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Power Branding
Navneet Agarwal
1988 was labeled
as “the year of the brand”. It was the year when the world saw
Phillip Morris taking over Kraft in the US and Nestle buying
Rowntree in Europe. Phillip Morris paid four times the value of
the target company's tangible assets and Nestle over five times.
If we look at the figures, in 1988 just four brands were sold for
a whooping US$50billion. Such incredible payments for "names" were
a reflection of the value placed on the brands in terms of long
term profit expectancy.
Since then the trend has continued and the power of brands to
command gigantic prices has become much more conspicuous.
Now the question that arises is, how is it that brands can deliver
such spectacular rewards? The answer - it's all in the mind!
How brand influence people?
Let’s start of by defining what a brand is -
A brand is a product, service, or
concept that is publicly distinguished from other products,
services, or concepts so that it can be easily communicated and
usually marketed and branding is the process of creating and
disseminating the brand name. Now from the definition above the
first thong to recognize when we talk about brands are that
that they are not just names, terms, symbols, designs or
combinations of these, although it is true to say that such things
can and often differentiate certain products and companies from
others.
The additional ingredient that makes a successful brand is
personality.
Today's leading brands are personalities in their own right and
are well known in all societies and cultures as film heroes,
cartoon characters, sports stars or great leaders.
World over, Coca Cola, Sean Connery, Nestle, Sony, Spiderman,
Mercedes, Bill Gates and Michael Jackson are equally well known.
Thousands of people relate to brand personalities in the same way
as they do to human personalities.
There is, of course, a psychological basis to this, and the
psychology behind brands really stems from Carl Jung's work where
he described the four functions of the mind - thinking, sensation,
feeling and intuition.
The secret to successful branding is to influence the way in which
people perceive the company or product, and brands can affect the
minds of customers by appealing to those four mind functions, or
combinations of them. This is how it happens.
Some brands appeal to the rational part of a person, to the
elements of logic and good sense such as toothpaste which prevents
decay and cholesterol-free foods. Others appeal to the senses of
smell, taste, sight and sound such as fashion and cosmetic
products.
Some brands attract the emotional part of people appealing to the
feelings' dimension to which consumers react with feelings of
warmth, affection and belonging. Products such as Harley-Davidson
motorcycles and companies like Benetton with its global village
branding exemplify these.
Then there is the strange phenomenon of intuition. Some companies
and products are attractive to people who intuitively feel
comfortable with them, because they see these brands as an
extension of themselves, a good fit to their personality,
lifestyle, aspirations and behavior --companies like the Body
Shop, with its environmental approach.
Brands influence consumer decisions to buy in any of the above
ways, or through combinations of them, sometimes with tremendous
persuasive appeal.
The Marlboro brand personality is a good example of how a company
understands and combines the physical and emotional elements that
appeal to certain customers who live or would love to live a
certain lifestyle. Products such as gold credit cards, watches or
prestige items help people to express themselves to others by
demonstrating that they are different and have achieved something.
They act as extensions of the personality, so it really is "all in
the mind", and the key to brand management and development is a
clear understanding of what benefits the customer is looking for.
Ask consumers what comes to mind when they hear the name of a big
brand such as BMW or Gucci and they will reply with a list of
attributes which go far beyond the physical tangible aspects of
product and delivery, but if there is one word which brings all
these things together in people's mind, it is value.
Time and again, research shows that the real driving force behind
market leadership is perceived value - not price or inherent
product attributes. As long as a brand to offer customers superior
perceived value, then good market performance will follow, which
makes consistency a highly important feature of brand behavior.
People prefer to buy brands
Brands are also successful because people prefer them to ordinary
products. In addition to the psychological factors already
mentioned, brands give consumers the means whereby they can make
choices and judgments. Bases on these experiences, customers can
then rely on chosen brands to guarantee standards of quality and
service, which reduces the risk of failure in purchase.
Today's world is characterized by more complex technology, and
this can be extremely confusing to people who are not technology
minded. Brands can play an important role here by providing
simplicity and reassurance to the uninitiated, offering a quick,
clear guide to a variety of competitive products and helping
consumers reach better, quicker decisions.
The rewards of brand
The most important point to be noted is that building a brand is a
corporate strategic issue and not a short-term tactical activity.
For companies wanting to satisfy the needs of consumers and beat
the competition, then building a brand provides an opportunity
which, if realized, could do not only this but also defy the test
of time - for brands have no limit to their life expectancy.
Many brands established in the 1930s are still the top brands now.
From Coca-Cola to Colgate, Kelloggs to Kodak, we see many examples
of the big brands successfully having defended their number one
position in their chosen markets and they, along with other famous
names, have become synonymous with their industries.
Brand loyalty also means that companies achieve a greater
consistency of demand through customer retention. Over time, good
brand strategies generate the production volume which gives the
economies of scale necessary to have a favorable impact in unit
costs. In turn, this allows companies to achieve higher margins,
putting them in a winning situation.
Brand pliability can help companies ride out stormy weather, as
with Mercedes in 1982, when other car manufacturers around the
world suffered disastrous sales, apart from Mercedes which
continued to sell well: often up to 50 per cent more than other
European competitors. And, because of the magnetic influence they
have over purchasing behavior, successful brands allow companies
to charge premium prices for their products and services, which of
course generate higher profits. Surveys indicate that brand
leaders can return a margin four to six times that of the closest
competitors.
Conclusion
Summing up the above, we see that in today’s competitive world,
successful global companies recognize that the source of their
dexterity in world markets is branding, and that investment in
plant, technology and people is no longer enough to guarantee
long-term sustainable profits. This has led to the brand being a
vital strategic issue for companies’ world over and in the
increasingly turbulent markets; a key to customer loyalty,
long-term survival and growth.
Navneet Agarwal
MBA (IB),
2nd
year
Indian Institute of Foreign Trade
School
of International Business Management
New Delhi
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