brands - introduction

Introduction to brands

Take a look at the list below that shows the world’s top 10 brands in 2002 (as measured
by value):
{Rank Brand Value ($ billions)}
1 Coca-Cola ($69.6)
2 Microsoft ($64.1)
3 IBM ($51.2)
4 GE ($41.3)
5 Intel ($30.9)
6 Nokia ($30.0)
7 Disney ($29.3)
8 McDonalds ($26.4)
9 Marlboro ($24.2)
10 Mercedes ($21.0)
Source: Interbrand; JP Morgan Chase, 2002

Why do companies such as Coca-Cola, Microsoft, IBM and Disney seem to achieve
global marketing success so easily? Why does it seem such an effort for others?
Why do we, as consumers, feel loyal to such brands that the mere sight of their logo has
us reaching into our pockets to buy their products?
The meaning of brands
Brands are a means of differentiating a company’s products and services from those of
its competitors.
There is plenty of evidence to prove that customers will pay a substantial price premium
for a good brand and remain loyal to that brand. It is important, therefore, to understand
what brands are and why they are important.
Macdonald sums this up nicely in the following quote emphasising the importance of
brands:
“…it is not factories that make profits, but relationships with customers, and it is
company and brand names which secure those relationships”
Businesses that invest in and sustain leading brands prosper whereas those that fail are
left to fight for the lower profits available in commodity markets.
What is a brand?
One definition of a brand is as follows:
“A name, term, sign, symbol or design, or a combination of these, that is intended to
identify the goods and services of one business or group of businesses and to differentiate
them from those of competitors”.
Interbrand - a leading branding consultancy - define a brand in this way:
“A mixture of tangible and intangible attributes symbolised in a trademark, which, if
properly managed, creates influence and generates value”.
Three other important terms relating to brands should be defined at this stage:
Brand equity
“Brand equity” refers to the value of a brand. Brand equity is based on the extent to
which the brand has high brand loyalty, name awareness, perceived quality and strong
product associations. Brand equity also includes other “intangible” assets such as patents,
trademarks and channel relationships.
Brand image
“Brand image” refers to the set of beliefs that customers hold about a particular brand.
These are important to develop well since a negative brand image can be very difficult to
shake off.
Brand extension
Brand extension
“Brand extension” refers to the use of a successful brand name to launch a new or
modified product in a new market. Virgin is perhaps the best example of how brand
extension can be applied into quite diverse and distinct markets.
Brands and products
Brands are rarely developed in isolation. They normally fall within a business’ product
line or product group.
A product line is a group of brands that are closely related in terms of their functions and
the benefits they provide. A good example would be the range of desktop and laptop
computers manufactured by Dell.
A product mix relates to the total set of brands marketed by a business. A product mix
could, therefore, contain several or many product lines. The width of the product mix can
be measured by the number of product lines that a business offers.
For a good example, visit the web site of Hewlett-Packard (“HP”). HP has a broad
product mix that covers many segments of the personal and business computing market.
How many separate product lines can you spot from their web site?
Managing brands is a key part of the product strategy of any business, particularly those
operating in highly competitive consumer markets.
brands - building a brand
What factors are important in building brand value?
Professor David Jobber identifies seven main factors in building successful brands, as
illustrated in the diagram below:
Quality
Quality is a vital ingredient of a good brand. Remember the “core benefits” – the things
consumers expect. These must be delivered well, consistently. The branded washing
machine that leaks, or the training shoe that often falls apart when wet will never develop
brand equity.
Research confirms that, statistically, higher quality brands achieve a higher market share
and higher profitability that their inferior competitors.
Positioning
Positioning is about the position a brand occupies in a market in the minds of consumers.
Strong brands have a clear, often unique position in the target market.
Positioning can be achieved through several means, including brand name, image, service
standards, product guarantees, packaging and the way in which it is delivered. In fact,
successful positioning usually requires a combination of these things.
Repositioning
Repositioning occurs when a brand tries to change its market position to reflect a change
in consumer’s tastes. This is often required when a brand has become tired, perhaps
because its original market has matured or has gone into decline.
The repositioning of the Lucozade brand from a sweet drink for children to a leading
sports drink is one example. Another would be the changing styles of entertainers with
above-average longevity such as Kylie Minogue and Cliff Richard.
Communications
Communications also play a key role in building a successful brand. We suggested that
brand positioning is essentially about customer perceptions – with the objective to build a
clearly defined position in the minds of the target audience.
All elements of the promotional mix need to be used to develop and sustain customer
perceptions. Initially, the challenge is to build awareness, then to develop the brand
personality and reinforce the perception.
First-mover advantage
Business strategists often talk about first-mover advantage. In terms of brand
development, by “first-mover” they mean that it is possible for the first successful brand
in a market to create a clear positioning in the minds of target customers before the
competition enters the market. There is plenty of evidence to support this.
Think of some leading consumer product brands like Gillette, Coca Cola and Sellotape
that, in many ways, defined the markets they operate in and continue to lead. However,
being first into a market does not necessarily guarantee long-term success. Competitors –
drawn to the high growth and profit potential demonstrated by the “market-mover” – will
enter the market and copy the best elements of the leader’s brand (a good example is the
way that Body Shop developed the “ethical” personal care market but were soon facing
stiff competition from the major high street cosmetics retailers.
Long-term perspective
This leads onto another important factor in brand-building: the need to invest in the brand
over the long-term. Building customer awareness, communicating the brand’s message
and creating customer loyalty takes time. This means that management must “invest” in a
brand, perhaps at the expense of short-term profitability.
Internal marketing
Finally, management should ensure that the brand is marketed “internally” as well as
externally. By this we mean that the whole business should understand the brand values
and positioning. This is particularly important in service businesses where a critical part
of the brand value is the type and quality of service that a customer receives.
Think of the brands that you value in the restaurant, hotel and retail sectors. It is likely
that your favourite brands invest heavily in staff training so that the face-to-face contact
that you have with the brand helps secure your loyalty.

brands - brand positioning

Brand positioning
As we have argued in our other revision notes on branding, it is the “added value” or
augmented elements that determine a brand’s positioning in the market place.
Positioning can be defined as follows:
Positioning is how a product appears in relation to other products in the market
Brands can be positioned against competing brands on a perceptual map.
A perceptual map defines the market in terms of the way buyers perceive key
characteristics of competing products.
The basic perceptual map that buyers use maps products in terms of their price and
quality, as illustrated below:
brands - brand names
Introduction
How should brand names be chosen? Is the name important?
Marketing theory suggests that there are three main types of brand name:
(1) Family brand names:
A family brand name is used for all products. By building customer trust and loyalty to
the family brand name, all products that use the brand can benefit.
Good examples include brands in the food industry, including Kellogg’s, Heinz and Del
Monte. Of course, the use of a family brand can also create problems if one of the
products gets bad publicity or is a failure in a market. This can damage the reputation of a
whole range of brands.
(2) Individual brand names:
An individual brand name does not identify a brand with a particular company.
For example, take the case of Heinz. Heinz is a leading global food manufacturer with a
very strong family brand. However, it also operates many well-known individual brand
names. Examples include Farleys (baby food), Linda MacCartney Foods (vegetarian
meals) and Weight Watcher’s Foods (diet/slimming meals and supplements).
Why does Heinz use individual brand names when it has such a strong family brand
name? There are several reasons why a brand needs a separate identity – unrelated to the
family brand name:
• The product may be competing in a new market segment where failure could harm the
main family brand name
• The family brand name may be positioned inappropriately for the target market
segment. For example the family brand name might be positioned as an upmarket brand
for affluent consumers.
• The brand may have been acquired; in other words it has already established itself as a
leading brand in the market segment. The fact that it has been acquired by a company
with a strong family brand name does not mean that the acquired brand has to be
changed.
(3) Combination brand names:
A combination brand name brings together a family brand name and an individual brand
name. The idea here is to provide some association for the product with a strong family
brand name but maintaining some distinctiveness so that customers know what they are
getting.
Examples of combination brand names include Microsoft XP and Microsoft Office in
personal computing software and Heinz Tomato Ketchup and Heinz Pet Foods.
What are the features of a good brand name?
Brand names should be chosen carefully since the name conveys a lot of information to a
customer. The following list contains considerations that should be made before making a
final choice of brand name:
A good brand name should:
• Evoke positive associations
• Be easy to pronounce and remember
• Suggest product benefits
• Be distinctive
• Use numerals when emphasising technological features
• Not infringe existing registered brand names

brands - brand extension and stretching

Brand extension and brand stretching
Marketers have long recognised that strong brand names that deliver higher sales and
profits (i.e. those that have brand equity) have the potential to work their magic on other
products.
The two options for doing this are usually called “brand extension” and “brand
stretching”.
Brand extension
Brand extension refers to the use of a successful brand name to launch a new or modified
product in a same broad market.
A successful brand helps a company enter new product categories more easily.
For example, Fairy (owned by Unilever) was extended from a washing up liquid brand to
become a washing powder brand too.
The Lucozade brand has undergone a very successful brand extension from children’s
health drink to an energy drink and sports drink.
Brand stretching
Brand stretching refers to the use of an established brand name for products in unrelated
markets.
For example the move by Yamaha (originally a Japanese manufacturer of motorbikes)
into branded hi-fi equipment, pianos and sports equipment.
When done successfully, brand extension can have several advantages:
• Distributors may perceive there is less risk with a new product if it carries a familiar
brand name. If a new food product carries the Heinz brand, it is likely that customers will
buy it
• Customers will associate the quality of the established brand name with the new
product. They will be more likely to trust the new product.
• The new product will attract quicker customer awareness and willingness to trial or
sample the product
• Promotional launch costs (particularly advertising) are likely to be substantially lower

brands - types
Types of brand
There are two main types of brand – manufacturer brands and own-label brands.
Manufacturer brands
Manufacturer brands are created by producers and bear their chosen brand name. The
producer is responsible for marketing the brand. The brand is owned by the producer.
By building their brand names, manufacturers can gain widespread distribution (for
example by retailers who want to sell the brand) and build customer loyalty (think about
the manufacturer brands that you feel “loyal” to).
Own label brands
Own-label brands are created and owned by businesses that operate in the distribution
channel – often referred to as “distributors”.
Often these distributors are retailers, but not exclusively. Sometimes the retailer’s entire
product range will be own-label. However, more often, the distributor will mix own-label
and manufacturers brands. The major supermarkets (e.g. Tesco, Asda, Sainsbury’s) are
excellent examples of this.
Own-label branding – if well carried out – can often offer the consumer excellent value
for money and provide the distributor with additional bargaining power when it comes to
negotiating prices and terms with manufacturer brands.
Why should businesses try to build their brands?
There are many advantages to businesses that build successful brands. These include:
• Higher prices
• Higher profit margins
• Better distribution
• Customer loyalty
Businesses that operate successful brands are also much more likely to enjoy higher
profits.
A brand is created by augmenting a core product with distinctive values that distinguish it
from the competition. This is the process of creating brand value.
All products have a series of “core benefits” – benefits that are delivered to all
consumers. For example:
• Watches tell the time
• CD-players play CD’s
• Toothpaste helps prevent tooth decay
• Garages dispense petrol.
Consumers are rarely prepared to pay a premium for products or services that simply
deliver core benefits – they are the expected elements of that justify a core price.
Successful brands are those that deliver added value in addition to the core benefits.
These added values enable the brand to differentiate itself from the competition. When
done well, the customer recognises the added value in an augmented product and chooses
that brand in preference.
For example, a consumer may be looking for reassurance or a guarantee of quality in a
situation where he or she is unsure about what to buy. A brand like Mercedes, Sony or
Microsoft can offer this reassurance or guarantee.
Alternatively, the consumer may be looking for the brand to add meaning to his or her
life in terms of lifestyle or personal image. Brands such as Nike, Porsche or Timberland
do this.
A brand can usefully be represented in the classic “fried-egg” format shown below,
where the brand is shown to have core features that are surrounded (or “augmented”) by
less tangible features.

distribution - introduction
Distribution (or "Place") is the fourth traditional element of the marketing mix. The other
three are Product, Price and Promotion.
The Nature of Distribution Channels
Most businesses use third parties or intermediaries to bring their products to market.
They try to forge a "distribution channel" which can be defined as
"all the organisations through which a product must pass between its point of
production and consumption"
Why does a business give the job of selling its products to intermediaries? After all, using
intermediaries means giving up some control over how products are sold and who they
are sold to.
The answer lies in efficiency of distribution costs. Intermediaries are specialists in
selling. They have the contacts, experience and scale of operation which means that
greater sales can be achieved than if the producing business tried run a sales operation
itself.
Functions of a Distribution Channel
The main function of a distribution channel is to provide a link between production and
consumption. Organisations that form any particular distribution channel perform many
key functions:
Information Gathering and distributing market research and intelligence - important
for marketing planning
Promotion Developing and spreading communications about offers

Contact Finding and communicating with prospective buyers

Matching Adjusting the offer to fit a buyer's needs, including grading, assembling
and packaging
Negotiation Reaching agreement on price and other terms of the offer
Physical distribution Transporting and storing goods
Financing Acquiring and using funds to cover the costs of the distribution channel
Risk taking Assuming some commercial risks by operating the channel (e.g. holding
stock)
All of the above functions need to be undertaken in any market. The question is - who
performs them and how many levels there need to be in the distribution channel in order
to make it cost effective.
Numbers of Distribution Channel Levels
Each layer of marketing intermediaries that performs some work in bringing the product
to its final buyer is a "channel level". The figure below shows some examples of channel
levels for consumer marketing channels:
In the figure above, Channel 1 is called a "direct-marketing" channel, since it has no
intermediary levels. In this case the manufacturer sells directly to customers. An example
of a direct marketing channel would be a factory outlet store. Many holiday companies
also market direct to consumers, bypassing a traditional retail intermediary - the travel
agent.
The remaining channels are "indirect-marketing channels".
Channel 2 contains one intermediary. In consumer markets, this is typically a retailer.
The consumer electrical goods market in the UK is typical of this arrangement whereby
producers such as Sony, Panasonic, Canon etc. sell their goods directly to large retailers
such as Comet, Dixons and Currys which then sell the goods to the final consumers.
Channel 3 contains two intermediary levels - a wholesaler and a retailer. A wholesaler
typically buys and stores large quantities of several producers goods and then breaks into
the bulk deliveries to supply retailers with smaller quantities. For small retailers with
limited order quantities, the use of wholesalers makes economic sense. This arrangement
tends to work best where the retail channel is fragmented - i.e. not dominated by a small
number of large, powerful retailers who have an incentive to cut out the wholesaler. A
good example of this channel arrangement in the UK is the distribution of drugs.

distribution - types of distribution

intermediary
Introduction
There is a variety of intermediaries that may get involved before a product gets from the
original producer to the final user. These are described briefly below:
Retailers
Retailers operate outlets that trade directly with household customers. Retailers can be
classified in several ways:
• Type of goods being sold( e.g. clothes, grocery, furniture)
• Type of service (e.g. self-service, counter-service)
• Size (e.g. corner shop; superstore)
• Ownership (e.g. privately-owned independent; public-quoted retail group
• Location (e.g. rural, city-centre, out-of-town)
• Brand (e.g. nationwide retail brands; local one-shop name)
Wholesalers
Wholesalers stock a range of products from several producers. The role of the wholesaler
is to sell onto retailers. Wholesalers usually specialise in particular products.
Distributors and dealers
Distributors or dealers have a similar role to wholesalers – that of taking products from
producers and selling them on. However, they often sell onto the end customer rather
than a retailer. They also usually have a much narrower product range. Distributors and
dealers are often involved in providing after-sales service.
Franchises
Franchises are independent businesses that operate a branded product (usually a service)
in exchange for a licence fee and a share of sales.
Agents
Agents sell the products and services of producers in return for a commission (a
percentage of the sales revenues)

Products - product life cycle

We define a product as "anything that is capable of satisfying customer needs. This
definition includes both physical products (e.g. cars, washing machines, DVD players)
as well as services (e.g. insurance, banking, private health care).
Businesses should manage their products carefully over time to ensure that they deliver
products that continue to meet customer wants. The process of managing groups of
brands and product lines is called portfolio planning.
The stages through which individual products develop over time is called commonly
known as the "Product Life Cycle".
The classic product life cycle has four stages (illustrated in the diagram below):
introduction; growth; maturity and decline
Introduction Stage
At the Introduction (or development) Stage market size and growth is slight. it is possible
that substantial research and development costs have been incurred in getting the product
to this stage. In addition, marketing costs may be high in order to test the market, undergo
launch promotion and set up distribution channels. It is highly unlikely that companies
will make profits on products at the Introduction Stage. Products at this stage have to be
carefully monitored to ensure that they start to grow. Otherwise, the best option may be
to withdraw or end the product.
Growth Stage
The Growth Stage is characterised by rapid growth in sales and profits. Profits arise due
to an increase in output (economies of scale)and possibly better prices. At this stage, it is
cheaper for businesses to invest in increasing their market share as well as enjoying the
overall growth of the market. Accordingly, significant promotional resources are
traditionally invested in products that are firmly in the Growth Stage.
Maturity Stage
The Maturity Stage is, perhaps, the most common stage for all markets. it is in this stage
that competition is most intense as companies fight to maintain their market share. Here,
both marketing and finance become key activities. Marketing spend has to be monitored
carefully, since any significant moves are likely to be copied by competitors. The
Maturity Stage is the time when most profit is earned by the market as a whole. Any
expenditure on research and development is likely to be restricted to product modification
and improvement and perhaps to improve production efficiency and quality.
Decline Stage
In the Decline Stage, the market is shrinking, reducing the overall amount of profit that
can be shared amongst the remaining competitors. At this stage, great care has to be taken
to manage the product carefully. It may be possible to take out some production cost, to
transfer production to a cheaper facility, sell the product into other, cheaper markets. Care
should be taken to control the amount of stocks of the product. Ultimately, depending on
whether the product remains profitable, a company may decide to end the product.
Examples
Set out below are some suggested examples of products that are currently at different
stages of the product life-cycle:
INTRODUCTION GROWTH MATURITY DECLINE
Third generation mobile
Portable DVD Players Personal Computers Typewriters
phones
E-conferencing Email Faxes Handwritten letters
All-in-one racing skin- Breathable synthetic
Cotton t-shirts Shell Suits
suits fabrics
iris-based personal identity
Smart cards Credit cards Cheque books
cards