BRANDS

1
BRANDS

• Introduction to Branding

2
The super-ordinal business objective

• Increase shareholder value

3
How

• Creating brand value

4
The Power of Brands

• Rank Brand bn. 2005
• 1 Coca Cola 67.52
• 2 Microsoft 59.94
• 3 IBM 53.38
• 4 GE 47.00
• 5 Intel 33.59
• Source Interbrand

5
Put it in perspective

• Greater than the 2003 GDP of Czech Republic
  (60.15 bn), Algeria (62.67 bn), New Zealand
  (57.52 bn.).
• Gross value of Coca Cola companys Dec. 2004 net
  fixed assets 6.09 bn.
• Personal Income for 2003, for Charlotte-Gastonia-C
  oncord MSA - 47.85 bn 1.439 mill. people (BEA
  US Dept. of Commerce)

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What does this value indicate

• The amount you would have to pay if you wanted to
  buy the brand (Bills Gates 46.5 bn. in 2005)
• The power to command future sales (Cokes 2004
  sales 21.96 bn.)
• The incredible skew in value placed on an
  intangible asset (6 bn. Vs. 67 bn.)
• Lastly, the strength and favorable attitude
  towards the name in your minds (1985 Cokes
  misadventure)

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Origins of branding

• Derived from old Norse word brandr meaning to
  burn
• Marks on Chinese porcelain, pottery jars from
  Grecian, Roman and Indian artifacts dating from
  1300 BC
• Cattle Ranchers
• Bakers to mark their bread - English law in 1266
• The Moon the Stars (1851) PG brand
• Uneeda biscuits 1898 first nationally branded
  biscuit

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Once upon a time (in a land far, far away!) there
were commodities

• Undifferentiable by seller/manufacturer
• Often sold loose
• Quality highly variable
• In competitive markets we have many mfrs. /
  sellers for the same commodity.
• QUESTION How do I get a buyer to prefer and buy
  my commodity?

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How do you differentiate

• ANSWER Differentiate it from competition
• HOW By branding your commodity.

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What is a brand

• A differentiated product is a brand.e.g. Adidas,
  Gap, Abercrombie Fitch, I-Pod, Motorola Razr,
  Panthers, Coca Cola, etc.
• A brand must satisfy two conditions
• Distinctive identity (name, symbol, logo, slogan,
  etc.)
• A distinctive image (e.g. Nano vs. Zen)

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Some advantages of branding

• Can be sold prepackaged hence specific quality
  levels can be assured
• Opportunity to communicate specific brand
  benefits
• Opportunity to appeal to specific market segments
• Ready value in MA transactions

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Why is branding important

• Push vs. Pull
• Financial value of brands in the context of
  mergers and acquisitions (KKR paid 30 bn. for
  RJR Nabisco (Oreos, Newtons, Teddy Grahams, Chips
  Ahoy, etc.) in 1989 first MA transaction to
  recognize value of the brand name)

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Why is branding important

• Jump start sales across product categories e.g.
  Hooters Airlines, Reebok bottled water, Ralph
  Lauren paints.
• Ability to operate highly profitably on minimal
  fixed investment (e.g. Sara Lee Corp. Hanes,
  Ball Park, Kiwi, Coach, etc. is an assetless
  company no manufacturing operations. Also
  Baskin Robbins, Sam Adams beer, Calvin Klein
  jeans and Motorola cellphones)
• Separate manufacturing from production

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Critical features of brands

• Intangible
• Exist at a perceptual level
• Whether a brand has been created or not is
  determined by the consumer.
• (manufacturers may invent the brand name,
  advertising and positioning, but if the consumer
  does not perceive the brand as such (i.e. a
  differentiated product), a brand HAS NOT been
  created)

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Types of brands

• Consumer brands (most fall in this category) e.g.
  Nike, Gatorade, Maytag, Pantene, Tyson chicken,
  Mercedes, etc.
• Industrial brands e.g. Xerox, Caterpillar,
  Komatsu, Boeing, Airbus, etc.
• Service Brands e.g. British Airways, Fedex, UPS,
  State Farm Insurance, Citibank, etc.

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Types of brands

• Corporate Brands e.g. GE, Disney, Honeywell, etc.
• Retail brands e.g. Gap, AF, JC Penney,
  Albertsons, etc.
• Person brands e.g. Cindy Crawford, Heidi Klum,
  Michael Jordan, Jennifer Lopez, etc.

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What are the brands benefits?

• Functional level does the product perform as it
  is supposed to perform primary benefits e.g.
• Crest clean teeth, whitening, fresh breath,
  protect against gum disease, etc.

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Brand benefits

• Emotional level does using this brand give me
  emotional satisfaction secondary benefits.
• Do I feel self-confident after using Crest ?
• Do I feel desirable in my AF jeans?

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Brand benefits

• Self-expressive level does using this brand say
  something about me to my peers tertiary
  benefits.
• If I drive a Corvette, what does it say about me
  to my peers?
• If I wear a Brooks Brothers suit, what does it
  say about me to my peers?

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In Conclusion

• Today almost everything is branded
• Brands cannot be seen, heard or felt intangible
  and exist in your mind
• Logo, symbol and brand name attempt to give the
  brand a physical identity
• Manufacturers / sellers do not create brands
• Consumers create brands