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An executive summary

for managers and Reinventing the brand: bridging


executives can be found
at the end of this article the gap between customer and
brand value
Stan Maklan and Simon Knox

Introduction
This paper outlines a new approach for managing brands that brings the
process into line with recent advances in the management of modern, team-
based organizations. In the 1980s, the discipline of creating brands out of
products and services spread from the consumer goods industry to financial
services, travel, retail and certain industrial sectors (de Chernatony and
McDonald, 1992). Company after company invested in new identities,
converting their goods and services into branded portfolios through
advertising, direct mail and publicity. These investments yielded substantial
returns when they were accompanied by sustained efforts at increasing
customer value by improving quality, service and optimizing the cost base.
British Airways, Andersen Consulting, Häagan Daz, First Direct, BMW and
Virgin stand out as examples of well-branded and well-delivered customer
value propositions.

Branding unsatisfactory However, the experience of branding has not been universally satisfactory
(Court et al., 1993). For instance, banks have retreated from the wall of
product brochures that used to greet customers; British Rail marketing is the
subject of jokes; Mercedes has suffered tremendous losses through the
recession and customers now refuse to pay a premium for the traditional
computer brand leaders such as IBM, Digital and Apple. In retailing, UK
petroleum brands have lost one-quarter of their market to grocery retailers
Tesco and Sainsbury almost overnight. More worryingly still for the
advocates of branding is the serious loss of brand equity, the differential
effect that brand knowledge has on consumer response to the marketing of
that brand (Keller, 1993), which has been widely experienced in companies
such as Unilever, Coke, Philip Morris (Marlboro) and Procter & Gamble.
This led The Economist magazine to publish an article in 1994 entitled,
“Death of the brand manager” which questioned the future role of brands
and, indeed, the marketing department itself as organizations flatten and
move toward horizontal structures.

We believe that questions raised recently over the effectiveness of branding


are due to the gap that has arisen between brand value and customer value.
Traditional branding no longer adds sufficient customer value because it is
generally a standardized offer which is the result of a functional
management hierarchy not structured to be sufficiently broad enough, nor
responsive enough, to satisfy modern customer demands. Customer value is
increasingly being generated by business processes traditionally outside the
remit of brand management. If the gap continues to grow, business will
abandon one of its greatest assets, the equity of its brands.

The authors argue that the management tool, the Unique Organization
Proposition (UOP), can bridge the gap between customer and brand value.

JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 2 1997 pp. 119-129 © MCB UNIVERSITY PRESS, 1061-0421 119
The UOP integrates a company’s core business processes into a visible set of
credentials that adds customer value through the supply chain. The metaphor
for the UOP is that of a cable sheath that holds, directs and provides a
consistent purpose to the individual “wires” of business processes. The
sheath is the visible embodiment of the organization’s reputation,
performance, network of relationships and portfolio of its brands and
customers.

Cable sheath With this view of the world, marketing management’s task is to design and
build a cable sheath that represents the UOP in a compelling manner to the
organization’s stakeholders. In so doing, it allows companies to build
powerful and branded value chains that deliver superior customer value
while differentiating the company’s offering. The UOP allows companies to
return to competition and pricing based on value added.

The activities which develop and sustain the UOP are very different from the
conventional branding practices that it replaces. Designing the UOP means
integrating the core business processes which we call Supply Partnership,
Asset Management, Resource Transformation, Customer Development and
Marketing Planning. The ways in which the UOP is a useful tool for linking
these core business processes to customer value are addressed in the main
part of the paper.

Next, we explore the decline of brands in more detail and identify some of
the main factors which have been instrumental in eroding brand equity.

Is the brand dead?


Brand marketing is in crisis. One brand icon after another has been shaken,
if not permanently damaged. Senior management openly questions the value
of their traditional marketing activities and marketing departments (Brady
and Davis, 1993).

Brand engineers A generation of marketers has been trained as brand engineers, manipulating
well-tried stimulus-response mechanisms such as advertising, promotion and
direct mail to engender brand preference. This used to create demand and
customer loyalty which generated power in the supply chain, healthy
margins and a platform for new products. However, it is increasingly evident
that traditional brand engineering no longer works and traditional marketing
managers no longer lead the most important customer value-adding
processes.

In the 1990s, a gap has arisen between brand value and customer value
wherein customer value is increasingly generated by business processes
traditionally outside the remit of brand management (Doyle, 1995). Drivers
behind this are:
• The brand as guarantor of product performance and status is
increasingly less effective as a means of product differentiation.
Customers are more confident about their own choices and no longer
pay premiums for brands unless performance so justifies.
• Customer value increasingly arises through a relationship with a
supplier for a stream of products and services over time, rather than
individual products and services.

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• The customer no longer wants a choice of products and services; the
customer wants what the customer wants. Customer value is created
through the ability of a supplier to understand customer needs and
effectively meet them through modern JIT supply chains. The products
and services add less value than the “problem-solving” activities around
them.
• Customer needs are increasingly met through alliances of companies;
more and more customers buy multi-branded solutions.
Disillusioned about value If the gap between brand and customer value continues to grow, business
of brands will become disillusioned about the value of brands and their ability to
differentiate on the basis of market positioning and a unique selling
proposition (USP). Companies will then be competing on the basis of
building “appropriate” quality for ever-decreasing prices while adding
costly, new added-value services to sell their commodity goods and services.

Marketers have begun to respond to these challenges. Consumer marketers


are reducing the premium of their brands to lower priced competitors
(Richards, 1996), rationalizing their product portfolios and improving
supply-chain management, particularly with large retailers. Services
marketers are trying to “productize” their offerings in an attempt to
differentiate themselves from competitors. Business-to-business marketers
have invested in quality, service and lower prices.

While all these are logical responses, they do not offer a permanent strategy.
There is a limit to price and portfolio reductions consumer brand owners can
offer. The benefits of “productizing” services have been difficult to prove.
Business-to-business marketers are struggling under the relentless pressure
to provide better quality, better services and all at lower prices. Many are on
a treadmill of constantly increasing the customer value that they provide
with less and less margin from which to do so.

By redefining customer value and integrating the sources of added value,


both within the company and throughout the supply chain, the brand can be
reinvented as the device which customers use to assess the company’s value
proposition beyond its products and services.

Redefining customer value


Traditionally, branding has been concerned with enhancing companies’
products and services in the expectation that their investments in added
functionality, emotional value and service would create customer value and
loyalty (Figure 1).

Figure 1. Traditional brand value creation*

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The definition of customer value identified here is based in economic theory,
namely, that customer value is the surplus between the perceived benefits of
owning/consuming a product or service and the perceived total life-cycle
costs of its acquisition (Christopher, 1996).

Emotional benefit Owning and consuming a product or service creates value-in-use as well as
emotional benefit. Customers’ costs comprise the initial acquisition, its
maintenance over its useful life, inconvenience and perceived risks
associated with its performance.

Conventionally, brands have created customer value by augmenting the core


functionality and emotional values of their offering, namely:
• Improving product quality to reduce the life-cycle cost of ownership or
use.
• Adding services that reduce the cost and hassle of acquisition and
maintenance.
• Enhancing product functionality to increase value-in-use.
• Creating status and prestige for owners of the product or service.
While these activities still create customer value, companies are finding it
increasingly difficult to differentiate themselves just by augmenting their
products and services. Differentiated customer value is increasingly created
by:
• Reducing cost through the entire supply chain (e.g. UK retailers such as
Marks & Spencer and Tesco that work in close partnership with their
suppliers).
• Reengineering service delivery systems to reduce cost and time for the
customer (e.g. telephone banking and insurance).
• Mass customization that maximizes value-in-use for each customer
(e.g. Dell Computer).
• Virtual companies that outsource noncore activities or enter into
meaningful alliances to provide clients with a unique combination of
world-class resources (e.g. the Computer Sciences, Andersen
Consulting, AT&T and Bell Atlantic partnership to serve JP Morgan).
Maximizing customer All businesses must be dedicated to maximizing customer value in today’s
value competitive markets. Since branding seeks to differentiate a company’s value
proposition from its competitors, the brand management process must
concern itself with integrating supply-chain leadership, alliances, business
process reengineering and customizing the brand’s unique selling proposition.
In other words, by integrating and developing the organization’s competences
and capabilities as marketing assets, marketing management can create
greater customer value (Hooley and Saunders, 1993). In the next section, the
authors develop this approach to value-added marketing by introducing the
cable sheath metaphor as a mechanism by which the UOP can be constructed
to close this value gap that traditional branding approaches are failing to do.

From unique selling proposition to unique organization proposition


Today’s marketing challenge is to bridge the widening gap between
customer and brand value and help the return to competition based on
adding value, leadership of the supply chain and healthier margins.
Traditional branding no longer adequately meets this role because it is
generally a standardized offer which is the result of a functional

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management hierarchy not enabled nor sufficiently enlightened to
acknowledge the need for change. Creating unique selling propositions for
brands and exploiting them through predictable stimulus-response tools is
falling short of customer perceptions.

Modeling tool We suggest that the concept of the UOP can provide the modeling tool with
which marketers can bridge the gap to customer value. The UOP integrates a
company’s core business processes into a visible set of credentials that add
value through the supply chain. The best metaphor for the visible UOP is
that of a cable sheath that envelops, holds and directs individual strands or
wires, each representing a core business process that potentially adds
customer value. The sheath is the organization’s reputation, the performance
of its goods and services, its brand and customer portfolios and the network
of relationships that it has developed (Figure 2).

Marketing management’s task is to design and build a cable sheath that


reflects the UOP in a compelling manner for the organization’s stakeholders.
To do so, marketing must ensure that core processes are integrated
effectively to deliver value to customers and other stakeholders at each point
of contact with the organization. The cable sheath is a far more relevant
metaphor than the brand engineer for modern marketers.

The activities which develop and sustain the UOP are very different from the
conventional branding practices that it replaces. Designing the UOP means
integrating the core business processes that we call Supply Partnership,
Asset Management, Resource Transformation, Customer Development and
Marketing Planning. The way in which the UOP is a useful tool for linking
these core business processes with customer value is discussed next.

Supply partnership
Modern competition is based on rapid exploitation of opportunities, quick
response to customers’ increasing expectations and experimentation with
new technologies and techniques to avoid getting “caught-out.” Such change
in one’s core products and services is hard enough to manage, but few, if any
company, can drag a long supply chain with them as they move quickly from
opportunity to opportunity. Companies which increasingly rely on strategic

Figure 2. Bridging the value gap

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supplier-partners to remain competitive in the future will be competing for
the best partnerships (Webster, 1992).

Enhance attractiveness There is, therefore, a growing need for companies to enhance their
attractiveness to the supplier market. This is made easier when companies
can define and communicate their UOP to potential supplier partners. The
UOP becomes the bridge between the organization’s purchasing program
and its own customers’ expectations of price, quality, delivery and
innovation. As supply chains grow more complex and geographically
disparate, the design and management of the cable sheath provides a
powerful tool for integrating supply partners. Examples of excellence in this
regard include Toyota and Marks & Spencer. For instance, suppliers of fresh
sandwiches to Marks & Spencer are closely networked, with shared best-
practices and in-bound supplies regularly shifted throughout the network to
ensure that day-by-day fluctuations in consumer demand can be met.
Management at Marks & Spencer encourage and develop this network and
provide their know-how and advice, such as recommending third-party
hauliers, on a regular basis. The lead supplier, who has been in partnership
with the retailer for over ten years, is the lead innovator of new varieties
which are presented to retail management at regular meetings. The systems
and processes at the boundaries of the two organizations are clear and well
managed which means that both remain very responsive to changes in
consumer preferences where innovation is the key to continued market
growth (Knox and Maklan, 1996).

Support customer Suppliers will support companies that move in this direction. The clearer
relationships definition of their role in the value chain will allow them to compete on
value as much as cost, guide their own R&D efforts and support customer
relationships based on shared objectives.

Asset management
Because the focus of brand management has been on functional attributes
and emotional benefits this has meant that, with rare exception, companies
are missing opportunities to make their assets work in synergy with
customer and product development.

These assets include items traditionally capitalized on the balance sheet as


well as the off-the-balance capabilities that are perhaps of greater
importance, such as methodologies, know-how, training, relationships and
access to markets.

Since many of these assets are the responsibility of functional managers who
are not customer facing, they are often guided by measures of cost,
efficiency and utilization. These measures are not based on customer value.
Progressive companies share their know-how, capabilities and other assets
with suppliers and customers to enhance their role in the value chain. This
policy transforms assets into processes which add value to customers
(Petrash, 1996).

The architecture of the UOP provides a management tool for deciding which
assets should be made most visible and accessible to clients and engages
corporate capabilities far more actively than traditional branding.

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Resource transformation
No area of management has been so closely examined as the process by
which assets are deployed against supplies to create products and services.
The process of creating and sustaining these products and customer services
has been the principal object of successive waves of management initiatives:
total quality management, kaizen (continuous improvement) and, most
notably, business process reengineering (Hammer and Champy, 1993).

Systems analysis These programs originated in systems analysis and not from a profound
understanding of customers’ purchase motivations and competitor strategies.
Many companies have embarked on ambitious improvement programs
without referencing their customer value proposition and ensuring that it is
sufficiently differentiated from competitors’ offerings. It is, therefore, not
surprising that they often complain of “initiativitis” and “consultancy-led
change” that exhausts management without necessarily generating customer
value.

Of course, reengineering is a vital part of remaining competitive. However,


without it being based on a full appreciation of customers and competitors, it
is as much by chance than by design that process improvements increase
customer value. For example, Cadillac won the prestigious Baldrige Quality
Award for its quality process in producing cars that the market did not wish
to buy; companies outsource after-sales service without managing the brand
image created by its outsourcing partners; banks reinvent themselves as
financial advisors while not resolving customers’ legitimate complaints
about basic services and the accuracy of their accounts.

The UOP helps to ensure that the fundamental processes of creating and
sustaining the goods and services are organized in a manner that builds
customer value through the supply chain. The cable sheath communicates a
clear, consistent and credible customer proposition at every point of contact
with the organization and business partners acting on its behalf.

Customer development
In OECD countries, most markets are now in the mature phase and
developing the organization’s customer portfolio becomes at least as
important as its brand and service portfolio.

In many organizations, there is a gap between the management of customers


and products. Traditional brand management’s focus on portfolios of brands
limits the companies’ ability to develop and manage their portfolio of
customers (Knox, 1996). For example, the customer service department is
often managed as a cost and operational center and sales departments are
often driven only by short-term targets and immediate transactions. Far
fewer companies optimize their portfolio of customers in the way they do
products, hence they are missing the opportunity to develop strong
relationships with their potentially most profitable customers.

To grow in mature markets, companies must manage their customer base


from a detailed knowledge of customer motivation, purchasing styles and
purchasing strategies (Marsh and Marshall, 1996). This understanding needs
to be based on research and systematic analysis. Marketing, in this scenario,
will increasingly be based on branding the relationship with customers more
than developing sales propositions for individual products and services. The

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cable sheath is a more relevant management tool for branding relationships
than the USP.

Marketing planning
Marketing planning is still developed from the organization’s mission
statement and business objectives. However, the brand-by-brand build up of
a mid-term operating plan no longer suffices since the customer impact of
organizational capabilities cannot just be thought of as simply a brand
portfolio today. In order to develop the superior value customers now
demand, marketing planning must change to meet the needs of cross-
functional management and ever-increasing numbers of stakeholders. It has
therefore to assume a broader role directing companies’ business processes
from supplier through to the customer. The strategic role of marketing is to
manage the design of the UOP and ensure that it is properly resourced and
then presented by the company in a manner that enhances company
reputation throughout the supply chain.

Employee participation Successful implementation of marketing planning today is dependent on


employee participation at the functional level, across process teams and at
the boundaries with outside stakeholders (Christopher, 1996). Planning
should be influenced by their contribution, whether through implementing
marketing programs, marketing research feedback or by direct management
involvement with these stakeholders.

Managerial implications and recommendations


Vertically-organized companies often have a lead function that dominates
management by virtue of its ability to generate more customer value than
other departments. Where brands are king, brand managers and marketing
rules. Where customer relationships are, key account management and sales
dominate. If project management or operations are top priority, operations
run the company. Where innovative new products are vital, science and
engineering may dominate.

In the 1980s, many companies felt it necessary to become “marketing-led”


and brand management structures were extended from their traditional base
in consumer goods companies through the service and business-to-business
sectors. For a while, it appeared as though all companies would become
marketing organizations.

Widening gap However, during the 1990s, a widening gap between brand and customer
value has emerged which brand management alone cannot bridge. In
response, many companies are creating cross-functional, systems-led
organizations (Katsanis and Pitta, 1995). As we have already discussed
earlier, without reference to the customer value proposition, systems
improvement does not necessarily increase customer value, differentiate the
company’s offering or enhance profitability.

We argue that the UOP is a more appropriate tool for directing company
processes since customer value is created throughout the whole organization
and in the supply chain. The management challenge is to ensure that the
UOP creates more customer value than other competitive organizations and
that this customer value can be sustained over time.

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Creating and managing UOP requires a different skill-set to those normally
present in brand marketing departments. The conventional marketing and
brand-building approach, characterized by a narrow, product-focussed
selling proposition no longer adds sufficient customer value. The marketing
task must move from brand engineering to UOP architecture.

Creating customer value Marketing, with its traditional focus on understanding customer motivations
and competitors, is well placed to lead UOP management. However, if
marketers are to regain their role at the heart of the value-adding process,
they must relegate their traditional brand engineering tools, such as
advertising and promotion, to an appropriate place in the overall UOP
architecture and focus on the bigger issue of what creates customer value.

References
Brady, J. and Davis, I. (1993), “Marketing’s mid-life crisis”, The McKinsey Quarterly, No. 2,
pp. 17-28.
Christopher, M. (1996), “From brand values to customer value”, Journal of Marketing
Practice, Vol. 2 No. 1, pp. 55-66.
Court, D., Freeling, A. and George, M. (1993), Marketer’s Metamorphosis, McKinsey and
Company, London.
de Chernatony, L. and McDonald, M.H.B. (1992), Creating Powerful Brands, Butterworth-
Heinemann, Oxford.
Doyle, P., (1995), “Marketing in the new millennium”, European Journal of Marketing, Vol.
29 No. 13, pp. 23-41.
Economist, The (1994), “Death of the brand manager”, 9 April.
Hammer, M. and Champy, J. (1993), Re-engineering the Corporation, Harper Collins, London.
Hooley, G.J. and Saunders, J. (1993), Competitive Positioning: The Key to Market Success,
Prentice-Hall, Hemel Hempstead, pp. 86-96.
Katsanis, L.P. and Pitta, D.A. (1995), “Punctuated equilibrium and the evolution of the product
manager”, Journal of Product and Brand Management, Vol. 4 No.3, pp. 46-60.
Keller, K.L. (1993), “Conceptualizing measuring and managing customer-based brand equity”,
Journal of Marketing, Vol. 57, pp. 1-22.
Knox, S.D. (1996), “Empirical developments in the measurement and management of brand
loyalty at the portfolio level”, in Baker, M. (Ed.), 2021 – A Vision for the Next 25 Years,
brand management section of CD, Glasgow.
Knox, S.D. and Maklan, S. (1996), Extracts taken from a personal interview with the
Commercial Director of the leading sandwich supplier to Marks & Spencer, Luton, UK.
Levitt, T. (1983), The Marketing Imagination, Collier Macmillan, London.
Marsh, H. and Marshall, S. (1996), “Can soaps simplify choice?”, Marketing Week, 19 April.
Petrash, G. (1996), “Dow’s journey to a knowledge value management culture”, European
Management Journal, Vol. 14 No. 4, pp. 365-73.
Richards, A. (1996), “P & G brings its price war to British aisles”, Marketing Week,
15 February.
Webster, E.E. (1992), “The changing role of marketing in the corporation”, Journal of
Marketing, Vol. 58, pp. 20-38.
(Stan Maklan is Principal Consultant with Computer Sciences Corporation, Farnborough, and
Simon Knox is Professor of Marketing, Cranfield School of Management, Cranfield
University, Cranfield, Bedford, UK.)

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This summary has been Executive summary and implications for managers and
provided to allow executives
managers and executives
The brand is dead. Long live the brand!
a rapid appreciation of
The jury is out on whether the brand is dead. Some observers see, in the
the content of this
move toward relationship marketing and the stress on quality and customer
article. Those with a
particular interest in the service, a declining importance for the brand. Others assert that far from
topic covered may then helping the consumer, brands represent a tax on consumers via premium
read the article in toto to pricing. These people go on to say that across most product categories
take advantage of the consumers are no longer fooled and cite the success of own label and
more comprehensive unbranded goods. Yet another set of observers opine that the brand is
description of the shifting from something applied to individual products to a concept more
research undertaken appropriate for an entire organization. And some stick to their belief in
and its results to get individual product brands.
the full benefit of the The price cut on Marlboro cigarettes a while back jolted brand
material present managements. It was this event that led to the opinion that brand
management was finished as the dominant marketing organization. Here
Maklan and Knox develop this change while acknowledging that the brand
still has relevance as a short-cut for consumers in making buying choices.
Their Unique Organization Proposition (UOP) is predicated on the branding
of organizations rather than individual products. After all, as they point out,
customer value is not determined solely by intrinsic qualities of the product.
Availability, convenience and customer service all matter more than ever to
the product marketer. The classic unique selling proposition (USP) that
dominates consumer goods marketing assumes that it is something about the
product which will make the customer buy. What Maklan and Knox claim is
that customers seek a relationship with their supplier rather than a
relationship with an abstract branding concept. There is no doubt that the
success of many retailers comes from the investment in the store brand
rather than simply dynamic and efficient management of the processes
involved.
By using a model acknowledging this principle marketers can focus on how
to exploit partnerships, customer relations and the business’s assets as the
basis of branding. The metaphor of a cable sheath surrounding and
protecting business processes demonstrates the need to create something
attractive and flexible – something consumers can understand and utilize in
their decision making. It all sound pretty basic really – marketers need to
concern themselves with more than just the external image of the products
and shifting boxes. All the business’s activities affect the chain from creation
to consumption and therefore relate to the brand. It’s no longer a question of
getting the product wrapped up nicely and giving it an appealing name. The
production and distribution process, customer service, corporate image and
much else will affect the consumer’s impression. And as those consumers
become better informed they will start to reject brands from unspecified
organizations. All but the very strongest individual brands will gradually die
away.
So how should marketers prepare for this new world of branding. Here are
some suggestions:
• Stop thinking that marketing is the bees knees with other processes a
poor second best.
• Pin the finance director in the corner and tell him that this new
branding concept used to be called goodwill and is worth lots of money.

128 JOURNAL OF PRODUCT & BRAND MANAGEMENT, VOL. 6 NO. 2 1997


• Encourage every employee, every shareholder and every customer to
become an advocate for the company.
• Stop using the term “stakeholder” – at best it means nothing to the
average employee or customer and at worst it suggests they own the
business. They don’t. Start calling people what they actually are.
• Nobody minds you making a profit but don’t do it in an underhand way.
Get your pricing so clear even a five-year-old can understand it. Pull
away from short-term discounts and offers by investigating ideas such
as efficient consumer response.
• Think about relationships. Not with numbers on a print-out but with real
people. Look at the branding success of Tango using the Internet and
exciting, different advertising.
• Set a base assessment and a target for your corporate image. Design
marketing programs to match this target.
• Remember that the brand franchise – and the extra profits associated
with it – come from a partial monopoly either in fact or in consumers’
minds. If you don’t invest in keeping that “monopoly” you will soon stop
making profits.
Corporate image, whole firm branding and identity have often been
dismissed as irrelevancies. What matters is the short-term sale. Maklan and
Knox show us that developing differentiation across the whole organization
is an effective way to build a lasting brand franchise appropriate to efficient
processes and sophisticated consumers.
Finally, if you want an example of how a total corporate image can work
take a look at Virgin with its reputation for innovation and youthful appeal.
Or look at Nordstrom with the one paragraph staff handbook including the
wonderful exhortation – “use your best judgement at all times.” Or learn
lessons from the past – from Cadbury which built a company town for its
staff or the UK’s Prudential Insurance which employed a vast network of
reps each one known as the “man from the Pru.”

(A précis of the article “Reinventing the brand: bridging the gap between
customer and brand value.” Provided by Marketing Consultants for MCB
University Press.)

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