UCSD MGT 100 Week 08

Kenneth C. Wilbur and Dan Yavorsky

Let’s reflect


  • Logos
  • Netflix & Kraft case studies
  • What is a brand?
  • How do brands work? 4 ways

Case study : Netflix

  • 1997: Founded to deliver moves over the internet
  • 1999: Pioneered DVD-by-mail
  • 2007: Launched streaming
  • 2011: July price hike, Sept service split into
    • Netflix: Video streaming
    • “Qwikster”: Rebranded DVD-by-mail service

Netflix Case study : Takeaways

  • Brand adjustments require consumer acceptance
    • You own the IP, not the mental real estate
    • Smaller steps encounter less resistance
  • Great brands monitor customer perceptions
  • If you mis-step, change course
    • Some news is bad news

Case study : Kraft Mac n Cheese

What is a brand?

What is a brand?

  • An idea that shifts preference

  • Brands reside in consumers’ minds

    • Mental real estate: Firm owns trademark but not brand
    • Rooted in reality but reflects consumer experiences, perceptions and idiosyncracies

Some auto-associative sequences

  • Why do firms spend so much to create these associations?

What association?

Brand Safety, Content Moderation

  • Brands try to avoid unsavory associations–misinfo, hate, violence, obscenity, etc–as they may upset consumers, embarrassing PR, and unfavorable brand associations
  • Brands have long demanded advertising platforms maintain “brand safety”

How do Brands Work?

  1. Credibility

  2. Rapid communication

  3. Personality & Self-expression

  4. Gestalt

1. Credibility

What happens when consumers gain knowledge?

  • Bron. et al. (MkSc 2020): Intercepted shoppers in-store
  • First, a survey, including:
    • Q2: Do you prefer private label or nat’l brand? (PL=1)
  • Then, a blind brand/PL taste test, followed by
    • Q3: Which did you prefer? (PL=1)
    • Q4: Will you buy PL next time?

PL Share among Surveyed Shoppers

1. Credibility : Takeaways

  • Less-knowledgeable consumers are more likely to pay the brand premium
    • Recognized brands assumed better/safer than alternatives
  • Informing consumers can change brand/PL sales
    • Changes may be transitory

2. Rapid communication

  • Names and graphics

    • facilitate understanding
    • call attention to differentiating attributes
  • What is the value proposition?

3. Personality & Self-expression

Brands can

  • Express shared identities: UC San Diego, San Diego Padres

  • Personify seller attributes, eg Jordan Brand, Kylie Cosmetics

  • Common brand “personalities”

    • Classic/sincere, eg Hallmark, In-n-Out
    • Competent, eg IBM
    • Exciting/fun, eg Snapchat, Scion
    • Sophisticated, eg Tiffany
    • Calm/peaceful (more common in East Asia)

4. Gestalt

Creating artificial differentiation

What’s in a name?

Does advertising build brands? Toyota

Does advertising build brands? Coke

Does advertising build brands? Apple

Advertising and brand attitudes

  • We analyzed $264B in ad spend by 575 brands in 37 categories over 5 years
  • Findings:
    • Own advertising increases brand perceptions

    • Competitor advertising decreases brand perceptions

      - Advertising looks like a prisoner's dilemma
    • Massive data needed to estimate precise effects

  • T/F: Increasing ad spend clearly boosts brand attitudes the following week.

Toolkit: Find wtp for sponsorship

  • We can pay a celebrity brand \(\$W\) to sponsor our phone. Market research indicates sponsorship will increase phone brand utility from \(\hat\beta\) to \(\hat\beta'\). Should we do it?

  • Let \(\pi_0=q_j(p_j-c)\) be current contribution assuming optimal pricing

  • Let \(q'_j(p_j)=N \hat{s}'_j(p_j)\) be celebrity-sponsored demand

  • Calculate \(\pi_1=q'_j(p_j)(p_j-c)\)

    • \(\pi_1-\pi_0\) is pure demand effect of celebrity association
  • Find new optimal price \(p'_j\) for demand \(q'_j(p_j)\)

  • Calculate \(\pi_2=q'_j(p'_j)(p'_j-c)\) ; associate with celebrity if \(\pi_2-\pi_0>W\)

  • Discuss: What if celebrity’s threat point is to associate with a competitor?

  • Discuss: What if celebrity association persists multiple years?

  • Discuss: What if 20% chance a celebrity scandal reduces \(\hat\beta'\) to \(\hat\beta''\lt\hat\beta\)?

Class script

  • Assess profit effect of celebrity affiliation with brand

Wrapping up


  • Let’s take a look


  • Brands are consumer associations between company assets (products, trademarks, etc) and related concepts
    • Mental real estate: We can influence it but we don’t own it
  • Brands work by establishing credibility, rapid communication, personality/self-expression and gestalt
  • Demand models can quantify returns to brand investments

Going further