Branding Strategy I. Branding Basics A. Quick recap. In the Web Notes on products, you were introduced to the concept of a brand and some of its components such as the brand name (part that can be spoken) and the brand mark (symbols and graphics that cannot be spoken). In those Web Notes, you were also briefly introduced to the concept of branding. Branding is a process that develops the image and meanings that are represented by the words and symbols in a brand. B. These Web Notes expand on the concept of branding, which has become extremely important in marketing. That’s because marketers recognize the value of brands as efficient means to quickly and succinctly communicate information about products to customers. Thus, successful branding helps customers and businesses alike. 1. What branding does for business. In short, what businesses get out of successful branding is marketplace power. a. Research has shown consistently that leading brands in product categories are more profitable. Because established and well- understood brands create such effective communication tools for businesses, they can frequently charge more for their products and spend less marketing them. b. The marketplace power created by brand leadership tends to last awhile. One study found that leading brands hold onto their leadership over time. One study found that almost 80% of the consumer brands that were number one in their product category fifty years ago remained so at the time of the study. 2. What branding does for customers. Successful brands produce lasting profitability because customers rely on them so heavily. A good brand makes a promise to customers about what they can expect when they buy. In a crowded marketplace, the reliable promises made by brands create value for customers that they’re willing to pay for. Specifically, branding helps customers in at least two critically important ways. a. identification. Brands identify products and their attributes, which makes shopping easier and less risky. Because brands help customers know with some degree of confidence what they’re getting when they buy, the likelihood of an unsuccessful purchase decision is greatly diminished. b. differentiation. Brands also help customers distinguish between competitive market offerings. Brands not only communicate characteristics of a particular product, they also help provide a means by which customers can quickly compare market offerings to each other. This increases the efficiency with which customers can shop and the likelihood of satisfactory purchases. II. Outcomes of Effective Branding A. Brand Position. 1. definition of brand position. Most authors define brand position as the “perception that a target market has of a brand relative to its competitors.” This definition raises two points. a. Positioning is perceptual. In other words, positioning is not factual; instead it pertains to influencing customer perceptions of your product. b. Companies cannot position brands in isolation; they must be positioned relative to one or more competitors. By nature, human beings learn by making comparisons. When we learn new information, one way we remember and use that information is by mentally comparing it to existing information. Therefore, it’s only natural for people to develop perceptions of one brand that are relative to other brands. When we say what our brand is, whether we like it or not, we also imply what our competitor is not. When we say what our brand is not, we imply what our competitor is. 2. how brand positioning works in memory. Brand positioning works because people organize their memories into groups of related concepts that psychologists call “memory schema.” Memory schema help people group and therefore compare different concepts, including brands. a. Marketers can influence the structure of memory schema by suggesting to people how they organize the parts of their memories related to a particular brand. By suggesting qualities and characteristics of their brands, marketers ask people to make inferences about competitive brands. b. Here are some examples: (1) When Coca Cola says, “Always Coca Cola,” they insinuate the sort of timeless and iconic nature of the Coke brand while also suggesting that Coke is always the refreshing soft drink choice. By implication, the word they hope we associate with Pepsi (and other competitive brands) is “never” or at least only “sometimes.” These brands lack Coke’s timeless quality and are actual “Johnny come latelys.” (2) When the Marines say they’re “The few, the proud,” they position themselves as an elite and selective branch of the armed forces. The implication is that other services are not as selective, that other services are not as elite.” 3. Not all brands are successfully positioned. In fact, many lack clear marketplace positions that distinguish them easily and quickly from rival brands. Many of these brands are quite profitable and enjoy strong followings. However, the clear image that successfully positioned brands enjoy earns them greater and more sustained profitability than poorly positioned brands. B. Brand Equity 1. brand equity defined. Brand equity refers to the extra value that brands on products provide to consumers beyond the benefits that the product normally provide. For example, an individual may purchase a watch in order to have the time of day readily available, and perhaps to have something stylish on his or her wrist. Brand equity could come when the person selected a watch brand. How much more the person was willing to pay for a particular brand of watch over an otherwise similar competitive brand represents the value or equity of the purchased brand. 2. Marketers hoping to establish equity in their brands should look to five components or factors that contribute to it. a. performance. Some brands are perceived to simply perform better than others (often for the obvious reason that they do). (1) Often, the performance differences between brands are merely perceptual. For example, one brand of wall paint may be perceived as being more aesthetically pleasing than another, which is strictly a subjective evaluation of performance. (2) For other brands, performance differences may be objectively assessed. Many high priced brands of automobiles last longer, require fewer repairs, handle better, are more comfortable, and protect their occupants better than lower priced brands. The equity in the high priced brand is not strictly perceptual. b. trustworthiness. Brands make promises. Brands that keep these promises over time become trusted and therefore valued. Even when performance differences between brands are perceptual or difficult to quantify, consumers that find performance consistency with their selected brands develop trust in them, which they become willing to pay for. c. social image. For an individual consumer, brands that are well regarded by other consumers gain value. This component of brand equity is particularly true of highly visible products. When social groups accept the value of a given brand and hold that brand in high regard, the brand gains in value. Frequently adding to the value of brands with strong social image are highly visible labels or logos, or extremely distinctive designs. These distinguishing factors amplify the social image value of the brand merely by making it easy for the purchaser to let others know he or she has purchased well. d. identification. In the context of brand equity, identification refers to the degree to which a brand’s image is consistent with the self image of its buyer. (1) In many product categories, identification does little for brand equity because people may not associate brands with self. For example, commodity products such as gasoline, salt, even canned vegetables probably connect little with consumer self image. (2) Marketers frequently attempt to build such connections even with products that one would not normally associate with self-image. Consider the “Choosy moms choose Jif” slogan for Jif peanut butter. Even for a product category as mundane and inexpensive as peanut butter, marketers try to position the product in such a way as to capitalize on the self image many mothers have as being exceptionally picky and protective of their children. e. substitutability. A brand whose attributes are perceived as unique is more valuable. To the extent that the brand is easily replaced by a competitor diminishes its value. For example, a parent who perceives that Peter Pan and Jif peanut betters are basically interchangeable will seek the lowest priced brand. Neither has equity relative to the other. However, a parent who would pay more for either brand over a store brand confers equity on both brands. C. Brand Loyalty. 1. definition of brand loyalty. When asked, most people would define brand loyalty as the purchase of the same brand on repeated occasions. This is a somewhat limited view. Think of what the term “loyalty” means. To be loyal means more than to associate with; it means to feel a commitment to something. The same is true for brands. Therefore, we define being brand loyal as making a “cognitive commitment” to buying the same brand on repeated occasions. 2. The value of brand loyalty lies in its ability to hold off competitors. Truly loyal customers don’t want to switch brands; they may even view competitive brands with suspicion or disdain. Marketers should treat brand loyal customers like gold. That’s what they are. Truly loyal customers represent a reasonably reliable income stream over time. Marketers should make great efforts to assure loyal customers that their loyalty is recognized and appreciated and to find ways of thanking them for their loyalty. III. Branding Policies The term “branding policy” refers to the basic approach a company takes to branding products or lines of products. The various branding policies described below are not either-or in nature. They can be used in combination with each other and modified to suit circumstance. However, they offer a starting point for marketers to consider how to best capitalize on the value and position of its brands. A. Individual branding. 1. A policy of individual branding means that each product in a given product line gets its own distinct name. For example, P&G markets nine different brands of detergents, all with their own individual names. 2. Individual branding allows marketers to develop distinct positions among brands, especially when those brands are in the same category. This permits companies to develop expertise and gain experience in a given product category while creating a line of similar products that appeal to a broad range of customers. 3. Individual branding does not permit a company to fully capitalize on the equity or reputation gained by one of its brands. By giving individual names to all brands, the equity or reputation of one brand cannot be given to a different product by allowing it to use an existing brand name. B. Brand extensions. 1. A policy of creating brand extensions means that new varieties or enhancements of a product are marketed. Extensions of a brand occur in the same product category as the original. For example, Tylenol manufacturers many different products under the Tylenol name, all of which contain the pain reliever acetaminophen, which is the basic ingredient in original Tylenol. 2. Brand extensions can be combined with individual branding policies. For example, while P&G may market many different brands of detergents, some of those brands have been extended. Tide detergent comes in several varieties from the original. 3. Brand extensions allow marketers to spread the value of an established brand in a category to other similar products. This works well for products that have relatively broad appeal to a wide variety of target markets. Tightly defined brand positions to not generally work well for brand extensions. C. Family Branding. 1. Family branding is a policy in which the same brand name is placed on many products in different product categories. For example, General Electric puts its brand on washers and dryers, CT scanners, locomotives, room air conditioners, and jet aircraft engines. They also offer home and business loans through GE Finance. A less disparate example of family branding is the Arm & Hammer company, which makes baking soda, air freshener, toothpaste, and laundry detergent, all carrying the Arm & Hammer name. While all of these products contain baking soda, these products cover a very broad array of product categories and are correctly considered a family brand. In contrast, although all Tylenol products contain the same pain reliever, they’re also all medicines and therefore not really a family brand. 2. Family branding allows a company to put a strong brand into many categories, but runs the risk of diluting its brand to the point that it really mans nothing distinctive anymore. Also, failure of one product line can damage the reputation of the brand’s original product. D. Co-Branding. 1. A co-branding policy allows one branded product to feature another brand as a component part or ingredient. Intel forces this policy on computer makers by requiring all computers using its chips to place the “Intel Inside” seal on them. 2. Co-branding uses one brand to convey quality assurances onto another brand. If either brand in a co-branding arrangement encounters problems that damage the name or reputation of the brand, both brands will suffer.