The effect of branding on the development of a company with an example of Puma

A critical analysis


Seminar Paper, 2009
53 Pages, Grade: 2,0

Excerpt

Table of Contents

Abbreviations and Symbols

Illustrations

Tables

1 Introduction
1.1 Problem
1.2 Aim of this work
1.3 Structure of this work

2 Branding
2.1 History of Branding
2.2 Brand Definition
2.3 Self-Image and Brand Image
2.4 Brand Name and Logo
2.5 Brand Strategy
2.5.1 Individual Brands
2.5.2 Extension and Stretching
2.5.3 Family Branding
2.5.4 Brand Entertainment
2.5.5 Product Placement
2.5.6 Ingredient Branding
2.6 Brand Equity
2.6.1 Monetary Valuation
2.6.2 Behavioural Valuation-Models
2.6.3 Combination of Monetary and Behavioural Models

3 Consumer Choice
3.1 Basics of Buying Behaviour
3.1.1 Categories of Buyers
3.1.2 Roles of Buyer
3.1.3 Basic Buying Process
3.1.4 Consumer’s Fashion Adoption Process Model
3.2 The Consumer
3.2.1 Involvement
3.2.2 External Influence Factors
3.2.3 Internal Influence Factors
3.2.3.1 Cultural factors
3.2.3.2 Social factors
3.2.3.3 Personal factors
3.2.3.4 Psychological factors
3.2.3.4.1 Motivation
3.2.3.4.2 Perception
3.2.3.4.3 Attitude
3.2.3.4.4 Learning

4 Puma
4.1 History of Puma
4.2 History of Puma as a Brand
4.3 Brand Strategy
4.3.1 Puma’s Four-Phase-Strategy-Plan
4.3.2 Brand Extension and Stretching
4.3.3 Brand Entertainment
4.3.4 Product Placement
4.4 Brand Image
4.5 Effect on Puma’s economical Development - brand equity
4.5.1 Annual Report
4.5.2 Puma’s Brand Equity

5 Summary and Conclusion
5.1 Critical View on Branding and Brand Equity Evaluation
5.2 Critical View on Puma as a Brand
5.3 View into the Future

6 Sources
6.1 Internet-Sources
6.2 Literature-Sources

Abbreviations and Symbols

illustration not visible in this excerpt

Illustrations

Illustration 1: From traditional trading to brand leadership

Illustration 2: Buying decision making process

Illustration 3: S-O-R Model of buyer behaviour

Illustration 4: Logo of Puma

Tables

Table 1: Pros and cons for brand extension

Table 2: Market capitalisation of sports article manufacturers

Table 3: Annual report Puma

1 Introduction

“It seems that everywhere you go in the business world these days people are talking about brands.”1 This quotation indicates that brands have become more and more important for companies as well as for consumers. On the one hand, brands can increase a company’s value significantly or even represent the company itself. On the other hand, consumers want to take over the image of a brand and identify themselves with the characteristics carried by the brand. This goes along with the need of having branded goods as a mark of status and belonging.

Therefore, companies need to focus on strengthening their brand image and brand equity in order to succeed on the market and diversify themselves from their competitors.

1.1 Problem

However, the question is, are the efforts in creating a strong brand image and high brand equity justified when thinking about the impact on the consumer? Why are so many companies focusing on image instead of paying attention to the quality of their products? And why do so many companies spent money on sponsoring sports teams instead of investing in the improvement of their product’s characteristics or developing new innovative products? In order to get into the topic, this case study will have a look at Puma as a concrete example of how branding affects a company.

1.2 Aim of this work

The intention of this case study is to point out how Puma achieved the way from a shoe manufacturer to a well-known lifestyle brand by looking at the creation of a brand image on the one hand and an increase in brand equity on the other hand.

- Does a positive brand image have an influence on a company’s turnover?
- Does a high brand equity influence a company’s economic development or does a positive development of a company increase its brand equity?
- Do brands have an effect on consumer’s buying behaviour?

1.3 Structure of this work

In order to find an answer to the above mentioned questions, this case study combines background, theory and practice.

Firstly, chapter 2 will give an overview about branding and the different branding strategies. Moreover different models of brand valuation will be explained. The following chapter points out the basics of consumer buying behaviour in order to show the effects of branding on the decision making process. Chapter 4 will have a distinct look at Puma as a brand, Puma’s history and economic development in combination with the brand image. Finally, a short summary and a conclusion can be found in chapter 5.

2 Branding

“A brand is the face of a company”2: this sentence shows the importance of branding quite clear. Branding got more and more important in recent times. Scientists found out that strong brands can have a positive effect on turnover rates. Moreover, companies with strong and well-known brands can take in higher prices than others, because a famous brand stands for quality.3 The following chapter will focus on the history of branding and company’s strategies to create strong brands.

2.1 History of Branding

Brands can be traced back to the Egyptian antiquity when people used logos to sign their property. Everyone knows the old Egyptian vases with old letters on their bottom.4 However, the expression „brand“ has been implemented in the USA many centuries later. It was originally used to describe the process of branding cattle to assign them to their owner.5

The first branded product in Germany was “Royal-Sugar” in the beginning of the 20th century. Before that, the wholesaler delivered bags with 50 kg of sugar. As the retailer had to fill bags of one kg for his customers and as this was very time-consuming, the wholesaler decided to deliver 50 bags of one kg instead of one bigger bag. He printed the name “Royal” on these bags and within a short time the customers asked for “Royal” when they wanted sugar.6

The first massive campaigns concerning brands started in the late 19th century, but they were more like advertising campaigns than brand campaigns. As there were many completely new products like radio and car, it was important to inform customers about these new products, as many did not know anything about what a radio was for example. Advertisements had to be descriptive and had to give many details about the product’s characteristics. The focus was therefore not on creating new brands; this appeared later when more and more sellers entered the market. The different manufacturers had to find a way to differentiate themselves from the others. In that way branding was created.7 The development took quite long until in the middle of the 1990s the term was really implemented. Everyday-products like cars, furniture and tobacco were branded and even companies that made the products like Coca Cola for example.8 The below illustration shows the development from the traditional merchants who focused on short-term increases in turnover and gains to companies focusing on long-term developments of their brands:9

illustration not visible in this excerpt

Illustration 1: From traditional trading to brand leadership10

Today brands are everywhere. When going through the shops or looking at famous places like Piccadilly Square in London for example, people are surrounded by famous brands. Some brand names are even used in everyday language to describe certain products instead of the brand itself. For example, we use “Aspirin” when talking about medicine against headaches or ask for a “Tempo” when needing a tissue.11

2.2 Brand Definition

Looking for a clear definition of brands is quite difficult. Numerous definitions can be found in literature. Only a few shall be named here: T. G. Williams defines brand as “a name, term, symbol, or design that identifies the products of a particular marketer and differentiates them from the products of others.”12

He also mentions that a brand is more than this. The brand shall communicate a certain image which is in the minds of the customers. Image is a central topic when talking about brands, which will be explained later in greater detail.

13 Klein defines brand as a core meaning of the modern combine and publicity as an instrument to let everyone know about this core meaning.

14 Bruhn defines the different functions of a brand by splitting the term into three different parts: function of the brand from the manufacturer’s point of view (instrument to create company image), function of the brand from the retailer’s point of view (branded product saleable without his support) and function of the brand from the consumer’s point of view (orientation, information, quality).15

2.3 Self-Image and Brand Image

When thinking of self-image, one has to differ between a person’s actual and his or her ideal self-image. What the individual thinks he or she is is called the actual self-image. In most cases individuals want to be different from what they are. What they want to be is therefore called the ideal self-image. Researches showed that consumers prefer to buy brands which fit to their personal self-image. What is not known is if this is the actual or the ideal self-image.16 The consumer just feels a connection to the brand.17 It also works the other way round. People buy brands with images they want to take over for their own. For example, people who want to be individualists who love their independence would buy a Levi’s, whereas a Wrangler or HIS-Jeans does not show these characteristics.18 By doing that they have the possibility to show the world what kind of persons they are.19 Lee explained image the following: “ (...) in their role as cultural artefacts, consumer goods become important material and symbolic resources with which ordinary people reproduce their life and their pattern of life.20 So knowing about these facts companies have to think of the way their target group is when creating a new brand image.

There are three different types of images: first of all, the „real“ brand image as can be found for Coca Cola. Moreover, there is a product image like “Mercedes-Benz” and as a last one, a company image like “Henkel”.21 To create a positive brand image, many factors have to be taken into consideration. Six factors are important to define the term „brand image“ according to T. G. Williams:

1. The nature of the product,
2. the product’s price (normally high prices are interpreted as signals for high quality22 ),
3. appeals used in promoting the product,
4. the product’s package,
5. the brand’s name,
6. the stores the brand is sold in (usually smaller shops stand for high quality products whereas big retailers are seen as low quality companies).23

Brand image consists of emotional and cognitive components. As most products have similar characteristics, emotional factors become more and more important. Researches found out that customers tend to better remember products which differ from others in an emotional way in contrast to products which differ in its characteristics.24 Moreover, surveys showed that buying decisions are strongly dependent on a consumer’s self-image as shown before.

2.4 Brand Name and Logo

Branding can be divided to the following terms:

- branding by colour and size of packaging.
- branding by brand name, company name and trademark.

When talking about branding by colour and size of packaging one can think of numerous colourful packages of different products. Also brand names are very important for successful brand developments.25

To define the term „brand name“, one has many possibilities. One can split it into the following terms:26

- the legal term or registered trademark, e.g. Coca Cola, Puma, etc.
- the characteristic term, i. e. the physical branding for the origin of a product - branding in a literal meaning.
- the effect-referred term - a brand is the consumer’s idea of a product.

Another definition could be the following: „A word or combination of words used to identify a product and differentiate it from other products. All brand names are trademarks, but not all trademarks are brand names.”27

One could also define the term brand name as follows: “A brand name is a word or term which is chosen by a firm to identify its product or line of products”. Four basic criteria should be used when choosing a brand name according to Warmke:28

1. It should be easy to pronounce in order to let people talk about the product.
2. It should sound distinctively in order to let customers remember the product’s name.
3. It should relate to the product in order to not confuse the consumer, e.g. one would not name a shampoo “Deodorant”.
4. As a last criterion, it should be appropriately to the target market, e.g. a children’s product should have a name appropriate to children.

According to T. G. Williams, even more criteria should be taken into consideration:29

1. The brand name should help to create a strong brand image.
2. It should fit the product’s design, its colour and use.
3. It should distinguish the product from others.
4. It should be descriptive.
5. It should motivate the consumer to buy.
6. It should be short, easy to say and remember.
7. It should communicate an appropriate meaning.

What is very important to think about when choosing a brand name is the connection between brand name and brand image. The name has a significant influence on the brand’s image. By choosing an appropriate brand name acceptance, preference or loyalty can be established.30 There are some companies (e.g. 1,000 firms per year in the US) who change their (perhaps well-known) names. This does not seem very rational, because a brand name should be easy to remember as could be read above. There can be numerous reasons for changing a name, e. g. the name is too long or outdated in terminology, it could be misleading or difficult to remember or is not appropriate for multinational use. However, one should take into consideration that a change in name should be taken with great care and caution. It can be noticed that a new brand name is usually well established within six months.31

A brand does not only consist of an illustrious name, but also a colour, logo or label.32

Corporate identity is also an important factor to mention when talking about branding. To create a strong brand a consistent use of the company’s logo is imperative according to D. E. Carter.33

A logo should be easy to remember. As our eyes are arranged horizontal, a logo should also have a horizontal form. Moreover, the writing should be easy to read, also from a far distance. Some companies were successful in establishing logos which can stand alone, e.g. Nike’s swoosh or Shell’s shell. Who does not know the brand name behind the logo? Another important factor when choosing a logo is the colour. The primary colours like red, green and blue should be preferred as they are most familiar to customers. Colours also have certain meanings to the customers: red has an aggressive touch whereas blue symbols reserve.34

2.5 Brand Strategy

When creating a strong brand, companies have many possibilities regarding their strategy. First of all they have to decide whether they want to use just an individual branding strategy (only one product), a mixed family and individual branding strategy (when brand extensions occur) or a family branding strategy.35 Manufacturers have to think about even more possibilities when creating a new brand. For example, they could use ingredient branding or brand entertainment strategies which are explained in more detail below.

2.5.1 Individual Brands

Companies who decide to use an individual branding strategy create a new brand for every new product they invent. This could have the following reasons: First of all, it could be that the old brand name is not appropriate for the new good, for example the brand name is XYZ-food and the new product is a shampoo.36 Moreover, the company could create a new brand because of the risk to fail with the new product. The bad image would not affect the old brand name with a perhaps good reputation and image.37 A. Ries and L. Ries have used the following sentence: “The easiest way to destroy a brand is to put its name on everything”.38

There are also some drawbacks which are important to mention: the costs to introduce the new product are much higher, because there has to be much

more advertising than for a new product within an existing brand. Moreover, the new brand is unknown to the consumers and has to be established completely new.39

2.5.2 Extension and Stretching

When a new brand has been successfully established one could think about new products under the same name. That is the creation of a new product which capitalizes on the brand equity of an already existing product. Usually, it is a good way to use the logo of an existing brand in order to maintain its visual identity.40

The first step would be line extension, when having a new product within the same category, for example Campbell Soup offers a new soup under the same logo. Brand extension would be a new product of a different category, for example Campbell Soup offers popcorn additionally. Brand stretching is the extensive strategy, when a complete unrelated product would be added, for example Campbell Soup offers a car additionally.41

What is important when extending or stretching an existing brand is to think about the credibility of the relation between the new and already existing products.42

Not all brands are useful for brand extensions or brand stretching. Brands with high brand equity tend to be more useful than brands with a low value.43 Brand extension will be difficult when the brand name is descriptive, e.g. the German “Spüli”, which describes washing-up liquid (“Spülmittel”). If the company “Spüli” now wants to extend the brand to washing-powder, “Spüli” is not an appropriate name.44 This shows that the decision of the brand name is a very important strategic step.

illustration not visible in this excerpt

Table 1: Pros and cons for brand extension45

There are many factors showing that line or brand extension could be an advantage, but there are also many critical voices. In a short-term view, a brand could profit from an extension. When thinking about the long-term strategy, brand extension and first of all brand stretching could water down a strong brand image.46

2.5.3 Family Branding

Once a brand has been successfully established in the market, one should think about a new brand within the “family”. The process of a brand family is to take over the existing brand name or logo, and then adding an individual part to it.47 The magazine company “Time” has developed a very strong brand family, with many sub-brands. What was very important was to find brand names which show an own strong profile.

For example, the economic magazine has been called “Fortune”, and not “Time for Business” and the sports magazine’s name is “Sports Illustrated” and not “Time for Sports”. By choosing these names, Time established new independent brands. However, the logo still appears on all magazines.48 The importance in case of a family branding strategy is to have a focus on corporate branding, which means the company has certain characteristics which are taken over for all products. For example Caterpillar stands for hard work, adventures, courage. All their products like dredges, shoes, watches etc. are fitted out with the same characteristics.49

[...]


1 Rayport (1999), p. 4.

2 See Klein-Bölting, Maskus (2003), p. 3.

3 See Garber (2005), p. 22.

4 See Bruhn (2001), p. 19.

5 See Klein-Bölting, Maskus (2003), p. 3.

6 See Huber (1987), p. 22.

7 See Klein (2002), p. 27.

8 See Schmidt, Ludlow (2002), pp. 2 f.

9 See Jary et al. (1997), p. 15.

10 See Jary et al. (1997), p. 15.

11 See Mono (2002), p. 8.

12 Williams (1982), p. 331.

13 See Williams (1982), p. 331.

14 See Klein (2002), p. 27.

15 See Pepels (2001), p. 160.

16 See Williams (1982), p. 332.

17 See Kisseloff (2005), p. 43.

18 See Klein-Bölting, Maskus (2003), pp. 13 f.

19 See Pepels (2001), pp. 155 f.

20 Lee (1993), p. 49.

21 See Huber (1987), p. 80.

22 See Huber (1987), p. 26.

23 See Williams (1982), p. 331.

24 See Esch, Andresen (1997), p. 26.

25 See Wöhe (2002), p. 521.

26 See Klein-Bölting, Maskus (2003), p. 4.

27 See Buell (1984), p. 416.

28 See Warmke (1985), p. 122.

29 Williams (1982), p. 334.

30 See Hisrich, Peters (1978), p. 234.

31 See Carter (1999), p. 44.

32 See Bruhn (1994), p. 1530.

33 See Carter (1999), p. 20.

34 See Ries, Ries (1998), pp. 141 ff.

35 See Hisrich, Peters (1978), pp. 235 ff.

36 See Hisrich, Peters (1978), p. 236.

37 See Koppelmann (1997), p. 295.

38 Ries, Ries (1998), p. 79.

39 See Hisrich, Peters (1978), p. 236.

40 See Carter (1999), p. 108.

41 See Kotler (2004), pp. 97 f. and Buell (1984), p. 438.

42 See Klein-Bolting (2003), p. 16.

43 See Aaker, Keller (1990), pp. 27 ff.

44 See Huber (1997), p. 134.

45 See Huber (1997), pp. 135 ff. and Ries, Ries (1998), pp. 22 f.

46 See Ries, Ries (1998), pp. 22.

47 See Bruhn (1994), p. 1447.

48 See Ries, Ries (1998), p. 133.

49 See Kotler (2004), p. 25.

Excerpt out of 53 pages

Details

Title
The effect of branding on the development of a company with an example of Puma
Subtitle
A critical analysis
College
University of Applied Sciences Essen
Grade
2,0
Author
Year
2009
Pages
53
Catalog Number
V177238
ISBN (eBook)
9783640987764
ISBN (Book)
9783640987979
File size
618 KB
Language
English
Tags
branding, puma, lifestyle, marketing, international, brand, brands, consumer
Quote paper
Dipl. Wirt.-Inf. (FH), Dipl. Kfm. (FH), BBA Andreas Schutt (Author), 2009, The effect of branding on the development of a company with an example of Puma, Munich, GRIN Verlag, https://www.grin.com/document/177238

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