BRAND MANAGEMENT
CHANGING DIMENSIONS IN NEW MILLENNIUM
Mohit Khandelwal

Branding has dominated the marketing literature for several decades. Though branding is an age-old concept, brand management is believed to have emerged in 1931 when the president of Procter & Gamble decided that each P&G brand should have its own brand assistants and managers dedicated to the advertising and other marketing activities for the brand. A separate sales department was responsible for getting products on to retailers’ shelves. The branding strategy required companies to spend heavily on mass media campaigns and build a brand and the world would beat a path to its doors. Long standing brands such as Marlboro, Coca-Cola, Xerox, IBM, and Intel are considered to be among the world’s most valuable assets. This has motivated many companies to base their strategies almost entirely on building brands.

Basically brands were created by marketers to address different needs of different segments of customers and for easy identification. The marketing department of the yesteryears thrived on the brand management principles. They were involved in researching the consumer attitudes and desires and identifying unmet needs. They were able to come up with modifications (often trivial one) to existing products that appealed to different segments or market niches. Then they went through the process of new product development, packaging design, positioning and promoting the product. This helped marketers to play the role of liaison men between the company and its customers.

However, the time-tested method of brand management is coming under tremendous pressure as more and more companies have started restructuring their marketing departments.

Current trends that are shaping brand management:

Value seeking behavior

The first trend is that people increasingly buy goods on `value for money’, not because they carry a famous name. Even the world famous Marlboro cigarettes had to slash prices to defend the much-advertised brand from cheap, generic rivals.

More and more price-conscious consumers are demanding the best value in the products they buy. Additionally, social status may be less a function of a person’s possession in the twenty-first century than it may has been in the last part of twentieth century. In response to these developments, the firms too offer more services and higher product quality - that is more value for the same amount of money. Consumers increasingly expect and even demand these added benefits. Consequently companies are forced to cut down most of the non-value-adding activities, including advertising, in most cases.

Brand proliferation

The second trend that is eroding the credibility of branding is brand proliferation. Basically, there are too many brands floating around in every product category, which differ only in their names. This only adds to the confusion of customers who are already bombarded by thousands of marketing messages daily. All these lead to an overall degeneration of the brand as a marketing tool.

Rising power of retailers
 

The third trend is the shift of power from manufacturers to retailers and the weakening of power brands. In the past the brand managers used market research information to assess consumer needs to gain an informational advantage over the retailers. Today, most retailers use sophisticated computer systems to track buyer behavior and this ownership of vital consumer information is becoming the key to power. Retailers have started marketing private label brands that offer better value for the consumers’ money. As the retailers can assure quality, consumers do not care much for the mega-brands. In many product categories, the retail brands are dominating over the individual company brands. In fact the retailers dictate whether a new brand will be given shelf space or not.

Declining TV audience

The fourth trend is the decline in television audience for different channels and effectiveness of television as a medium for promoting brands. Though the media costs are on the rise, the impact is getting less and less, particularly in the FMCG sector. This is mainly due to the fact that rival products differ so little that brands have become hard to promote. The clutter and the noise have also contributed to the compounding of the problem. As such the proliferation of TV channels has greatly reduced the audience reached through individual programs.

Emergence of e-commerce

The fifth trend is the emergence of e-commerce and the shift towards buying through the Internet. The Portals themselves become the brands and they consequently manage to sell an assortment of products sourced from different places. Amazon currently sells books, music, electronic gadgets, toys, games, women's apparel, sporting goods and software – all under the Amazon banner.

Mass customization

The sixth trend is customization. With the emergence of one-on-one marketing, brand proliferation within a company has lost its relevance. Why would anyone want to have sub brands, when the company can offer products customized to the individual level? All that matters will be the company name for identification. With the media getting highly fragmented, and advertising itself shifting to the interactive mode, brands are losing their relevance in today’s context. In the future, there won’t be any brand but for the ‘company brand’. When, for example, a company can deliver customized liquid soap out of a vending machine to suit every individual, why then have sub brands? Branding, as we know of it today may not exist in the future.

Shift to category management

The seventh trend points to the move away from the traditional ‘Brand Management’ to ‘Category Management’. The multinationals have realized that the individual brands are not essential, but the company will need to maximize the sale of a category as a whole. The category manager responsible for toilet soaps will look after the sale of all toilet soap brands of a company and liaison with the retailers to ensure the product availability and report the customers’ (retailers’) voice back to the manufacturing department.

Hyper-active media

The eighth trend is the emergence of hyperactive media. All that has been built over a period of time through concerted brand efforts may get demolished overnight by the news-hungry media. On June 14th 1999, Coca-Cola's soft drinks were banned in Belgium as more than 100 people suffered nausea, headache and diarrhea. Luxembourg and France followed suit with the company voluntarily withdrawing from Netherlands.

In the same way, the negative word of mouth spreads much faster through Internet that could break even established brands. The point that is being put forward is that brands are not as durable as they were made out to be. If they are not going to give that kind of a sustainable advantage, the question being raised is, whether the marketers are justified in making large investments in building of brands. Not that there should not be any brand name; but marketers will have great difficulty in justifying the ad budgets to promote their brands in the future.

Brand building without advertising

The ninth trend is brand building without mass media advertising. There is a new breed of companies like Body Shop, Tupperware, Oriflame, Amway etc. who got their brands built without spending a penny on advertising. Brand image gets registered in the minds of the consumers based on the relationship the company has with its customers. Relationship building is a two way process with care and concern for mutual interests. Contrary to this, brand image thrives on the knowledge-gap of the consumers and helps marketers to charge a premium that is directly proportional to the ignorance of the customers; whereas relationships are built on fair dealings and educating the customers where knowledge gap exists rather than exploiting it. This concept is particularly followed in Multi-Level Marketing (MLM). Firm relationships are more durable than the fancy brand image built in the air.

Commoditization of products

The tenth trend is the commoditization of products. The loss of brand power can be seen in many product categories when the patents expire or the technology becomes easily available to a large number of manufacturers. Consider the case of any new drug, say Viagra. Currently Pfizer is able to charge a premium price, as it is the sole proprietary owner of the formula for the drug. Sooner or later the substitute products or even superior formulations will emerge. Once a number of formulations become available, automatically the prices will start falling. Generic brands will also start appearing in the market. It is at this time, that the product will become a commodity and the so-called ‘brand magic’ will cease to work and the brand can no longer charge a premium price.

The different phases leading to commoditization are shown in Figure above.

The Phase I in the figure refers to the introduction phase, when the price tends to be lower than the cost as the entire product development cost cannot be passed on to the first few customers. After a while the company breaks-even and enters the Phase II where it starts earning supernormal profits. This is when it starts attracting competition. The substitute products and new products start appearing in the market which lower the price of the product in the market place in Phase III, which in turn leads to a shake-out in the industry and the commoditization process gets initiated. During Phase IV, commoditization gets completed. Here the companies in the marketplace bring out products of more or less similar quality and the price gets lowered to a stage where there is a one to one correspondence between the cost and price.

These strategic issues will play an important role in Brand Management in the new millennium. Marketers will have to understand the relevant issue while deciding upon their strategy in of brand management.

Mohit Khandelwal
MBA (IB): 2001-03
Indian Institute of Foreign Trade
New Delhi

Back