Define the concept of branding, its advantages /disadvantages, brand strategy decisions and finally sustainable competitive advantage.
Table of Contents
- Advantages of branding
- Company’s value
- Consumer preference and loyalty
- Barrier to competition
- Major brand strategy decisions
- Disadvantages of branding
The word “brand” is revealed from the Old Norse word “brandr” which means to burn as brands were and still are the means by which livestock owners mark their animals to identify ownership said Keller (2003).Building and maintaining a brand is the critical task for marketing managers as they need to consider lots of aspects to make the brand successful they added. A strong brand name is the tool to dominate the market and to have sustainable competitive advantage which is vital for any business growth.
This report aims to define the concept of branding, its advantages /disadvantages, brand strategy decisions and finally sustainable competitive advantage.
Kelly (2008) defined brand as “a name, term, design, symbol or any other features that identifies one seller’s good or service as distinct from those of other seller”.
Capon & Hulbert (2001) defined brand as “they are distinguishing names and symbols, such as logos, trademarks, package designs and spokespersons”.
In terms above definition, a brand is a name, logo or sign given to the product which differentiates one product from another. Brands are like people they have personalities, image, positioning, values, attributes etc. For example, some of different signs and symbols have been given (in Figure 1) to specify the brands,
Some of this brand tells their name and some of them don’t but still they can be easily recognised because they are well known signs or names.
Brassington & Pettitt (2006) defined branding as a means of linking items within a product line or emphasising the individuality of product items.
Jobber and Fahy (2006),“branding is the process by which companies distinguish their product offerings from the competition”.
Branding is a characteristic (of product) which adds value to products. It helps companies to differentiate them from others. For example, if Next plc displays a suit of Primark by putting their own logo on it, consumers would expect high quality, expensive, fashionable etc from that suit because of brand belief. On the other hand, if Primark does the same thing as Next, they would have to sell at much cheaper price than its original price because of brand differentiation and brand value. On the other hand customer would treat it as lower quality suit. This is how branding works out.
Advantages of branding
Branding is very important for a company to distinct its products and services from others. Branding is not only important to the owner but also important to consumers and retailers.
According to Brassington & Pettitt (2006) the benefits of branding are following,
To the consumers;
- Consumer can easily identify the products as they are distinctive. For example, a G Star Jeans is easily distinguishable from H&M, Next or Zara’s Jeans because G Star puts their sign or name (96, G Star) on the pocket.
- It gives some feelings to the consumers when they shop branded products. For example, if someone buys an Armani watch he/she feels prestige.
- It reduces risk in purchasing because consumer knows the quality, features and other benefits of products without using it.
- Helps to have quick buying decision because brand attracts consumers.
To the owners;
- Companies can charge premium price. For example, Next plc, Armani, Lactose, Harrods etc charges premium price because they have strong brand name.
- It gives opportunity to the company for line extension through building on the consumer’s perception of the values and character represented by the brand name.
- It helps owners to create consumer loyalty as it gives value to the consumers what they pay for.
To the intermediaries;
- Branded items make easier for the suppliers to process the orders and track down problems.
- Retailers are happy to sell branded products because they are good seller.
In terms of Jobber and Fahy (2006) branding helps to enhance,
- Company’s value.
- Consumer preference and loyalty.
- Barrier to competition.
Jobber & Fahy (2006) said that strong brands can enhance the financial value of companies. For example, Nestle paid £2.5bn for Rowntree (a UK confectionary manufacturer). As a result, the acquisition gave Nestle access to Rowntree’s stable of brands including Kit Kat, Quality Street they added.
Solid brand name increases company’s value because it differentiates the products or services from competitors.
Consumer preference and loyalty
It’s very hard to have customer loyalty in such competitive market where everyone is trying to lock in customers by giving loyalty cards. When consumers get satisfied with products or services what they pay for, they become brand loyal and stick to the same brand. For example, Tesco recorded a 5.9% rise in sales to £21.8bn in the UK and 5% profit increase to £1.2bn for the six months ending 28th August 2010 (Baker 2010). It clearly shows that Tesco has been able to create the customer loyalty with their strong brand name.
Barrier to competition
Company can create barriers for competitors by its brand if the brand is powerful. For example, Apple has been able to set bars over its competitors Nokia, Samsung, Motorola etc by its innovative technology and brand strength. When Apple launched ipad2, Britain’s most popular magazine Fortune said that Apple is the world’s most admired company and the company’s blistering pace of new product releases has continued to set the bar high for tech companies across the board (Fortune 2011). It has been so easy for Apple to be the world’s most admired company for its great innovations and established brand.
Major brand strategy decisions
Some of the following factors to be considered in developing and maintaining branding strategy;
Moore & Pareek (2010) said that Positioning is a distinction between products or brands. These distinctions can be drawn by highlighting differences in quality, price, performance and other things relevant to the customers they added.
Positioning means how companies want their products or services to be perceived in the market. A product position leads to build up the overall brand position of a Company. It’s basically the creation of brand identity. For example, Kellogg’s products (breakfast cereals such as corn flakes, porridge etc) are positioned in the market to highlight the quality of the goods and to build on the emotional attachments (The Times 100). Apple differentiated their smart phones (iphone) in the market a gaming device beside the phone. “Apple is positioning the iphone as a gaming console” (Hardy 2008).
According to Jobber and Fahy (2006), the anatomy of brand positioning is following (in Figure-2).
Figure-2 (Brand positioning)
Kellogg’s (breakfast Cereal Company) brand positioning has been made as an example based on The Times 100’s case study (class hand out).
Brand domain means the target market of the brand. It depends on the product. For example, Kellogg’s target market is global. They cover North America, south & Central America, Asia pacific, Europe, Africa and Middle East. Their target market is clearly mass market (The Times 100).
It means overall background of the brand. It’s successes and failures throughout the life. For example, Kellogg’s is an American owned organization. Their dedicated sales team built up the successful brand by giving millions of samples packets of corn flakes and rice Krispies throughout the door. As a result, there are currently 29 products in Kellogg’s family and they have been placed # 35 in the “Best Global Brand 2010” by Interbrand (The Times 100).
It means the total price of the brand. For example, Kellogg’s brand value is worth $11,041m (Interbrand 2010).
The distinctive features of the brand such as symbol, image or relationship. For example, Kellogg’s packaging provides the space for nutritional information and promotional offers. In 2000, they differentiated their product range by launching a bright colourful corporate image for all its cereal brands through extensive market research and communication with consumers.
It is the character of the brand. According to a research analysis of (IIPM) Kellogg’s gives fun loving personality especially to the kids because their Chocó’s brand relates to the kids.
Brand reflection means what are the benefits consumers expect from the brand prior to buying the products. For example, consumer may perceive Kellogg’s products as nutritious, healthy, energetic etc.
Brand name selection:
It’s very important to select the right brand name for the right product because a good name can add quality to a product success (Kotler, Armstrong, Saunders& Wong (2001). Finding the best brand name is a difficult task they added.
In terms of Kotler, Armstrong, Saunders& Wong (2001) a brand name should have following qualities,
- A brand name should suggest something about product’s qualities and benefits. For example, Mercedes (a prestigious & expensive car), Asda (cheap price shopping chain), Next plc (high quality fashion shop) etc.
- It should be easy to pronounce, remember and recognise. For example, Nokia, Apple, H&M, M&S, Honda, Intel, Nike, Visa and Sony these brands are easy to pronounce, recognise and remember. Some brands such as Schwarzkopf (FMCG), Budweiser (lager) these are quite tough to pronounce.
- It should be distinctive. For example, Apple is known as a luxurious, innovative good quality high technological brand (Fortune 2011).
- It should translate easily. For example, AA means American Airlines, BA means British Airlines etc.
There are some levels of branding which needs to be considered when companies name their products.
Individual branding or house of brands
The individual brand name doesn’t identify a brand with a particular company (Jobber & Fahy 2006). It comes with separate name. This is probably the best branding architecture because none of them brand have impacts (if it goes denied) over the other brand as they carry separate name. The disadvantage of this architecture is the reputation or goodwill of brand doesn’t get added automatically with its house of brand as they carry separate names. Some of the individual brand names have been given in the following table (table-1) as an example,
Table-1(List of individual brand names)
Procter & Gamble
Head & Shoulder
Source: Jobber D & Fahy J (2006), Foundations of Marketing.PP-150.
Corporate or family branding
A family brand name is used for its all products. This is known as “Umbrella branding” as well (Jobber & Fahy 2006). The benefit of this architecture is one product’s good will promotes all of the brand carrying family name. On the other hand, if one brand gets failed or denied, it affects the overall reputation of the family brand. Some of the corporate brand’s list has been given following (Table-2),
Table-2(List of corporate branding)
Apple Mac book
Private or own label
These brands are offered by distribution channel. For example, supermarkets have their own brand named products. For example, Tesco, Asda, Sainsbury they all have products on their own brand name. It gives them opportunity to have economies of scale and customer loyalty as they give good quality at cheaper price than corporate or individual brand.
In terms of Kotler, Armstrong, Saunders & Wong (2001), four brand strategies can be used to develop a brand.
Figure: 3(Four brand strategies)
Line extensions are done through adding new features, flavours, colours, size, packaging etc with company’s existing products. The reason for doing this is to increase the sales when company faces high competition. For example, Danone has added several new flavours, colours, ingredients, fat free and large/ family size varieties (KASW 2001) to penetrate the market.
Johnson, Scholes and Withington (2011) said that brand extension is to launch new or modified products/services. Companies extend their brand because it increases consumers brand loyalty. For example, M&S extended their brand by introducing two ranges of products (in 2001) such as “Per Una” for women and “Autograph” for men (Anon 2004). Apple’s ipad2, Smirnoff apple, Smirnoff ice, Pepsi max, Lucozade sport are examples of brand extensions.
Kotler, Armstrong, Saunders & Wong (2001) defined Multi brand strategy as “a strategy under which a seller develops two or more brands in the same product category”.
Multi brand strategy is an innovative brand development idea. Most companies go through this strategy because when they promote similar products under the different brand name they can fill up the price and quality gaps of the target market (KASW 2001). It helps them to have greater market share. For example, Lever’s line of laundry detergents are- Persil, Surf, Radion etc are multi brands with the corporate name hardly featured (KASW 2001). This strategy has some risks as well such as, a company might be denied due to miscommunication with targeted consumers and poor management.
This strategy means creating a complete new product and new brand (see Figure-3) whether multi brand stays with existing product but establishes new brand. For example, Toyota created a separate family name “Lexus” (luxury executive car) in order to distinct its identity.
Disadvantages of branding
Some of the disadvantages of branding are following,
To build a new brand requires huge cost. According to Solomon, Marshall, Stuart (2008) companies introduce 17,000 new products or line extensions each year, 25% are new brands and marketers spend about $127.5bn per year to introduce new brands which is $7.5m per brand on average. “Procter & Gamble Co. and Gillette Co. will back the introduction of their six-bladed Fusion with a massive marketing budget of $200 million in the U.S. alone and global rollout support that could top $1 billion”( Neff 2005).
High percentage rate of Failures
All companies don’t get succeeded when they do branding for products or services. For example, nearly 40% of all new products fail, but for new brands the failure rate is even higher which is up to 80-90% (Solomon, Marshall, Stuart 2008).
To establish a new brand company needs long time to understand the market (such as people’s willingness, needs or wants), analyse the competitors etc. For example, Kellogg’s needed over a year establish its breakfast products.
Becoming generic name
Some time brands become generic name for example, Hoover, Aspirin and Filofax etc which doesn’t make any sense for the company.
Company needs to establish strong identity and values so that it cannot be copied by competitors.
Sustainable competitive advantage
Kotler, Armstrong, Saunders & Wong (2001) defined competitive advantage as“ an advantage over competitors gained by offering consumers greater value, either through lower prices or by providing more benefits that justify higher prices”.
Sustainable competitive advantage means the superiority, dominance or favoured position over competitors for long term which is achieved by providing distinctive (e.g.-better quality/features, lower price etc) products or services. A brand can create sustainable competitive advantage by it outperforming over its competitors.
How branding creates sustainable competitive advantage
Hills & Jones suggest that there are four building blocks of competitive advantage,
- Superior efficiency.
- Superior quality.
- Superior innovation.
- Superior customer responsiveness.
A company can get sustainable competitive advantage by having any of above building block.
This is a lower cost structure which refers to compete with price. For example, According to feature and quality, Apple’s iPad’s nearest competitor is Motorola Xoom which is £499.99 (in pc world) and another substitute is Samsung galaxy tab which has been introduced recently at higher price (Wortham 2011). In comparison, Apple’s ipad (or ipad2) is only £305 which is much cheaper than substitutes. This results Apple to get competitive advantage over its competitor because no one can beat them on price for tablet computer. Wortham (2011) cited Toni Sacconaghi (an analyst at Sanford C. Bernstein) “But it seems that no one has eclipsed or even matched Apple on pricing.”
This building block of competitive advantage refers to features, reliability and performance of the brand. For example, Apple’s performance in tablet market is very good as they provide high quality of products. They have been ranked #1 for best quality (Fortune 2011). Apple has got over 65,000 apps for its ipad (revealed from Apple’s website) whether Motorola Xoom got only 20 apps (Spirrison 2011). Another example, BMW creates competitive advantage by highlighting product attributes (KASW 2001).
The competitive advantage is gained when company innovates something unique. For example, beside the quality, Apple is superior in innovation. They got ranked #1 in innovation by Fortune magazine (Fortune 2011).They shake world’s telecommunication market every year by innovating unique product which gets accepted globally and hit the substitute products. (iphone, ipad, iPod are good example for superior innovation). This results them to have competitive advantage over the competitors.
Superior customer responsiveness
Branding gets sustainable competitive advantage if it has a good communication with people. This helps companies to identify the gap in the market and then to fill it. Company requires some marketing prior to response the consumers. For example, Asda store marketed out that most of the Asian people shop at Asian groceries basically for halal(permitted by Islamic dietary law) meat, fish and spices that’s why some of the Asda store has started selling those items at cheaper price than local Asian cash and carries. As a result, people who go to Asian groceries for halal meat, they are moving to Asda stores as Asda is expected to give better quality and obviously the cheaper price which gives them to have the full competitive advantage over those local cash and carries.
Creating sustainable competitive advantage is not such easy because there are more imitators in the market than innovator. Though branding has some disadvantages but advantages are more. A brand itself is a competitive advantage as it attracts customers and creates customer’s loyalty. A company should establish its brand because it is vital for company’s business growth and for company’s long run sustainability.
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