Branding : Win Win for customer and company

Abstract

The paper analyses the benefits accrued by a customer from brands in the form of parameters likes reduced search cost, getting a acceptable level of quality, higher self image as well as the brand connect .The paper goes on to analyse the corresponding benefits to the producers from having a strong brand ranging from price premium non duplicable competitive advantage to reduced cost of production as well as brand loyalty and endorsement. Finally the paper analyses the common pitfalls that brands go through and tries to provide work around strategies to circumvent this.

Introduction:

Brands are present at every aspect of our lives. From the toothpaste we use, to the clothes we wear the food we buy brands dictate our preferences. It is imbibed in our ethos to such an extent that at many times we do not even aware of our brand preference. Brands help us in

· Reducing search cost

· Reducing the risk of not receiving a accepted level of service and quality

· Higher Self esteem/Self image:

· Connect with the Brand

Branding is very important from the organization point of view. Brand helps an organization

· Differentiate among themselves.

· Enables one to charge a price premium over its generic products.

· Initiate itself to be pull driven (marketing) rather than push driven (sales).

· Occupy a space within a customers mind which enables sale.

Branding: Study into the tangible /intangible benefits for a customer

Brands provide the customer with several benefits that cause it to remain loyal to a particular brand. These benefits and traits can emanate from a plethora of tangible and intangible attributes that makes the association with the particular brand pleasurable for the customer. These can include-

Reduction of search cost:

Today’s marketplace is filled with a mind boggling number of products vying for our attention. We are bombarded from all sources of media regarding the benefits achieved from using a particular product. Thus it becomes quite a task for the average customer to make up their mind regarding the product to buy. Branding helps him to cut through the clutter and buy what he wants.

For example there are hundreds of beer brands in the world. Each has its own taste and characteristics that caters to a desired set of audience. By branding a customer knows which brand (his favourite from the set of options) to pick up.

It would be naive to consider that this clutter exists only in the mass market products. This clutter exists in all segments of the market. Even in upmarket luxury products like high end watches there exists dozens if not hundreds of premium brands. Each caters to a target set of customer which though intersecting has its own distinct identity.

Providing a accepted level of quality /perceived quality

When an individual buys a branded product he is assured of a certain quality. This acts as a strong incentive for him to do a repeat purchase of the product even when there are cheaper alternatives available. For example most of the leading pain killers have the generic formula of paracetamol. Even then the customer is seen paying a price premium from a well known brand like Crocin rather than buy generic paracetamol. This perception of quality may go beyond a particular brand and embrace a much larger landscape. Example include-

· Swiss watches /chocolate

· Japanese electronics

· Scotch whisky

· German engineering

· French fashion

· Indian handicrafts

· Russian vodka

· Persian rugs

This perception of quality may cause customer to choose a product that is a little inferior to its competitors but the customer has a positive feeling attached to it. That is why it is said “Perception is more real than reality “. In many cases a product is perceived to have quality vastly superior to its competitors while in reality this difference may not be to such a steep extent. At many cases the product is accorded higher care and handling that a normal product does not enjoy

For example the Swiss made watch is considered an example of finest quality watches. Thus it is assumed that Swiss made watch is considered a possession for life time. It is also true that Swiss watches are known to be passed from generations to generation. Part of it is of course due to the superior quality that a Swiss watch invariably has. But a greater reason for that lies in the fact that such watches, because of their value are handled with a degree of care that normal watches will not enjoy. A person will not just open and keep such a watch on the surface of a table. Most of the time it is kept in its own casing .On use it is returned to that casing. This extra care goes a long way to ensure greater longevity of the product.

Higher Self esteem/Self image:

Buying and using a branded product may give the user a high degree of intangible benefits. As a branded product is perceived to have a higher quality and thus a higher cost associated to it, using it may make the user feel more successful and confident. Some of this can be seen from the following expression

· I get all my suits tailored from Armani

· I drink only single malt scotch

· I like to smoke Cuban cigars

· I bought my self a Ferrari

· I like collecting famous art

Successful premium brands are expensive. Thus not all people are able to afford these brands. Thus the possession of this adds to a persons self esteem. A lot of the branded products are bought to

a) Show that they have cultural taste –Art

b) Show that they have arrived in life-Bentley, Private jet

c) Show that they like to enjoy the good things in life – Ferrari, Yacht

d) Show that they are serious about someone – proposing with a diamond ring

e) Show that someone is very important and respected – gifting a Swiss watch

f) Show that this is a rare occasion- opening a Champagne, rare bottle of wine, Cuban cigars, premium scotch /single malt

At many times the users may not be able to objectively tell you what it is that makes these products worth it. Most of the answers can be summarized in this single phase

“It feels good”

Connect with the Brand

It has been established by many tests that the difference in characteristics of products has as much with the perception of the brand as has to do with the physical product. Many people buy a brand because they believe that they can connect with the brand and the attributes that is stands for. When I person buys a brand it does not only buy the physical product. There are thoughts, beliefs, feelings, experience that are associated with the brand that make the customer make his choice. These attributes decide the characteristics that a customer gets from the product.

The best example that can be quoted will be that of soft drinks. Without branding a cola is coloured sweetened water. But due to the brand imaginary the brand value of cola companies are quoted as one of the highest in the world. Everybody is aware of the intense rivalry between the cola brands. During 1985 coca –cola introduced a new formula for coca cola replacing the older one. This was done to counter the rise of Pepsi in gaining market share. This formula was introduced after considerable research involving blind tests. The blind tastes and market research projected that the new flavour was better appreciated than both its classic variant as well as competitor brand.

But when this variant was introduced it caused wide unrest and dissatisfaction among its target customer. So much so that the old coke had to be reintroduced as classic coke. This incident portrays a powerful message regarding the power of brands

a) The satisfaction from a particular product does not belong only from physical characteristics. One has also to take into account the brand image, positioning that the particular product has. A customer may not accept a product just it is a little better than the previous one. This because the customer may have an emotional connect with the previous brand and the loss of that may be many times greater than the benefits accrued by the superiority of the product.

b) There is influence of peer pressure and herd mentality in defining a brand preference: As we saw in the case of coke there was some section of people who might have liked the new formula. But they could never express that openly because of the fact that most of his peer group had a very high attachment towards the old coke and its legacy. This phenomenon is not a new one. When a brand achieves a cult status it creates an indirect barrier for other brands as well as forces a level of acceptance. The following example will illustrate under different categories examples how brand creates a indirect barrier for entry of competitors

o Rooting for Argentina football team when your group is a Brazil fanatic

o Buying a Japanese superbike when your entire group is a Harley Davidson bike enthusiastic

o Rooting for Pakistan cricket team if your friend circle is prominently Indian

Any of the above examples can hurt relationship within the circle and thus an invisible barrier is created in their execution .One can and does express their own preference towards a brand. But the influence of peers is also not insignificant.

c) Brands often create a blanket of acceptance that eliminates early exit. As a brand acquires a cult status its customers become its indirect promotional tools. This helps bring people in its fold who may not have done so based solely on their first experience. Let this be illustrated with some first use examples and how peer pressure creates this blanket to eliminate early exit

o You are a young person who is offered a drink of scotch (Jonnie Walker). At first the taste seems bitter. You do not like it. But most of your friends say that you will acquire a taste for it. They tell you that it is one of the best drinks in the market .You decide to try again and like it.

o You are offered a cigarette (Marlboro). It tastes horrible at the first puff. But you see most of your friends smoking. They tell you that smoking is macho .You remember the Marlboro man ad .You decides to try again. This time it seems less revolting.

o You are offered sushi. You taste it and it tastes horrible. You see many successful people have sushi and enthuse about it. You feel that you should try again considering so many people like it. You like it better this time .

o You are a successful business man. You go to a watch shop to buy a watch. You are shown a Rolex watch. You do not see it so much different than the Timex you have been wearing until now. But you see that all successful people wear a Swiss watch. You buy the watch.

Of course for a brand to be successful it has to offer some outstanding quality. No brand can be successful if it does not fulfil the customer expectation. But this blanket of acceptance helps give it a second chance with people who might not have understood this value preposition at the first instance.

Conclusion: Brand is much more than a product. Brand is the complete set of attributes that a customer expects and gets from the use of the Brand. This attachment to a brand is built over a sustained period of time and is influenced as much by individual values as is by peer group. But the degree varies with the type of product.

Branding: Study into the tangible /intangible benefits for a company

Branding is of paramount importance from the company’s perspective. A good brand provides it with an advantage over it competitors’ .The following are the benefits that a company gains from having a strong brand

Price premium

A good brand always commands a price premium over generic products. On virtue of reducing search cost for the customer the company is able to change more promising better quality and service. This higher price translates to the company having higher resource thus being able to research and come up with better ways to service the customer better as well continue to give a higher quality product.

Non duplicable Competitive Advantage:

A products physical characteristic can be copied by the competitors. But a competitor cannot copy the brand equity that is associated with a particular brand. Also the brand and its logo are protected and thus cannot be copied. It is this brand that catapults a company’s product from low margin commodity to a desired product for which customers are willing to pay a price premium.

For example in the fashion industry any body can copy the design of a Tommy Hilfiger. But one cannot copy the brand equity translating to customer satisfaction obtained from buying a brand like Tommy Hilfiger. This is the reason that today many companies are getting the products manufacturing outsourced and concentrating only on the marketing aspect.

This is the reason it is said that in marketing “Perception is more real than reality “

Reduced cost of Production

This is an advantage that is accrued by a mass brand. As more people buy a product the unit cost of production decreases due to economy of scale. This advantage helps a company have significant cost advantage over its competitors.

Branding is often mistaken as something only for a premium product having price premium. Though that category of branding exists there exist other kinds of branding where the value proposition is the lowest cost. Discount stores (Wal-Mart), low cost airlines (Southwest airlines), Low cost car (Nano) all fall in that category. Though brand purists may call that commoditization of brand this is an emerging category.

Comparison between a Commodity, Discount brand, Mass brand and a Premium brand

Parameters	Commodity	Discount Brand	Mass Brand	Premium Brand
Quality	No guarantee of quality	Acceptable level of quality	Quality is assured though not as good as a premium brand	Quality is assumed to be assured
Branding and promotional activity	No branding and differentiation strategy	Branding present but as the main attractiveness is price there is little promotional activity	Moderate Promotional activity	Extensive promotional activity to uphold the brand equity.
Price	Low	Low	Low to moderate	High
Scale of production	Medium-Large	Large-very large	Large-very large	Medium-Large
Product Portfolio(number of choices)	Small	Limited	Large	Limited to the target segment
Product Service	Virtually non existent	Limited	Acceptable amount	Extensive

This advantage becomes particularly severe in industries that have a very high fixed cost and very little variable. Such industries include

a) Pharmaceutical Industry: In a pharmaceutical industry the bulk of the cost lies in research for newer formulation. The cost of production is not of that significance. Thus a company that has a greater market share will have a much lower cost of production per unit

b) Software: For software the cost of production of the CD that lodges the software is insignificant. The real cost lies in the cost of development of the software

This reduced cost of production does not apply to luxury brands. For a luxury brand exclusivity is as big a selling proposition as is quality. Thus a luxury brand cannot go the mass production route. It must keep the number of units produced at a very small number.

“If diamonds were as common as rocks

You would not bother to pick them up”

Thus for the customer the value proposition lies in telling that they possess something rare that others do not have .

Brand Loyalty and endorsement

It is a well known fact that all companies engage in promotion of their products. For this purpose they try to use all types of media to catch the attention of the customer. This is the reason for the heavy advertisement in all forms of media like Television, News paper, and the internet. But even today the most effective method of reaching the customer is word of mouth.

Today customers are bombarded from all sides by a plethora of information. Along with this a degree of mistrust has started to form in their mind about the reliability about the attributes claimed by the company. Thus an average customer believes the experience by a fellow customer more than the attributes that are claimed by the company in its communication. Thus a brand and the positive experience obtained by its use are very effective means of ensuring its continued sales.

Thus a brand in which the users have a sense of loyalty goes a long way in having top of the mind recall and thus greater number of sales. This is a truth that companies have begun to understand.

The best example of this type of Brand association can be seen in a brand like Harley Davidson. Harley Davidson loyalists have their own clubs that promote the brand. Harley Davidson sponsors racing events for these clubs in order to promote the concept of cruising.

This degree of brand loyalty that a customer has towards the brand can have many levels

a) Brand Recognition: The Brand is recognized by the customer. The customer at times picks up the Brand among the set of options available. But the customer does not have a clear preference for that brand .For example a customer has gone into a departmental store to buy a Park Avenue shirt. But in the department store his eyes fall on an arrow shirt. He looks at the shirt and likes the value proposition offered by the colour, quality and price of the product. He buys the shirt. The level of attachment of the customer with this brand is that of Brand recognition. Thus the customer knows about the brand and deems it worthy of trial. But the customer does not have a clear preference towards that particular brand

b) Brand Preference: The brand is recognized by the customer. The customer connects with the brand. The customer searches for the brand among other brands. For example a person is going to buy a digital camera. He has a positive experience with the canon brand. He goes to the electronic store and asks for the canon brand of camera. If it is not present he usually goes to another store. Only if he does not get it in first few attempts does he consider another Brand

c) Brand Loyalty: The customer is aware of the brand. He has a preference for the brand. He likes the brand attributes. He will not settle for any other brand. For example a family wanting to buy a BMW will not buy a Mercedes because the automobile store does not have it in stock. They will wait till the car comes in stock.

It is observed that brand loyalty and brand preference apply mainly to low involvement products. But for a high involvement product brand loyalty comes to the picture. Thus a company should analyse its product portfolio and thus decide the positioning that it want to go to.

Retaining customers: Maintaining brand advantage

Competitive landscape

Today’s world is a hyper competitive world. There are multiple products chasing the same set of customers. Thus there is a considerable pressure to reduce cost. While the fact remains that reducing cost is the easiest way to in a price war the competitor reacts by reducing price to match the competitors. This is by no means an isolated case. This phenomenon is very common especially in stagnant and mature market products. Some of the recent incidents include

Ø The price war between Coca cola and Pepsi

Ø The price war between Hindustan Unilever and Proctor and Gamble in the detergent market

Ø The on going tariff war between the telecom companies

Vicious cycle of price reduction

Implication for Brands

A price cut is deemed unhealthy for a brand in a long point of view. Some of the adverse effects that the organization will face in the long term include

Brand commoditization: As a brand reduces prices it faces a very high difficulty in raising prices. The brand value of the product often goes down in the eyes of the customer. Thus the brand loses its identity and becomes like a commodity

Reduction in quality: As a product reduces its price there is a lot of pressure on its margins. Thus at many times in a bid for cost reduction the quality of the product gets compromised. Thus

Reduction in technological lead: With the reduction in price the margin of the product reduces. This implies that the company does not possess enough money for funding research. Thus the company over a long time loses its competitive edge over its competitors

Reduced advertising and other Brand building activities: When a particular company goes on a price war the first axe to fall is on different advertisement and brand building activities. Thus the company no longer remains in the top of the mind of the customer.

Differentiating between price cut and cost reduction

It is very important at this point to clearly differentiate between price cut and cost reduction. These two are often confused and used in the same line. But there is a sea of difference between the two though both can result in the customer paying less for the products. While price aims at reducing the price to gain market share cost reduction aims at reducing cost by increasing efficiency. The below table illustrates the basic difference between price cut and cost reduction.

Characteristic	Price Cut	Cost reduction
Production cost	In absence of cost reduction techniques in case of a price cut the production cost does not change. If it does take place it may be at the cost of reduced quality	In case of a cost reduction the processes are optimized in such a way that cost of production reduces without decrease in the quality of the product
Selling Price	Selling price is reduced to increase penetration	Selling price may be reduced but it is not necessary
Margin	Decreases due to reduction in selling price	Increases if the selling price is kept unchanged. Remains same if the price cut equals the cost reduction. Decreases if the price cut exceeds the savings from cost reduction.
Sustainability	A price cut without cost reduction can be disastrous for the company. The corresponding reduction in margin will erode the company’s financial health and be a major impendent in the continuance of the company’s prosperity.	A cost reduction without a price cut increases the margin of the company. A cost reduction enables a company to go ahead with price cut without the corresponding erosion of company’s financial health.
Customer Reaction	A price reduction will cause customer to buy more of the product if there is no decrease in quality. But frequent reduction of price may erode the brand equity that the company has.	Cost reduction being in the production side is invisible to the customer. But if by virtue of cost reduction the company starts giving you higher quality at the same price this will have a positive effect on the customer. This will help sustain brand equity and even increase the brand preference

Cost reduction examples include

Ø The continuous price reduction of mobile tariff

Ø The continuous price reduction of electronic equipment or the ability to give better equipment at the same cost

Study of the common branding mistakes done by corporations

Create a plethora of products around the brand through brand licensing that in the end create Brand disconnect

Companies are under constant pressure to increase revenue. In the short term a brand can earn a lot of money by lending its brand identity to another corporation. This is called brand licensing .Prominent example in this domain will be Disney which used to lend its brand to plethora of products ranging from School bag, chocolate .pens laundry food etc. By virtue of this it generates a lot of money through royalty but rampant use of brand in so many products can cause it to lose its brand equity. Thus the brand equity becomes diluted.

Foray into areas that are not in sink with the brand characteristics

Companies are in constant pressure for a growth in revenue. Thus, it is very tempting for them to create a brand extension for the company. This in the short run is very cost effective. The new umbrella brand piggy bags on the brand equity of the parent brand. But this can create brand disconnect. This in turn dilutes the brand equity of the parent brand. Thus over a long period of time, the brand looses with the core values based on which the organization has grown.

Loosing its uniqueness

As the company in the quest for increasing revenue go on creating newer and newer product lines around the parent line. Also the focus on more sales volume ensures that the brand losses its uniqueness. At many times people buy a brand because they feel connected to the brand and the values it portrays , If they see everybody using the same brand and it becomes available at mass level across different target population then in the long run it losses the interest. People no longer feel connected with the brand and the values that it provides.

Loosing control on Quality Standards

As a product getting mass produced, one starts loosing over its quality standards. It is common phenomenon in today’s marketing landscape that the bigger brands do not produce the product themselves. They concentrate on maintaining the brand characteristics and outsource the production parts to other companies. Thus, it looses control on the quality of the product that is produced. Thus when batches of products are produced they adversely affect the brand equity.

Marketing strategy to maintain market growth as well as brand equity

Create a plethora of products around the brand through brand licensing that in the end create Brand disconnect

There is a need for organization to understand that brand equity is built over a period of time. Thus one should not become myopic and look only as short time gain. One needs to access the impact that brand licensing will have on the brand equity of a brand. One should go only for brand licensing if the move does not affect the brand equity in a negative way. This is a conscious decision that the organization needs to take. Brand licensing is not recommended strategy for a strong brand. This is because in brand licensing one loses control over the product quality. This can adversely affect the brand image of the company. If done the following thing should be kept in mind

· One should ensure that the licensed product does not affect the brand equity in the minds of the customers. For example Disney gave the licence to use their name to a brand of chocolate. If that chocolate is of inferior quality then the brand image that the customers have of Disney will be tarnished

· One should ensure that the product to which the brand licence is given to in sys with the brand image that the brand has. For example a brand like Pantene is associated with hair care. If a licence of it uses it for pesticide it will prove disastrous for the company

Foray into areas that are not in sync with the brand characteristics

Every company needs to grow and diversify. But care should be taken that company does not erode the brand equity that is associated with it. Thus an intelligent company having strong brands under its belt enters different segment under different brand names. This ensures that the brands maintain their pull towards the target segment it serves. The below examples highlight

· How one serves different market segment without affecting brand equity

· How one maintains different brand portfolio

· How the brands become the focus rather than the company

Company	Branding Strategy
Gillette	Gillette is positioned in the market as a leader in the shaving product range .It has a dominant position in this market .It is the manufacturer of the best selling razors. It also manufactures accessories like shaving cream, after shave. It has successfully done brand extension in introducing personal care products under its belt like shower gel, shampoo, deodorant etc. But in case of its other interests it does not use the Gillette brand name. It markets its battery offerings in the name of Duracell. It markets it electronic products under the brand name Braun. It markets its oral care pack under Oral B. This ensures minimal brand disconnect though the brand is serving different segment. After it was acquired by P&G it retains it brand names
Volkswagen	The Volkswagen group has interests in different marketing segments. It s main brand is Volkswagen. But other than that this organization also has many other brands under its belt. These subsidiaries has their own brand equity and act like separate companies. They include SEAT, Audi, Škoda, Lamborghini, Bentley, and Bugatti. This maintenance of separate brand helps the company serve different markets.
Unilever	Unilever has many brands under its umbrella. It focuses on 13 brands each of which has business in excess of 1 billion in terms of sale. Each of these brands has different identity and services a different target population and segment. In total Uni lever has more than 400 brands .in many instances the customer is not even aware that the brand is belonging to Unilever. This ensures that the company can serve different customer segment without creating disconnect. Each brand acts like an independent business unit.
Kellogg	Kellogg has gone into multi branding strategy. It is the dominant player in the ready to eat cereal. It has introduced many brands within the ready to eat cereal space. This strategy is used as the category is a low involvement product with multiple brands. Thus in such a market multi branding works as this helps the customer experiment with different types of cereal without changing to another brand
Beiersdorf	This German company is more famous for the brand “Nivea’ in the personal care range. So much so that customers know much less about the company than they do about the brand. Here the brand is more recalled than the company
Anheuser–Busch InBev	This company formed by the merger of Anheuser–Busch and InBev is the largest brewer in the world controlling 25% market share in the brewery market . In this case also the global brands are like Budweiser , Beck’s , Stella Artois is at the top of the mind of the customer as independent business units.

As we observe there is no cookie cutter method in determining how a brand should be portrayed. Each brand is unique and it should be handled based on it positioning and history .As observed there are instances where the company names is the main brand like Volkswagen. For other brands under the same company separate brand positioning is used. But in a company like Anheuser–Busch InBev the brands like Budweiser, Beck’s, and Stella Artois are at the forefront. The name of the company takes a back seat. Same is the case of Beiersdorf manufacturing “Nivea”.

Loosing its uniqueness

As a company establishes its brand there is an increase in sales as more and more people start buying the product. A manager is under constant pressure to enter new market segment in order to increase sales. But as one goes into different segments it loses its brand appeal to the original target segment. To prevent this company should follow the following methodology

· Maintain a brand portfolio that provides maximum market coverage with minimum over lap. For the Gap brand portfolio Banana Republic anchors the high end, the Gap covers the basic style and quality terrain ,and Old Navy taps into the broader mass market . each brand has a distinct image and own source of equity (1)

· Understand what does the brand stand for and the feeling it conveys to the target customers. This will enable the organization to understand the product strategy that it is to follow. Depending on the research one can go either for brand extension or a new brand for the segment

Losing control on the quality standards

It is a common practice among company to outsource the manufacturing part and concentrate more on the branding and other marketing concept. This may not be known to the customers who think the company is producing the products themselves .But with this one loses control over quality. One bad batch can seriously erode the brand equity that the company has created over time. Also in case of industries like consumer electronics, car manufacturing and a lot of other industries the company is dependant on other suppliers for different component. So even if the company is assembling the final product it is dependant on its suppliers for various components. The failure of any of the components will cause the customer to have a negative image about the reliability of the company .

To prevent such a mishap companies should

· Have a great degree of control on the process of manufacturing the product. The company may not be producing the product by itself but it can specify the process of production and the quality standards. The standard and specification should be clearly communicated to the company to which the manufacturing is outsourced. This will ensure that the finished components that they procure from the suppliers are reliable. The company should conduct frequent quality checks to ensure that there is no lacuna in the expected quality. This is particularly important for the company.

· The company should work in conjunction with the suppliers. This is particularly important in cases the company is dependant on the suppliers for various components. A lack of communication may cause the company not being able to launch products at a particular timeline. This may cause it to fail on its commitments to customers and distributers which may contribute to its fall in brand equity.

Conclusion

Branding is a dynamic science. The response to be adapted depends on the market scenario. One can just take the various things into consideration regarding factors that can help nurture a brand. But the final results depends on the effectiveness achieved from the synergy of

· Superior product

· Competitive pricing

· Continuous innovation

· Right marketing communication

References

(1) The Brand Report card(Kelvin lane Keller) pg 9

(2) Wikipedia(regarding different brand under companies)