUILDING STRONG BRANDS

• Long-term outlook. P&G takes the time to analyze create strong consumer awareness and preference.
each opportunity carefully and prepare the best prod- In recent years, the company has shifted more of its
uct, then commits itself to making this product a suc- advertising budget to online marketing efforts and
cess. It struggled with Pringles potato chips for almost social media such as Facebook, Twitter, and blogs.
a decade before achieving market success. Recently, These efforts help infuse stronger emotional ap-
P&G has focused on increasing its presence in devel- peals into its communications and create deeper
oping markets by concentrating on affordability, brand consumer connections.
awareness, and distribution through e-commerce and • Aggressive sales force. P&G’s sales force has been
high frequency stores. named one of the top 25 by Sales & Marketing
• Product innovation. P&G is an active product innova- Management magazine. A key to its success is the
tor, devoting $2 billion annually to research and devel- close ties its sales force forms with retailers, notably
opment, an impressively high amount for a packaged- Walmart. The 150-person team that serves the retail
goods company. It employs more science PhDs than giant works closely with Walmart to improve both the
Harvard, Berkeley, and MIT combined and applies for products that go to the stores and the process by
roughly 3,800 patents each year. Part of its innovation which they get there.
process is to develop brands that offer new consumer • Manufacturing efficiency and cost cutting. P&G’s repu-
benefits. Recent innovations that created entirely new tation as a great marketing company is matched by
categories include Febreze, an odor-eliminating fabric its excellence as a manufacturing company. P&G
spray; Dryel, a product that helps “dry-clean” clothes spends significant amounts developing and improv-
at home in the dryer; and Swiffer, a cleaning system ing production operations to keep its costs among
that more effectively removes dust, dirt, and hair from the lowest in the industry, allowing it to reduce the
floors and other hard surfaces. premium prices at which some of its goods sell.
• Quality strategy. P&G designs products of above- • Brand-management system. P&G originated the
average quality and continuously improves them in brand-management system, in which one execu-
ways that matter to consumers, including Tide com- tive is responsible for each brand. The system has
pact detergents, Pampers Rash Guard (a diaper that been copied by many competitors but not often
treats and prevents diaper rash), and improved two-in- with P&G’s success. Recently, P&G modified its
one shampoo and conditioner products for Pantene, general management structure so each brand cat-
Vidal Sassoon, and Pert Plus. egory is now run by a category manager with vol-
• Brand extension strategy. P&G produces its brands in ume and profit responsibility. Although this new
several sizes and forms. This strategy gains more shelf organization does not replace the brand-manage-
space and prevents competitors from moving in to ment system, it helps to sharpen strategic focus
satisfy unmet market needs. P&G also uses its strong on key consumer needs and competition in the
brand names to launch new products with instant category.
recognition and much less advertising outlay. The P&G’s accomplishments over the past 173 years have
Mr. Clean brand has been extended from household come from successfully orchestrating the myriad factors
cleaner to bathroom cleaner, and even to a carwash that contribute to market leadership.
system. Old Spice extended its brand from men’s fra-
grances to deodorant. Crest successfully extended Questions
into a tooth-whitening system called Crest Whitestrips 1. P&G’s impressive portfolio includes some of the
that removes surface stains from teeth in 14 days. strongest brand names in the world. What are some
• Multibrand strategy. P&G markets several brands in the of the challenges and risks associated with being the
same product category, such as Luvs and Pampers di- market leader in so many categories?
apers and Oral-B and Crest toothbrushes. Each brand
2. With social media becoming increasingly important
meets a different consumer want and competes against
and fewer people watching traditional commercials
specific competitors’ brands. At the same time, P&G is
on television, what does P&G need to do to maintain
careful not to sell too many brands and has reduced its
its strong brand images?
vast array of products, sizes, flavors, and varieties in re-
cent years to assemble a stronger brand portfolio. 3. What risks do you feel P&G will face going forward?
• Communication pioneer. With its acquisition of Sources: Robert Berner, “Detergent Can Be So Much More,” BusinessWeek, May 1, 2006,
Gillette, P&G became the nation’s largest advertiser, pp. 66–68; “A Post-Modern Proctoid,” The Economist, April 15, 2006, p. 68; P&G Fact Sheet
spending over $2.3 billion a year or nearly twice as (December 2006); John Galvin, “The World on a String,” Point (February 2005), pp. 13–24;
Jack Neff, “P&G Kisses Up to the Boss: Consumers,” Advertising Age, May 2, 2005, p. 18;
much as the number two company, General Motors www.pg.com; “The Nielsen Company Issues Top Ten U.S. Lists for 2008,” The Nielsen
Corp. P&G pioneered the power of television to Company press release, December 12, 2008.