Why Brand?Why do companies such as Coca-Cola, Microsoft, IBM and Disney seem to achieve global marketing success so easily? Why does it seem such an effort for others?Why do we, as consumers, feel loyal to such brands that the mere sight of their logo has us reaching into our pockets to buy their products?
The meaning of brandsBrands are a means of differentiating a company’s products and services from those of its competitors.There is plenty of evidence to prove that customers will pay a substantial price premium for a good brand and remain loyal to that brand. It is important, therefore, to understand what brands are and why they are important.
The Importance of BrandsMcDonalds sums this up nicely in the following quote emphasizing the importance of brands:“…it is not factories that make profits, but relationships with customers, and it is company and brand names which secure those relationships”Businesses that invest in and sustain leading brands prosper whereas those that fail are left to fight for the lower profits available in commodity markets.
Coca-Cola “If Coca-Cola were to lose all of its production-related assets in a disaster, the company would survive. By contrast, if all consumers were to have a sudden lapse of memory and forget everything related to Coca-Cola the company would go out of business.” Coca-Cola
What is a brand?One definition of a brand is as follows:“A name, term, sign, symbol or design, or a combination of these, that is intended to identify the goods and services of one business or group of businesses and to differentiate them from those of competitors”.Interbrand - a leading branding consultancy - define a brand in this way:“A mixture of tangible and intangible attributes symbolized in a trademark, which, if properly managed, creates influence and generates value”.
Brand Equity “Brand equity” refers to the value of a brand. Brand equity is based on the extent to which the brand has high brand loyalty, name awareness, perceived quality and strong product associations. Brand equity also includes other “intangible” assets such as patents, trademarks and channel relationships.
Brand image“Brand image” refers to the set of beliefs that customers hold about a particular brand. These are important to develop well since a negative brand image can be very difficult to shake off.
Brand extension “Brand extension” refers to the use of a successful brand name to launch a new or modified product in a new market. Virgin is perhaps the best example of how brand extension can be applied into quite diverse and distinct markets.
Branding gives the seller severaladvantagesSeller’s brand name and trademark provide legal protection of unique product featuresBranding gives the seller the opportunity to attract a loyal and profitable set of customers.Branding helps the seller segment markets.Strong brands help build corporate image, making it easier to launch new brands and gain acceptance by distributors and consumers.
Benefits of Branding to A BUYER Help buyers identify the product that they like/dislike. Identify marketer Helps reduce the time needed for purchase. Helps buyers evaluate quality of products especially if unable to judge a products characteristics. Helps reduce buyers perceived risk of purchase. Buyer may derive a psychological reward from owning the brand, IE Rolex or Mercedes.
BRANDS - BUILDING A BRANDWhat factors are important in building brand value?Professor David Jobber identifies seven main factors in building successful brands, as given next:
Quality Quality is a vital ingredient of a good brand. Remember the “core benefits” – the things consumers expect. These must be delivered well and consistently. The branded washing machine that leaks, or the training shoe that often falls apart when wet, or a watch which needs frequent adjustments will never develop brand equity. Research confirms that, statistically, higher quality brands achieve a higher market share and higher profitability than that of their inferior competitors.
Positioning Positioning is about the position a brand occupies in a market in the minds of consumers. Strong brands have a clear, often unique position in the target market. Positioning can be achieved through several means, including brand name, image, service standards, product guarantees, packaging and the way in which it is delivered. In fact, successful positioning usually requires a combination of these things.
RepositioningRepositioning occurs when a brand tries to change its market position to reflect a change in consumer’s tastes. This is often required when a brand has become tired, perhaps because its original market has matured or has gone into decline.
Communications Communications also play a key role in building a successful brand. We suggested that brand positioning is essentially about customer perceptions – with the objective to build a clearly defined position in the minds of the target audience. All elements of the promotional mix need to be used to develop and sustain customer perceptions. Initially, the challenge is to build awareness, then to develop the brand personality and reinforce the perception.
First-mover advantageBusiness strategists often talk about first- mover advantage. In terms of brand development, by “first-mover” they mean that it is possible for the first successful brand in a market to create a clear positioning in the minds of target customers before the competition enters the market. There is plenty of evidence to support this.
Long-term perspectiveThe need to invest in the brand over the long- term is utmost essential. Building customer awareness, communicating the brand’s message and creating customer loyalty takes time. This means that management must “invest” in a brand, perhaps at the expense of short-term profitability.
Internal MarketingFinally, management should ensure that the brand is marketed “internally” as well as externally. By this we mean that the whole business should understand the brand values and positioning. This is particularly important in service businesses where a critical part of the brand value is the type and quality of service that a customer receives.Think of the brands that you value in the restaurant, hotel and retail sectors. It is likely that your favorite brands invest heavily in staff training so that the face-to-face contact that you have with the brand helps secure your loyalty.
An Effective Brand Name● Is easy to pronounce● Is easy to recognize and remember● Is short, distinctive, and unique● Has a positive connotation● Reinforces the product image● Is legally protectable
Branding Strategies Brand No Brand Manufacturer’s Private Brand BrandIndividual Family Combi- Individual Family Combi- Brand Brand nation Brand Brand nation
Manufacturers’ Brands VersusPrivate Brands Manufacturers’ The brand name of a manufacturer. Brand A brand name owned by a wholesaler Private or a retailer. Also known as a private Brand label or store brand.
Types of brandThere are two main types of brand – manufacturer brands and own-label brands.Manufacturer brandsManufacturer brands are created by producers and bear their chosen brand name. The producer is responsible for marketing the brand. The brand is owned by the producer.By building their brand names, manufacturers can gain widespread distribution (for example by retailers who want to sell the brand) and build customer loyalty (think about the manufacturer brands that you feel “loyal” to).
Private Label brands Own-label brands are created and owned by businesses that operate in the distribution channel – often referred to as “distributors”. Often these distributors are retailers, but not exclusively. Sometimes the retailer’s entire product range will be own- label. Own-label branding – if well carried out – can often offer the consumer excellent value for money and provide the distributor with additional bargaining power when it comes to negotiating prices and terms with manufacturer brands.
Advantages of Private Brands Earn higher profits Less pressure to mark down prices Ties customer to wholesaler or retailer
Advantages of Manufacturers’ Brands Develop customer loyalty Attract new customers Enhance prestige Ensure dealer loyalty
Individual Brands Versus Family Brands Individual Using different brand names for Brand different products. Marketing several different Family products under the same Brand brand name.
Branding Policies First question is whether to brand or not to brand. Homogenous products are difficult to brand Branding policies are: Individual Branding: Naming each product differently P&G, facilitates market segmentation and no overlap. Overall Family Branding: All products are branded with the same name, or part of a name, IE Nokia, promotion of one item also promotes other items. Line Family Branding: Within one product line. Brand Extension Branding: Use one of its existing brand names as part of a brand for an improved or new product, usually in the same product category. 75% new products are brand extensions!!
1. Coca-Cola $67,000 million Based in U.S. Flagging appetite for soda has cut demand for Coke, but the beverage giant has a raft of new products in the pipeline that could reverse its recent slide.
2 Microsoft $56,926 million Based in U.S. Threats from Google and Apple havent yet offset the power of its Windows and Office monopolies.
3 IBM $56,201 million Based in U.S. Having off-loaded its low-profit PC business to Lenovo, IBM is marketing on the strategic level to corporate leaders.
4.GE $48,907 million Based in U.S. The brand Edison built has extended its reach from ovens to credit cards, and the "Ecomagination" push is making GE look like a protector of the planet.
5.Intel $32,319 million Based in U.S. Profits and market share werent the only things slammed by rival AMD. Intels brand value tumbled 9%, as it loss business from high-profile customers.
6.Nokia $30,131 million Based in Finland .Fashionable designs and low-cost models for the developing world enabled the mobile phone maker to regain ground against competitors.
7.Toyota $27,941 million Based in Japan. Toyota is closing in on GM to become the worlds biggest automaker. A slated 10% increase in U.S. sales this year will help even more.
8. Disney $27,848 million Based in U.S. New CEO Robert Iger expanded the brand by buying animation hit-maker Pixar and beefing up digital distribution of TV shows through the Internet and iPods.
9.McDonalds $27,501 million Based in U.S. A new healthy-living marketing campaign—and the premium-priced sandwiches and salads that came with it—have led to a fourth year of sales gains.
10.Mercedes-Benz $21,795 million Based in Germany The new S-Class sedan and M-Class SUV are helping repair a tarnished quality reputation. High costs and weak margins will take longer to fix.
Heres how we calculate the power ina nameINTERBRAND TAKES lots of ingredients into account when ranking the worlds most valuable brands. To even qualify for the list, each brand must derive about a third of its earnings outside its home country, be recognizable outside of its base of customers, and have publicly available marketing and financial data. One or more of those criteria eliminate such heavyweights as Visa, Wal- Mart, Mars, and CNN. Interbrand doesnt rank parent companies, which explains why Procter & Gamble doesnt show up. And airlines are not ranked because its too hard to separate their brands impact on sales from factors such as routes and schedules.
Evaluation BUSINESSWEEK CHOSE Interbrands methodology because it evaluates brands much the way analysts value other assets: on the basis of how much theyre likely to earn in the future. The projected profits are then discounted to a present value, taking into account the likelihood that those earnings will actually materialize. THE FIRST STEP IS figuring out what percentage of a companys revenues can be credited to a brand. (The brand may be almost the entire company, as with McDonalds Corp., or just a portion, as it is for Marlboro.) Based on reports from analysts at J.P. Morgan Chase, Citigroup, and Morgan Stanley, Interbrand projects five years of earnings and sales for the brand. It then deducts operating costs, taxes, and a charge for the capital employed to arrive at the intangible earnings. The company strips out intangibles such as patents and management strength to assess what portion of those earnings can be attributed to the brand.
SummaryFINALLY, THE BRANDS strength is assessed to determine the risk profile of those earnings forecasts. Considerations include market leadership, stability, and global reach—or the ability to cross both geographic and cultural borders. That generates a discount rate, which is applied to brand earnings to get a net present value. BusinessWeek and Interbrand believe this figure comes closest to representing a brands true economic worth.