- Explain key brand-development strategies
Managing Brands As Strategic Assets
As organizations establish and build strong brands, they can pursue a number of strategies to continue developing them and extending their value to stakeholders (customers, retailers, supply chain and distribution partners, and of course the organization itself).
Who “owns” the brand? The legal owner of a brand is generally the individual or entity in whose name the legal registration has been filed. Operationally speaking, brand ownership should be the responsibility of an organization’s management and employees. Brand ownership is about building and maintaining a brand that reflects your principles and values. Brand building is about effectively persuading customers to believe in and purchase your product or service. Iconic brands, such as Apple and Disney, often have a history of visionary leaders who champion the brand, evangelize about it, and build it into the organizational culture and operations.
When an organization truly owns its brand, its efforts are unified around a common symbol of the value it provides to customers. These organizations use their resources wisely to produce marketing that is targeted and effective because they have a sophisticated understanding of the marketplace; they know how their brand and offerings fit into it, which audiences they are targeting, and they have a strategy for successful growth. These advantages lead to disciplined and effective brand management, which enables these organizations to remain relevant in a rapidly changing and often saturated marketplace.
A branding strategy helps establish a product within the market and to build a brand that will grow and mature. Making smart branding decisions up front is crucial since a company may have to live with their decisions for a long time. The following are commonly used branding strategies:
“Branded House” Strategy
A “branded house” strategy (sometimes called a “house brand”) uses a a strong brand—typically the company name—as the identifying brand name for a range of products (for example, Mercedes Benz or Black & Decker) or a range of subsidiary brands (such as Cadbury Dairy Milk or Cadbury Fingers). Because the primary focus and investment is in a single, dominant “house” brand, this approach can be simpler and more cost effective in the long run when it is well aligned with broader corporate strategy.
“House of Brands” Strategy
With the “house of brands” strategy, a company invests in building out a variety of individual, product-level brands. Each of these brands has a separate name and may not be associated with the parent company name at all. These brands may even be in de facto competition with other brands from the same company. For example, Kool-Aid and Tang are two powdered beverage products, both owned by Kraft Foods. The “house of brands” strategy is well suited to companies that operate across many product categories at the same time. It allows greater flexibility to introduce a variety of different products, of differing quality, to be sold without confusing the consumer’s perception of what business the company is in or diluting brand perceptions about products that target different tiers or types of consumers within the same product category.
Competitive Multi-Brand Strategy
In a very saturated market, a supplier can deliberately launch totally new brands in apparent competition with its own existing strong brand (and often with identical product characteristics) to soak up some of the share of the market. The rationale is that having three out of twelve brands in such a market will give a greater overall share than having one out of ten. Procter & Gamble is a leading exponent of this philosophy, running as many as ten detergent brands in the U.S. market. In 2015, hotel giant Marriott International operated sixteen different hotel chains across different pricing tiers, including some chains that compete with one another directly. A sampling of these includes Fairfield Inn, Springhill Suites, Residence Inn, Courtyard, Marriott, JW Marriott, and The Ritz Carlton, among others.
Cannibalization is a particular problem with the multi-brands-strategy. As will be discussed further in the product marketing module, cannibalization occurs when the new brand takes business away from an established one, which the organization also owns. This may be acceptable (indeed expected) if there is a net gain overall.
Brand Families, or “Umbrella Branding”
Similar to a “branded house” strategy, a brand family uses a single brand name for multiple products. However, brand families–also called umbrella branding–may also be used in a “house of brands” strategy to extend the reach of some of the company’s brands. For instance, consumer products powerhouse Procter & Gamble manages many popular brands including Tide (laundry detergent), Pampers (disposable diapers), Ivory (soap), and Olay (skin care and beauty products) among many others. Each of these brands constitutes its own family, with multiple products carrying the same brand name.
Attitude Branding and Iconic Brands
Attitude branding is a strategy of representing the larger feeling that a brand comes to embody. The idea is that the brand’s feeling or “attitude” transcends the specific products being consumed. Examples of companies that use this approach effectively include:
- Nike: “Just do it”
- Apple: “Think different”
- Harley Davidson: “Live to Ride”
- Starbucks: “Daily Inspiration”
Effective attitude branding can transform strong brands into iconic, “lifestyle” brands that contribute to the consumer’s self-expression and personal identity.
Some suppliers of important product or manufacturing components try to guarantee positions of preference by promoting these components as brands in their own right. For example, Intel created competitive advantage for itself in the PC market with the slogan (and famous sticker) “Intel Inside.”
Private-Label or Store Branding
Also called store branding, private-label branding has become increasingly popular. In cases where the retailer has a particularly strong identity, the private label may be able to compete against even the strongest brand leaders and may outperform those products that are not otherwise strongly branded. The northeastern U.S. grocery chain Wegman’s offers many grocery products that carry the Wegman’s brand name. Meanwhile national grocery chain Safeway offers several different private label “store” brands: Safeway Select, Organics, Signature Cafe, and Primo Taglio, among others.
A number of companies successfully pursue “no-brand” strategies by creating packaging that imitates generic-brand simplicity. “No brand” branding can be considered a type of branding since the product is made conspicuous by the absence of a brand name. “Tapa Amarilla” or “Yellow Cap” in Venezuela during the 1980s is a prime example of no-brand strategy. It was recognized simply by the color of the cap of this cleaning products company.
Personal and Organizational Brands
Personal and organizational branding are strategies for developing a brand image and marketing engine around individual people or groups. Personal branding treats persons and their careers as products to be branded and sold to target audiences. Organizational branding promotes the mission, goals, and/or work of the group being branded. The music and entertainment industries provide many examples of personal and organizational branding. From Justin Bieber to George Clooney to Kim Kardashian, virtually any celebrity today is a personal brand. Likewise, bands, orchestras, and other artistic groups typically cultivate an organizational (or group) brand. Faith branding is a variant of this brand strategy, which treats religious figures and organizations as brands seeking to increase their following. Mission-driven organizations such the Girl Scouts of America, the Sierra Club, the National Rifle Association (among millions of others) pursue organizational branding to expand their membership, resources, and impact.
Crowd-sourced branding is the phenomenon of brands being created “by the people” for the business, which is the opposite of how branding traditionally works (business create the brands). This method minimizes the risk of brand failure, since the people who might reject the brand are the ones involved in the branding process. The drawback is that the business cannot fully control these brands, because they are the product of crowd sourcing and, in effect, are owned by “the crowd.”
An interesting example of crowd-sourced branding is the Timbers Army, the independent fan organization of the Portland Timbers Major League Soccer (MLS) Team. The Timbers Army was created by fans, and it operates independently from the MLS team and the Portland Timbers management. Although the organizations coordinate in many areas, ultimately the fan organization gets to assert and control its own brand identity.
Place Branding and Nation Branding
The developing fields of place branding and nation branding work on the assumption that places compete with other places to win over people, investment, tourism, economic development, and other resources. With this in mind, public administrators, civic leaders, and business groups may team up to “brand” and promote their city, region, or nation among target audiences. Depending on the goals they are trying to achieve, targets for these marketing initiatives may be real-estate developers, employers and business investors, tourists and tour/travel operators, and so forth. While place branding may focus on any given geographic area or destination, nation branding aims to measure, build, and manage the reputation of countries.
The city-state Singapore is an early, successful example of nation branding. The edgy Las Vegas “What Happens Here, Stays Here” campaign, shown in in the following video, is a well-known example of place branding.
Co-branding is an arrangement in which two established brands collaborate to offer a single product or service that carries both brand names. In these relationships, generally both parties contribute something of value to the new offering that neither would have been able to achieve independently. Effective co-branding builds on the complementary strengths of the existing brands. It can also allow each brand an entry point into markets in which they would not otherwise be credible players.
The following are some examples of co-branded offerings:
- Delta Airlines and American Express offer an entire family of co-branded credit cards; other airlines offer similar co-branded cards that offer customer rewards in terms of frequent flyer points and special offers.
- Home furnishings company Pottery Barn and the paint manufacturer Benjamin Moore co-brand seasonal color palettes for home interior paints
- Fashion designer Liz Lange designs a ready-to-wear clothing line co-branded with and sold exclusively at Target stores
- Auto maker Fiat and toy maker Mattel teamed up to celebrate Barbie’s fiftieth anniversary with the nail-polish-pink Fiat 500 Barbie car.
Co-branding is a common brand-building strategy, but it can present difficulties. There is always risk around how well the market will receive new offerings, and sometimes, despite the best-laid plans, co-branded offerings fall flat. Also, these arrangements often involve complex legal agreements that are difficult to implement. Co-branding relationships may be unevenly matched, with the partners having different visions for their collaboration, placing different priority on the importance of the co-branded venture, or one partner holding significantly more power than the other in determining how they work together. Because co-branding impacts the existing brands, the partners may struggle with how to protect their current brands while introducing something new and possibly risky.
Brand licensing is the process of leasing or renting the right to use a brand in association with a product or set of products for a defined period and within a defined market, geography, or territory. Through a licensing agreement, a firm (licensor) provides some tangible or intangible asset to another firm (licensee) and grants that firm the right to use the licensor’s brand name and related brand assets in return for some payment. The licensee obtains a competitive advantage in this arrangement, while the licensor obtains inexpensive access to the market in question.
Licensing can be extremely lucrative for the owner of the brand, as other organizations pay for permission to produce products carrying a licensed name. The Walt Disney Company was an early pioneer in brand licensing, and it remains a leader in this area with its wildly popular entertainment and toy brands: Star Wars, Disney Princesses, Toy Story, Mickey Mouse, and so on. Toy manufacturers, for example, pay millions of dollars and vie for the rights to produce and sell products affiliated with these “super-brands.”
A licensing arrangement contains risk, in that if the licensing venture is very successful, the profit potential is limited by the terms of the licensing agreement. If the venture isn’t successful, the licensee loses a substantial investment, and the failure may reflect poorly on the original brand. Also, a licensor might be very controlling about how the licensed offering is designed, produced, distributed, marketed, or sold, making it difficult for the licensee to meet the expectations or requirements of the licensor. Conversely, a licensor might make a long-term commitment to a firm, and that firm could be less capable than expected, leading to a botched implementation of the licensing venture. Or, the licensee may be unwilling to invest in product quality, marketing, distribution, or other areas needed to be successful.
Franchising represents a very popular type of licensing arrangement for many consumer products firms. Holiday Inn, Hertz Car Rental, and McDonald’s have all expanded globally through franchising. In a franchise, the entity purchasing the franchise (the franchisee) typically pays an up-front fee plus a percentage of revenue in return for the right to use branded assets such as recognized brand name(s), proven products, building design and decor (as in a fast-food restaurant chain), business processes, and so forth.
Lines Extensions and Brand Extensions
Organizations use line extensions and brand extensions to leverage and increase brand equity.
A company creates a line extension when it introduces a new variety of offering within the same product category. To illustrate with the food industry, a company might add new flavors, package sizes, nutritional content, or products containing special additives in line extensions. Line extensions aim to provide more variety and hopefully capture more of the market within a given category. More than half of all new products introduced each year are line extensions. For example, M&M candy varieties such as peanut, pretzel, peanut butter, and dark chocolate are all line extensions of the M&M brand. Diet Coke™ is a line extension of the parent brand Coke ™. While the products have distinct differences, they are in the same product category.
A brand extension moves an existing brand name into a new product category, with a new or somehow modified product. In this scenario, a company uses the strength of an established product to launch a product in a different category, hoping the popularity of the original brand will increase receptivity of the new product. An example of a brand extension is the offering of Jell-O pudding pops in addition to the original product, Jell-O gelatin. This strategy increases awareness of the brand name and increases profitability from offerings in more than one product category.
Another form of brand extension is a licensed brand extension. In this scenario, the brand owner works with a partner (sometimes a competitor), who takes on the responsibility of manufacturing and selling the new products, generally paying a royalty every time a product is sold.
Line extensions and brand extensions are important tools for companies because they reduce financial risk associated with new-product development by leveraging the equity in the parent brand name to enhance consumers’ perceptions and receptivity towards new products. Due to the established success of the parent brand, consumers will have instant recognition of the product name and be more likely to try the new line extension.
Also, launching a new product is time-consuming, and it requires a generous budget to create awareness and promote a product’s benefits. As a result, promotional costs are much lower for a line extension than for a completely new product. More products expand the company’s shelf-space presence, too, thereby enhancing brand recognition. For example, consider Campbell’s Soups™: the strength of Campbell’s™ brand lowers costs of launching a new flavor of soup, such as Healthy Request Roasted Chicken with Country Vegetables Soup™, due to the established brand name and package design. Consumers who have enjoyed Campbell’s Chicken Noodle Soup™ are likely to try Campbell’s Healthy Request Roasted Chicken with Country Vegetables Soup™, even with minimal impact from advertisements and promotions.
Overall, the main benefits of a line extensions and brand extensions are the following:
- Expand company shelf-space presence
- Gain more potential customers
- Offer customers more variety
- Greater marketing efficiency
- Greater production efficiency
- Lower promotional costs
- Increased profits
Risks of Brand/Line Extension
While there can be significant benefits to brand-extension strategies, there can also be significant risks, resulting in a diluted or severely damaged brand image. Poor choices for brand extension may overextend the brand so that it no longer stands for something meaningful and valued by consumers. This phenomenon is called brand dilution. It causes the core brand to deteriorate, and it damages brand equity. According to research, there is a higher rate of brand extension failures than successes. Studies also suggest that when brand extensions fail, not only does the new product fail but the core brand’s image and equity also suffer. When products fail, negative associations and a poor communications strategy can harm the parent brand and even an entire brand family.
A common, visible example of brand dilution occurs when fashion and designer companies extend brands into fragrances, shoes, and accessories, furniture, hotels, vehicles, and beyond. Often the products being introduced are no different from the offerings already available in the market, with the exception of an added brand name (and probably a higher “designer” price tag). Brand dilution is almost guaranteed when consumers no longer see the branded product adding value. Brand dilution can also happen when the new products do not meet the standards consumers expect around quality, workmanship, price, design, or other differentiating features of the brand. An inferior brand extension leads to negative associations that reflect poorly on the original brand. Customers no longer trust the brand in all product categories, and they may be less willing to pay a price premium for it in the future.
Line extensions carry similar risks. If the new line extension fails to satisfy, consumers’ attitudes toward other products carrying the same brand name may be damaged. Additionally, there is potential for intra-firm competition between the parent product and the line extension or between two or more line extensions. The key to avoiding intra-firm competition is to clearly differentiate between products. Although similar, the products must be different enough that they will not compete with one another as much as they will with the brands of rival companies.
Check Your Understanding
Answer the question(s) below to see how well you understand the topics covered in this outcome. This short quiz does not count toward your grade in the class, and you can retake it an unlimited number of times.
Use this quiz to check your understanding and decide whether to (1) study the previous section further or (2) move on to the next section.