Branding: Why do we brand products?

5 Branding

Brands much more than just logos or names. They are the culmination of a user’s total experience with the product…over many years. That experience is made of a multitude of good, neutral and bad encounters such as the way a product performs, an advertising message, a press report, a telephone call, or a rapport with a sales assistant, CIM (2007).

The origins of branding in business terms lies with the need for groups and individuals to have an identity that was easily recognisable by others. This started as a military application but soon spread to guilds and master craftsmen who made especially good products. This continued with manufacturers who could provide consistent quality goods who, realised that they could attract more customers and charge higher prices if they could “badge” their products making them easily recognisable. With the expansion of world trade, brands became a necessity as a mark of quality and assurance.

Modern concepts of branding developed alongside marketing as a managerial process although some of today’s best known brand names existed as companies before the branding concept as we now know it became the established norm. Today a strong brand brings with it a wealth of quality, value and high performance cues and can even be an intrinsic part of its customers’ lifestyles; branding is now a strategy used ‘to differentiate products and companies, and to build economic value for both the consumer and the brand owner’.

With the growth of branding has come a change in emphasis within organisations. Companies used to be centred on the production of goods or services. The emphasis was very much on quality and efficiency. The importance of marketing has long been well accepted in most organisations and customer satisfaction is now seen as being at the heart of success rather than excellence in production or selling – largely as a result of increased competition making it harder to attract and keep customers.

Now brands are denoted by their unique names, logos, packaging and associated images. This makes up their brand identity. That identity is designed to represent the brand’s values and to signal them to potential customers. An appreciation of those values then helps the customers to form a brand image in their minds.

5.1 Why do we brand products?

Companies invest millions in the development and protection of their brands; they do so because branded products have distinct advantages over non-branded ones, this is akin to differentiated versus generic product positioning.

A strong brand is now seen as key to commercial success by providing the following main advantages:

• • high brand equity
• • increased product awareness levels
• • the ability to charge a premium price
• • reduced susceptibility to price wars
• • competitive edge
• • a sound basis for building strong customer relationships
• • higher likelihood of repeat purchases
• • retail leverage
• • new products have a better chance of success thanks to the brand name

Whilst the above are the main advantages there are others and the exact mix of advantages will depend on the context of the brand-product-market environment on a case by case basis. It will also depend on the investment made in building-up the brand; in order to be strong and benefit from the above advantages a brand has to be crafted, designed and invested in. It is not enough just to attach a name and a logo to a product and as with products unless they are developed and adapted, brands tend to decline over time. They must be nurtured and carefully managed or they become unfit.

5.1.1 High brand equity
The basis of brand equity lies in the relationship that develops between a consumer and the company selling the products or services under the brand name. A consumer who prefers a particular brand basically agrees to select that brand over others based primarily on his or her perception of the brand and its value. Thus a well known brand adds value to a product both from the customer perspective and from the company’s. Indeed brands may be the most valuable assets that a company has, a quick examination of major international business’ balance sheets will show that their brand equity, usually shown as intangible goodwill, is often over fifty percent of their asset value, and in some cases such as Coca-Cola is over seventy percent of their asset value – far in excess of their tangible assets.

5.1.2 Increased product awareness

Clearly it is crucial that potential customers should be aware of a product, it is the first stage on their journey to buying it (see sequential models in Chapter 6.4 Promotion). One of the key roles of advertising is to build that awareness and an easily recognised brand makes that task much more achievable. Product and packaging design play key roles here as well by making the product more visible and reinforcing the brand’s values.

5.1.3 Premium pricing and reduced susceptibility to price wars

A good brand name helps a firm achieve a premium price for its products. Think of the differences in the prices of trainers. The well known brands, e.g. Nike and Reebok, can charge much more for their products than lesser known brands. It is not just a question of having a well known name, the strength of the brand depends upon the values associated with it in that particular market. Marks and Spencer is a well known brand but they cannot get away with charging Nike prices for their trainers even if the quality is comparable.

Without a brand, a firm will have to settle for a commodity position in the market where low prices alone drive sales. Some firms actively choose this position, e.g. the makers of generic pharmaceuticals, but it does not sit well with the concept of marketing as a series of complex management tasks leading to greater future success for the organization. In very price conscious markets, e.g. children’s shoes and clothing, or in economic downturns, marketers can come under great pressure to compete on price but this might devalue their brand (assuming it already has a reputation). Aaker (2002) argues that pressure to compete on prices can even undermine attempts to build up a brand as one of the main impetuses for branding, i.e. the differentiation from the competition that allows a firm to charge premium prices, is removed.

5.1.4 Competitive edge

A branded prod uct simplifies shopping by assisting with the customer’s product adoption process. If the marketing communications have worked well, then the potential customer will already have built up a set of associations with the brand, short-circuiting a lot of the information searching that they might otherwise have to do. This is good for customers as they save time and effort (this assumes that their image of the brand is correct) and is certainly an advantage to the branded product as it is likely to be preferred to other unknown, or less well thought of, products.

5.1.5 Building relationships

The strength of the customer’s relationship with a brand is central to that brand’s growth.

The relationship is normally between the customer and the brand, rather than between the customer and the brand’s owner who may even be a company that the customer has never heard of. There are many big companies who own many brands which do not bear their owner’s name. For example, Diageo is the owner of a large number of drinks brands (Smirnoff, Bailey’s, Guinness, Johnny Walker, Captain Morgan) and yet ‘I’ll have a Diageo please’ is never heard in bars.

The importance of this brand relationship has prompted companies to develop various relationship-building activities which establish a two-way flow of communication with their customers and encourage them to integrate brands into their lives. Examples of these activities include: club memberships, loyalty card schemes, registration of warranties, other products such as T-shirts and bags with the brand name and logo on and website activities. The number of brand communities is increasing rapidly, thanks in part to the World Wide Web, and they form a significant part of a growing number of people’s social lives. Muniz and O’Guinn (2001) first coined the term brand community and they defined it as; “a specialized, non-geographically bound community, based on a structured set of social relations among admirers of a brand.” Brand communities are characterised by a set of shared attitudes towards, and beliefs about, the brand (shared consciousness), rituals and traditions connected with the brand and a sense of moral guardianship for the brand. A brand that is well liked enough to inspire a community to grow around it clearly has a number of loyal consumers and therefore this is generally held to be a positive thing for the brand – though members of brand communities can be the brand’s greatest critics as well as its greatest fans. Brand communities can be very possessive about the importance of understanding their views is illustrated by the reaction of loyal customers to the introduction of a new recipe for Coca Cola. They boycotted the product and sales slumped so badly that the original recipe had to be reinstated. New Coke lasted about three months.

5.1.6 Repeat purchases

Most human beings instinctively avoid unnecessary risk. Buying things represents at least a financial risk in that money may be wasted if the product is not fit for purpose. There are other possible risks too for example: ego risk if the product is unflattering (e.g. clothes) or ridiculed by others (e.g. an unpopular scent), or physical risk if the product turns out to be unsafe (e.g. faulty machinery). A brand that has been bought before and found to be satisfactory reduces these risks and so people are more likely to buy that trusted brand again.

A good experience of a brand results in a happy customer who continues to purchase. Conversely, a bad experience can lead to an unhappy customer who may very well reject future offerings bearing this brand, no matter how attractive the offering appears to be. Worse still, they may tell their friends, family and acquaintances of their bad experience, influencing them against the brand. Attraction and retention are the key words when thinking about the development of a brand.

5.1.7 Retail leverage

In many countries, notably the UK, large retailers have enormous power when it comes to setting prices and dictating terms of purchase and sale. Tesco, for example, is one of the largest companies in the world, much larger than many of the manufacturers who supply it. Tesco therefore has a great deal of buying power (see 6.2, Place). However, there are some branded products that are so popular that even a retailer as powerful as Tesco is unlikely to leave them off its shelves, for example: Heinz Tomato Ketchup, Heinz Baked Beans, Kellogg’s cereals, Coca Cola, Kleenex tissues.

5.1.8 New product success

Even the most innovative and high quality new products struggle to make headway in today’s markets. Many entrepreneurs have launched seemingly superb products only to watch them fail. A strong brand gives that vulnerable new product a much better chance of success. The customers can call on their experience of previous products of the same brand, and transfer those brand values to the new product. This reduces the risk associated with trying something new and so the new product is more likely to make it into their evoked set of products, and therefore they are more likely to buy it.

5.2 Chapter summary
Branding is a way of clearly highlighting what makes your product or service different to and more attractive than, your competitors’. Successful branding is about promoting your strengths. Firms need to be sure that they can always deliver on their promises using these strengths, referred to as ‘brand values’.

Within the context of a general introduction to marketing theory it is not possible to cover the subject of Branding in the depth and breadth its role in modern business demands.