Marketers Don’t Build Brands

Consumers Do!
S.Ramachander

“It will be more important in the future for companies to own markets than
factories. And the only way to own markets is to own dominant brands”
Larry Light, an eminent Research Professional in the USA

“A product can be quickly outdated – a BRAND can be timeless”

Stephen King of J Walter Thompson, UK

T he subject of marketing sometimes suffers from the fact that many words and
phrases – brand image is one of them – are bandied about in every day speech.
Sometimes this leads to gross misconceptions of about what a brand can and cannot
do. Until some years ago, even many Third World managers used to think that as many
of their companies deal in intermediaries, commodities and industrial products, there
was no need for sophistication in the thinking or the implementation of branding. The
thesis was that indeed nearly all products (and brands such as they were) were either
sold to industrial customers as components carrying no special branding other than the
most primitive labelling for corporate identification; or they were near monopolies,
requiring no special efforts to sell them competitively.

Business in a free-market must deliver competitive, strategic, value for one’s

products. Nothing does this better than branding. Brands, however, are not really built by
the marketer’s hands but by the consumer’s minds. While they do not automatically
confer invincibility on one’s business, they do help protect it, if marketers, with or
without the e in front of their names, learn to work with them effectively.
*********
As with many such subjects in the public domain, both clichés and
misconceptions abound which need to be clarified if we are to truly appreciate what
brands can mean to developing markets. All over Asia, satellite TV advertising –
especially for glamorous consumer goods – is the most visible instrument of this brand
building process. For this reason, brands too have attracted some of the controversial
attention that advertising itself draws.
Mass media unleashed
Two new features have added spice to this recently. The first is the near total
reach of mass media, (including potentially the Internet for B2C business) amongst the
large Asian middle class today. The numbers that must have noticed the impact of the
Wills, Coke, Pepsi and Hero brand names during the one-day cricket tournaments must
surely run into millions. So too with MRF and Vimal in earlier cricket series. Combine a
game that has become a national institution, a national brand and an almost national
medium; the result is a heady mixture that produces strong reactions. And this before the
Internet cafes became a common feature of the urban landscape!

The liberalisation wave

The second feature is an immediate outcome of economic liberalisation in South
Asia – the advent or resurgence of some truly global brands such as IBM, McDonald’s,
Sony, Ray Ban, Coke, Pepsi, Arrow, Lacoste, Marlboro, Ariel … to mention just a few.
And this we are assured, is just the beginning! There is something in these very names to
fuel the fires of populist political debate. However the days of “either – or” choices
between local and international brands are mercifully behind us. The customer will
become more discerning and demanding as she realises what she has been missing in
terms of world class quality. Manufacturers must stop thinking that there is something
patriotic in accepting second best! They ought, instead, to get on with the more serious
business of delivering to the consumer – a housewife, the working man or even a
company – competitive value and something approaching world class.

How managers see competition

In a survey amongst 90 Asian top managers conducted in 1993, the single most
significant result predicted of the globalising process was an increase in the quality
standards of the Asian product made for the domestic market. This point needs to be
carefully listened to. The need to dramatically improve the attractiveness and
performance standards of Third World products for export is, of course, obvious.
Without certifications such as ISO 9000, we will not even begin to matter in the global
market; but what may not be so readily apparent is why the same quality must be offered
to the domestic market also. The compelling reason is the emergence of unprecedented
competition – both present and potential. When barriers to entry into the domestic market
are lowered or removed altogether, the prospect of one’s loyal customers switching to
another brand becomes an everyday reality. In several studies it has been established that
retaining customers is considerably less expensive than replacing a lost customer with a
new one. Some estimates put it at a ratio of 1: 6 in terms of total cost to the enterprise.
Product quality is not enough
It has also been established by research that objective product quality alone does
not explain the reason for loss of market share. Among every 100 customers who switch
– in the US market at any rate – as many as 70 report dissatisfaction with the company
and its delivery/service quality. Against such a fickle customer-base, loyalty to brands
and brand equity are the minimal first level of defence one must erect to protect the
business.

Brands are not built in a day. Some have evolved over centuries, as can be seen
in the table below:

Historic Brands
Brand Country of Origin Product Category Date
1. Schweppes UK Soft Drinks 1798
2. Colgate UK Toothpaste 1806
3. Levi’s USA Jeans 1850
4. Nestle Switzerland Beverages 1866
5. Coca Cola USA Soft Drinks 1886
6. Omega Switzerland Watches 1894
7. Martini Italy Liquor 1896
8. Fiat Italy Automobiles 1899
9. Gillette UK Razor Blades 1902
10. Max Factor USA Cosmetics 1909
11. Hitachi Japan Domestic Goods 1910
12. Marlboro USA Cigarettes 1924

[Source: Adrian Room, Dictionary of Trade Name Origins, Routledge and Kegan Paul, London
1982]

It is, of course, possible to compress the time it takes to establish a new brand,
by investing heavily in promotions in a short burst. This may accelerate the attainment of
a peak level of trial and market share; but sustained repurchase, which reflects loyalty,
can only be gained over time. Greater spending power does not automatically ensure
success – a lesson which both Procter & Gamble and Pepsi have learnt at great cost
recently in India.

The elusive brand image concept

Yet the brand image or personality is a term which is treated in somewhat
cavalier fashion by the practitioner and informed layman alike. Brands evoke images and
perceptions – especially of style, class, modernity, quality and so on. One has only to
think of Parker, Johnny Walker, Gucci, Rolex, Chanel, Revlon, Nike, Apple Macintosh,
Toyota, Sony, Panasonic, Philips … a formidable array which, one can safely predict,
would be instantly recognised by nearly anyone who has ever shopped duty free at an
international airport. Yet a brand image resides not so much in the product itself but in
the collective eyes of the beholders. They are, indeed, imagined benefits. They also
reflect expectations, beliefs and attitudes that surround a brand like a halo; and in the
most successful examples, giving it, in David Ogilvy’s memorable phrase, ‘a first class
ticket through life’. Most important of all, they may have nothing whatever to do with
the ingredients and components or verifiable performance of the product in question.

Research evidence
Many economists, especially of a socialist persuasion, argue that rich
multinationals will swamp the Asian market and liberalisation will sound the death knell
of local brands. This argument has an emotional appeal to some. But it is easily
disproved by facts. In 1994, University of Michigan Business School and the Academy
for Management Excellence (ACME), Madras, India conducted a survey amongst
housewives and professionals on Global Brands and Marketing Strategies. Some of the
critical issues researched were:

• What do consumers consider as global, i.e. made or sold all over the world as
opposed to local for local only?
• What are the strengths and weaknesses of local brands?
• What are the perceived strengths and weaknesses of global brands?
• Under what circumstances do global brands have a competitive advantage?
• How much does the country of origin matter?
• If the perceived ‘globality’ of a brand is important, does it vary between product
categories and consumer segments?

The results were indeed revealing and, sometimes, counter-intuitive. Consumers

considered Coke, Citizen and Ariel detergent to be distinctly world-wide brands. At the
same time, they thought HMT watches – made by India’s largest and once-profitable
public sector enterprise – as well as its most recent and successful rival – Titan Watches
– to be bought by consumers outside India as well. An entirely locally developed herbal
toothpaste under the brand name Vicco, was also similarly perceived. Indeed, amongst
32 brands, covering eight product categories very familiar to the housewives, HMT
evoked the greatest warmth and affection. Interestingly, the intention to buy switched in
favour of the glamorous rival. In the soft drink category – universally recognised to be
the stronghold of truly global brands Coke and Pepsi – two Indian names, Limca and
Thums Up, showed remarkable strength to associations and purchase intent. Five years
later they remain so despite having changed hands in terms of the owners.
Local –Vs- Global
On the whole, the executives interviewed were more anxious about competition
from the most prosperous and powerful marketing companies, fearing the might of their
advertising dollars. Naturally, a Pepsi or a Coke can afford to take a much longer term
view. While the per capita consumption in the rest of the world is in hundreds of bottles
per annum, in India it is three and in Indonesia, six per year. Further, the proportion of
their Indian business is so small compared to the world-wide turnover that the risk to
their net work is minuscule. Not so with the local brand. Therefore, the more
internationally oriented an Asian brand, the less vulnerable it is to global competition in
any one geographical area.
The markets of local brands have the unique advantage of more intimate
knowledge of the market, greater familiarity with the nuances of distribution and
personal relationship with the trade, a better understanding of the packaging and
transportation required by extremes of climate. All of these are disadvantages for the
multinational corporate (MNC), for some years at any rate.
Typically, the headquarters of the global company tends to rely more on the
conventional wisdom that all humans are the same, or becoming so. They tend to apply
as far as possible the same elements of the marketing mix, as they do elsewhere in the
world. Whether markets the world over are growing closer (a view strongly urged by
Professor Theodore Levitt of Harvard since the ’60’s) or drawing apart, is an interesting
but inconclusive debate. Yet MNC top managements tend to imagine that markets are
more homogenous. They will, therefore, be more inflexible in localising their marketing
mixes, thus losing adaptability. The recent failures and faltering starts of many new
multinationals in India tends to confirm this.

The battle for the emerging markets

The battle for the emerging markets of Asia and Africa is not so much between the
local and the global, as between old and new competition. Even within the countries,
domestic markets have seen the onslaught of a new wave of entrepreneurs who have
brought in brands such as Daewoo, Gold Star, Samsung, Acer … all of which have
become household names in less than a decade. Some Indian names such as Bajaj, Birla
and Tata, are becoming so. The research suggests that the consumer is willing to give
them a try more readily than the marketing specialist would suppose. However, in
sunrise industries such as consumer electronics, entertainment and computers – which
are fast converging with telecommunications – brand names do convey technological
superiority, which mere advertising cannot deliver. The same is true of high-fashion
products such as cosmetics and clothes. Thus, a Nokia or a Motorola or a Levi with a
powerful media presence in print and Satellite TV, is bound to carry a significant
premium image. Such an association is not necessarily true in a more familiar, low-tech
category.
The country of origin, per se, does not confer any advantage unless – as with
jeans, soft drinks and fast food – they are universally identified with one country, such as
the USA. Hence, the exceptional dominance of brands such as McDonald’s, Levi’s, Coca
Cola … over the consumer imagination, even in Communist China. In more neutral
categories, familiarity with the use of the product, perceived quality, reputation of the
manufacturer and such other issues strongly weigh in favour of brands that have always
been near the top. Ironically, the brands which led the pack in several categories as long
ago as 1923, continue to do so in 1993. Examples: Kodak, Avon, Levi’s, Coke,
McDonald’s, Ford, Xerox, Philips … and so on. Equally, even local brands, which have
sustained their marketing effort and continue to please customers, remain leaders after
several decades. This has also been borne out by Indian brands. Incidentally, brands are
seen as local, totally regardless of who is the ultimate owner of the equity in the
company! A good example is Tata’s Hamam and Lever’s Lux, both of which toilet soaps
have been the housewife’s favourites for over six decades. The fact that Unilever has
now acquired Hamam as well as Kissan jams and squashes is irrelevant to her.
Thus, brands that seek proactively to build consumer loyalty and deliver
more than what they promise will always have a future . Those that mistakenly
believe that the image of a brand delivers more competitive punch than the reality behind
it, are merely chasing a mirage and are doomed to die.

De-mystifying branding
Another major misconception about branding is that it magically confers on the
product the power to hold consumers in thrall. Nothing could be farther from the truth.
Nothing destroys a brand faster than a promise which the product or service fails to live
up to. If it is a new brand, it becomes exposed in the initial trial stages itself and quic kly
sinks without trace. Even established brands such as HMT (watches), Dunlop (tyres),
Raleigh (bicycles), Binny’s (textiles) … to mention but a few age-old names, can be
repositioned by later entrants and steadily lose market share; or expire altogether.
 What does a Brand mean? (A schematic view)
Max price willing to
pay
Consumer Surplus
Potential Profit
Current price
Producer
Surplus
Branding

material
Packg

Distbn
Raw

Qlty

Before we look at such home truths or remove misconceptions, however, let us

examine what brands really mean. The figure above shows the marketing exchange
process as a trade-off between the producer’s surplus and the consumer’s. Let us take an
example of a ready-made shirt or a food product, such as a ready-to-eat snack. The
housewife knows the ingredients that go into it, and she knows how much effort and cost
it would mean for her to make it at home. And yet, given the right assurance of quality,
she is willing to buy the same snack, off the shelf of a neighbourhood retailer at a price.
We may conceptualise the difference between the price she pays for the snack and
what it would cost her to make it at home as comprising the cost of packaging,
transportation, retailing and building in a profit for the manufacturer. She does, however,
willingly part with a premium because she not only saves herself the labour and hassles,
but also knows that the brand is “an assurance of dependable and consistent quality”. The
brand is also less risky than buying the same product from an unknown source,
considering the potential damage to her children’s health, which she values greatly.
Indeed, she might even be willing to pay much more than she actually pays up to a point.

The consumer’s surplus

In a famous definition of this ‘stretch’ inherent in any price, Alfred Marshall, the
classical economist, called it The Consumer’s Surplus – the difference between what she
actually pays to possess a good and what she would rather pay than go without it. As the
gap between the brands in terms of perceived quality narrows down, the premium that
she is willing to pay will also come down. To the extent that the product is not a familiar
one, without an alternative source of supply and seen to be a product of high technology
or specialist skills (such as a fashion house or a famous surgeon), the brand premium
commanded will indeed appear disproportionate to the inherent ingredients.

The paradox of a no-name brand

This is the clue to understanding the paradox of a no-name brand dress-shirt being
available at factory gates in Thailand, Indonesia or India at $4, while the self-same shirt –
with a Van Heusen label – retails within Asia itself at $20 – and in the US at $35! This
also explains why a local brand in some cases commands a smaller premium and is
priced between $4 and $20.
Perceptual paradoxes are not confined to the realm of fashion or personal
products. For many years, TI Cycles of India made two brands of regular bicycles –
Hercules and Philips. While Hercules was known as the tough, sturdy, loan carrying bike
and a favourite of milkmen, vendors and farmers, Philips had a much more urban white-
collar association. Back in the ’50s and ’60s it was the coveted reward (costing all of
nearly 300 rupees!) for entering college. In market surveys people consistently described
Philips as lighter and easier to ride while Hercules was seen to be physically heavy. In
fact the two brands were identical in most respects, including weight – and their
components were totally interchangeable. Yet perceptions persisted stubbornly – proof of
the amazing power of brand personality to influence minds!
Brands convey three things – an identity, a set of associations and an image
beyond the mere functional qualities or performance of the product. Most of all, brands
raise expectations. The reassure: In a formal phrase, brands serve to ‘reduce the
perceived risk’ inherent in any purchase decision. This basic feature of brands applies in
practice across most categories, including services.
To the marketer, the great attractiveness of brand distinctiveness has always been
the opportunity to charge a premium, while distancing himself from all competition. To
the traditional businessman, it once seemed the answer to a prayer, because the premium
enabled him to build a profit pile or use the surplus via advertising, trade deals and
consumer promotions to erect a competitive barrier. Alas, such euphoria has proven to be
short-lived, especially in the USA – the acknowledged home of marketing warfare.

The Private Label Challenge

In 1993, Wall Street was shaken to its foundations when hugely successful brands
led by Marlboro, cut prices and offered deep discounts on sales in supermarkets, in
response to the onslaught of private label and store-brands. For years, conventional
wisdom had held that while purely functional, external and impersonal products (floor
cleaners, dish washing liquids, wrapping paper etc.) could attract low priced competition,
personal products (soft drinks, toothpaste, cigarettes, cosmetics) would not be so
challenged. Housewives would ‘go to the extra mile’ to buy their favourite brand at a
premium. Three years of continuous recession, unemployment, and static incomes have
proved this to be untrue. Part of the reason is the myopia of mega brand marketers,
driven by Wall Street to show short-term profits at the risk of losing long-term brand
loyalty. They kept on raising prices until the consumer screamed ‘Halt!’
There is a lesson in this for all of us. In David Ogilvy’s deathless phrase: ‘The
consumer is not a moron. She is your wife!’ Over the years, she has been sufficiently
educated to know that store brands or cash-and-carry sales are excellent value for money.
The frills absent in the store brands are irrelevant to the use of the product, so that when
push comes to shove, she can afford to do without them.
Corporate Brand
Asia has a number of brands, including corporate house names, which if
imaginatively developed and look after, will become world class brands and international
household names. Take the case of a trusted name like Parry’s or Jardines, probably
among the oldest ‘names’ in the commercial sphere in Asia. It not only identifies a
legendary business over two centuries old, it is associated with a well above average
standard of quality (no matter that a brand can sell confectionery, financial services,
fertilisers or bathroom fixtures all at once!) and conveys an image of respectability.
Many brands have already held their own for years in some everyday product
categories against strong competition from the so called MNC brands … Margo soap,
Tiger balm, Mysore Sandal soap, Parle biscuits, Singha beer, Amul chocolates, cheese
and dairy products, Sumeet mixies, Bombay Dyeing furnishings and fabrics and so on.
Some of these brands do not even belong to large, well-established companies with huge
resources. They have not had the advantage of protection from existing foreign
companies or new Asian entrants – unlike others in totally protected industries. Most
important of all, they do not have any inherent superiority of raw material, technology or
skill that could make them especially competitive in any way, versus other competitors.
The continued consumer confidence in brands such as these (over nearly four
generations in some cases) is sure proof against the facile argument that mega brands
with mega bucks alone can survive. To attempt to sustain a premium only on advertising
puffery is, however, a gross and tragic error.

S Ramachander.
Director Academy for Management Excellence,
Chennai India.