University American College Skopje

School of Business Economics and Management

Building brand equity in the

wine industry the case of
Tikves brand Tga za jug
in Macedonia
Master thesis in Business Administration

Candidate:

Mentor:

Anisija Mincikovska

Krum Efremov

PhD

Abstract
Branding has emerged as a top management priority in the last decade due to the growing
realization that brands are one of the most valuable intangible assets that companies have.
Brands are considered to be the valuable assets of business. Branding and brand equity has been
the topic of interest for the researchers in the area of marketing. Because of the significant
intangible value of brands, building and managing brand equity had become a priority for
companies in a wide variety of industries and markets.
Nowadays a brand reflects the quality and credibility of a firms products or services and
it is a perception of the consumers towards the organization. Therefore, each time more
companies focus on creating strong and powerful brands and use them as a strategy to create
value and differentiation in todays competitive environment.
The thesis investigates the concept of brand equity and its dimensions and provides the
necessary depth and breadth of understanding of brand equity and its importance. The overall
purpose of this thesis, which is of an exploratory nature, is to provide an overview of the brand
equity building process, as well as to reveal the importance of brand equity with special
emphasis on the wine industry in Macedonia through the case of Tikves brand Tga za jug.
Furthermore, the thesis aims to describe, explain and understand how Macedonian wine
producers create and sustain a strong brand, with special emphasis on explaining and
understanding its importance.

Keywords: brand, brand equity, brand equity determinants, customer-based brand equity, brand
building, wine, wine industry, wine brand

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Table of Contents
Abstract........................................................................................................................................................i
Table of Contents...2
List of tables and figures.............................................................................................................................4
Chapter 1 Introduction..............................................................................................................................5
1.1. Introduction......................................................................................................................................5
1.2. Problem formulation.........................................................................................................................7
1.3. Objectives of the research.................................................................................................................7
1.4. Structure of the thesis.......................................................................................................................8
Chapter 2 Review of literature The concept of brand equity..................................................................9
2.1. Brand equity conceptualizations.......................................................................................................9
2.2. Customer-based brand equity..........................................................................................................13
2.3. Brand equity models.......................................................................................................................14
2.4. Brand equity determinants..............................................................................................................20
2.4.1. Brand loyalty...........................................................................................................................20
2.4.2. Brand awareness......................................................................................................................21
2.4.3. Perceived quality.....................................................................................................................22
2.4.4. Brand associations...................................................................................................................24
2.4.5. Other proprietary brand assets.................................................................................................24
2.4.6. Brand knowledge.....................................................................................................................25
2.4.7. Brand image.............................................................................................................................25
2.5. Marketing mix elements and brand equity......................................................................................26
2.6. Brand equity measurements............................................................................................................30
2.6.1. Financial measurement............................................................................................................30
2.6.2. Customer-based measurement.................................................................................................32
2.7. The value of brand equity...............................................................................................................35
2.7.1. Value for the firm.....................................................................................................................35
2.7.2. Value for the customers............................................................................................................37
2.8. Brand equity in wine industry.........................................................................................................38
Chapter 3 Wine industry in the Republic of Macedonia.........................................................................40
3.1. General information........................................................................................................................40
3.2. Sector analysis................................................................................................................................41
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3.3. Domestic market and exports..........................................................................................................42

3.4. Competitive landscape....................................................................................................................44
3.5. Wine regions...................................................................................................................................45
3.6. Types of wine..................................................................................................................................46
3.7. Tikve Winery.................................................................................................................................46
3.7.1. Market position of Tikve Winery............................................................................................48
3.8. The brand Tga za jug.....................................................................................................................50
3.8.1. History.....................................................................................................................................50
3.9. Sales information............................................................................................................................52
3.9.1. General information.................................................................................................................52
3.9.2. Tga za jug...............................................................................................................................52
Chapter 4 Research methodology and results.........................................................................................54
4.1. Research methodology....................................................................................................................54
4.1.1. Research aim and objectives....................................................................................................54
4.1.2. Research design and method....................................................................................................55
4.2. Research results and findings..........................................................................................................57
4.2.1. The brand building process......................................................................................................58
4.2.2. Tikves strategy for the brand Tga za jug..............................................................................59
4.2.3. Marketing activities.................................................................................................................65
4.2.4. Other activities for brand reinforce..........................................................................................68
4.2.5. Budgetary information.............................................................................................................70
4.3. Discussion......................................................................................................................................71
Chapter 5 Conclusions............................................................................................................................75
5.1. Conclusion....75
5.2. Contributions of the thesis79
5.3. Limitations of the research79
5.4. Recommendations for further research.80
References.................................................................................................................................................80
Appendix 1: Interview guide.....................................................................................................................84
Appendix 2: Interview guide.....................................................................................................................85

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List of tables and figures

Figure 2.1.1 From awareness to financial value

Figure 2.3.1 Aakers brand equity model
Figure 2.3.2 Kellers dimensions of brand knowledge
Figure 2.3.3 Kellers customer-based brand equity pyramid
Figure 2.3.4 Sub dimensions of brand building blocks
Figure 2.5.1 Yoo et al.s model of brand equity
Figure 2.5.2 Chattopadhyay et al.s conceptual framework of brand equity
Figure 3.2.1 Total wine production in Republic of Macedonia (2010-2013)
Figure 3.3.1 Total wine exports in Republic of Macedonia (2010-2013)
Figure 3.5.1 Wine regions in Republic of Macedonia
Figure 3.7.1.1 Market position of Tikve Winery
Figure 3.7.1.2 Market share of Tikve Winery in total turnover in hospitality and trade
Figure 3.8.1.1 Evolution of the label of Tga za jug over the years
Table 3.9.2.1 Total sales of Tga za jug in 2012 and 2013
Figure 4.2.1.1 Tikves strategy for the brand Tga za jug
Figure 4.2.3.1 The new label of Tga za jug

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Chapter 1 Introduction
The first chapter provides a general overview of the contents of the thesis, including brief
introduction in the topic of the thesis, presents the problem discussion, together with the aim and
objectives of the research, and introduces the structure of the thesis.

1.1. Introduction
The role of brands within companies has changed over the last decades. Being no longer
just any part of the corporate value chain they are today the key to a companys success. This
development can be explained by the fact that the market value of a company does not mainly
come from its tangible assets anymore, but its intangibles and goodwill. Brands as intangible
assets thus gain more and more importance for a companys existence. This rising position of
brands within companies implicates the need to understand how to manage the brand governance
mechanisms effectively in order to maximize brand value and therewith also the companys
profit.
Over the last decades much of the marketers attention has been devoted to the concept of
brand equity, which has become one of the most popular and potentially important marketing
concepts, discussed by both academicians and practitioners. The motivations for studying brand
equity were primarily financially based in order to estimate the value of a brand more precisely
for accounting purposes or for merger, acquisition or divestiture purposes. The dynamic
environment made it later obvious that brand equity was important especially from a strategy
based motivation to improve marketing activity, given higher costs, greater competition and
flattering demand in many markets. However, it is widely recognized that the brand has
developed into one of a companys most important assets, which makes effective management of
the brand a key factor in corporate success.
The concept of brand equity has been debated both in the accounting and marketing
literatures, and has highlighted the importance of having a long-term focus within brand
management. In a general sense, brand equity is defined in terms of the marketing effects
uniquely attributable to the brand. That is, brand equity relates to the fact that different outcomes
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result from the marketing of a product or service because of its brand element, as compared to
outcomes if that same product or service did not have hat brand identification. Although a
number of different views of brand equity have been expressed, they all are generally consistent
with the basic notion that brand equity represents the added value endowed to a product or a
service as a result of past investments in the marketing for the brand.
Basically, brand equity arises from the greater confidence that customers place in a brand
than they do in its competitors. This confidence translates into customers loyalty and their
willingness to pay a premium price for the brand. Additionally, brand equity is the driving force
for incremental financial gains to the company. Therefore, building a strong brand with
significant equity has been seen as providing a host of possible benefits to a company, including
greater consumer loyalty and less vulnerability to competitive marketing actions, larger margins
as well as more favorable consumer responses to price increases and decrease, increased
marketing communication effectiveness, and licensing

and brand-extension opportunities

(Keller, 2001).
It is not surprising that some marketing academics have studied wine marketing and
building brand equity (Nowak, et al., 2006). Building brand equity in the wine industry is
particularly difficult yet necessary. By building equity a brand will stand out from its
competitors. In making a brand recognizable, and developing relationships with consumers, the
decision making process for wine purchases becomes simpler and more direct to the consumers.
It is widely recognized that equity can be built into brands that will give them value and strength
in the market well beyond that which is provided by the inherent characteristics of the products.
Therefore, it is vital for the wine brands to ensure that they have the brand equity required to rise
above the competition and get their labels off the shelf and into the homes of their target
consumers.
This thesis has identified dimensions of brand equity from academic literature and
provides the necessary depth and breadth of understanding of brand equity and its importance.
Further, there will be outlined a detailed explanation of the process of brand building through
applicative example of one of the most well-known wine brands on the Macedonian market
Tikves brand Tga za jug. The aim of the thesis is to describe, explain and understand how

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Macedonian wine producers create and sustain a strong brand, with special emphasis on
explaining and understanding its importance.

1.2. Problem formulation

Following the previous problem outline, the research question of the thesis Building
brand equity in the wine industry the case of Tikves brand Tga za jug in Macedonia can be
distinguished in two parts and formulated as follows:

How brand equity can be built and maintained?

How brand equity can provide value for the company?
This main problem is approached through a number of sub-questions that will be
addressed in the different chapters:

What is brand equity?

How can brand equity be measured?
What are the determinants of brand equity?
Which steps does the brand building process include?
How does brand equity provide value for the firms/customers?
What does strong brand means to a winery?

1.3. Objectives of the research

The aim of the thesis Building brand equity in the wine industry the case of Tikves
brand Tga za jug in Macedonia is to provide an overview of the brand equity building process,
as well as to reveal the importance of brand equity with special emphasis on the wine industry in
Macedonia through the case of Tikves brand Tga za jug. Furthermore, the thesis aims to
describe, explain and understand how Macedonian wine producers create and sustain a strong
brand, with special emphasis on explaining and understanding its importance.
Therefore, the thesis is expected:

To analyze relevant academic literature on the issue of building the brand equity with

particular focus on the wine industry;

To describe, explain and analyze the process of brand building through the case of a wine
brand Tikves brand Tga za jug;
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To suggest further improvements for the company.

The expected results from this thesis are to get a picture of the overall brand equity
building process through an example of wine brand. The importance of having a strong brand, as
well as, the benefits that a company can enjoy are the priorities that the thesis will emphasize.

1.4. Structure of the thesis

The first part of the thesis Building brand equity in the wine industry the case of
Tikves brand Tga za jug in Macedonia consists of an introduction chapter, which illustrates
the relevance of the topic and defines the thesis research question. Furthermore, it outlines the
research approach as well as its structure. The second chapter gives an introduction to brand
equity in general by defining the term brand equity, describing how it can be built and
measured, and explaining its importance for the companys existence and success, as well as for
the customers purchase decisions. This chapter includes conceptualization of brand equity,
analyzing it in different perspectives, and presents its dimensions and determinants constructed
in reference to different theories from the literature. Thereby, the models of brand equity
developed by Aaker (1991) and Keller (1993; 2001) are given particular consideration. Further,
this chapter analyses the benefits of having strong brand equity, both for companies and for the
customers. Special attention is thereby paid to the importance of brand equity for the companys
success, as well as to the advantages it can enjoy while having a strong brand. Chapter 3
analyzes the wine industry in the Republic of Macedonia and provides general information,
mainly focusing on the sector analysis, annual production, domestic and export sales, as well as
competitive landscape of the Macedonian wineries. In addition, this chapter analyzes the case of
Tikve Winery and the brand Tga za jug, taken as a subject of research. Chapter 4 presents
research methodology and techniques of collecting data considering the case of Tga za jug, than
it continues discussing the results from the researches and analyzing the data collected. The
thesis ends with conclusions derived from the research results, consists of a summary on what
was previously researched and discussed in the thesis, as well as guidelines and suggestions for
further improvements in terms of building brand equity, as well as recommendations for further
research.
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Chapter 2 Review of literature The concept of brand

equity
The literature review chapter provides insight in the theoretical perspective on the topic
of the thesis, analyzing the academic literature relevant for answering the previously defined
research questions. The chapter presents a conceptual framework, regarding the concept of brand
equity, and it represents a base for further research.

2.1. Brand equity conceptualizations

So far, the brand equity construct has been viewed from two major perspectives in the
literature. Some authors focused on the financial perspective of brand equity (Farquhar, et al.,
1991; Simon & Sullivan, 1993; Winters, 1991) and others on the customer-based perspective
(Aaker, 1991; Keller, 1993; Shocker, et al., 1994; Chaudhuri, 1999; Yoo & Donthu, 2001). The
first perspective discusses the financial value that brand equity creates to the business and is
often referred to as firm-based brand equity. However, the financial value of brand equity is only
the outcome of consumer response to a brand name. The latter, is considered the driving force of
increased market share and profitability of the brand and it is based on the markets perceptions
(customer-based brand equity). The customer-based perspective focuses on customer mind-set
and is explained with such constructs as attitudes, awareness, associations, attachments, and
loyalties (Keller & Lehmann, 2006) .The firm-based perspective, however, uses product-market
outcomes such as price premium, market share, relative price, and financial-market outcomes
such as brands purchase price and discounted cash flow of license fees and royalties (Ailawadi,
et al., 2003). In sum, there are different approaches to the concept of brand equity depending on
the actors, measures, and the final purpose of using it.
As Winters (1991) states, if you ask ten people to define brand equity, you are likely to
get ten (maybe eleven) different answers as to what it means (p.70). Since then, many studies
have been published on brand equity and it is obvious that Winterss statement is even more
relevant today than it was in 1991. Brand equity is such a complex concept, including diversity
of its conceptualizations in the literature, and different studies describing different aspects of this
intangible asset. The lack of an agreed definition of brand equity has in turn caused various
methodologies for measuring the construct.

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Yoo et al., (2000) emphasize that brand equity poses the difference in consumers choice
between a focal branded product or service and an unbranded product or service given the same
level of product features or service attributes. Winters (1991) relates brand equity to added value
by suggesting that brand equity involves the value added to a product by consumers' associations
and perceptions of a particular brand name. Bello and Holbrook (1995) argue that brand equity
comes into the picture when consumer knowingly pay higher prices for the same level of quality
in products as well as services, because of the charisma of the name emotionally involved in that
particular product or service.
Simon and Sullivan (1993) take advantage of the financial approach and define brand
equity as the incremental cash flows which accrue to branded products over and above the cash
flows which would result from the scale of unbranded products, while the incremental cash flows
are based on the value consumers place on branded products and on cost savings brand equity
generates through competitive advantages. Farquhar (1989) in turn, considers brand equity as the
added value with which a given brand endows a product, explaining that product is something
that offers a functional benefit, while brand is a name, symbol, design or mark that enhances the
value of a product beyond its functional purpose. The author further agrees that, depending on
which perspective is considered, the brand can have added value to the company, the trade or the
consumer.
Aaker (1991) presents one of the most detailed and widely accepted definitions of brand
equity as A set of brand assets and liabilities linked to a brand, its name and symbol that add or
subtract from the value provided to a firm and/or to that firms customers (p.15). Although the
brand assets on which brand equity is based, can differ depending on the context, they can be
usefully grouped into five categories: brand loyalty, brand awareness, perceived quality, brand
associations and other proprietary assets. His model demonstrates that brand equity is developed
based on these five dimensions. How the brand performs on these dimensions is what leads
consumers to develop an overall, intangible rating of brand equity. This equity then provides
value to the consumer and the firm in different ways. The model by Aaker was one of the first
seminal works in the field of brand equity and led to future research in the area.
Yoo et al. (2000) extend Aakers (1991) model by placing brand equity as a separate
construct between the dimensions of brand equity and the value for the customer and the firm.
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They also add price, store image, distribution intensity, advertising spending, and price deals as
antecedents of brand equity with their significant effects on the dimensions of brand equity. In
their model, brand awareness and brand associations dimensions have emerged as a single
dimension, whereas perceived quality and brand loyalty are retained as separate dimensions. Yoo
and Donthu (2001) also developed and validated a cross-culturally invariant multidimensional
consumer-based brand equity scale containing these dimensions.
One of the first critical articles of brand equity (Feldwick, 1996) finds that the term brand
equity has three different meanings depending on its use. At any one time brand equity can be
used to refer to brand description (consumer associations with the brand name), brand strength
(similar to Aaker as a measure of relative consumer demand for the brand), and brand value (to
set a price of the brand for when it is sold). Feldwick (1996) argues that brand equity is a vague
concept especially due to its lack of measurability and application in the business environment.
He concludes that brand equity is too imprecise to be used as the holistic measure of everything
that a company should be doing to improve its future performance. As accountants tend to define
brand equity differently from marketers, with the concept being defined both in terms of the
relationship between customer and brand (consumer-oriented definitions), or as something that
accrues to the brand owner (company-oriented definitions), Feldwick (1996) simplifies the
variety of approaches, by providing a classification of the different meanings of brand equity as:
1) the total value of a brand as a separable asset when it is sold, or included in a balance sheet;
2) a measure of the strength of the consumers attachment to a brand; 3) a description of the
associations and beliefs the consumer has about the brand.
Kotler and Keller (2009) argue that the foundation of brand equity is formed by the brand
knowledge of the consumers. Brand knowledge enables the consumer to differentiate brands and
guides the mind and response to marketing activities as a result of this knowledge. In
conceptualizing how customers evaluate brand equity, Srivastava and Shocker (1991) view it as
consisting of two components brand strength and brand value. Brand strength constitutes the
brand associations held by customers, while brand values are the gains that accrue when brand
strength is leveraged to obtain superior current and future profits.
Kapferer (2008) stands that brand equity is the financial value of a brand which provides
capital/value to products and services. Brand equity is related to future returns that customers
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generate to the product or service. Developed brand assets in the past, enable the brand to
leverage her strength and should deliver future value to the brand. Hence brand equity fulfils a
bridging role where it connects the past to the future. Kapferer (2008) distinguishes three levels;
1) brand assets, 2) brand strength and 3) brand value. The sequence from past to future is a
conditional consequence which differs in time due to competitive and environmental changes.
See Figure 2.1.1.
Figure 2.1.1 From awareness to financial value
Brand assets
Brand awareness
Brand reputation
Perceived brand personality
Perceived brand values
Reflected customer imagery
Brand preferences or attachment
Patents and rights

Brand strength
Market share
Market leadership
Market penetration
Share of requirements
Growth rate
Loyalty rate
Price premium
Percentage of products the

Brand value
Net discounted cash flow
attributable to the brand
after paying the cost of
capital invested to
produce and run the
business and the cost
of marketing

trade cannot delist

Source: Kapferer Jean Noel (2008) The New Strategic Brand Management: Advanced Insights and
Strategic Thinking. 5th edition, London, GBR: Kogan Page Ltd.

Although there is no universally accepted definition of brand equity, and a number of

different views of brand equity have been expressed, they are all generally consistent with the
basic notion that brand equity represents the added value endowed to a product or a service as
a result of past investments in the marketing for the brand. Additionally, brand equity can be
defined as the marketing effects or outcomes that accrue to a product given its brand name
compared with those that would accrue if the same product does not have the brand name
(Feldwick, 1996; Aaker, 1991; Farquhar, 1989).

2.2. Customer-based brand equity

As indicated above, the literature shows that brand equity can be approached from the
perspective of the individual consumer. However, the customer-based perspective has been
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proved as more conceptualized and analyzed as in the literature, as well as applied in practice.
The advantage of conceptualizing brand equity from the consumers perspective is that it enables
managers to consider specifically how their marketing program improves the value of their
brands. Though the eventual goal of many marketing programs is to increase sales, it is first
necessary to establish knowledge structures for the brand so that consumers respond favorably to
marketing activity for the brand (Keller, 1993).
Keller (1993) as one of the most prominent authors considers brand equity from a
consumer perspective. The author introduces the concept of customer-based brand equity
(CBBE), which differs slightly from Aakers (1991). CBBE may be either positive or negative
when consumer react more (less) favorably to a brand, compared to an unnamed version of the
product or service, and it is related strongly to the knowledge (memory and associations) of the
brand. Keller (1993) includes the companys view and defines CBBE as the differential effect of
brand knowledge on consumer response to the marketing of the brand. According to Keller
(2003), CBBE occurs when the consumer has a high level of awareness and familiarity with the
brand and holds some strong, favorable, and unique brand associations in memory. Kellers
model of brand equity focusses on brand knowledge, conceptualized in terms of two components
brand awareness and brand image. Thus, brand awareness relates consumers ability to identify
the brand under different conditions and consists of brand recognition and brand recall, while
brand image refers to the perception about the brand as reflected by a set of brand associations
held in consumers memory. The author classifies the associations in three major categories
attributes, benefits and attitudes, which can vary according to their favorability, strength and
uniqueness.
The basic premise of Kellers (1993) customer-based brand equity model is that the
power of a brand lies in what customers have learned, felt, seen, and heard about the brand as a
result of their experiences over time. In other words, the power of a brand lies in what customers
have in their minds (Keller, 2008). His model is an insightful way to represent how brand
knowledge is the key to creating brand equity. Keller (1993) viewed customer-based brand
equity as the differential effect of brand knowledge on consumer response to the marketing of
the brand. He conceptualized the sources of brand knowledge as brand awareness and brand
image.
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According to Keller (1993; 1998) brand is said to have positive (negative) customerbased brand equity when consumers react more (less) favorably to a product and the way it is
marketed when the brand is identified as compared to when it is not. Thus, a brand with positive
customer-based brand equity might result in consumers being more accepting of a new brand
extension, less sensitive to price increases and withdrawal of advertising support, or more willing
to seek the brand in a new distribution channel. Customer-based brand equity occurs when the
consumer is familiar with the brand and holds some positive brand associations in memory.
Favorable consumer response, in turn, can lead to enhanced revenues, lower costs, and greater
profits for the firm.
Customer-based brand equity occurs when the customer is familiar with the brand and
holds some positive brand associations in memory. A brand with positive customer-based brand
equity might result in consumers being more accepting of a new brand extension, less sensitive
to price increases and withdrawal of advertising support, or more willing to seek for the brand in
a new distribution channel. Favorable consumer response, in turn, can lead to enhanced
revenues, lower costs, and greater profits for the firm. Conceptualizing brand equity from
customer perspective is useful because it suggests both specific guidelines for marketing
strategies and tactics and areas where research can be useful in assisting managerial decision
making (Lassar, et al., 1995).

2.3. Brand equity models

It is widely recognized that the brand has developed into one of a companys most
important assets, which makes effective management of the brand a key factor in corporate
success. The development and long term enhancement of brand strength has been identified as a
target function of any company that wishes to maintain a competitive position in the market,
being it local, national, regional or international, allowing brand equity and hence the companys
enterprise value to be increased. Therefore, many perspectives and approaches regarding the
concept of brand equity has appeared and many models of brand building have been developed,
primarily describing what brand equity is and how it should be built, measured and managed. In
addition, there will be emphasized and described some of the most popular models of brand

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equity extracting the main issues of each: brand equity dimensions, the benefits of brand equity
and the brand building process implications.
Aaker (1991) considers that brand equity is a set of brand assets and liabilities linked to
a brand, its name and symbol that add to or subtract from the value provided by a product or
service to a firm/or to that firms customers(p.15). In his brand equity model, the author
identifies five brand components: brand loyalty, brand awareness, perceived quality, brand
associations and other proprietary assets. Aakers concept is summarized in Figure 2.3.1., the
figure illustrating how each brand equity asset/liability generates value for the customer or the
firm in a variety of ways.
Figure 2.3.1 Aakers brand equity model

Source: Aaker David A. (1991) Managing Brand Equity: Capitalizing on the Value of a Brand Name. Free
Press: New York; adapted

Furthermore, Keller (1993; 1998) has approached brand equity from more of a consumer
behavior perspective. He defines customer-based brand equity as the differential effect of
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brand knowledge on consumer response to the marketing of the brand (p.2; p.45). According to
his model, a brand is set to have positive (negative) customer-based brand equity when
customers react more (less) favorably to an element of the marketing mix when it is attributed to
a fictitiously named of unnamed version of the product or service. Customer-based brand equity
occurs when the consumer is familiar with the brand and holds some favorable, strong, and
unique brand associations in memory. Three key elements of Kellers definition must be
outlined: the differential effect (brand equity arises from differences in consumer response),
the brand knowledge (the difference in consumer response is generated by consumers
knowledge of the brand and the consumer response to marketing (the differential response is
reflected in perceptions, preferences and behavior related the marketing of a brand).
To understand how customer-based brand equity can be built, measured, and managed,
Keller described a detailed conceptualization of brand knowledge. According to Keller, brand
knowledge is defined in terms of two components/dimensions, brand awareness and brand
image. Brand awareness is the consumers ability to identify the brand under different conditions
and consists of brand recognition and brand recall. Brand image is defined as perceptions about a
brand as reflected by the brand associations held in consumers memory. Considering these
aspects, a brand may have positive customer based brand equity, when consumers are more
accepting of a new brand extension, less sensitive to price increases and withdrawal of
advertising support or more willing to seek the brand in a new distribution channel etc., which
means they react favorably to marketing activity of the brand as compared to an unnamed or
fictitiously named version of the product, or a negative customer based brand equity when
consumers react less favorably to marketing activity for the brand in the same comparison
context. Figure 2.3.2 illustrates the Kellers model of brand equity the dimensions of brand
knowledge.

Figure 2.3.2 Kellers dimensions of brand knowledge

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Source: Keller, Kevin Lane, (1993), "Conceptualizing, measuring and managing customer-based brand
equity", Journal of Marketing, 57(1), p. 7

Additionally, Keller (2001) considers that building a strong brand implies a series of four
steps, where each step is contingent upon the successful completion of the previous step:
establishing the proper brand identity, create the appropriate brand meaning, elicit the right
brand responses, and forge appropriate brand relationships with customers. All steps involve
accomplishing certain objectives with customers, both existing and potential. These four steps
represent a set of fundamental questions that customers invariably ask about brands either
implicitly or explicitly: 1) Who are you? (brand identity), 2) What are you? (brand meaning), 3)
What about you? What do I think or feel about you? (brand responses), 4) What about you and
me? What kind of association and how much of connection would I like to have with you?
(brand relationships). The first step is to ensure identification of the brand with customers and an
association of the brand in customers minds with a specific product class or customer need. The
second step is to firmly establish the brand meaning in the minds of customers by strategically
linking a host of tangible and intangible brand associations. The third step is to elicit the proper
customer responses to this brand identity and brand meaning. The fourth and final step is to

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convert brand response to create an intense, active loyalty relationship between customers and
the brand.
Keller (2001) divides these four steps into six brand-building blocks: brand salience,
brand performance, brand imagery, brand judgments, brand feelings and brand resonance. To
connote the sequencing involved, these building blocks can be assembled as a brand pyramid.
Creating significant brand equity involves reaching the top of the pyramid and will only occur if
the right brand-building blocks are in place. The corresponding brand steps represent different
levels of the pyramid as illustrated in Figure 2.3.3. Figure 2.3.4 examines each of the building
blocks in detail.
Figure 2.3.3 Kellers Customer-based brand equity pyramid

Source: Keller, Kevin Lane, (2001), "Building Customer-Based Brand Equity: A Blueprint for Creating
Strong Brands", Marketing Science Institute, p.7

Figure 2.3.4 Sub dimensions of brand building blocks

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Source: Keller, Kevin Lane, (2001), "Building Customer-Based Brand Equity: A Blueprint for Creating
Strong Brands", Marketing Science Institute, p.8

Considering the dimensions of brand equity described above, both Aakers and Kellers
models are very customer-oriented and emphasize the importance of brand awareness and
associations. Despite this commonality, some important differences exist. The primary difference
is that the customer-based brand equity framework of Keller is based on a more detailed
conceptual foundation. A much stronger focus on consumers and their brand knowledge
structures can be seen in his brand equity model, compared to Aakers model. In spite of the
differences Aakers model seems to complement customer-based brand equity quite well,
because it takes the perceived quality aspect into account.
Both Aaker and Keller suggest clear advices to build brand equity. Aaker outlines general
guidance for each dimension of brand equity, while Keller suggests a four step process of
building strong brands. Both authors outline the need to understand how customers respond to
the brands and their marketing activities so as brand building strategies can develop into the
desired direction.

2.4. Brand equity determinants

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2.4.1. Brand loyalty

Aaker (1991) defines brand loyalty as the attachment that a customer has to a brand.
Brand loyalty generates value by reducing marketing costs and leveraging trade. Loyal
customers expect the brand to be always available and entice others advising them to use it.
Brand loyalty, which can reflect a range from the habitual buyer to the satisfied buyer to those
that like the brand to the truly committed, generates value mainly by reducing marketing costs:
retaining existing customers is much less costly than attracting new ones. It is also difficult for
competitors to communicate to satisfied brand users because they have little motivation to learn
about alternatives. The burden on the competitor brand is substantial. A common mistake is to
grow sales by enticing new customers to the brand while neglecting existing ones. Loyal
customers, in some cases, can also entice others by using the product or advising others to use it
(Aaker, 1992).
Brand loyalty represents a favorable attitude toward a brand resulting in consistent
purchase of the brand over time. It is the result of consumers learning that only the particular
brand can satisfy their needs. Two approaches to the study of brand loyalty have dominated
marketing literature: behavioral and cognitive loyalty (Keller, 1998). The first, a behavioral
approach to brand loyalty, views consistent purchasing of one brand over time as an indication of
brand loyalty. Behavioral measures have defined loyalty by the sequence of purchases and/or the
proportion of purchases. Repeat purchasing behavior is assumed to reflect reinforcement and a
strong stimulus-to-response link. The second, a cognitive approach to brand loyalty, underlines
that behavior alone does not reflect brand loyalty. Loyalty implies a commitment to a brand that
may not be reflected by just measuring continuous behavior.
The brand loyalty of the customer base is often the core of a brands equity. It reflects
how likely a customer will be ready to switch to another brand, especially when that brand
makes a change, either in price or in product features. As brand loyalty increases, the
vulnerability of the customer base to competitive action is reduced (Aaker, 1991).
The brand loyalty of existing customers represents a strategic asset that, if properly
managed and exploited, has the potential to provide value in several ways. A loyal set of
customers can reduce marketing costs, since it is much less costly to keep a customer than to
gain and regain, and it provides trade leverage over others in the distribution channel. Customers
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can create brand awareness and generate reassurance to new customers. Loyal customers will
also give a company time to respond to competitive threats (Aaker, 1991).
Traditionally, in marketing literature, it has been considered that loyalty is a component
of brand equity (e.g. Aaker, 1991), whereas others argue that loyalty is an outcome of brand
equity (e.g. Van Riel et al, 2005 (Swait & Erdem, 1998)), and that it could positively influence
the customers willingness to stay, repurchase and recommend the brand (Vogel, et al., 2008).
2.4.2. Brand awareness
Brand awareness is considered to be a key determinant of brand equity (Aaker, 1991;
Keller, 1993; Yoo & Donthu, 2001). It is defined as an individual's ability to recognize and recall
a brand (Aaker, 1991; Keller, 2003), and it is related to the strength of the brand node in memory,
as reflected by consumers ability to identify the brand under different conditions. In particular,
brand name awareness relates to the likelihood that a brand name will come to mind and the ease
with which it does to (Keller, 1993; 1998).
Aaker (1996) defines three levels of brand awareness: brand recognition, brand recall
and top of mind. Recognition reflects familiarity and linking acquired from past exposure.
Remembering as such, one brand among others is a manner of aided recall. Brand recognition
relates to consumers ability to confirm prior exposure to the brand when given the brand as a
cue. In other words, brand recognition requires that consumers correctly discriminate the brand
as having been seen or heard previously (Keller, 1998). Recall reflects awareness of a brand
when it comes in mind as soon as its product class is mentioned. It relates to the consumers
ability to retrieve the brand when given the product category, the needs fulfilled by the category,
or some other type of probe as a cue. In other words, brand recall requires that consumers can
correctly generate the brand from memory (Keller, 1998). It is a manner of unaided recall. Top of
mind is the highest awareness level, where the brand dominates the mind and appears as first
whenever applicable (Aaker, 1991).
Awareness can affect customers perceptions, which lead to different brand choice and
even loyalty. A brand with strong brand recall and top of mind can affect customers perceptions,
which lead to different customer choice inside a product category. Brand awareness, even at the
recognition level, can provide the brand with a sense of the familiar and a signal of substance and
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commitment. A brand that is familiar is probably reliable and of reasonable quality. Awareness at
the recall level further affects choice by influencing what brands get considered and selected as
the brand must first enter the consideration set before being on the purchase list.
Brand awareness is the ability of a potential buyer to recognize or recall that a brand is a
member of a certain product category. A link between product class and brand is involved. Brand
awareness involves a continuum ranging from an uncertain feeling that the brand is recognized to
a belief that it is the only one in the product category (Aaker, 1991).
Brand awareness creates value in different ways. Brand awareness provides the anchor to
which other associations can be linked. Recognition provides the brand with a sense of
familiarity and people like the familiar. In the absence of motivation to engage in attribute
evaluation, familiarity may be enough. Brand awareness can be a signal of substance. The first
set in the buying process often is to select a group of brands to consider. Brand awareness can be
crucial to getting into this group (Aaker, 1991).
The specific activities to increase or to transit of each level of awareness, depends on the
purchase cycle, on the decision making process, and on the level of involvement. Awareness
comes from customers who feel themselves attracted and interested to the brand, is not just a
matter of high pressure advertising. It's all about managing selective perceptions, exposure,
attention and memory (Kapferer, 2008).
The studies of Yoo et al., (2000) and Yoo and Donthu (2001) incorporate this dimension
into their empirical models but have not detected any direct effect on brand equity. Therefore, in
their studies, it is simply combined with brand associations.
2.4.3. Perceived quality
Perceived quality refers to the customers perception of the overall quality or superiority
of a product or service relative to alternatives. Perceived quality can be defined as the customers
judgment about a products overall excellence or superiority in comparison to alternative's brand
and overall superiority that ultimately motivates the customer to purchase the product. It cannot
necessarily be objectively determined, because perceived quality itself is a summary construct
(Aaker, 1991).

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Perceived quality provides a reason to buy. A brand will have associated with it a
perception of overall quality not necessarily based on a knowledge of detailed specifications. The
quality associated with a brand can also be a strong factor of differentiation and positioning.
Building a strong durable brand implies nevertheless an above average quality positioning or at
least a minimum perceived quality when considering brands positioned as low market
competitors. Perceived quality can also attract channel member interest, allow extensions and
support a higher price that provides resources to reinvest in the brand.
Keller (2008) defines perceived quality as customers perceptions of the overall quality or
superiority of a product or service relative to another and with respect to its intended purpose.
Thus, perceived quality is an overall assessment based on customer perceptions of what
constitutes quality product and how well the brand rates on those dimensions. According to
Keller (2008), achieving a satisfactory level of perceived quality has become more difficult as
product improvements have led to higher customer expectations regarding the quality of
products.
Perceived quality is valuable in several ways. In many contexts, the perceived quality of a
brand provides a crucial reason to buy. It is influencing which brands are included and excluded
from the consideration set and which brand is to be selected. A principal positioning
characteristic of a brand is its location within the dimension of perceived quality. A perceived
quality advantage provides the option of charging a premium price. The price premium can
increase profits and/or provide resources with which to reinvest in the brand. Perceived quality
can also be meaningful to retailers, distributors and other channel members and thus aid in
gaining distribution. Channel members are motivated to carry brands that are well regarded. In
addition, the perceived quality can be exploited by introducing brand extensions, using the brand
name to enter new product categories. A strong brand with respect to perceived quality will be
able to extend further, and will find a higher success probability than a weak brand (Aaker,
1991).

2.4.4. Brand associations

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Brand associations are a key to building strong brands since they represent what the
brand stands for in the customers mind (Aaker, 1991). In essence, brand association helps
process and retrieves information about the brand and, in the ideal case, creates a positive
attitude and feelings about the brand. The way consumers perceive brands is a key determinant
of long-term business-consumer relationships. Hence, building strong brand perceptions is a top
priority for many firms today.
Brand associations are important to marketers and to consumers. Marketers use brand
associations to differentiate, position, and extend brands, to create positive attitudes and feelings
toward brands, and to suggest attributes or benefits of purchasing or using a specific brand.
Consumers use brand associations to help process, organize, and retrieve information in memory
and to aid them in making purchase decisions (Aaker, 1991).
Brand associations may include, e.g., product attributes, customer benefits, uses, lifestyles, product classes, competitors and countries of origins. The association not only exists but
also has a level of strength. The brand position is based upon associations and how they differ
from the competition. An association can affect the processing and recall of information, provide
a point of differentiation, provide a reason to buy, create positive attitudes and feelings and serve
as the basis of extensions. The associations that a well-established brand name provides can
influence purchase behavior and affect user satisfaction. Even when the associations are not
important to brand choices, they can reassure, reducing the incentive to try other brands (Aaker,
1991; 1992).
2.4.5. Other proprietary brand assets
Other proprietary brand assets refer to patents, trademarks and channel relationships
which can provide strong competitive advantage. A trademark will protect brand equity from
competitors who might want to confuse customers by using a similar name, symbol or package.
A patent can prevent direct competition if strong and relevant to the purchase decision process.
Finally, a distribution channel can be indirectly controlled by a brand as customers expect the
brand to be available (Aaker, 1991; 1996).

2.4.6. Brand knowledge

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Considering the Kellers brand equity model, brand knowledge is the key issue in
creating customer-based brand equity (Keller, 1993; 1998). Brand knowledge is defined in terms
of two dimensions: brand awareness and brand image. Brand awareness relates to brand recall
and recognition performance by consumers. Brand image refers to the set of associations linked
to the brand that consumers hold in memory. Consistent with an associative network memory
model, brand knowledge is conceptualized as consisting of a brand node in memory to which a
variety of associations are linked. Building brand awareness requires repeatedly exposing
consumers to the brand as well as linking the brand in consumer memory to its product category
and to purchase, usage and consumption situations. Creating a positive brand image requires
establishing strong, favorable and unique associations for the brand. The relevant dimensions
that distinguish brand knowledge and affect consumer response are the awareness of the brand
(in terms of recall and recognition) and the favorability, strength and uniqueness of the brand
associations in consumer memory. These dimensions are affected by other characteristics of and
relationships among the brand associations (Keller, 1993).
2.4.7. Brand image
According to Keller (1993; 1998), brand image refers to consumer perceptions of a brand
as reflected by the brand associations held in consumers memory. Brand associations are
informational nodes linked to the brand node in memory and contain the meaning of the brand
for consumers.
In addition, Keller (1993; 1998) states that brand associations may take different forms.
One way to distinguish among brand associations is the level of abstraction, that is, how much
information is summarized or subsumed in the association. Within this dimension, the types of
brand associations can be classified into three major types of increasing scope: attributes,
benefits, and attitudes.
Brand attributes are those descriptive features that characterize a product or service. They
can be further distinguished according to how directly they relate to product or service
performance. Along these lines, attributes can be classified into product-related and nonproduct-related attributes (Keller, 1993). Brand benefits are the personal value and meaning that
consumers attach to the product or service. Benefits can be further distinguished into three
categories according to the underlying motivations to which they relate: functional benefits,
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experiential benefits, and symbolic benefits. The third and most abstract types of brand
associations, brand attitudes are defined in terms of consumers overall evaluations of a brand.
Brand attitudes are important because they often form the basis for actions and behavior that
consumers take with the brand (e.g., brand choice) Consumers brand attitudes generally depend
on specific considerations concerning the attributes and benefits of the brand. It is important to
note that brand attitudes can be formed on the basis of benefits about product-related attributes
and functional benefits and/or beliefs about non-product-related attributes and symbolic and
experiential benefits (Keller, 1993; 1998).
Considering the previously mentioned pyramid consisted of four steps for creating strong
brand, suggested by Keller (2001), each step is seen as a brand equity determinant, and each step
is a contingent upon the successful completion of the previous one. The process of brand
building, according to these steps includes: establishing the proper 1) brand identity, create the
appropriate 2) brand meaning, elicit the right 3) brand responses, and build corresponding 4)
brand relationships with customers.

2.5. Marketing mix elements and brand equity

Marketing strategy is often considered the most important mean of establishing brand
equity. Over the years, a large number of studies have explored how various marketing mix
elements affect brand equity.
Brand equity is seen as the outcome of long term marketing efforts operated to build a
sustainable, differential advantage relative to competitors (Yoo, 1996). According to Keller
(1993) a brand is said to have a positive (negative) customer-based brand equity if consumers
react more or less favorably to the product, price, promotion, or distribution of the brand than
they do to same marketing mix element when it is attributed to a fictitiously names or unnamed
version of the product or service. Yoo (1996) suggests, any marketing actions will affect on
customers brand knowledge e.g., psychological perception, which is result in a positive or
negative impact on brand equity.
Based on Aakers concept, Yoo et al., (2000) created brand equity creation process model
to systematically examine the relationship among marketing efforts, brand equity dimensions,
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and brand equity. Their model was an extension of Aakers proposal which indicated that
marketing activities had significant effects on brand equity dimensions, which in turn created and
strengthened the equity. Yoo et al., (2000), extend Aakers model by placing brand equity as a
separate construct between the dimensions of brand equity and the value for the customer and the
firm. They also add price, store image, distribution intensity, advertising spending, and price
deals as antecedents of brand equity with their significant effects on the dimensions of brand
equity. In their model, brand awareness and brand associations dimensions have emerged as a
single dimension, whereas perceived quality and brand loyalty are retained as separate
dimensions. As clarification, their study investigates the relationships between selected
marketing mix elements and the creation of brand equity. The authors explore how these
marketing actions increase or decrease brand equity. The findings provide insights into how
marketing activities may be controlled to generate and manage brand equity. Figure 2.5.1
exhibits their model of brand equity.
Figure 2.5.1 Yoo et al.s model of brand equity

Source: Yoo B., Donthu N. and Lee S., (2000), An Examination of Selected Marketing Mix Elements and
Brand Equity, Journal of the Academy of Marketing Science, p. 196

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With an increase in marketing efforts, there is an increase in the dimensions of brand

equity, which in turn positively influences brand equity. Increase in brand equity leads to an
increase in the value of the brand to the customers and also to the firm, which means the firm has
an increased bottom line now and can hence invest in more marketing activities. The idea that
brand adds value to products or services is fundamental to marketing (Yoo, et al., 2000).
Chattopadhyay et al., (2009) investigate the consumers perceptions on several factors
that in turn affect brand equity. The study examines the relationship between marketing mix
elements, the factors that are not part of the marketing mix, and brand equity. The authors divide
the two groups into direct marketing mix variables and indirect marketing mix elements. The
first group contains price, store image, advertising frequency, price promotions and distribution
intensity. The indirect variables include peer recommendation, country of origin of the brand and
celebrity endorsement. The authors study the interaction effect of the direct and indirect
marketing mix parameters that impact brand equity. The results of the study unambiguously
prove that both direct and indirect marketing mix variables have a significant impact on the
dimensions of brand equity and thereby on the brand equity of the products. Figure 2.5.2
illustrates their conceptual framework of brand equity.
Figure 2.5.2 - Chattopadhyay et al.s conceptual framework of brand equity

Source: Chattopadhyay et al., (2009), Determinants of brand equity - A blue print for building strong
brand: A study of automobile segment in India, African Journal of Marketing Management, Vol. 1(4), p. 110
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Advertising is considered as an obvious variable that one would assume to have a

relationship with brand equity. It is seen as one of the most important means of establishing
brand awareness and educating consumers on the different attributes or dimensions of a brand.
Aaker (1991) frequently indicated that advertising was important to the building of consumer
perceptions in the five dimensions of brand loyalty, name awareness, perceived quality, brand
associations, and other proprietary brands assets. The author further proposed that advertising
may be the key driver of brand equity through the means of cumulative advertising and
possessing a higher share of industry advertising.
Simon and Sullivan (1993) use advertising as a variable related to market share in the
development of a financial-based measure of brand equity. It has been concluded that companies
with higher advertising budgets possessed higher levels of brand equity when compared to
companies with smaller advertising budgets. Furthermore, Yoo et al. (2000) found that frequent
price promotions are related to low brand equity while high advertising spending, high price,
good store image, and high distribution intensity are related to high brand equity.
Kotler and Keller (2006) argued advertising could create long-term brand image for a
product or service and trigger quick sales by reacting a number of customers. A company invests
a huge amount of fund in advertising of its product or service in order to create and increase
brand awareness by exposing brands to customers. As well as, advertising strengthens the
brands likelihood of being included in consumers mindset. Thus, enhance the market
performance of a brand.
According to Hoeffler and Keller (2002) there are six means by which marketing
programs can build brand equity: (1) building brand awareness, (2) enhancing brand image, (3)
establishing brand credibility, (4) evoking brand feelings, (5) creating a sense of brand
community, and (6) eliciting brand engagement. It is of particular importance for one brand to
develop its marketing strategy in accordance with the companys mission and vision.
Shocker et al., (1994) believed that companies must pay more attention to develop a
systematic sight of products and brands in order to specify how intangible assets which are
resulted from managers pricing, promotion, services and distribution decisions, contribute with
self-product to form brand equity and affect the buyer decision-making.
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However, there exist many studies that examine the effects of marketing mix elements, as
well as marketing activities on brand equity. Some of the mostly investigated marketing elements
that has relationship with brand equity include price, store image, distribution intensity,
advertising frequency, celebrity endorsement, price promotion, non-price promotions, event
sponsorship, country-of-origin and word-of-mouth recommendation (Chattopadhyay, et al.,
2010; Kabadayi, et al., 2007; Rajh, 2005).

2.6. Brand equity measurements

As the concept of brand equity has gained much prominence both in academia and
industry, along with it appeared different methods of measurement. Unlike the developments at a
conceptual level, however, the existing literature does not provide a satisfactory measurement
method for understanding the sources of brand equity.
Studies regarding the measurement of brand equity can be grouped mainly in two distinct
categories. As was the case with the definitions, some authors have studied the financial aspects
of the brand equity measurement, whereas others have focused on the customer-based
measurement issues. The first perspective of brand equity is from a financial markets point of
view where the asset value of a brand is appraised (Simon & Sullivan, 1993; Farquhar, 1989),
while consumer-based brand equity has attitudinal associations and refers to evaluating the
consumers response to a brand name (Keller, 1993; Shocker, et al., 1994; Chaudhuri, 1999).
2.6.1. Financial measurement
Developing a financial measure of brand equity is crucial for effective brand
management. Quantifying the dollar value of a brand would allow firms to report brand asset
values in financial statements, and assign an objective value to a brand during sale or acquisition.
A standard measure of brand equity that can be tracked longitudinally would also allow
marketers to evaluate changes in a brands value over time, helping to evaluate the effects of
changes in marketing strategies or tactics, competitive factors, or managerial impact. Developing
a financial measure of brand equity would address MSIs top priority of increasing accountability
and measuring ROI of marketing expenditures (MSI, 2008). Firm-based measures, such as
revenue premium, provide single objective number that is credible to senior management and the
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financial community and acts as a useful guide to the value of a brand in mergers and
acquisitions.
Among the financially-oriented studies, Simon and Sullivan (1993) emphasized macro
and micro approaches as an estimation technique extracting the value of brand equity from the
value of the firms other assets. The authors first assign an objective value to a companys brands
and relate this value to the determinants of brand equity according to the macro approach. Then,
the micro approach isolates changes in brand equity at the individual brand level. In a similar
manner, Motameni and Shahrokhi (1998) proposed a global brand equity valuation model
quantifying all the components and applying the generally accepted financial techniques.
Interbrand Group has used a subjective multiplier of brand profits based on the brands
performance along seven dimensions: leadership, stability, market stability, internationality,
trend, support and protection (Keller, 1993).
Simon and Sullivan (1993) present a financial technique based on financial market
estimates of brand-related profits. The method for the financial approach takes into consideration
expenditures on advertising and research and development, company market share, age of the
firm, and market concentration in combination with tested dummy variables. The results provide
evidence that brand equity comprises a large percentage of the total value of many firms and
gives weight to the belief that brands must be managed effectively.
Furthermore, Farquhar (1989) explains that, from the firms perspective, brand equity can
be measured by the incremental cash flow from associating the brand with the product.
Incremental cash flow also results from premium pricing and reduced expenses. The author, also,
outlines three main elements that are essential in building a strong brand with the consumer: a
positive brand evaluation, an accessible brand attitude, and a consistent brand image.
Whereas the consumer-based method of measuring brand equity is based on the feedback
of consumers, the financial-based brand equity methods are more focused on valuating brand
equity upon financial performance. This methodology involves highlighting key financial
measures and factoring these results into a formula for evaluating brands. Winters (1991)
provides three methods accountants use when determining the value of a brand as:

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1. Market approach present value of the future economic benefits to be derived by

the owner of a property.
2. Cost approach amount of money required to replace a brand, including the costs
of product development, test marketing, advertising, etc.
3. Income approach net income derived from the brand divided by the risks
associated with the brand achieving the prospective earnings.
The revenue premium measure developed recently by Ailawadi et al. (2003) and
defined as the difference in revenue (Net Price Volume) between a branded good and a
corresponding private label can also be considered within the firm-based perspective.
Park and Srinivasan (1994) proposed a survey-based method for measuring and
understanding brand equity at the individual consumer level in a specific product category, which
offers brand managers an indication of the sources of brand equity. This method measures brand
equity as the difference between an individual consumers overall brand preference and his or
her brand preference on the basis of objectively measured product attribute levels.
Brand valuation is a relatively new phenomenon. Many different methods have been
proposed because financial accounting standards for valuing intangible assets vary across
countries. However, little consensus has emerged about how brand performance should be
measured.
2.6.2. Customer-based measurement
On the other hand, a consumer-based measure of brand equity is based on the value
consumers derive from the brand name. Some researchers define this added value as the positive
associations, awareness, loyalty, and perceived quality of the brand (Aaker, 1991), as the
differential effect of brand knowledge to the marketing of the firm (Keller, 1993), or as the price
premium that consumers are willing to pay for the brand (Park & Srinivasan, 1994). Consumerbased measures of brand equity can provide valuable insights and diagnostics for the marketing
or brand manager concerned about a brands value to consumers. Such measures can effectively
capture the equity of strongly positioned popular brands and the equity of brands that enjoy high
consumer loyalty and command a significant price premium in niche markets.

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Aaker (1991) was the first to propose a means of assessing customer-based brand equity
measurements. He supports that brand equity is measured by how consumers perceive a brand in
regards to brand loyalty, name awareness, perceived quality, brand associations, and other
proprietary brands assets. This measurement is to be established by surveying customers directly
to determine satisfaction and perceptions regarding a brand and its equity.
Keller (1993) carried the research of Aaker one step further by defining and outlining
customer-based brand equity measurement methods and encouraging managers to think more
strategically about brand equity. Keller defines customer-based brand equity as the differential
effect of brand knowledge on consumer response to the marketing of a brand. He views the
measurement in a broad manner as a brand has positive (or negative) customer-based brand
equity if consumers react more (or less) favorably to the product, price, promotion, or
distribution of the brand than they do to the same marketing mix when it is attributed to an
unbranded version of the product or service.
According to Keller (1993; 1998), there are two basic complementary approaches to
measuring customer-based brand equity. The indirect approach attempts to assess potential
sources for customer-based brand equity by measuring brand knowledge structures, that is,
consumers brand awareness and brand image. The indirect approach is useful for identifying
what aspects of the brand knowledge may potentially cause the differential response that creates
customer-based brand equity. The direct approach to measuring customer-based brand equity, on
the other hand, attempts to more directly assess the impact of brand knowledge on consumer
response to different elements of the marketing program for the firm. The direct approach is
useful in approximating the possible outcomes and benefits that arise from the differential
response that creates customer-based brand equity. The indirect and direct approaches to
measuring customer-based brand equity are complementary and should be used together. In order
to apply these two different types of measures in a managerial setting, it is necessary to design
and put into place a customer-based brand equity measurement system. There exists an extensive
set of research procedures designed to provide timely, accurate and actionable information for
marketers so that they can make the best possible tactical decisions in the short run and strategic
decisions in the long run.

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Yoo and Donthu (2001) propose a multidimensional consumer-based brand equity scale
based on the research of Aaker and Keller, where consumer-based means measurement of
cognitive and behavioral brand equity at the individual consumer level through a consumer
survey. The authors develop a scale utilizing 22 items for assessment: five on brand loyalty, four
on brand awareness, seven on perceived quality, and six on brand associations. They developed a
brand equity measure with an etic approach, in which a universal measurement structure across
cultures is sought using multiple cultures simultaneously. The outcome measure that an etic
approach produces is functionally, conceptually, linguistically, and metrically equivalent across
cultures, which provides the basis for generating valid cross-cultural comparisons.
Park and Srinivasan (1994) developed a survey-based method of measurement. Their
method is intended to gather different customer opinions and attitudes to determine possible
factors in building brand equity, which will assist brand managers in making informed decisions.
By collecting data on the importance of attribute and non-attribute based factors, brand managers
can determine how the companys brand rates compared to the competition and plan for the
future direction of the brand.
Silverman et al., (1999) explored the relationship between customer-based and
financial/market-based brand equity measurements. The overall implication of customer-based
research suggests that measures of customer-based brand perceptions are accurate reflections of
brand performance in the marketplace. Customer-based brand equity, in this respect, is the
driving force for incremental financial gains to the firm.
The challenge for many brands is to develop credible and sensitive measures of brand
strength that supplement financial measures with brand asset measures. When brand objectives
and programs are guided by both types of measures, the incentive structure becomes more
balanced, and it becomes more feasible to justify and defend brand-building activities (Aaker,
1996). General progress in the measurement of brand equity will help managers develop valid
instruments for individual brands.

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2.7. The value of brand equity

The importance of brand equity has been discussed in many writings. Brand equity can
be regarded as an indicator of the success of a brand. It is widely recognized that the brand has
developed into one of a companys most important assets, which makes effective management of
the brand a key factor in corporate success. One of the reasons for its popularity is its strategic
role and importance in gaining competitive advantage and in strategic management decisions
(Simon & Sullivan, 1993). There is no doubt that if there is no obvious difference between the
products or services of different companies and their prices are the same, customers will be
attracted to the stronger brand.
Aakers five assets model implicates that brand equity provides value to the customer, as
well as to the firm. The resulting customer value becomes a basis for providing value to the firm.
The implication is that in managing brand equity, it is important to be sensitive as to how value
can be created in order to manage brand equity effectively and to make informed decisions about
brand-building activities (Aaker, 1992).
2.7.1. Value for the firm
A companys brand equity is of great importance in the increasingly competitive market
today. Having strong brand equity means keeping the valuable customers, influencing the
spreading of positive word-of-mouth as well as ensuring the companys good reputation and
thereby its market position. Today, too many companies neglect or down-prioritize the brand
equity of the company, which means losing a great opportunity to build their competitive
advantage. Generally, brand equity is the driving force for incremental financial gains to the
firm. Competitive advantage for firms may be determined in terms of revenue, profit, added
value or market share.
Farquhar, (1989) early on, suggests the result of high brand equity may be the allowance
of premium pricing for a product. A successful brand with high equity is able to charge more for
its products and thus receive a higher return or gross profit when compared to other companies.
Farquhar (1989) additionally suggests a relationship between high brand equity and market
power asserting that the competitive advantage of the firms that have brands with high equity
includes the opportunity for successful extensions a strong brand provides a platform for new
products and for licensing; resilience against competitors promotional pressures a strong brand
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has the resiliency to endure crisis situations, periods of reduced corporate support, or shifts in
consumer tastes; and creation of barriers to competitive entry a dominant brand name provides
resistance from competitive attack.
This was reinforced by Aaker (1991) who believes that a brand possessing high ratings in
the dimensions of name awareness, perceived quality, associations, and loyalty is able to charge
more for its products. The author suggests that a strong brand will usually provide higher profit
margins and better access to distribution channels, as well as providing a broad platform for
product line extensions. Aaker (1996) further points out that the most suitable method for
determining brand equity may be using conjoint analysis to establish how much more a
consumer is willing to spend on one brand product versus another. His model assumes six ways
that brand assets create value for the firm. Firstly, brand equity can enhance the efficiency and
effectiveness of marketing programs. A promotion, for example, will be more effective if the
brand is familiar and if the promotion does not have to influence a skeptical consumer of brand
quality. Secondly, brand awareness, perceived quality and brand associations can all strengthen
brand loyalty by increasing customer satisfaction and providing reasons to buy the product. Even
when these assets are not visibly pivotal to brand choice, they can reassure the customer,
reducing the incentive to try other brands. Enhanced brand loyalty is especially important in
buying time to respond to competitor innovations. Thirdly, brand equity will usually provide
higher margins for products, permitting premium pricing and reducing reliance on promotions.
Brand equity can also provide a platform for growth by brand extensions and can provide
leverage in the distribution channel as well. Channel members have less uncertainty dealing with
a proven brand name that has already achieved recognition and has established strong
associations. Finally, a strong brand represents a barrier that prevents customers from switching
to a competitor.
Brand equity is a key marketing asset, which can engender a unique and welcomed
relationship differentiating the bonds between the firm and its stakeholders. Understanding the
dimensions of brand equity, then investing to grow this intangible asset raises competitive
barriers and drives brand wealth (Yoo, et al., 2000). For firms, growing brand equity is a key
objective achieved through gaining more favorable associations and feelings among target
consumers. In paying very high prices for companies with brands, buyers are actually purchasing
Page | 37

a position in the minds of potential customers. Awareness, trust and reputation are the best
guarantees of future earnings (Kapferer, 1992).
Pitta and Katsanis (1995) suggest that brand equity increase the profitability of brand
choice, leads to brand loyalty and insulates the brand from a measure of competitive threats.
Neal and Strauss (2008) state that in the marketplace, the concept of brand equity allows firms to
charge a price premium over the ones with poor brand equity, and that price differential allows
firms to reinforce their brand equity through improved product quality, higher levels of customer
service, investment in socially responsible programs, and more effective promotion. It also gives
firms pricing power the power to trade off margin against share. Brands also play an important
role in determining the effectiveness of marketing efforts such as advertising and channel
placement (Keller & Lehmann, 2006). Some researchers have identified brands as central to
companys ability to earn profit and as firms most valuable assets (Erdem, 1998). It is also
proved that high brand equity help company attract new customers, establish superior position
and retain high customer loyalty (Lee, 2011).
According to Keller (2001), building a strong brand with significant equity has been seen
as providing a host of possible benefits to a company, including greater consumer loyalty and
less vulnerability to competitive marketing actions, larger margins as well as more favorable
consumer responses to price increases and decrease, increased marketing communication
effectiveness, and licensing and brand-extension opportunities. Positive customer-based brand
equity can lead to greater revenue, lower costs and higher profits, and it has direct implications
for the firms ability to command higher prices, customers willingness to seek out new
distribution channels, the effectiveness of marketing communications, and the success of brand
extensions and licensing opportunities (Keller, 2003).
2.7.2. Value for the customers
Powerful brands create meaningful images in the minds of customers, with brand image
and reputation enhancing differentiation and having a positive influence on buying behavior.
Brand equity from an individual consumers perspective is reflected by the increase in the
strength of associations an individual has for a product by using the brand. Successful branding
means lower uncertainty in purchasing. There is also less need for an extensive decision making
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process on the part of the customer. Brands carry with them certain assurances of product quality
and reliability in use. Apart from this, there are also psychological benefits to the customer using
brands.
Aakers (1991) brand equity model lists three ways of how brand assets create value for
the customer. Firstly, brand equity can help a customer interpret, process, store, and retrieve a
huge quantity of information about products and brands. Secondly, it can affect the customers
confidence in the purchase decision; a customer will usually be more comfortable with the brand
that was last used, is considered to have high quality, or is familiar. Finally, perceived quality and
brand associations provide value to the customer by enhancing the customers satisfaction.
For customers, strong brands can simplify choice, promise a particular quality level,
reduce risk, and/or engender trust (Keller & Lehmann, 2006) and also can motivate repeated
buying (Aaker, 1996; Keller, 2001). Brands thus reflect the complete experience that customers
have with products. Brand equity, also creates value to customers by enhancing efficient
information processing and shopping, building confidence in decision making, reinforcing
buying, and contributing to self-esteem.

2.8. Brand equity in wine industry

Building brand equity in the wine industry is particularly difficult yet necessary. By
building equity a brand will stand out from its competitors. In making a brand recognizable, and
developing relationships with consumers, the decision making process for wine purchases
becomes simpler and more direct to the consumers. It is widely recognized that equity can be
built into brands that will give them value and strength in the market well beyond that which is
provided by the inherent characteristics of the products. Therefore, it is vital for the wine brands
to ensure that they have the brand equity required to rise above the competition and get their
labels off the shelf and into the homes of their target consumers.
It is not surprising that some marketing academics have studied wine marketing and
building brand equity (Nowak, et al., 2006). The authors examined the tasting room experience
and its effect on building loyal wine drinkers who would continue to purchase the winerys brand
after the tasting room experience is over. They suggested that by understanding their target
Page | 39

customers, wineries can learn how to meet the customers expectations for the type of tasting
room experience that will lead to positive word of mouth, wine club memberships, and repeat
purchases.
There is a considerable evidence that brand names are associated to consumer perceptions
of quality and their purchase intentions (e.g. Dawar and Parker, 1994; Wanke et al, 2007). As
with other product classes, the brand name of a wine can either help to bring it success or cause it
to struggle. A boring name may be easy to forget, whilst a distinctive one can connect with the
story or place behind the wine.
Today, the wine industry is making signicant efforts to develop processes and
procedures in grape cultivation and wine production. Macedonian wine is seeking to become
more competitive, both in terms of quality and price. In line with an international phenomenon
that is occurring in the increasing homogenization of goods and services, branding has
progressively become more important to the wine industry as a means of differentiation and
competitive advantage.
Branding is crucial in any industry, company or product. Wineries and the wine industry
in general should appreciate and recognize that branding is of paramount importance, as strong
brands will continue to enjoy robust growth. The success of a brand is the work of everyone in
the organization. Building the brand is very important in the wine market where the consumer
can be overwhelmed by too many choices. By having a strong brand a company can enjoy cost
effective marketing campaigns, greater trade leverage, higher margins, ease of extending lines,
stands out of competition and defense against price competition. These benets come as a result
of the brand becoming recognizable and established in the minds of the consumers and thus
triggering recognition of the brand name and/or mark in a purchasing situation. Strong brands
lead to strong companies, consumer loyalty and to an overall strong industry.

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Chapter 3 Wine industry in the Republic of Macedonia

The following chapter provides general information about the wine industry in the
Republic of Macedonia, mainly focusing on the sector analysis, annual production, differences
between domestic and export sales, competitive landscape of the Macedonian wineries, as well
as the wine regions and types of wine in Macedonia.

3.1. General information

Local tradition of wine-making and consumption in the Republic of Macedonia has deep
roots and long history. Vineyard cultivation and wine-making date back in time for several
millennia. Following modern trends, in recent years a new type of wine culture has begun
developing in Macedonia which includes establishing on-site wine bars, clubs and restaurants,
located throughout the most important wine-making regions of Macedonia, which organize winetasting tours coupled with a local culinary experiences. These kinds of events had a positive
influence on wine consumption over the review period and introduced new wine tourism
development concepts.
Macedonia is a country at the crossroads of a Continental and Mediterranean climate.
Crucially, summers are very hot and dry with an enormous amount of sunshine, while winters are
mild and bearable for vines during the dormancy period. The intense aroma of the Macedonian
wines is result of the combined influence of the Mediterranean and Continental climates, with
warm summer days and cooler nights. The lengthy ripening process concentrates the sugar and
acids in the grapes, ensuring rich colors and complex aromas in the wines. In Macedonia grapes
contain a high quantity of sugar and thus potential alcohol. The recent generation of local
winemakers is responding well to the key challenge, to produce fruit with phenolic ripeness,
natural acidity and eventually wines without excessive levels of alcohol.
Considering the domestic attitude to wine, it is becoming a trend. People are eager to
learn more regarding wine in general and curious when it comes to domestic wines and wineries.
Even though Macedonia has from always been an export orientated country when it comes to
wine, there have been massive changes in the last years. People are more and more interested to

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get to know about wine in general, domestic wine tourism is becoming a trend and wine tasting
classes are much desired by wine enthusiasts.
In the last years it is evident that some of the Macedonian wine producers join in local
wine associations to work together on various issues. Examples include: Wines of Macedonia,
Tikve Wine Route foundation and the Group of Macedonian Wine Producers. All these local
associations are formed to encourage collaboration between member wineries on various issues,
among which the promotion of Macedonian wine and increase of exports take important place.

3.2. Sector analysis

The wine sector in Macedonia has great macroeconomic significance. Around 70% of the
total wine production in Macedonia is exported to foreign countries, indicating the export
oriented character of the sector. In terms of export value, wine is the second most important
agricultural product after tobacco (Dimitrievski & Kotevska, 2008). Therefore, the sector is very
important for the national economy in terms of providing foreign capital. Moreover, the wine
sector together with the grape sector contributes to employment in the viticulture regions
(NARDS, 2007). Because of its strategic importance for the national economy, as well as a result
of the global wine hyper production, the saturation of the wine market and the global financial
crisis, the Macedonian government seeks to support the finding of new trade partners (DSVWP,
2010). In addition, the financial support that the government provides to the wine sector, among
the other measures, includes measures to support scientific research projects, organization and
participation on a wine fairs and manifestations as well as promotion and marketing.
In the period from 2010 to 2013 average annual production of wine is about 975.740 hl
(Figure 3.2.1). Minimum annual production of wine is noted in 2011 and is 789.949 hl. The trend
of the wine production shows continued increases in the period from 2011 to 2013, wherein 2013
is noted the greatest wine production and it is 1.251.759 hl.

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Figure 3.2.1 Total wine production in Republic of Macedonia (2010-2013)

Total wine production in Republic of Macedonia (in hl)

Source: State Statistical Office of the Republic of Macedonia

3.3. Domestic market and exports

Based on an evaluation of the data from the State Statistical Office, about 85.500 hl are
consumed within the Republic of Macedonia, which represents about 9% of total production
(DSVWP, 2010). However, in recent years the consumption of wine per capita exceeds this
figure taking into account the consumption of wine in tourist facilities and restaurants, including
the consumption of domestic produced wine so-called unofficially production, consumption of
wine per capita is estimated at 15 l per capita per year. In 2011 the domestic consumption of
wine is estimated at an average of 8.6 l per household. Mixed households emerge as the largest
consumers of wine, or consume 9.8 liters per household (ARARD, 2011).
This relatively low consumption of wine in comparison with European countries,
Macedonia's wine market is not attractive to major European manufacturers. For these reasons,
although the Macedonian market for wine relatively open, there is a serious danger to the same
as result of the importation of wine in the country.
After tobacco, wine is the second most important exported agricultural product, and
participates in the total exports of agricultural and food products with about 11% (DSVWP,
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2010). Export of wine increases from year to year (Figure 3.3.1.), while only in 2013 it is noticed
a slight decline. In 2011 compared with 2010 exports increased by 31.6%, and in 2012 compared
to 2011 increased by 17.7%. In 2013 compared to 2012, export of wine has seen a reduction of
31.2%. According to information obtained from wineries and initial analysis of MAFWA
(Ministry of agriculture, forestry and water economy), the increase is due to the quantities of
wine that wineries reserved for the production of high quality wine, which have a period to serve,
and the other became the global financial crisis and drastically decreased demand for wine in
world markets.
Figure 3.3.1 Total wine export in Republic of Macedonia (2010-2013)

Total wine export in Republic of Macedonia

Source: State Statistical Office of the Republic of Macedonia

Edited by: Mistry of agriculture Forestry and Water Economy

Most of the exported wine (approximately 85%) is exported in bulk, while about 15% of
the exported wine is exported as wine bottles.
The main export markets for Macedonian wine are the European Union (EU) countries
and the member countries of CEFTA (Central European Free Trade Agreement), where wine is
exported duty free (DSVWP, 2010). Wine is mainly exported in bulk quantities in the EU market

Page | 44

(ranging from 60% to 72% of total exports of bulk wine), while exports in CEFTA member
countries are dominated by bottled wine (accounting for 70% to 85% of total exports of bottled
wine). Other markets where Macedonian wine is exported in smaller quantities are: United States
of America, Canada and Japan.

3.4. Competitive landscape

Wine production in the Republic of Macedonia takes place in the 80 officially registered
wineries with a total capacity of 2.222.647 hl, which is two times the total production of wine
(50% utilization of total capacity) (GMWP, 2009). The total capacity for pouring in bottles is
around 650,000 hl per year, which is insufficient to cover the entire production of wine in the
country. Although there is a lack of capacity, the capacity for pouring in wine bottles remains
unused, because most of the wine is marketed in bulk. Considering this numbers, the wine
industry in Macedonia plays a significant role in the whole economy, and it continues to expand
rapidly, especially through export and placement on the foreign markets.
Wineries in the Republic of Macedonia fairly much differ between sizes, product
finalization, market orientation and innovation strategies. In terms of size distribution, 90% of
the wineries have a capacity below 50.000 hl, while the rest are larger (five have a capacity
between 51.000 hl and 150.000 hl, and three between 151.000 hl and 500.000 hl). That makes
only 10% of the wineries to hold the greatest market share. The capacity of the wine cellars for
the production of red wine (60%) is higher than for white wine (40%) due to the fact that
varieties of white wine (which predominate) more commonly used for the production of brandy.
The total annual capacity for pouring wine in bottles is around 650.000 hl, which is
insufficient to cover the entire wine production in the country. However, even though the
capacity for pouring wine bottles is lacking still it is not fully utilized.
In recent years, the number of new wineries (mostly manufacturing plants with small and
medium size) has increased almost three times compared with times in 2003 (only 28 registered
companies), an interesting trend given that the total vineyard records repeatedly decreasing.
These wineries tend towards concentration of production of wine in bottles filled and highquality wines, through strict control of the selection of varieties, vineyard management and
Page | 45

harvesting, transportation and delivery practices. Furthermore, they invest in sophisticated

equipment for finishing and processing, bottling and marketing technologies and competitive
domestic and foreign markets (DSVWP, 2010).
Analyzing the Macedonias wine market, it is easy to conclude that just few of the
wineries control the wine market in terms of capacity, production, as well as the export at the
foreign markets.

3.5. Wine regions

The Republic of Macedonia is a small country that cultivates an area of over 22,400 ha
for wine production. Based on environmental conditions and grape plantings, Macedonia is
divided into three grape growing regions:
1. Povardarie Vardar valley region (Central Region)
2. Pchinya - Osogovo (Eastern Region)
3. Pelagonia - Polog (Western Region)
Figure 3.5.1 Wine regions in Republic of Macedonia

Source: Group of Macedonian Wine Producers

Page | 46

The regions are characterized by specific production conditions, which determine the
structure of the vine varieties and the formation of specific quality characteristics.
Each has further established wine districts with specific localities. There are 16 wine
districts in total. The largest and most famous grape growing region is the Povardarie (Vardar
Valley) region, where 85% of Macedonian wine is produced.

3.6. Types of wine

Macedonia produces all styles of wine - dry and sweet, still and sparkling, red, white and
ros. Well-known international varieties such as Chardonnay and Cabernet Sauvignon, as well as
indigenous grapes like Vranec, are used to produce wines that are always uniquely Macedonian.
When experts are asked to describe the wine style nurtured by Macedonian winemakers
from their specific terroir, the most frequent answer received is fruit-forward style'.
Macedonian wines are inviting, pleasant and delicate, with a flavor that lingers on the palate.
They are a living proof of our winemakers' progress towards balance and a sense of moderation.
Macedonian wines abound in concentrated fruit and aroma. The wonderful climate of
warm weather and sunny days, and the excellent harvest conditions, allow wine producers year
after year to have ripe and healthy grapes to make their wines from.

3.7. Tikve Winery

Tikve Winery is one of the most important creators of Macedonias wine tradition.
Noting the existence of more than 125 years, Tikve Winery had become the largest and the most
contemporary winery in Macedonia, with a total capacity of 55.000.000 l. Tikve Winery ranks
as the leading wine company in Macedonia, according to tradition, meaning, production, number
of people etc., with a production of more than 10.000.000 bottles of wine per year. The process
of creating premium wines does not only refer to good grapes and long wine tradition. It is the
largest and the most modern winery in Republic of Macedonia, accounting for more than 65% of
the total production of bottled wine on the domestic market. However, making exceptional
quality wines includes also high technology, standards, quality personnel and full commitment.
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All of these elements are converted into a perfect process in the Tikve winery. Tikve winery is
proof that with a clear vision and true concept all dreams can be achieved. One of the greatest
combine on the Balkan has become a modern winery, which has made a successful blend among
the tradition, noble region and modern technology. The development objective of Tikve Winery
is to create an international brand. It is a long-term process on which the winery operates
continuously, and therefore Tikve is currently the most recognizable brand in Macedonia. One
of the Tikves wine brands is Tga za jug, which is the most recognizable brand, not only on the
domestic market, but also in the region. The wine and its name have their own story which
corresponds with one of the most famous and most distinguished poetry events in the world.
Corporate Philosophy
Without mission there is no purpose, without vision there is no destination, without
value there are no guiding principles
Vision
As a regional stronghold in the wine market, Tikve Winery intend to grow into an active
participant in the global wine industry, creating new trends and standards in the production, sale
and promotion of wine.
Mission
We create and promote authentic and quality products that carry the distinctive stamp of
Tikve Winery. We strive to fully meet the expectations of our customers and to continue to
create moments of enjoyment and memories.
Values
They determine our commitments, define business processes, manage decision making,
determining the way we behave in the workplace: to colleagues, business partners, customers,
suppliers and the wider community. Our values are the "soul" of our company. They are essential
and had not changed:

Quality
Market orientation
Professionalism
Cooperation
Dedication
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 Loyalty
Social responsibility
Development
Tikve Winery is located in the heart of Vardar valley wine region in the Tikvesh
region, around the central part of the river Vardar, which represents the largest and most
important wine region in the Republic of Macedonia. That is where the Mediterranean climate
from the south, with characteristic long and hot summers, collides with the Continental climate
from the north, with mild, rainy, sub-Mediterranean winters, creating stunning, unique conditions
for growing grapes, which can make temperamental, complex, high quality wines with rich fruit
flavors.

3.7.1. Market position of Tikve Winery

Wine market remains fragmented with a large number of players of which only a few are
present in all sales channels and in most retail facilities. However, despite the numerous
competitions, Tikve Winery remains the market leader, especially in the channel of hospitality,
faced with growing competition.

Figure 3.7.1.1 Market position of Tikve Winery

Page | 49

Market position
Serbia
Market share: 9.7%
Sales: 4.900.000 bottles
Croatia
Market share: ?%
Sales: 490.000 bottles
BiH
Market
share: ?% Sales:
290.000 bottles
Montenegro
Market share: ?%
Sales: 79.000 bottles
Kosovo
Market share: ?%
Sales: 63.000 bottles

Bulgaria
Market share: ?%
Sales: 33.000 bottles
Macedonia
Market share: 67.5%%
Sales: 6.200.000 bottles
Albania
Market share: ?%
Sales: 74.000 bottles

Source: Annual report - Tikve Winery, 2010

According to internal analysis of Tikve Winery, on a representative sample of 167

facilities, hospitality participation of Tikve Winery is 77% of the total payment operations with
wine, while in the area of trade it is 55%.

Figure 3.7.1.2 Market share of Tikve in total turnover in hospitality and trade

Page | 50

Market share in total turnover in hospitality Market share in total turnover in trade

5%
10%
4%

2% 1% 1%
77%

Tikve Winery
Stobi
Bovin
Vila Marija
Skovin
Sopot
Others

5%
7%
21%

5% 7%
55%

Tikve
Imako
Vila Marija
Skovin
Stobi
Others

Source: Annual report - Tikve Winery, 2012

3.8. The brand Tga za jug

3.8.1. History
If it is true that the wine is bottled poetry, then Tga za jug is the most dignified example
of. The wine is sold with a good story by which is built its image. If there is at least one wine
brand that is common to the area of the former Yugoslavia, it is certainly Tga za jug. This wine
is drunk with equal pleasure in Macedonia, Croatia, Bosnia, Serbia ... Tga za jug is not a new
brand, but the original name has a completely different meaning. This wine and its name have a
story that corresponds to the beginning of the creation of one of the largest and most elite poetry
events in the world. It is the Struga Poetry Evenings held since 1961 in Struga. The very name of
the wine comes from the title of a song by Konstantin Miladinov, a poet from Struga, which in
the 19th century resided in Russia and attacked by disease wrote elegy in which grieving for his
hometown. This song is a landmark of the Struga Poetry Evenings, it opens and closes this event,
and was translated into many languages. Based on the agreement between the leadership of the
winery and Struga Poetry Evenings, Tikve each year supported the festival with a certain
amount of wine, mainly in barrels, which poets called Tga za jug. This wine is then crushed to
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these Evenings, and very little in the regular sale. Then Tga za jug was very similar to todays,
from the sort of grapes Vranec which is very successful in Macedonia. Time passed, and Tga za
jug has become synonymous for tradition and quality. Over the years the wine became
interesting also for the consumer market where experienced an ongoing success. Part of the
popularity is due to the unusual name.
Figure 3.8.1.1 Evolution of the label of Tga za jug over the years

Tga za jug is one of strongest brands that continually succeeded on the Macedonian
market. Except Macedonia, the wine is popular in the region and is one of the best-selling brands
of Tikve Winery. Part of the story, which has been going on four decades, represents more than
11 million bottles ever produced.
Today, Tga za jug is national pride, one of the most recognized Macedonian brands and
the most commonly consumed wine in Macedonia. Apart from the domestic market, Tga za jug
is present as well as in Serbia, which represents the most important exports destination for Tikve
Winery (60% of the export end up there), Croatia, where Tga za jug is the top-selling imported
wine, and also the countries from the diaspora.

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3.9. Sales information

3.9.1. General information
The total volume of sales of Tikve Winery in 2012 reached 135,806 hl, which represents
an increase of 35% compared with 2011. Into this value, bottled wine participates with 65%,
bulk wine with 28%, brandy with 5% and wine distillate with 2%.
From a total sales of 135,806 hl realized in 2012, 31% belong to sales realized on the
domestic market and 69% belong to the export markets, as compared with 2011, which
represents an increase of 11% of participation in volume sales in the export markets in the total
conversion.
The total volume of sales of Tikve Winery in 2013 reached 95,660 hl, which represents a
decrease of 35% compared with 2012. Into this value, bottled wine participates with 81%, bulk
wine with 8%, brandy with 7% and wine distillate with 3%.
From a total sales of 95,660 hl realized in 2013, 45% belong to sales realized on the
domestic market and 55% belong to sales realized on the export markets.
Generated sales are classified under four sectors. Sector 1 includes the total sales of the
domestic market. Sector 2 includes total sales of the market in Serbia. Sector 3 includes regional
markets: Bosnia, Croatia, Montenegro, Kosovo, Albania and Bulgaria. Sector 4 includes
international markets such as Germany, Denmark, America, China, Russia, France, Belgium,
Australia and others.
The Macedonian market is crucial for Tikve Winery considering the volume and value
effect and profitability that brings to the company. In 2013 it accounts for 46% of the total sales
volume of bottled wine and 53% in total revenue generated from sold bottled wine.
3.9.2. Tga za jug
In total sales of bottled wine sold in 2012 and 2013, the participation of the wine Tga za
jug bottle 0.75 l is 5% in volume and 9% in value in the total bottled wine. Table 3.9.2.1 below
outlines the total sales of Tga za jug in the last two years.

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Greater percentage of the sales of Tga za jug accounts in horeca, while in the overall
wine market in Macedonia, it participates with 10%.
Table 3.9.2.1 Total sales of Tga za jug in 2012 and 2013
Sales information
Year
Package
Market

2012

2013

0.187 l
domestic
market

export

0.75 l
domestic
market

0.187 l
export

domestic
market

0.75 l

export

domestic
market

export

Quantit
y in
liters
Amount
in MKD

78.326

10.390

210.486

239.755

75.365

7.845

186.789

211.509

20.572.872

2.527.436

47.608.393

37.748.661

19.730.969

1.795.085

42.575.746

33.450.026

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Chapter 4 Research methodology and results

The following chapter presents the research methodology, as well as the results and
findings from the research conducted. Basically, the chapter is divided in two sections:
Section 4.1 Describes and explains the research aim and objectives of the thesis and
presents the research methods adopted for the thesis, discussing the methods for collecting
research data, as well as techniques used for data collection;
Section 4.2 Presents the findings from the research conducted, analyzes and explains
the data collected from the both primary and secondary sources, including information about
Tikve Winery, as well as the brand Tga za jug, corresponding to the expected objectives of the
research.

4.1. Research methodology

4.1.1. Research aim and objectives
As described in the first chapter of this thesis, the overall purpose of this thesis, which is
of an exploratory nature, is to provide an overview of the brand equity building process, as well
as to reveal the importance of brand equity with special emphasis on the wine industry in
Macedonia through the case of Tikves brand Tga za jug. Furthermore, the thesis aims to
describe, explain and understand how Macedonian wine producers create and sustain a strong
brand, with special emphasis on explaining and understanding its importance.
Accordingly, the following research questions were formulated:
How brand equity can be built and maintained?
How brand equity can provide value for the company?
However, the general objective of this research is to analyze, describe and explain the
process of brand building through the case of Tikves brand Tga za jug. It is expected from the
research to show how Tikve Winery built their brand Tga za jug, which activities are required
in order to build and maintain a strong brand on such a competitive market, as well as to
emphasize the reasons why it is essential for any company to build brand equity. Finally, it is
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expected from the thesis to indicate that Tga za jug is one of the strongest brands on the
Macedonian market.
Accordingly, the research will focus on two main objectives:
To provide a deeper understanding of how Tga za jug has gained brand equity
To offer recommendations and suggest further improvements for the company
For that purpose the empirical material for the research was obtained by using a mixture
of data collection techniques. However both primary and secondary sources were used, and
interviews have been the primarily source.

4.1.2. Research design and method

The research methodology consisted of both primary and secondary data. Primary data
included the use of qualitative and quantitative approaches. Primary research was focused on two
face-to-face interviews, carried one with representative from Tikve Winery, and other with
representative from the Association of the Macedonian wine producers, which is called Wines
of Macedonia. The person who was interviewed from the association of the wine producers has
also been former CEO of Tikve Winery. The researchers focused on a list of themes and
questions. However, there was some variation in terms of the order and the questions were asked
depending on the ow of the discussion. Taking notes was used in order to keep a record of the
information collected.
For the interviews, both quantitative and qualitative questions were used. The questions
were focused on gathering information about the company, such as the capacity of the winery,
the annual production of bottles, market share, volume sales, as well as information about the
brand Tga za jug, which was the subject of research, such as sales volume, domestic sales and
export sales, prices and budgetary information. Apart from the quantitative analysis, some
qualitative analysis also took place. Qualitative questions provided further information and
understanding about the companys strategies, their mission, vision, values, as well as
information about the brand Tga za jug, such as history of the brand, their marketing strategy
through which the company built their brand Tga za jug, including target group and positioning,

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pricing, distribution networks, marketing activities used, communication with customers,

building relationships with them, ways of collecting information about the customers etc. Taking
into account the investigated phenomena, interviews were conducted with managers from Tikve
Winery as most relevant sources of information as they are directly involved in the brand
building process.
The interviews were conducted between October 1 st and November 10th 2014 in the
companies offices, located in Skopje. Each interview lasted approximately one hour and was
guided by an interview guide prepared in advance with questions emerging from the theory
composed in order to obtain all the information needed for the research. The interviews were
semi-structured, mainly with open-ended questions. Semi-structured interviews are based on
predetermined questions but are more flexible than fully structured interviews because they
allow for modification of the questions based on the responses, as well as researcher beliefs of
what is important for the study. Combined with the open-ended questions, which limits the
discussion to the specific topic and provides no restrictions on the answers, this technique
allowed the respondents to discuss other important issues related to the topic, of interest for the
research. During each interview, notes were taken in order to preserve the data collected. Further
to this procedure, the results from the interviews were summarizes and analyzed and described in
details in the part 4.2. Sample of both interviews are enclosed in Appendix 1 and 2.
Regarding the questions which both interviews were composed of, it is important to
emphasize that they are entirely arisen from the literature described in Chapter 2 of this thesis.
As marketing strategy is often considered the most important mean of establishing brand equity
(Keller, 1993; Yoo, et al., 2000; Chattopadhyay, et al., 2009), the questions were mainly directed
to explaining and describing the marketing strategy of the brand Tga za jug, especially the
marketing efforts that the company continuously undertakes in order to reinforce the brand, as
well as to enhance its position on the market. The literature indicates that marketing mix
elements and marketing activities has significant effects on brand equity dimensions, which in
turn create and strengthen the brand equity (Aaker, 1996; Yoo, 1996), therefore, the interviews
questions were aimed to understand how these marketing efforts influence on building and
sustaining strong brand equity.

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Conducting surveys did not really reveal the depth and volume of information that would
generate knowledge and understanding regarding the customers opinion, preferences and
behavior about the brand. In addition, due to the accuracy and credibility of the sample, surveys
were not used as a method of research in this case. Instead, several reports from researches
carried by the company were used as a secondary data in order to obtain such information.
In addition to the interviews, secondary data was collected by reviewing the existing
branding literature as discussed in books, academic and trade journals, information databases,
professional magazines, government publications and specialized internet sides. Reports from
different organizations, other published materials as well as companys website was used to
obtain richer information for analysis. Some of the secondary sources used in this thesis include
information from the academic literature, available on the online research database EBSCO,
books, and also publications from the Macedonian institutions, such as annual reports of the
State Statistical Office and Ministry of Agriculture, Forestry and Water Economy, as well as
annual reports form Tikve Winery available on their website. Furthermore, the website of the
Economic Chamber of Macedonia and the Association of Macedonian wine producers Wines
of Macedonia were used to obtain other important information of interest for the research.
Information gathered from secondary sources was treated as exploratory and explanatory and
were also used for the design of interviews. The literature review part in Chapter 2 analyzes the
data collected from the existing academic literature, while information from the other secondary
sources is analyzed in the part 4.2 of this chapter. List of all sources used for this thesis is
outlined in the references part.

4.2. Research results and findings

The following part presents the results and findings from the research and analyzes the
data collected from the both primary and secondary sources. In the previous chapter, there were
analyzed the wine industry in Republic of Macedonia, as well as were presented a brief
information about the Tikve Winery, and the brand Tga za jug, which was taken as a subject of
research. After discussing the ways of collecting relevant data for the research, this part will give
a presentation of collected data and analysis of the information gathered corresponding to the
defined research questions. This part provides information generally from the data collected from
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the interviews, including information about Tikve Winery, and the brand Tga za jug, mainly
focusing on the companys strategies and activities that contribute to building strong brand
equity. The last part of this chapter discusses the results and findings from the research,
indicating that Tga za jug is one of the strongest brands on the Macedonian market.

4.2.1. The brand building process

Based on the results from the research, Figure 4.2.1.1 below represents an illustrated
outline of the Tga za jugs brand building strategy. In order to understand how Tikve Winery
built and managed their brand Tga za jug, this process will be described and explained in details
below.

Figure 4.2.1.1 Tikves strategy for the brand Tga za jug

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4.2.2. Tikves strategy for the brand Tga za jug

Wineries or wine companies need to have a clear understanding of what exactly the
discipline of marketing encompasses in order to be able to effectively compete in todays
saturated wine market. Only with a clear understanding can a company can work seamlessly
toward offering a product to customers that are both willing and able to purchase them. Not only
sales, but all the other marketing elements are crucial to build a strong wine brand. This includes
the design of the label, packaging elements, store displays, case cards, tasting events and many
other marketing activities.
Accordingly, Tikve Winery had understood the need of defining clear and precise
marketing strategy for their brand Tga za jug in order to be competitive on the market, as well
as to be differentiated and recognizable, which will at the end result with building a strong brand
with significant equity. Here is a detailed explanation of their marketing management process.

1. Marketing research and segmentation

This initial step is aimed at identifying the markets that exist for wine or a specific niche,
analyzing the competitive situation and assessing the companys strengths and weaknesses. A
market is any person or group with whom an individual or organization has an existing or
potential exchange relationship. This can be further broken down into niches or sub-categories.
The market analysis focuses on those markets that have a specific need or want they need
fulfilled and are both willing and able to purchase the wine. Once potential markets have been
developed, factors such as market size, growth, and accessibility should be assessed as well as
market demographics, psychographics, cultural factors and technological aptness. However, this
initial step represents a base for further defining the target market, as well as for further
positioning the brand.

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2. Targeting and positioning

Targeting markets offers an opportunity for the winery to focus its business competencies
on the requirements on one or more specific groups of buyers. Its purpose is to consider the
differences between markets and what those differences are based on.
Tga za jug is wine with the widest target consumers of all products from Tikve Winery.
Furthermore, Tga za jug is wine with the greatest tradition (produced by 1973), consumed by
older generations that represents synonymous for red wine, but at the same time perceived as a
wine to recruit new consumers of quality wine, that are not top wine experts. Accordingly, in the
case of Tikves brand Tga za jug, the target market includes:
Male and female, 21 years and older, medium to high income, want to drink good wine
and not be satisfied with anything less, traditionalists, but if they are first trying quality red wine,
they should choose Tga za jug.
This statement will guide the development of promotional activities: where
advertisements are places, channels of distribution, public relation efforts, etc. A more complete
explanation of those elements is encompassed in the following section.
Once the market is targeted it is up to the winery to position their product. Positioning
seeks to place the product in the mind of the consumers, as well as to distinguish the product, i.e.
the brand from the competition. In order to effectively position wine in the minds of consumers,
the marketing strategy needs to be developed oriented toward the specific target market. The
consistency in the development of the marketing mix strategy is crucial, in order to have a stable
brand and not to destroy the winerys positioning.
Accordingly, Tga za jug has always stood out of the range, differentiating firstly by its
specific name intended to connect the consumers with the tradition, and its taste, arising from the
specific conditions the wine is made under. Also, the brand is differentiated by its unique outlook
and design of the label, which represents an interesting blend of the traditional and modern,
created to correspond to the target consumers defined by the winery. The name of the brand Tga
za jug, the story behind it, the long history and the connection with the Macedonian tradition, as
with the Struga Poetry Evenings is what makes the brand recognizable and emphasizes the
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products greatest competitive advantage. Some recent researches indicate that it is exactly the
brand name that creates consumers perceptions relating to the quality of the product, and also
affects consumers expectations of the quality and value that the brand supposed to deliver to
them. In case of Tikve Winery, it always aimed at developing a unique and recognizable brand
and always emphasized on putting some unique value in the product in order to win the trust of
audience as well as to make a strong brand.
3. The marketing mix
From a winerys perspective the marketing mix involves how a specific wine or line of
wines will be developed, priced, promoted and distributed. The development of the marketing
mix is dependent on the target market. This market should always be the source of reason for
choosing one element over another. It may help to look at the marketing mix from the
consumers perspective, such as customer value (instead of product), cost to the customer
(instead of price), communication to the customer (instead of promotion), and convenience
(instead of distribution) (Kotler, 1999).
Product: The basis of wine development from a marketing perspective is to differentiate
the wine in the mind of the target market from the competition. Only if the wine is differentiated
will the consumer choose it over another. Elements of the product that can be taken into account
in marketing wine includes product variety, quality of wine, design, features, brand name,
packaging, sizes, services, return policies etc.
Taking into consideration the case of Tikves brand Tga za jug, it has been developed
very accurately and precisely according to their target public. Not only one element is used to
differentiate the wine from the competitors, but several of them. However, the name of the brand
itself is what makes the crucial differential advantage and also what makes the brand
recognizable, standing out of the others from the range. Furthermore, the distinctive taste of the
wine, as well as the specific conditions it is made under also participates in the product
differentiation.
Price: The objective in pricing wine is to give the customer a sense of value. Many
companies in the wine industry price products according to how much it costs the company to
produce the wine plus a markup (cost-based pricing). Others will price the wine according to the
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estimated amount the consumer will pay for it. They dont charge that amount but something less
(value-based pricing). Discounts, allowances, generous payment periods and credit terms are
good methods of conveying value.
What is essential for a brand is to adjust the price of the product according to the
previously defined target market. Thus, Tikve winery has developed an affordable price for their
brand Tga za jug, corresponding to the abilities of their target consumers and willingness to pay.
Regardless of whether there is a period of price increase or decrease, the winery is continuously
making efforts to maintain an appropriate price-quality relationship.
Promotion: This is the most involved portion of the marketing mix and what many
misconstrue as to what marketing is. The elements of promoting a product are referred to as the
promotional mix. Advertising, sales promotions, sales force, public relations, direct marketing
etc. are the broad elements contained in this portion of the marketing mix. Some examples of the
activities that Tikve winery continuously undertakes in promoting their brand Tga za jug are as
follows:
Advertising
- Print and outdoor advertisements
- Outer packaging
- Posters and leaflets
- Brochures
- Billboards
- Display signs
- Point-of-purchase displays (shelf-talkers)
- Audio-visual materials (multimedia)
- Internet banners
- Spam
- Social networks
Sales promotion
- Sampling (tasting events)
- Fairs and trade shows
- Wine festivals
- Demonstrations (wine tasting)
- Entertainment
- Continuity programs (wine clubs)
- Tie-ins (usually in horeca)
Public relations
- Press kits
- Speeches
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- Seminars
- Sponsorships
- Annual reports
- Charitable donations
- Events
Sales force
- Sales presentations
- Sales meetings
- Incentive programs
- Samples
- Fairs and trade shows
Tikve Winery highly concern about each of the elements regarding the promotional part
of the marketing strategy. Due to the fact that in Macedonia broadcasting advertisements of
alcoholic drinks is forbidden, the company has to make greater efforts in promoting their
product, in order to be competitive on the market. Several examples of marketing activities that
Tikve Winery continuously undertakes will be described and explained further in this chapter.
Place: Wine is distributed either through a middleman for retail distribution or direct to
the consumer. Elements to keep in mind when developing a distribution strategy are the channels
in which company chooses, the coverage reached, the assortment distributed, and the retail
establishment distributed to, inventory management and transportation costs.
One of the greatest advantages of Tga za jug is the fact that Tikve Winery has already
built an excellent and highly developed distribution system. The quality blend of experience of
their sales team, implemented through the prism of the specifics of the wine market generates
superior market position for the company. Additionally, Tikve has developed special
HORECA (hotels, restaurants, caf bars) and KA (key accounts) teams, for faster, more timely
and more segmented response to market demands.
The distribution network of the domestic market consists of four distribution centers,
covering the sales area of the capital city, Skopje, ten distribution centers that operate the
distribution on the territory of the Republic Macedonia and five supermarket chains. The rapid
and flexible approach to managing the distribution network contributes to strengthening the
market position.

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As mentioned above, apart from the domestic market, Tga za jug is present also in
Serbia, Croatia and other regional and international markets, where the company has also
developed great distribution network.
4. Implementation
When implementing a specific marketing strategy it is important all functional areas of
the business communicate. Marketing needs to communicate to production, finance with
accounting, accounting with marketing, etc. One of the main objectives of marketing any product
is to deliver a consistent message. If the sales force is delivering a different message than the
message being advertised, the position will be destroyed and sales will suffer. Likewise, if the
sales force is pre-selling more wine than is available for sale the reputation of the winery will
suffer. As in the case of Tikve Winery, the development of a system for cohesive and frequent
communication between functional departments is the key to successfully implementing a
specific marketing campaign.
5. Control
Controlling the marketing process is just as important as the other steps to developing a
successful marketing plan. This will lay the foundation for improving the marketing plan and
making any changes to the current plan. Controlling may include marketing audits, collecting
feedback from customers, intermediaries, etc. and marketing corrections. Also, attention should
be paid on the organizations income statement, financial ratios, market share, customer
retention, customer acquisition and customer satisfaction.
Developing a clear and precise marketing strategy is essential in creating strong brand
with significant equity. Several conceptual developments and experimental researches are
implemented to found that which of the marketing activities create brand equity. Some recent
researches indicate positive effects of brand equity dimensions (brand awareness, image, loyalty,
etc.) on brand equity and strong effects of marketing mix components and marketing
communication on these dimensions. Thus, the marketing activities that company undertakes
have an indirect positive effect on creating strong brand with significant equity.
4.2.3. Marketing activities
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As stated in the literature, it is also shown in practice that continuous investments in

marketing activities ends up resulting with building brand equity. Therefore, Tikve Winery does
not cease to make efforts in modifying their marketing strategies and constantly developing
marketing activities in order to have stable and durable brand. Achieving the highest quality of
each bottle of wine, constant care for the entire production process, excellent distribution system,
market developers, improvements in the outlook and design of the label etc. are just a few parts
of Tga za jugs marketing strategy. Below, there are listed some examples of the marketing
activities of Tikve Winery for the past years.

Changes in distribution system

During the 2012 Tikve Winery changed its commercial policy distributors, which

effected a greater dedication and commitment to commercial targets and plans. They realized a
change in the distribution system of the domestic market and communication with the key
accounts. In this sales channel, in 2013, especially in the last quarter of the year, there was
intensive presence of promo teams on the points of sale, which realized many promotions. This
resulted in an increase in market share of 5%.

Implementation of CRM
For better monitoring and faster and more appropriate meeting the needs of the market, in

2013 was introduced CRM (customer relationship management) system, through which with
regular system synchronization with all distributors allows monitoring of sales to the final
customers.

Changes in product outlook and design

In 2013, for the 40th anniversary of the creation of one of the most famous Macedonian

brands, we realized the new visual solution of Tga za jug. The solution is done so that allows
easy scalability at the launch of the innovations brand of Tga za jug that will follow in the
future. On the occasion of this important anniversary, good old Tga za jug gained a new, modern
esthetic appearance, which contains the Macedonian spirit and emotion, represented by the elegy
song of Konstantin Miladinov, which is registered to the background of the new label.

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Due to its uniqueness, tradition and quality, the wine Tga za jug deserves to be visually
differentiated from all the other wines of the range of Tikve Winery. The new outlook of Tga
za jug is following the global design trends and also makes the brand more competitive for
penetrating out of the region.
Figure 4.2.3.1 The new label of Tga za jug

Tikve Winery is constantly conducting researches in order to analyze the effectiveness of

the marketing activities implemented, as well as to understand the customers opinion about
certain issue. Following the previous part, according to some internal researched conducted by
the company in 2013, aiming to investigate the customers opinion about the new outlook and
design of Tga za jug, as well as to reveal the general attitude of the customers towards this
brand, it is founded that satisfactory percentage of the respondents have a positive opinion about
the changes. The obtained results indicate that the new outlook and design of the brand Tga za
jug fully satisfies the criteria of 68% of the customers for a wine brand, as it is Tga za jug.
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Placing educational tablets

As a winery, Tikve constantly works on enhancement of domestic wine culture, and in

this respect are the last implemented solutions educational tablets, through which the company
is trying to reach out to the customers in an innovative way, and also to bring wine as a beneficial
drink to as many consumers. Through the educational tablets, which were placed in some of the
largest markets in Skopje and Bitola by the end of 2013, the company aimed to offer customers
the opportunity to get educated about wine and the best combinations with food at the very
points of sale. This technological solution allows customers to easily make the best choice of
wine. On the information tablets, set on the wine shelves, customers can be informed about the
characteristics of each wine, as well as the food which the wine ideally matches with.

Enhancement of internet communications and social networks

As a part of the marketing strategy of Tikve Winery, the company is actively present on

the internet through their website and social networks, which contribute to interactive
communication with the customers. Social networks used are Facebook, Instagram, Twitter,
Linked in, with emphasis on Facebook as the most attractive channel. In 2013 the base of fans of
Tikve Winery rose from 40.700 to 74.497 fans, which represents an increase of 45% thanks to
the many Facebook applications and interactive nature of everyday corporate communication.
Also, during 2013 the lease was made for google ads and facebook ads in order to directing
visitors who are seeking certain keywords (Macedonia, Macedonian wine etc.) to companys
Facebook page and corporate website. All this contributed to greater establishment of Tikve
Winery as most present online wine brand in Macedonia and the region. In 2013 there were fan
pages on Macedonian and Serbian language. Average rate of interaction is 8% from total of 370
different publications.

4.2.4. Other activities for brand reinforce

Very frequently, Tikve Winery is host of worlds famous wine critics, who have assessed
Tga za jug positively, and the company has been awarded several times for maintaining constant
quality of the wine. Also, the company consistently receives awards at many regional wine

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competitions and wine fairs. Apart from the quality of their products, the company has been also
awarded for having stable brands at many international brand fairs. Some of the examples
include ranking of Tikve among the 100 most perspective brands in 2012, on the list formed by
the leading global magazine for market and media research M&M Global, as well as awards
given to Tga za jug by several global wine competitions in 2013, such as bronze medal on
International Wine Challenge 2013 etc.
Furthermore, Tikve Winery has been continuously improving their lines of wines by
hiring world renowned wine consultants. The company is especially proud of the fact that in their
operating they use the best world knowledge and experience. Since the beginning of 2010 the
team of oenologists of Tikve Winery is being headed by a person who actively cooperates with
one of the leading consultants in the world of wine.
In addition, Tikve Winery for six years in a row organizes wine education trainings for
the hospitality people, as well as educational workshops for the winegrowers. Each training is
attended by representatives of hotels, restaurants and cafes (horeca segment), who are getting
introduced with the techniques of tasting, ways of serving and characteristics of the wines.
For customer education about combining wine and food, the company continuously
organizes real hedonistic experiences, known as wine & dine. These unique evening
experiences were organized for different target audiences from Macedonia, Serbia and the
region.
Tikve Winery participates on several wine festivals for years back. Wine festival,
Vinoskop, Vero-vinofest are just a few of the events that the company has taken place. The
winery is present with its own stands where customers can taste their wines at promotional
prices.
Moreover, Tikve Winery is sponsoring different events, such as renowned music
festivals and individual concerts, as well as other public events held in Macedonia. Some of the
events that were sponsored by Tikve during 2013 were Ohrid fest, OFFest, Ohrid
swimming marathon, Skopje Design Week, Skopje jazz festival, Investment Summit
"Macedonia 2025" etc. Within Skopje Design Week 2013 was organized a special exhibition of
Tikve Winery - "The Best of the South", which was held perfectly and which, due to the
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excellent reception from the visitors, will be part of other regional festivals and design
exhibitions during the next years. Traditionally, considering Skopje jazz festival, Tikve
Winery makes special labels for their wines, which are at the end given to the musicians from
around the world that are performing on the festival.
Tikve Winery already the 5th year in a row prepared quarterly newsletter "Veritas", with
which the company informs customers about the innovations in the operation, organized or
supported events in the country and the region, the penetration of new markets, the participation
on fairs, introducing new wines in the portfolio, wine lessons, etc. During 2013 were sent four
editions of their e-newsletter to all customers that requested for additional information on their
website and to all associates and friends of Tikve Winery.
As part of the winery, Tikve has its own restaurant Tikve Winery Restaurant, located
in Kacadarci, in the Tikve region. The restaurant offers full enjoyment for those who want to be
immersed in the beauty of the world of wine, presented by the history of the winery, a walk
through the wine cellar, and feel the spirit and character of the region with tasting the wines that
Tikve Winery offers. In the attractive authentic restaurant, along with the top wines of the
winery, customers can taste the specialties of the traditional Macedonian cuisine and also many
international specialties. They offer a variety of tours and wine tasting options, in order guests
who have visited the wine cellar to leave with unforgettable impressions.

4.2.5. Budgetary information

Literature suggests brand equity is seen as the outcome of long-term marketing effect on
consumers and argued brand knowledge as psychological perceptions. Tikve Winery spends
about 5% to 8% from the sales of Tga za jug on marketing activities such as promotion and
public relations. Furthermore, Kotler and Keller (2006) argued advertising creates a long-term
brand image for a product that on the other hand trigger quickly on sales. So, company invests in
advertising and promotion of its product in order to create its brand awareness, and also the other
dimension of brand equity. Tikve Winery put a lot invest on its different promotional activities
such as advertisements in magazines, electronics display boards on the points of purchase in
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supermarkets, branded promotional materials in restaurants and bars, sampling and tasting
events, presence on wine festivals etc.
Additionally, Tikve Winery continuously shows its involvement in sponsorship of
different events, such as TV shows, music events, awards events etc. The company considers that
event sponsorship such as music events, televisions shows etc. is an effective communication
tool for building or enhancing not only brand awareness, brand image but also promotes
corporate image and inspire customers loyalty. Therefore, the company allocates its budget
resources in sponsoring such events, thus the company believes is will hold stable brand image,
at the end resulting with building brand equity.
Furthermore, customers care is of particular importance for Tikve Winery, so part of the
budget the company allocates for building and maintaining relationships with them. Being
present on the social networks, organizing fan clubs and loyalty programs are some of the
activities that the company constantly undertakes in order to get close to the customers, hear their
opinions and comments and gain information for future development.

4.3. Discussion
As it was mentioned in the research formulation, the general objective of this thesis is to
provide an overview of the brand equity building process, as well as to reveal the importance of
brand equity. In addition, the thesis aims to show how effective brand strategy and brand
communication contribute to build brand equity and consequently create a strong brand, which
delivers value to both, customers and company. Therefore, after an in-depth analysis of the
empirical data, based on the case study of the brand Tga za jug, the following findings are seen
as vital as a way to create strong brands.
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Building brand equity has shown as necessary for a wine brand. By building brand equity
a brand will stand out from its competition, and certainly, in todays fragmented wine industry it
is of particular importance. In making a brand recognizable and developing relationships with
customers, the decision making process for wine purchase becomes simpler and more direct to
the customers.
Nevertheless, it is obvious that from the beginning of Tga za jug, up until today the
brand has shown constant growth and it is due to a number of factors. According to the results
and findings, it is evident that Tga za jug did not become successful over night, but it took time
and efforts for the company to build and maintain such brand. It is apparent that in a brand
building process, it is crucial for a company to invest a lot of strength, knowledge and
experience, as well as to be completely dedicated to the work and the objectives and goals set.
Additionally, the findings indicate that brand building is a complex process, which is not
implemented only by the managers or the marketing team in a company, but it is consisted of
numerous activities, divided literally for every person in every functional department in the
organization, starting from the people who harvest the grapes, ending with the people who sell
the wine. For Tikve Winery, one of the best ways to reach success is to understand and practice
companys values equally with their employees, partners and surely customers. The dedication
and trust are imprinted in every process leading to their final goals making quality wine, and at
the same time, building strong brand.
As it was verified in the case of Tga za jug, strong brands are built around high quality
products. It can be said that it is more than obvious that one of the most important conditions to
create a strong brand is companies to establish best quality products and this way offer to their
customers something that is unique and exceptional. As consequence, once provided with such
unique product, with incomparable characteristics, customers will trust it will become unlikely to
switch to other substitutes, even if they are comparatively cheaper. Thus, Tikve Winery
emphasizes the production process and the special conditions the wine is made under as a key
indicator for the quality of the wine Tga za jug.
However, precisely defined strategy and continuous investments in marketing activities
are the key factors for Tikve Winery in their brand building process. Segmentation and defining
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the target market for the brand are initial steps and represents a guide for future developing the
brand. Clearly defined target customers represent a base towards which marketing efforts will be
oriented and carried in the future. Tikve Winery believes that knowing the consumer has the
same importance as knowing the trade. All efforts at creating a wine brand should be done with
consumers in mind, which means knowing who the customers are and developing the brand
corresponding to the specific market.
Also, it is important for the company to set goals, which provide future basis for
evaluating that brand. When considering goals, it means branding goals, which may include
achieving certain level of brand awareness, perceived quality, getting specific brand associations
or gaining defined level of brand loyalty. Accordingly, these goals will assist in future
development of the brand, as well as in developing the marketing strategies and communication
with customers. However, the brand is a reflection of the winery, and every effort that is taken to
produce and promote it should be done according to the vision, mission, goals and objectives of
the winery in mind. Also, the communication with the customers should be consistent in order to
best deliver the message that the winery wants to communicate with the customers.
Positioning the brand has a significant importance in the brand building process, thus it
places the brand in the minds of consumers and distinguishes it from the competitors. However,
one of the strongest competitive advantages of a wine brand is differentiation. Besides producing
high quality wine, it is of particular importance for the winery to make efforts in differentiating
the brand from the competitors. As discussed previously, Tikve Winery differentiated their
brand Tga za jug firstly by its unusual name and the story behind it. Also, the brand is
differentiated by its unique outlook and design of the label, which represents an interesting blend
of the traditional and modern, created to correspond to the target consumers defined by the
winery. The company believes that this unique concept is what the brand is valued by, and it
represents the greatest competitive advantage for the brand.
Given that brand equity is seen as the outcome of long term marketing efforts operated to
build a sustainable, differential advantage relative to competitors, Tikve Winery considers
marketing strategy as the most important tool in the brand building process. Many companies
develop marketing strategies in order to improve their sales and to make their brands stand out
among competitive ones. However, the ultimate goal of marketing success is to generate a brand,
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which can differentiate from others. Consequently, Tikve Winery strives to create, maintain and
increase brand equity by optimally designed marketing mix strategies, and their challenge is to
decide true combination of activities that would be utilized. Moreover, the strategies are
constantly improved and modified corresponding to the target market for the brand, as well as in
accordance with the companys goals. Continuous investment in marketing activities is important
for the brand to reinforce the position it has. Accurately and precisely selected combination of
marketing efforts, including different models of communication, such as advertising,
promotional activities, sponsorships, public relations in accordance with the target consumers
and their needs and wants should be implemented constantly in order to strengthen the brand and
to be competitive on the market.
One of the main objectives of the winery is to deliver a consistent message. What will be
communicated through the marketing programs should be corresponding to the previously
defined brand goals. By having standard message that is communicated in every customer
contact that message and the position of the brand will be reinforced.
Additionally, having well established distribution system is very important for a wine
brand. Tikve Winery believes that strong brands combined with strong distribution network
have a good chance at succeeding. This concept is linked to the exposure of the brand. By having
the product distributed to all the areas that the target market purchases the wine, the brand will
get exposure and the value of the brand will increase.
As it was confirmed in the case study of Tga za jug, companies should implement
renewing and recovering strategies in order to sustain their successful brands. As seen from
the experience of the brand Tga za jug, the objective therefore lies in the modernization of the
brand, by developing a new image, which offers updated and more appealing packaging and
clear sense of the brands distinctiveness.
Furthermore, it is of particular importance to continually take care and control of each
step and action taken in the process of brand building. Starting from the production process,
through the channels of distribution, until the wine is delivered to the final consumer, even after,
controlling each step is crucial in the brand building process. For Tikve Winery, controlling is
one of the most important steps in the entire process, thus it assists to developing a successful
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brand. This way lays the foundation for future improving the marketing strategies, leading to
strengthening the brand.
Nevertheless, establishing long-term relationships with the customers is in the foreground
for Tikve Winery. Brand communication represents the voice of the brand and is a way to
establish relationships with customers, helping to enhance brand equity. Therefore, Tikve
Winery constantly strives to establish relationships with the customers through different
techniques, as well as to monitor customers satisfaction level and to hear their opinions for the
brand.
As it was verified, the case study of Tga za jug presented real evidences that effective
brand strategy and creative brand communication programs influence on brand equity
determinants, which in turn build brand equity. Moreover, from the results it is evident that
having strong brand provides value as for the company, as well as for the customers in different
ways. Effective marketing communications, higher level of customer loyalty, as well as greater
revenue and lower costs are some of the benefits that Tikve Winery emphasizes as the most
significant values that brand equity provides to the company.
Being the general objective of the undertaken research to analyze the brand building
process, as well as to show that building brand equity is essential for a wine brand, it can be
concluded that the aim of this study was met due to the fact that the main concepts presented in
the literature review, to big extent were verified in the empirical part of the thesis.

Chapter 5 Conclusions

5.1. Conclusion
Branding has emerged as a top management priority in the last decade due to the growing
realization that brands are one of the most valuable intangible assets that companies have.
Brands are considered to be the valuable assets of business. Branding and brand equity has been
the topic of interest for the researchers in the area of marketing. Because of the significant
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intangible value of brands, building and managing brand equity had become a priority for
companies in a wide variety of industries and markets.
Nowadays a brand reflects the quality and credibility of a firms products or services and
it is a perception of the consumers towards the organization. Therefore, each time more
companies focus on creating strong and powerful brands and use them as a strategy to create
value and differentiation in todays competitive environment.
The thesis has identified knowledge of brand equity from academic literature and
provides the necessary depth and breadth of understanding of brand equity and its importance.
As described in the first chapter of this thesis, the overall purpose of this thesis, which is of an
exploratory nature, is to provide an overview of the brand equity building process, as well as to
reveal the importance of brand equity with special emphasis on the wine industry in Macedonia
through the case of Tikves brand Tga za jug.
However, the general objective of this research was to analyze, describe and explain the
process of brand building through the case of Tikves brand Tga za jug. It can be concluded
that the thesis met the expected results showing how a wine brand is built, which activities are
required in order to build and maintain a strong brand on such a competitive market, as well as to
emphasize the reasons why it is essential for any company to build brand equity. Finally, the
thesis indicates that Tga za jug is one of the strongest brands on the Macedonian market.
Given the results and findings from this thesis, it can be concluded that Republic of
Macedonia is a country with deep roots and long history of wine-making and consumption. Even
though Macedonia has from always been an export orientated country when it comes to wine,
there have been massive changes on the domestic market considering the production and
consumption of wine in the last years.
Considering the annual average production of wine in Macedonia, the trend of the wine
production shows continued increases in the last years. As discussed previously, Macedonian
wine sector is mainly export oriented, thus, according to some recent researches only 9% of the
total wine production is consumed within the country. However, most of the exported wine
(approximately 85%) is exported in bulk, while about 15% of the exported wine is exported as
wine bottles.
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Wine production in the Republic of Macedonia takes place in the 80 officially registered
wineries, which fairly much differ between sizes, product finalization, market orientation and
innovation strategies. Analyzing the Macedonias wine market, it is easy to conclude that just
few of the wineries control the wine market in terms of capacity, production, as well as the
export at the foreign markets. Nevertheless, Tikve Winery ranks as the leading wine company in
Macedonia, according to tradition, meaning, production, number of people etc., with a
production of more than 10.000.000 bottles of wine per year.
Considering the brand Tga za jug, which was taken as a subject of research for this
thesis, it is evident that it is one of strongest brands that continually succeeded on the
Macedonian market. It represents one of the most recognized Macedonian brands and the most
commonly consumed wine in Macedonia. However, the success of Tga za jug undoubtedly
arises from the company investments in building brand equity.
As already pointed out in the literature review, the brand and what it represents is the
most important asset for many companies and, as presented in the empirical part of the study,
having a strong and recognizable brand brings benefits, as powerful brands deliver value to the
customer and value to the company.
Given these accumulation of knowledge of brand equity, it can be concluded that strong
brands provide significant value both for the company and the customers. From the case
elaborated in this thesis, the wine brand Tga za jug, it can be seen that the brand is very
important, because it represents an effective way to secure a sustainable, competitive advantage.
The brand allows improved identification of the product, and the likelihood of a repeat
purchase. It can increase the ability to differentiate the product, within a line and apart from
competitors. Also, brand is a real way to build customer loyalty. A strong brand makes people
purchase it more often. It creates resistance to competitive marketing action. This means that
when the competitor comes up with a new campaign, lowers the price, etc., a strong brand will
help the customer to stay with the brand he trusts. Moreover, strong brands have less elastic
responses to price increases and more elastic responses to price decreases. The brand can
positively impact all marketing tools, thus communication efficiency and effectiveness is higher

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for strong brands. Marketing communications are read more, processed more deeply and
understood better when they are coming from a strong brand source.
In addition, there is greater trade cooperation and support. People are more willing to
support the new product coming from a strong brand. When a strong brand makes a mistake,
people treat it with more leniencies and with more kindness than they do if it is a mistake from a
weaker brand.
However, several suggestions and recommendations can be derived from the results and
findings of this thesis. The recommendations of the thesis are aimed for the wineries that
attempting to build strong wine brands. Research results of this thesis, upon the case of the brand
Tga za jug in Macedonia, have outlined that Tikve Winery puts a lot effort in branding their
products toward the customers and communicate them accordingly, in creating effective long
term consumer relationships. Therefore, it can be recommended that precisely defined branding
strategies are essential for a winery in order to be able to effectively compete in todays saturated
wine market, as well as in achieving long term success. Currently, many wineries are very much
oriented toward producing wine and selling it. From a marketing point of view, wineries are
oriented toward the promotional part of the marketing process. However, sales or promotional
activities are only part of the whole marketing process. Building a brand represents long and
involved process, yet it, in turn, brings the company strong competitive brands, with significant
level of brand equity.

5.2. Contributions of the thesis

The thesis has identified knowledge of brand equity from academic literature and
provides the necessary depth and breadth of understanding of brand equity and its importance.
However, the thesis is considered to have contributions as for the science, as well as for the
business. Even though numerous of papers on wine branding exist and many authors have
examined the brand building process of wine brands, yet, there is a lack of understanding how
certain marketing activities influence on building brand equity. Additionally, many papers that
examine the brand equity of wine brands are mostly directed towards investigating the whole
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wine industry in a certain country or market, which may not be necessary applicable for every
wine brand in general. Therefore, the thesis is considered to contribute in providing knowledge
and understanding of how specific marketing activities influence on building and sustaining
strong wine brand, resulting with brand equity.
Moreover, the brand taken as a subject of research represents a proven example of what
has been pointed out in the literature, thus it indicates that brand equity represents the most
important asset for the company, and reveals the importance of brand equity especially in terms
of delivering value for the company. As the thesis indicates that Tga za jug is one of the
strongest brands on the Macedonian market, it can be considered to have contributions aimed for
the wineries, suggesting that clear and precisely defined and implemented marketing strategy, as
well as continuous investment in communications can lead to sustaining strong brand, which in
turn results with a range of benefits for the companies.

5.3. Limitations of the research

Considering the limitations of this thesis, it is important to notice that the subject of
research is the wine industry in Republic of Macedonia, and the research was focused on only
one wine brand on the Macedonian market, so it can be only relatively considered indicative of
the brand Tga za jug. Furthermore, the research was based on data collected on both primary
and secondary sources, where secondary sources included statistical information mainly focusing
on the recent years, while the primary sources included face-to-face interviews, taken as a
research method, which were conducted with only two participants. Additionally, both of the
interviews used as a primary source of data, required for the research were carried with
representatives from the company, one current, and one former member of Tikve Winery,
thereby, not taking into consideration any customers opinion. However, having into account the
investigated phenomena, yet and the fact that both respondents were directly involved in the
brand building process, the information gathered from the interviews are seen as relevant.

5.4. Recommendations for further research

Nevertheless, the thesis allows opportunities for further additional researches oriented
towards brand equity in wine industry. As pointed out in the previous part, the research was
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focused on only one wine brand on the Macedonian market, therefore it can be recommended to
examine other wine brands, and also to make a comparative analysis of several competitive
domestic wine brands. Additionally, considering the brand Tga za jug, which represents a
subject of research in this thesis, it is important to notice that the research included face-to-face
interviews carried with representatives from the company, while there was no investigation on
revealing the customers opinion about the brand. Consequently, the area of interest for further
research focusing on the brand Tga za jug can be additional investigation on the customers
opinion about the brand, including measuring the customers loyalty, satisfaction and attitudes
towards the brand and how they influence on brand enhancement, as well as brand equity.

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Appendix 1: Interview guide

Questions for Tikve Winery
1. Can you provide me with general information about your company?
2. What are the companys corporate philosophy, mission and vision?
3. Can you describe the companys market position?

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4. Can you briefly describe the history of the brand Tga za jug?
5. How can you describe the companys attitude toward the brand Tga za jug?
6. Can you briefly describe the marketing strategy of Tga za jug?
7. What is the target group of the brand?
8. How can you describe the brands positioning?
9. What represents the greatest competitive advantage of the brand?
10. Can you briefly describe the brands marketing mix elements?
11. How does the brand sustain the stable position on the market?
12. Can you provide me with some examples of recent marketing activities for the brand?
13. How do you establish relationships with customers?
14. Can you provide me with some examples of other companys activities that enhance the
brand?
15. How do you provide information about the customers opinion of the brand?
16. Can you provide me with information about the budgetary percentage that you use in
advertising and promotion for the brand?
17. Can you provide me with information about the annual sales volume of the brand?

Appendix 2: Interview guide

Questions for the Association of the Macedonian wine producers
1. How can you describe the wine production in Republic of Macedonia?
2. How can you describe the tradition of wine consumption in Republic of Macedonia?
3. Can you briefly describe the wine regions and types of wine that are produced in the country?
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4. Can you briefly describe the competitive landscape of the Macedonian wineries?
5. Considering the overall wine industry in Macedonia, where Tikve Winery is situated?
6. Can you provide me with general information about Tikve Winery?
7. Can you describe the winerys market position?
8. How can you describe the brand Tga za jug?
9. How can you describe the marketing strategy of Tga za jug?
10. Does the brand sustain stable position on the market?
11. Can you provide me with information about the annual sales volume of the brand?
12. Is the sales volume stable or it has noted large variations in recent years?
13. Is the brand present on the foreign markets and where?
14. How do you monitor and measure the sales volume and consistency of the brand on the
domestic market and on the foreign markets?
15. How do you communicate with the consumers and how do you collect information about
them?

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