1. DEFINING BRANDS

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Using this guide

Introduction

Checklist

Case studies

© The Chartered Institute of Marketing 2003

1. DEFINING BRANDS“Aren’t brands just about dressing a product up in pretty packaging?”

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Contents

> Using this guide

> Introduction

> The case for brands

> Branding importance in the future

> Evolution of brands

> The core elements: brands versuscommodities

> Definitions

> Output perspective: the users’ view, orbrands in consumers’ minds

> Brands and their stakeholders

> Brand lifecycles

> The longevity of brands

> Product lifecycle vs. brand lifecycle

> Checklist

> Case studies

Defining brands

Types of brands

How brands work

Brand strategy

Managing and developing brands

Brand portfolio andarchitecture

Measuring brands and their performance

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Using this guide

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Brands may start life inplanning documents but

ultimately they rest inthe minds and hearts

of people.


1. DEFINING BRANDS

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Introduction

“Aren’t brands just about dressing a product up in prettypackaging?”People don’t drink a sweet-tasting brownliquid: they drink Coca-Cola, with all theconnotations surrounding that brand. Thevalue of brands resides in the minds of thosewho use them. Brands may start life inplanning documents but ultimately they rest inthe minds and hearts of people.

Brands are thus much more than just logos ornames. They are the culmination of a user’stotal experience with the product or service (orcompany) over many years. That experience ismade of a multitude of good, neutral and badencounters, such as the way a productperforms, an advertising message, a pressreport, a telephone call, or a rapport with asales assistant.

In a wider sense, a brand is the effect on theuser of everything the company does and howit behaves. It is not the responsibility of onedepartment but of the whole organisation.Every employee influences brand encounters.

Get it right and the brand strengthens, usersbecome more loyal, shareholder valueincreases, business partners are attracted andemployees enjoy a better environment. Everystakeholder has a stake in the brand.


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The brands consumerschoose can reinforcetheir self-image andgenerate peer-group

approval.


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The case for brands

Brands are important to users in termsof:

>ChoiceChoice works in two ways. First, consumershave much more choice over where to spendtheir money and, thanks to technology andglobalisation, those choices are becomingalmost limitless. But that in itself has createda crowded and competitive marketplace.

A good brand can save the consumer timeand effort and act almost as a shorthanddevice of trust when making a choicebetween competing products. Consumerschoose between brands, in part on the basisof the value for money they provide, but alsofor reasons of function and emotion. Brandshelp consumers decide what to wear, eat anduse, and how to shop, travel and managetheir money.

“A brand is a complex thing. Not only is itthe actual product, but it is also the uniqueproperty of a specific owner and has been

developed over time so as to embrace a set of values and attributes, both tangible andintangible, which meaningfully andappropriately differentiate products which are otherwise very similar.” [John Murphy,founder of Interbrand]

>RelevanceBrands often evoke strong rational andemotional responses and have beendescribed as ‘a powerfully held set of beliefsby the consumer’. Successful brands create aspecial relationship between the customerand the company by meeting not justfunctional but also emotional expectations intheir experience with the products/servicesand the way they are presented.

The brands consumers choose can reinforcetheir self-image and generate peer-groupapproval. They can thus be a form of socialshorthand, with a consumer’s choice ofbrand making a social statement for whichthat consumer is willing to pay a premium.Brands can also offer aspirational targets, aswell as putting people in touch with like-minded individuals.


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Figure 1.1: Brand essence A statement of how the brand is defined (facts and feelings) in people’s minds

RATIONAL ASPECTS

What the product does for me

How I would describe

the product

How the brand makes me feel

How the brand makes

me lookEMOTIONAL ASPECTS

Source: British Brands Group (2001) Innov8: Brands and the Innovation Imperative.The Brand Conference 2001 Summary. British Brands Group. © Priceline 2001-2

Core

Facts and symbols that support brand claims

Brand personality

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People use brands to make statements aboutthemselves [Goodchild and Callow, 2001]:

I am a high achiever – Mercedes, Rolex,HermesI am on my way to the top – BMW, TagHeuer, ArmaniI am an individual – Apple, SwatchI am a world citizen – British Airways,BenettonI care about the environment – CooperativeBank, Body Shop

“In the modern world brands are a key part of how individuals define themselves and their relationships with one another.”[Sir Michael Perry]

Case study: Harley Davidson

>SatisfactionA good brand reduces the risk of apotentially poor choice and offers theconsumer a guarantee of consistentperformance, quality and thus satisfaction.While many consumers are happy to shoparound, they are unwilling to risk theirmoney on a product which they fear may not deliver.


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The important point to make is thatsatisfaction is based on both expectation andperformance. However, this isn’t a staticprocess: brands have to evolve to meet thechanging needs of consumers throughcontinuous innovation and improvement.

Consumers’ wants and needs are ever-changing and brand managers need to stay intouch with the public’s demands. In the pastan item of clothing that looked hard-wearingmay have been the choice of preference for acustomer; today the designer label attachedmay have more importance. Safety may havegreater importance in a person’s choice of car,cholesterol levels in their choice of sandwich.As tastes change, brands that don’t evolve canstagnate and lose relevance.

Brands are importand to brand ownersin terms of:

>Sustainable advantageBrands are a company’s prime asset and thefoundation of the business. They are thesource of revenue and profitability and thekey to future prosperity. They are the reasonconsumers choose one company overanother. By creating consumer preferenceand adding value to consumers, the

increased value to a brand owner may besignificant. Often 40-75% of a company’sassets may be attributed to brands.

Successful brands not only promote loyaltyand even advocacy among customers, butthey also generate price premiums and formthe platform for long-term growth with theability to use the brand franchise to moveinto new segments or even sectors. This isbecoming critical as differentiation becomesever more difficult in the face of better,faster and cheaper competition.

History shows that during an economicdownturn or recession, brands that investahead of the competition do better duringthe slowdown and recover much morequickly on the upturn.

“As to valuing brands, fashions in businessmodels may come and go – but cash flowremains a trusty and constant yardstick. Theallegiance that a consumer feels towards afavourite brand – the predisposition topurchase that is built on a better product anda more useful bundle of benefits – is a capitalasset. It is a reservoir, if you like, of futurecash flow.” [Niall FitzGerald, chief executive,Unilever]

During an economicdownturn or recession,

brands that investahead of the

competition do betterduring the slowdown

and recover much morequickly on the upturn.


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>DefendabilityThe realisation that brands, althoughintangible assets, have substantial worth hasfocused their owners’ minds on protectingthem. That coincides with a worldwide trendin intellectual property which makes thatprotection feasible and comprehensive.

A trademark is thus an important part ofbrand strategy. It acts as a powerfuldifferentiator between goods and services, itindicates the source or origin of those goodsand services, it acts as a signal for qualitybuilt up in a brand over time, and registeredrights, unlike patents, can go on indefinitely.

In addition to registration, some countrieshave unfair competition laws while others,like the US, UK and Australia, offer a parallelprotection system called ‘passing off’,whereby owners can bring an action againstsomeone confusing consumers. However, inthe case of lookalike brands, this has oftenbeen difficult to prove.

Figure 1.2: Brands shift the demand curve: all else being equal, brand equity shifts the demand curve, resulting in a higher price and/or share

Source: Almquist, E.L., Turvill, I.H. and Roberts K.J. (1998) Combining economic image analysis for breakthough brand management. Journal of Brand Management, Vol. 5 (4), p. 275.

Brand equity shifts the demand curve

Demand for product when branded

Demand for product when unbranded

Pric

e

Quantity (share)

∆p

∆s


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Brand leaders commonlyhave lower costs,

particularly because ofscale economics inmarketing spend.


1. DEFINING BRANDS

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>Share performanceStrong brands can have a positive impact onshare performance. For example, a study byEquiTrend in the US has found thatcompanies experiencing the largest gains inbrand equity saw their stock return average30%. Conversely, those firms with thelargest losses saw stock return average anegative 10%. [Aaker, 2000]

The level of cash flow is the most importantdeterminant of shareholder value. A brand’scash flow is determined by four factors: itsprice, growth, costs and investment. If abrand can achieve a brand premium this hasa major impact on its value. There isconsiderable evidence that successful brandsdo achieve price premiums.

Successful brands should also grow faster,again increasing the level of cash flow. Brandleaders commonly have lower costs,particularly because of scale economics inmarketing spend. Finally, strong brands canhave lower investment levels (as aproportion of sales) because of their greaterpotential leverage over the supply chains.[Doyle, 1989]

Brands are important to distributors,retailers and financial agents in termsof:

>Traffic generatorsTraditionally the investments brand ownersput into building their brands in terms ofinnovation, marketing and distribution act as‘pull-through’ and bring customers to thosewho distribute them.

In more advanced sectors such as foodretailing, however, where the power isconsolidated in the hands of a few bigcompanies, the retailers themselves havebecome strong brands in their own right, socan no longer be seen as merely a ‘channel’to market by manufacturers.

>MarginAdded values provided by brands commandhigher prices because of the improvedconsumer offer. This yields higher margins todistributors than those from commodityproducts.


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Own label accounts forover 40% of grocery

sales in the UK.


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>LoyaltyMiddlemen can benefit from brands – likeHarley Davidson, for example – that havegone a step beyond achieving visibility and differentiation to developing deeprelationships with a customer group. Thisprovides a stable sales base. [Aaker, 2000]

“The acid test on the issue (of brand loyalty) is whether a housewife intending to buy HeinzTomato Ketchup in a store, finding it to beout-of-stock, will walk out of the store to buyit elsewhere or switch to an alternativeproduct.” [Tony O’Reilly, ex-CEO of H J Heinz(Lury, 1998)]

> ImageMiddlemen benefit from the image ofsuccessful brands. Image is what exists in the minds of consumers. It is the total of allthe information they have about the brand,whether from experience, word of mouth,packaging, marketing, service and so on.

>Own brandsPrivate label products provide retailers withan opportunity to generate higher marginsbecause of the very different cost structuresbetween private label products and brands.

Own label accounts for over 40% of grocerysales in the UK. The strength of private labelin food retailing has altered the traderelationship between the manufacturer andretailer, with the retailer now both a majorcustomer and a powerful competitor –particularly when brand manufacturers make private labels products as well as their own brands.

This can give retailers a significantcompetitive advantage. Brandmanufacturers, however, have been rising tothe challenge through continued investmentand innovation, competing on the basis ofquality and value.

Brands are important to the economyin terms of:

>Economic value addedThe role of manufacturers’ brands in the UKeconomy is highly significant because brandmanufacturing stimulates demand and drivesthe market forward. At home and abroadmany of Britain’s major companies are builton brands. Their success contributes to thesuccess of the national economy.


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In the often saturatedmarkets of the late 20th

century, the market-building potential of

brands is a majorservice to the economy.


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A report by Coopers and Lybrand in 1995,based on a limited definition of the packagedgoods sector, suggested that producers’ ofbranded consumer goods (excluding privatelabel) accounted for £50 billion of grossoutput and some 14% of total UKmanufacturing.

>InnovationBrands play a critical role in stimulatinginnovation. In some markets demand isdriven by constant innovation. For example,the tortilla chip sector has grown nine foldsince the launch of Walker’s Doritos. In theoften saturated markets of the late 20thcentury, the market-building potential ofbrands is a major service to the economy.

Case study: Gilette

Case study: Pedigree Masterfoods

>ExportsA report by Coopers and Lybrand in 1995,based on a limited definition of the packagedgoods sector, suggested that producers’ ofbranded consumer goods (excluding privatelabel) accounted for exports valued ataround £6 billion a year.

>EmploymentHundreds of thousands of jobs across the UKhave been generated and sustained bycompanies who manufacture some of thecountry’s most famous brands. A report byCoopers and Lybrand in 1995, based on alimited definition of the packaged goodssector, suggested that producers’ of brandedconsumer goods (excluding private label)accounted for 400,000 jobs.

Related reading

Are Brands Good for Britain?



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Branding importance in the future

>Increasing choiceIn a crowded, competitive, market brandswill be the beacons that guide choice notonly for customers but for employees,investors, partners and all a company’sstakeholders.

>Distance purchasing (Internet)A strong brand becomes even moreimportant when dealing with consumersthrough the Internet. Brands play animportant role in consumer behaviour on thischannel. Online purchasing is more riskythan purchasing in the real world, whichmakes trust an essential ingredient.

Research by Pro Active International among12,000 Internet users in eight Europeancountries found that over 50% of therespondents feel that the Internet is animportant medium to make people aware ofbrands. Nearly two-thirds of the users aredisappointed if they cannot find the brandthey are interested in on the Internet, whileover 75% say that they have encounteredcompanies or brands on the Internet thatthey didn’t know before.

On the other hand almost half feel that theInternet is primarily suited to purchasingbrands they have bought before.

Figure 1.3: Brands in the future: increasing role of branding

Source: Brand Finance (2001) Brands in the Future.

1950s

%100

0

20

40

60

80

1970s 1990s 2010s

Tangibles

Other intangibles

Brand


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A brand’s reputation isincreasingly more

important to consumerchoice than where a

brand is made.


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>GlobalisationThe world has become a smaller place asmodern communications erode borders andtime barriers and domestic markets nolonger give companies the critical mass theyneed to survive. That offers both challengesand opportunities for brands. Opportunities,because brands that can find similarsegments in different countries can travel.Challenges, because large brand owners canenter markets and compete with localbrands.

So today brands are more important thanthey have ever been. As countries develop,the marketplace is expanding and becomingeven more diverse. Both brands andconsumers are increasingly thinking in globalterms.

Brands are also important in the sense thata brand’s reputation is increasingly moreimportant to consumer choice than where abrand is made. Brands like Nike are made indifferent parts of the world. It’s Nike’s brandreputation that enables it win loyalconsumers all over the world and charge apremium.

>More demanding customersWhat is driving this is a powerfulcombination of technology, growingcustomer sophistication and the proliferationof choice. Companies have to becomeproficient students of their customers if theyare to compete.

Changes in lifestyle, together with wideaccess to education and information, meansthat consumers are becoming both moresophisticated and more demanding. Inaddition, new technology, improvedproduction and new media mean that themarket is ever more crowded. The rewardsto be gained from successful branddevelopment may be greater but so are therisks.

And that means that companies have toreally understand what consumers want andneed, rather than just making products oroffering services that they expect them tobuy. They have to achieve economies ofscale in the way things are produced, whilemaking their brands relevant to individuals.Some brands tailor products and services forindividual needs – a sort of masscustomisation.


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People have beenconfidently

differentiating betweenobjects since they were

first invited to make achoice between two

identical arrowheads.


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Evolution of brands [de Chernatony, L., 2001]

>In Greek and Roman times, because of thehigh level of illiteracy, shopkeepers hungpictures above their shops to show the typesof goods they sold. This was the forerunnerof the brand logo being used as a shorthanddevice.

>In the Middle Ages, craftsmen used brandingas a form of legal protection against copying.

>The first hallmark was stamped on silver in1300 to indicate its source.

>In the American West, cattle ranchers used ared-hot iron to brand their cattle as proof ofownership.

>The advent of the Industrial Revolutionbegan the move towards mass production,mass market distribution channels, massmedia, and the separation of producers andend consumers. This led to the increasedemphasis on branding, both to reassureconsumers of the quality of goods they werepurchasing and to help manufacturersdifferentiate their offer from that ofcompetitors.

>Now that most basic consumer needs in thedeveloped world have been satisfied,people’s interests in brands have moved to ahigher level – one in which they turn tobrands which add value to their lives, notonly in terms of tangible factors butintangible ones as well.

>In the knowledge economy, brands are oneof the few sources of competitive advantagebecause, if they are successful, they create aresonance in consumers’ minds that isharder to copy.

“It is people who call brands into existence –who form attachments, detest homogeneity,value consistency and delight in conferringpersonality characteristics on animals, entitiesand inanimate objects. People have beenconfidently differentiating between objectssince they were first invited to make a choicebetween two identical arrowheads.” [NiallFitzGerald, FitzGerald 2001]


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The core elements: brands versuscommodities

>User focusA brand is much more than a product. Whilemost brands start as ‘products’ – a set offunctional and physical qualities – over timetheir values are enhanced, a relationship isbuilt with the consumer, and they slowlyemerge as brands.

>ConsistentPeople believe in brands because they keeptheir promises. This doesn’t mean that theproduct has to remain unchanged. Mostsuccessful brands continually improve orupdate their products to remain competitiveor meet changing market requirements.[Feldwick, 1996]

>Guaranteed qualityThe brand name offers the value ofreassurance [Feldwick, 1996]. Thisguarantee of consistent quality reduces anyrisk in the consumer’s view that the productwill not perform the intended roles. [de Chernatony, L., 2001]

Figure 1.4: Functional and emotional differentiation

Source: Goodchild, J. and Callow, C. (2001) Brands, Visions and Values. John Wiley and Sons, p. 37.

MARKETING HYPE

BRAND

COMMODITY SUPERIORPRODUCT

Emotionallydifferentiated

Emotionallyundifferentiated

Functionallyundifferentiated

Functionallydifferentiated


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Brand owners have toremain at the cutting

edge, providingconsumers with a

constant flow of newand improved products

ahead of thecompetition.


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Even in today’s world of strict regulation, thebrand still provides that quality assurance forevery product every time.

>RelevantSuccessful brands deliver a value proposition– functional benefits, emotional benefitsand/or self-expressive benefits. They createan association that resonates with theconsumer because it is both relevant andmeaningful. [Aaker, 2001]

The consumer is invited not only to bring thebranded product into his/her life, but toidentify with, and step into, the world ofvalues and people which the brand projects.That is why brand owners have to remain atthe cutting edge, providing consumers with aconstant flow of new and improved productsahead of the competition.

>DifferentiatedCertain brands have managed to embodycertain ideas or viewpoints with which theyhave become almost synonymous. Even twocompeting brands that share a seeminglycommon brand identity can be differentiatedby diverging interpretations and companionassociation. These points of differentiationare sustained by the brand over time.[Aaker, 2001]

Consumers are looking for something to helpthem decide between an increasinglybewildering set of alternatives. Brandssimplify consumer choice by making certainkey attributes the property of certainproducers (Johnson & Johnson for baby care,Tide for detergent, Kellogg’s for cereal, Volvofor safety), which makes them the obviouschoice in their category. [Goodchild andCallow 2001]


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What gives these twobrands their strength is

the way they haveleveraged their

functional excellenceinto an emotional

resonance in the mindsof consumers.


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>CommunicatedCommunication enhances all the attributesthat distinguish brands from products. Atone level, BMW and Mercedes are all aboutengineering excellence: BMW is performancefocused, Mercedes is reliability focused. Bothmanufacture excellent products. But whatgives these two brands their strength is theway they have leveraged their functionalexcellence into an emotional resonance inthe minds of consumers.

For example, BMW has taken physicalperformance and used it to communicate aform of emotional aggression. Mercedes, onthe other hand, has taken the concept ofpowerful reliability and used it tocommunicate a form of emotionalreassurance.

Definitions

Input perspective: the producer’s view[de Chernatony, L., 2001]

>Brand as a logoThis was proposed by the AmericanMarketing Association in 1960 and stressesthe importance of the brand’s logo and visualsignifiers – mainly as a source ofdifferentiation – such as the unique shape ofthe Coca-Cola bottle, the golden arch ofMcDonald’s, the part-eaten apple of AppleComputers.

Such visual signifiers however tend to bemore signposts for consumers. The brand isthe impact these have on individualconsumers, combined with their experiencesover time.

>Brand as legal instrumentOne of the simpler interpretations of a brandis ensuring a legally enforceable statementof ownership to protect against imitations.This is by no means clear-cut, as thecontinuing arguments about look-alikeretailer brands and manufacturer brandsshows.


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Brand positioning shouldbe based not on what is

done to the brand butwhat results in the

customer’s mind.


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>Brand as companyAt one end of the spectrum the brand has aunique name and isn’t recognisedimmediately as being part of a company(Ariel as part of Procter & Gamble). At theother, the company is the brand (Halifax).There is increasingly a move towards thisend of the spectrum, as consumers want tosee the company behind the brands theybuy, while for companies the corporate brandis becoming the emblem of theirrelationships with their various stakeholders.

>Brand as shorthandThere is an enormous plethora of informationconfronting people, and it multipliesexponentially. To cope with a deluge ofmarketing information, the mind aggregatesbits of information into ‘chunks’. Continuallyreinforcing the link between a brand nameand its attributes helps embed the relevantinformation into consumers’ minds.

>Brand as risk reducerConsumers think about risk in a number ofways: whether the brand will perform aspromised, whether it will be value for money,the time it takes to decide on the brand andwhether it has been wasted or not, what a

consumer’s peer group will think, andwhether the consumer feels ‘right’ with thebrand in terms of matching self-image.

>Brand as positioningThe bombardment of information causesconsumers to put up barriers to the sheerquantity. Brand positioning should thus bebased on one or two of the functionalattributes but, even more importantly,positioning should be based not on what isdone to the brand but what results in thecustomer’s mind.

>Brand as personalityOne way to sustain a brand’s uniqueness isto surround it with emotional values beyondits functional attributes. They becomesymbolic devices with personalities thatusers welcome – comparable to a celebrity.It is thus important to understand theemotional role potential customers expect ofthe brand in terms of the self consumersbelieve they are, the self they desire to be,and the self in particular situations.


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Central to any brand isits vision, which

provides a clear sense ofdirection about how it is

going to bring about abetter future.


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>Brand as a cluster of valuesThis provides the basis of making the branddifferent from others because it echoes thevalues of the target group of customers. Forexample, the success of First Direct bankfrom its early days stemmed from the factthat it matched its target consumers’ valuesof respect, openness and getting it right firsttime.

Case study: First Direct

>Brand as adding valueThis has the brand offering extra benefitsabove and beyond the basic product/servicewhich can be either function-based oremotion-based. It creates an identity thatenables customers to make a purchase onthe basis of superiority over competingbrands.

>Brand as identityWhat does the brand stand for? What are itsethos, aims and values? Central to anybrand is its vision, which provides a clearsense of direction about how it is going tobring about a better future. Achieving thisdepends on creating a culture where thereare shared values and a shared mentalmodel about the brand and its relationships.

Figure 1.5: The components of brand identity

Source: de Chernatony, L. (2001) From Brand Vision to Brand Evaluation. Butterworth-Heinemann.

> Brand > Vision> Culture

Presentation

PersonalityPositioning

Relationships: > staff to staff

> staff to customers> staff to other stakeholders


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It is unlikely that twopeople will have the

same image of a brand,although the image mayhave common features.


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Output perspective: the users’ view,or brands in consumers’ minds[de Chernatony, L., 2001]

>Brand as imagePeople don’t react to reality but to what theyperceive as reality. So the set of valuespeople associate with any particular brand isbased on both direct and indirect experienceof it. This makes it unlikely that two peoplewill have the same image of a brand,although the image may have commonfeatures.

Understanding this forces managers toanalyse consumers’ perceptions and takeaction to encourage favourable perceptions –and to do so either more or less extensively,depending on customers’ levels ofinvolvement.

>Brand as relationshipIf brands can be personified, then consumerscan have relationships with them. Customerschoose brands in part because they seek tounderstand themselves and to communicateaspects of themselves to others. Managersthus need to consider how the brand’s valuesshould give rise to particular types ofrelationships. This also places greatimportance on the relationships customershave with a company’s employees.

The input perspective and the outputperspectives have to be in balance.

“Brands are part of our social existence.Relationships with brands are obviously notthe same as relationships with people but themetaphor is useful. The brands we usereinforce our self-image and how others seeus. Cars are an obvious example. Whatrational person would want to drive a RollsRoyce in West End traffic? Brand perceptionsare moulded just as much by their users as bytheir marketers, perhaps more so. We aresocial beings and brands are part of that.”[Tim Ambler, Senior Fellow, London BusinessSchool, Inaugural Brands Lecture, BritishBrand Group, December 2000]


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Brands and their stakeholders

You need a 360-degree approach to buildingcoherent brands, offering the same promiseirrespective of stakeholder and contact point.

That’s because all stakeholders affect acompany’s relationships with its customers andhence its performance. The collective supportof every stakeholder group – customers,employees, partners, investors, and so on –determines profitability because their supportdetermines revenues as well as costs. Andtheir level of support is based on theirrelationship with the brand and theirperceptions of it and the company.

That is why it is critical to develop and managerelationships by treating each stakeholdergroup as a target market with its ownobjectives and message strategy within theoverall vision and values of the brand. Thebroader and deeper the support of yourstakeholders, the greater your stakeholdercapital and hence your brand equity.

Figure 1.6: Unaligned micro-management: the management of the typical organisation brand is diffused and confused

Stakeholder Responsibility for Organisation Brand

Consumers Marketing Department

Distributors/Retailers Sales Department

Employees Human Resources Department

Shareholders Finance Department

Opinion-formers External Affairs Department

Suppliers Operations Department

Source: Davidson, H. (2002) The Commited Enterprise. Butterworth-Heinemann, p. 212.

Figure 1.7: Stakeholders have an economic interest or impact on your organisation

Economic interest and impact

Economic impact

> Employees > Distributors> Shareholders > Partners> Suppliers > Trade unions

> Customers > Legislators> Pressure groups > Communities> Regulators > Media

Source: Davidson, H. (2002) The Commited Enterprise. Butterworth-Heinemann, p. 6.


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Brand share is the result of your brand’scustomer franchise. Brand equity is the resultof your company’s stakeholder franchise.[Duncan and Mariority, 1997]

Related reading

Mapping Stakeholders: In search of win-winrelationships

Figure 1.8: Stakeholders have conflicting needs

Source: Davidson, H. (2002) The Commited Enterprise. Butterworth-Heinemann, p.6.

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There is nothinginevitable or

predetermined aboutbrand decline.


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Brand lifecycles

A state of inherent decline: brandsneed looking after

Why do so many brands decline and die?[Fitzgerald, 2001] Because companies killthem. This is rarely done deliberately orknowingly, but through negligence andneglect. There is nothing inevitable orpredetermined about brand decline. There area number of reasons why brands do decline,including:

>ArroganceCompanies forget the fundamental truthabout brands: that they belong toconsumers, not brand managers. They forgetwhat made brands useful to consumers.And, because of that, brands start to losetheir coherence, which is fatal.

>GreedTaking cost out of a product formulationsounds efficient but as often as not it’s themost effective way to starve a brand todeath.

>ComplacencyA company or brand builds a goodreputation, sits back and rests on thatreputation, and then wakes up one day tofind out that faster, hungrier, moreinnovative competitors have passed them by.

>InconsistencyConsumers increasingly expect the values ofa brand to be reflected in every aspect of thebusiness behind the brand. Brands can nolonger be securely ring-fenced from theircorporate owners.

>MyopiaThe world is in a state of permanent change.Those who fail to understand theconsequences of this for their brand putthose brands at serious risk.


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Dotcoms mistookadvertising for the much

harder job of buildingbrands that formedstrong, meaningfulrelationships with

customers.


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The longevity of brands

Companies who die early were not brands inthe first place.

>Many brands have a heritage andexceptional longevity: Moët & Chandon wasfounded in 1743; Campbell’s developedcondensed soup in 1897; the Bass trianglewas the first trademark developed in the UKin the late 1870s; Coca-Cola was developedin 1886, with its famous glass bottleappearing in 1915; Cadbury’s was foundedback in 1831.

>Dotcoms spent millions of pounds onawareness advertising, with ultimately littleeffect, as they mistook advertising for themuch harder job of building brands thatformed strong, meaningful relationships withcustomers.

Figure 1.9: Long lived brands

Date of birth Brand

1743 Moët & Chandon1759 Wedgewood1769 Gordon’s Gin1830 McVitie’s1831 Cadbury’s1850 Levi Strauss & Co1869 Heinz1875 Colgate1886 Coca-Cola1887 Johnson & Johnson

Source: BrandRight/British Brands Group (2002)


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The drive for somethingwell-known and trusted

is stronger than thedrive for novelty.


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Product lifecycle vs. brand life cycle

>A Gillette razor is a product with a definedlifecycle. Gillette is a brand that enduresthrough a constant focus on innovation andmeeting consumer needs, wants andaspirations.

>A brand has an existence separate from anactual product or service; it has a life of itsown. The test lies in the collective opinion ofthe target customers and consumers. If theycan perceive that a product has a uniqueidentity that differentiates it from othersimilar products, and they can describe itand the unique set of benefits it offers, thenit is a brand. [Randall, 1997]

>Once a leading brand is established with aloyal customer base, it is more than likelythat the position will be maintained for along time. Brands are larger than products,large enough to be repeatedly updated andaltered in almost any aspect to maintaintheir relevance to the market. [Arnold, 1992]

>As long as the brand is kept up-to-date withevolving standards and values, there is noreason why it shouldn’t live forever. Theactual contents of a can of Coca-Cola or apack of Ariel may change, but the brandpersonality, if well-managed, can remain thesame. [Arnold, 1992]

>All purchase decisions involve an element ofrisk, and buying behaviour shows the drivefor something well-known and trusted isstronger than the drive for novelty. [Arnold,1992]


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Checklist

>Gauge the organisation’s understanding of‘brand’.

>What makes the organisation’s brandpromise distinct/differentiated? Is thismeaningful to consumers?

>Is the brand’s promise being consistentlydelivered by all members of an organisationand its value chain partners?

>Identify those ‘brand encounters’ that haveimpact with users. Do these add to thebrand, detract from it, or have no effect?

>Identify those people and activities thatinfluence brand encounters. Are these beingmanaged to clarify and strengthen thebrand?

>Assess the brand from the perspective ofeach stakeholder. Is it being managedpositively for each stakeholder?


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CASE STUDIES1. Harley Davidson: a brand with personality

2. First Direct: brand or community?

3. Gillette: consumer-led innovation – not an option, an imperative

4. Pedigree Masterfoods: nick, nack, paddiwack, give the dog a Jumbone®

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1. Harley Davidson: a brand withpersonality

The turn of the twentieth century saw the birthof a name that developed its own cultfollowing; Harley Davidson. It’s not just abrand, it’s an attitude, a lifestyle, a faction ofpeople and a brand with a shared heritage.Harley Davidson doesn’t uphold a product, buta maverick disregard for convention.

Strong brands meet emotional needs as wellas physical ones. They say something aboutour innermost character. They invariably evokea strong emotional response and add value toa relationship. From the earliest times peoplehave used certain products to ‘make astatement’ about who they are as a personand where they are going.

In today’s world, individualism wrestles withinsidious conformity. Good brands provide anidentity, along with a set of surroundingemotional values, which slowly infusethemselves throughout the collectiveunconscious.

In this way, Harley Davidson has been able tocreate an almost child-like attachment ofreliance with their followers. Followers worshipthe Harley Davidson idol much as others woulda celebrity, even tattooing the Harley nameonto their bodies in a declaration of loyalty tothe ‘cause’. One might say Harley has becomea ‘brand’ in the literal sense.

But what causes brands to become so deeplyembedded in the psyche of their proponents?The answer lies in their ability to promote alifestyle, a way of thinking, and by theircapacity to satisfy such deep-seatedpsychological needs. A relationship with abrand can be as fulfilling as one with anotherperson.

“It is people who call brands into existence,who form attachments, detest homogeneity,value consistency and delight in conferringpersonality characteristics on animals, entitiesand inanimate objects. People have beenconfidently differentiating between objectssince they were first invited to make a choicebetween two identical arrowheads.” [NiallFitzgerald]

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This need for identity and the continuing drivefor novelty and uniqueness drives us to seekaffiliation seemingly to affirm our acceptance.

One of the major fortes of the Harley Davidsonbrand is its determination to involve all itsstakeholders, from customers to employees,suppliers, and the community at large. Theyhave a shared heritage.

Harley has an almost unique affinity with itscustomers. Reinforcing the pride felt by ridersand developing intimate relationships withthem has shaped enduring customer loyalty,which others have found almost impossible toimitate.

Harley is a brand that truly has personality.

First Direct: brand or community?

First Direct is more than just a bank. A passionfor new technology and a zeal for customersatisfaction set it apart from the high-streetbanks. What did it for First Direct? A mutualunderstanding with customers that bankingshould be easy and convenient. Simplicityitself. A black-and-white logo with black-and-white principles.

When you become part of First Direct, youvow to uphold the First Direct tradition. TheFirst Direct brand could not have existed in itscurrent form without a genuine contributionfrom all involved. It is this inclusive brandculture that has helped dispel bureaucracy andinstill a sense of unity and cooperation.

The idea that utility should take precedenceover town-centre façades runs deep at FirstDirect, and the brand relies on the motivationand verve of its staff in upholding its values.

The brand provides an assurance of quality.The service is seen as a special one for those‘in the know’, those astute enough torecognize and value the benefits. A classicearly-adopter base has made innovation amatter of routine at First Direct.

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As a service operation, quality is measured bythe nature of the interaction betweencustomer and staff. What the customer getsout of that relationship is what creates andpreserves the value of the brand.

First Direct focuses on the intangible, oncreating and maintaining those importantpersonal relationships while bringing everyonetogether within the caring ‘pavilion’ of thebrand.

Making the brand work across all channels isalso important to First Direct. Providingcustomers with choice and giving them thefreedom to access their financial information ina manner convenient to them not onlyrevolutionised the banking sector butaugmented the First Direct brand.

“A brand is a complex thing. Not only is it theactual product, but it is also the uniqueproperty of a specific owner and has beendeveloped over time so as to embrace a set ofvalues and attributes, both tangible andintangible, which meaningfully andappropriately differentiate products which areotherwise very similar.” [John Murphy, Founderof Interbrand]

But the reasons for First Direct’s notoriouslyhigh satisfaction levels are multifactorial. Anygood brand stems from the combination ofevents that shape the total customerexperience. A simple-to-use, accessiblewebsite, perceptive staff, and a commitment toadding value are all contributing features. Butbrand unity and a culture of mutual benefitbetween customer, brand and staff have madeFirst Direct a brand and a community.

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3. Gillette: consumer-led innovation– not an option, an imperative[Bashaw, D. (1999) British Brands, Issue 10.]

Companies stay ahead of the pack and earn areturn on investment in the long term throughinnovation. A strong belief in innovation is atthe heart of Gillette’s success.

Putting it bluntly, innovation is not an option, itis an imperative. It is demanded in themarketplace, and for any innovative productsto be successful, they must be driven by afocus on the consumer.

Why do we need innovation? There are alwayssceptics. The head of Warner Brothers oncequestioned whether people would want talkingmovies. He was wrong. Dyson produced a newvacuum cleaner. Did we really need it? Thefact is we need innovation because consumerswant it. Consumers vote for successfulinnovations like the Dyson cleaner that addreal benefit to their lives. And if we don’t bringthe benefits of new technology to market, youcan bet the competition will.

But innovation is highly competitive, risky,complex, and costly. We wouldn’t do it if wedidn’t have to.

With the change of pace going on today,innovation is critical. Look around us – mobilephones, the internet, computers, digitaltelevision. Again sceptics may question thevalue of all this innovation but ultimately theconsumer decides. If you don’t innovate intoday’s world you will lose ground fast.

The process

Gillette has a product development cycle thatquantitatively and qualitatively tests productswith thousands of consumers before bringingthem to market. A new product launch cyclemay be anything from two to ten years.

Gillette starts the product cycle by firstunderstanding consumer needs and theopportunities to satisfy them better. Thenconcepts are extensively tested withconsumers, asking them what they like, dislikeand what they would change. Owningproprietary rights in the chosen concept is akey consideration.

Once a viable concept has been identified,additional work begins. To ensure we canmake a return on investment, finance andmanufacturing are involved in developingprototypes and conducting feasibility and cost

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studies. Product innovations can often drivemanufacturing innovations, as better andcheaper ways of producing goods aredeveloped.

New ideas may emerge from these tests and,if so, a new project team may need to be setup. There will be more feasibility studies,further cost estimates, more financial analysis,concept refinement and packagingdevelopment. It may be necessary to gothrough this cycle several times as new ideasor problems emerge before we feel we have itright. Eventually we have a product that meetsthe consumer’s needs and ours. Then we buythe equipment (based on complex capacity,design and logistical factors which haveevolved in step with the product design), startproduction, develop and test the advertising,go to the trade, and launch the product. Thisis a complex process, which is time consumingand expensive.

What is critical for Gillette in the product cycleis consumer testing of all aspects of theproduct, including the name, the packagingand the pricing. We make a huge investmentand cannot afford to get it wrong. The producthas to be successful and meet consumer

needs, while also giving us a return on ourinvestment.

The product/consumer equation

Let me spend a minute to outline theparticular equation between the Mach 3 designand consumer expectations. Whatever theFMCG category in which we operate asprofessional marketing and brand managers,this equation is always there and it is our dutyto live and breathe it, and to get it right.

The most obvious difference in Mach 3 is thatit has three blades. However it is morecomplicated than that. In fact the concept ofthree blades was not the solution, it was thechallenge: how to deliver them to theconsumer in a structure and design that wouldmeet his demands and aspirations.

The floating blades needed to be set in a newgeometry in order to achieve a closer shavewith fewer strokes, thus avoiding irritation tothe skin. Mach 3 also has a thinner blade edgethat required a diamond-like carbon coating tomake it stronger. A balance was achieved –although three blades may give more ‘drag’than two, the sharper blades reduce the drag.

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Other innovative features include the singledocking point between the blade and thehandle, improved manoeuvrability, and a morepleasant sensation of actually pulling on ratherthan pushing into the face. And the openarchitecture of the blade cartridge allows mucheasier rinsing.

So this product really delivered against whatwe had found consumers wanted, beingpreferred on 61 out of 62 attributes, a uniqueproprietary innovation supported by 35patents.

In summary, it is often true that as muchinnovation and work go into the launchprocess – manufacturing, advertising, retailer presentations, etc – as into the product itself.

Risk

None of this is risk free. Any innovation carriesa financial risk and a risk to our image andbrand. The financial risk lies in the fact thatwe invest in engineers, equipment, production,PR companies, printers, suppliers, TV stations.And remember, we pay these companiesbefore the product starts to recoup any

investment. This helps the economy, but putsthe financial risk firmly on the manufacturer’sshoulders.

We place a high value on the name we put onthe product. If we don’t get the innovationright and satisfy consumers, brand loyalty canbe eroded very quickly. If consumers stoptrying our products, our image suffers not onlywith consumers but also with retailers.Retailers may seek increased margins if theybegin to doubt the marketability of our futureproducts, or may ask us to increase our mediaand promotional spend behind new launches.Maintaining our reputation is essential, and weare only as good as our last launch.

The right environment

For our innovation to compete, we need a levelplaying field. We need access to distribution.We need a fair, competitive chance to get ourproducts onto the retailer’s shelf. Consumersdon’t come to Gillette. We want fair marginsand equal access to the airwaves tocommunicate the benefits of our innovation.And we are in business to earn a return on ourinvestment and risk.

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In summary, innovation is an imperative fordynamic brands. There is a famous quote thatyou can be on the right track but if you arestanding still you get run over. Well, you canbe on the right track, you can have a brand,and you can have a strong reputation, but ifyou are standing still, you are going to get runover, especially in today’s marketplace. Thepace of change is enormous so it is critical toget it right with the consumer. But it is noteasy, there are risks, and it takes time, moneyand effort.

The paradox is that innovation is a must – butthat no-one can afford to innovate forinnovation’s sake: it has to start with theconsumer. So planning Mach 3 began not inthe laboratory but with the question ‘what domen today want when they shave?’ Four keyattributes emerged from fresh research intothis question – closeness, comfort, smooth feeland lack of irritation.

The next question was how well does theconsumer think these needs are being satisfiedby current products? Is there a gap in themarket? It became clear from research thatconsumers’ expectations had again run aheadof the products on the market. Having

established this, it was imperative for Gilletteto address the gap in order to stay ahead andkeep growing its business and the category.

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4. Pedigree Masterfoods: nick, nack, paddiwack, give the dog a Jumbone®[Lambert, P. (2000) British Brands, Issue 12.]

The world of dogfood is not one that is usuallyassociated with innovation, but in early 1998 anew product was launched which couldjustifiably claim that title. Its name wasPedigree® Jumbone®, and it was conceived,as are many of the best innovations, through acombination of a strong consumer insight andthe creative use of technology.

About big dogs and big bones

Back in 1996, the marketing team at Thomas’Europe decided to probe two areas of dogownership that appeared under-developed.

The first concerned large dogs and theirowners. Our calculations suggested that largedogs should (due to their high calorierequirements) consume around half of all themanufactured snacks, treats and chews sold inEurope. In reality, however, they were beingfed significantly less than this. Why? Wereowners of large dogs less emotionally-attachedto their pets? Did the cost of feeding a largeanimal mean that treats were an unjustified

luxury? Or, were existing products simply notmeeting the needs of large dogs and theirowners?

The second area of research focused on real‘butcher’s bones’. Despite their apparentinconvenience and uncleanliness, a highpercentage of dog owners were still givingthem to their pets on a regular basis. Whatwas so special about a real bone? Why andwhen did owners feed them? Were there anynegatives associated with real bones? Couldwe provide a better alternative?

Qualitative research with European dog ownersimproved our understanding of these areas,and helped us to develop some importantconsumer insights. We discovered that:

>large dog owners did tend to have a strongemotional bond with their animal;

>large dog owners also had the desire to givesnacks, treats and chews;

>however, most manufactured products wereseen as insufficient for a large dog, andoften, therefore, inappropriate or poor valuefor money.

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And, in our bone research, we found that:

>real bone users regarded a butcher’s bone asthe ultimate dog treat, satisfying the basicinstincts of their dog;

>however, real bones had some majordrawbacks including availability, hygiene andsafety (with concern over BSE).

By combining the learnings from these twopieces of market research, we developed theJumbone® concept: a large, realistic, ediblebone for dogs. All the benefits of a real bone,without the negatives. Ideal for large dogs andtheir owners. We then had to work out how todeliver such a unique product!

When is a real bone not a real bone?

The product development brief for Jumbone®was challenging. It had to look like a realmarrowbone, it had to be completely edibleand clean to eat, it had to occupy a large dogfor a considerable time, and it had to be highlypalatable and digestible. And, of course, it hadto meet cost targets to make it affordable (forthe dog owner) and profitable (for Thomas’).

Product development took around 12 monthsof continuous R&D and engineering effort, andwas achieved through the innovative use ofextrusion and forming technology. Throughoutthe development, prototype products wereregularly tested with dog owners to confirmthat the product was meeting the brief.

In parallel, other elements of the marketingmix were developed. The name was created,checked and trademarked. Packaging andgraphic designs were developed with externaldesign agencies. A communication strategywas agreed in conjunction with the Pedigree®advertising agency. A full pricing andprofitability model was developed.

In mid-1997 quantitative market researchstudies were commissioned to refine theproposition. Results were outstanding, and amajor capital investment was agreed for themanufacture of the product.

A ‘tail’ of successful innovation?

Jumbone® was launched initially at Crufts inMarch 1998 to an outstanding response fromconsumers. The product has subsequentlybeen launched into 14 European markets andhas now become the second-fastest selling

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product in the UK snacks, treats and chewscategory in value terms, ahead of many long-established products. This despite (or perhapsthanks to) the fact that the product is onlysuitable for large dogs. A Jumbone® has nowbeen launched for small and medium-sizeddogs.

Such success has only come as a result ofsignificant investment of human and financialresources – over two years from conception tolaunch; significant commitment of marketingand R&D resources; extensive marketresearch; major capital investment;advertising and promotional investment. A lotof hard work, a lot of belief and a lot ofinvestment – all of which are necessary tocreate a successful innovation.

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