INTRODUCTION TO BRANDING

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 brands

Brands are a means of differentiating a companys 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.

 McDonalds 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.

 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

 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.

What is a brand?

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 several advantages

Sellers brand name and trademark provide legal protection of unique product features Branding 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 BRAND

What 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 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.

Positioning

Repositioning Repositioning occurs when a brand tries to change its market position to reflect a change in consumers tastes. This is often required when a brand has become tired, perhaps because its original market has matured or has gone into decline.

 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.

Communications

First-mover advantage Business strategists often talk about firstmover 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 perspective
The need to invest in the brand over the long-term is utmost essential. Building customer awareness, communicating the brands 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 Marketing
Finally, 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

Manufacturers Brand

Private Brand

Individual Brand

Family Brand

Combination

Individual Brand

Family Brand

Combination

Manufacturers Brands Versus Private Brands

Manufacturers Brand
The brand name of a manufacturer.

Private Brand

A brand name owned by a wholesaler or a retailer. Also known as a private label or store brand.

Types of brand
There are two main types of brand manufacturer brands and own-label brands. Manufacturer brands Manufacturer 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 retailers 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 Brand
Using different brand names for different products.

Family Brand

Marketing several different products under the same 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 haven't 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 weren't the only things slammed by rival AMD. Intel's 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 world's 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.McDonald's

$27,501 million Based in U.S. A new healthy-living marketing campaignand the premium-priced sandwiches and salads that came with ithave 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.

Here's how we calculate the power in a name

INTERBRAND TAKES lots of ingredients into account when ranking the world's 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, WalMart, Mars, and CNN. Interbrand doesn't rank parent companies, which explains why Procter & Gamble doesn't show up. And airlines are not ranked because it's too hard to separate their brands' impact on sales from factors such as routes and schedules.

 BUSINESSWEEK CHOSE Interbrand's methodology because it evaluates brands much the way analysts value other assets: on the basis of how much they're 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 company's revenues can be credited to a brand. (The brand may be almost the entire company, as with McDonald's 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.

 FINALLY, THE BRAND'S strength is assessed to determine the risk profile of those earnings forecasts. Considerations include market leadership, stability, and global reachor 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 brand's true economic worth.