Brands and branding are hot topics in recent years. It is almost impossible nowadays to open any serious newspaper or magazine (general or specialist) without coming across an article that talking about the importance and value of brands. In the routine lives, customers find brands existing and surrounding them everywhere and everyday by various means-products, retailers, advertisements and media, etc. Some of them are so world-famous that once you see them – the “Golden Arches,” or the “Swoosh”, the singular images will automatically make you think of “McDonald’s” and “Nike.”- They don’t even need words. When facing the choice among alike products, majority of customers were found prefered to stick on their favorite brands rather than try an unfamiliar brand.
Why is brand so powerful to influence customers’ decision? Does branding hold the dominant position of marketing?
Before we go further to analyze the function of brands in marketing. Let’s have a brief view of “what is a brand”. The first brands in a modern marketing sense were developed a century ago. Brand used to be defined as “A name, symbol, design, or some combination which identifies the product of a particular organization as having a substantial, differentiated advantage” (O’Malley, 1991:107). As the market has been moved from sales driven to customer driven to meet the constantly changing customer needs, building an enduring relationship between products and customers is vital for company to obtain more market share in competitive environment for the need of survival and growth. Keegan, Duncan & Moriarty (1995:318) took a consumer-oriented approach in defining a brand as “a complex bundle of images and experiences in the customer’s mind that communicates a promise about the benefits of a particular product manufactured by a particular company”, which more precisely explains the relationship between brands and consumers.
How much does brand worth to product and company? How and why does branding play an important role in marketing?
1. Brand image and the impact on Consumer behaviour
When customers face the various choices of products in their daily activities, they have to handle enormous product information, consequently they will try to develop efficient ways of processing information-that is, they will often use brands to simplify information handling and decision making process rather than taking time to investigate the way of technology and raw material been used within the process of manufacture-very few people have got time and interest to do it. A common sense of reason that customers choose products with a certain brand and keep sticking on it is that, when they purchase this brand, they expect to get “added value”, such as quality, reliability and good service on top of the style, status or visible value of products.
They also expect to receive the same quality with their next purchase as they did with their last time on the same brands. To this extent, a good brand should be a constant promise to consumers, which means it represents not only a logo to consumers, but also value. When customer buys a Benz car, it may come up with symbol of superior social status and luxurious life style as well as high quality. When a female pays premium price for a Versace’s cloth rather than a mass-produced cloth, the reason of her choice is that she may feel more confident and noble because of the sexy and elegant image the brand stands for beyond the style and quality.
2. Brief introduction of development of Global Brand
Although brands and branding are not new ideas, firms are applying them to more different settings where the role of branding is becoming increasingly important. According to Philip Kotler, there are four degrees of brand recognition: brand awareness, brand acceptability, brand preference and brand loyalty, which represent the different classes of relationship that marketing has established with customers. In the world where customer has so many options, every product wants to achieve brand loyalty with possibly more consumers by attempting marketing communication. Marketing represents a shift from “monologue to dialogue”, which means “moving from manipulating customers to involving them, from selling and telling to asking and satisfying” (Keegan, Duncan ; Moriarty 1995:322) in order to build strong relationship with customers. “Successful relationship marketing can develop brand equity,” (Keegan, Duncan ; Moriarty 1995:320).
“Brand equity is the value of additional cash flows generated for a product because of its brand identity.” (Doyle 1999:189) Although brand equity, which is regarded as intangible, usually is not listed on companies’ balance sheet because of the arbitrariness of the estimate, most of valuable brands worth much more than companies’ assets. The average British and American company is valued by the stock market at around twice of net balance sheet assets. Coco-Cola’s brand value was estimated as $68.9 billion, which is 85% of its market value. Philip Morris, Inc., paid $12.9 billion for Kraft for the brand, which is 4 times of its book value. Nestle paid $4.5 billion for General Foods (five times book value). Table 1 shows the world’s 10 most valuable brands in 2001.
The ranking reflects the important developments of those brands during the past year and shows how much they cost in brand value. All the above 10 brands have been considered as global brands. Global brands are those “brands with a high degree of similarity across countries with respect to brand identity, position, advertising strategy, personality, product, packaging, and look and feel.” (Aaker 2000:306) Global branding became trendy from the 1990’s, when barriers to world trade fell and enormous new markets opened up to the owners of powerful brands. They started to focus on global market to meet the needs of reducing cost; accelerating speed of growth and obtaining more market share.
What’s the identity of a global brand? The most important components of global brand can be found in graph 2.
The table shows that a global brand consists more than a single name, logo and image for an identical product, it should also imply the same basic personality, strategy, and positioning in world markets. E.g. Chanel, one of the most famous and established brand names in the perfume and beauty cosmetics field, has become global brand by exploring global market. As a prestige producer, Chanel products are sold only in department stores and selective distribution outlets around the world to keep the image.
In recent years, many established companies have been reevaluating their world-product policies and launch the product in attractive foreign markets after they have developed and get strong in home market. This trend doesn’t only cover the developed countries, but also lead companies in developing countries. The Chinese home appliance manufacturer Haier, one of the ten biggest appliance producers in the world nowadyas, was founded in 1984 from a factory with less than 800 employees merely focusing on local market. During the past 18 years, Haier has had an 81.6% average annual growth per year and had produced revenue for 60.2 billion RMB in 2001.
Nowadays Haier has successfully achieved its brand extension to a global brand, which covers 11,000 products (frig, freezer, washing machine, air conditioning, etc), 36,000 stores in 160 countries with more than 30,000 employees. Its global market share of selling refrigerators has been ranked as the first one among global brands in 2001 and has been ranked as the fifth among the global white appliance selling companies. Haier creates miracle by carrying out the consistent principle that is “the brand is a guarantee of reliability and durability”, which has been confirmed by the steeply increased sales volume that reflects the strong relationship with consumers. In 2001, the brand equity of Haier has raised to 43.6 billion RMB.
3. Why is global power brand successful?
The rapid development of telecommunication and strong consuming capability of youth have created common demands, tastes and values globally in last two or three decades, which thus driven international marketers increasingly focusing on the importance of global brands. In recent years, global branding has not only taken root, it’s in full bloom. As Peter Doyle (1998:165) said: “Brands are at the heart of marketing and business strategy. The purpose of marketing is to create a preference for the company’s brand.” The trend towards global branding, moreover, is accelerating rapidly. Successful global brands are powerful to obtain a number of benefits.
A) Price premium-higher profit
Consumers are willing to pay a premium price for global brands because the common sense in their mind is that global power brands imply credibility, high quality and up-to-date global trend. Nike bought sports shoes for $15/per pair from Chinese shoes manufacturer, and then sell them by the price more than seven times higher, just because they put “Nike” on the shoes. To consumers, brand choice somewhat reflects certain lifestyle, taste, image or even social status beyond the product. So if they feel the brand fit them, they’ll not only prefer it, but also will be happy to pay a higher price for it. Consumers also perceive added values-“the subjective beliefs of customers” (Doyle 1998:168)-out of international or global brands from the implication of brand personality and association. Microsoft has introduced Xbox to Europe, Australia and New Zealand at a high price – more than ï¿½100 than the PS2 currently sells at, because for many consumers there is added value in being among the first to own the Xbox and this perception of value means that the product attracts a premium price.
B) Lower costs
Cost cutting is another vital issue of marketing. A single global brand can reduce the marketing cost, not only because of “the significant scales of economy it achieved” (Aaker 2000:306) in terms of new brand development, packaging and manufacturing, but also because brands with global reputations can enter new markets at lower cost than new national brands: if you move into a new market with a brand that is already global in scope, you can reduce cost of introductory and follow-up marketing programs. E.g. Starbucks Coffee Bar become popular in no time once it came into main cities of China without huge efforts on advertising, because it’s already well known to young generation by means of media even before it started to explore Chinese market.
C) Facilitate new product acceptance.
A global brand can also facilitate the launch and distribution of line extensions and other brands in portfolio. Coca-Cola has more than 20 very significant national brands of carbonated soft drinks (beverages) around the world in addition to the Coca-Cola brand. All these national brands secure much better sales by virtue of being in the Coca-Cola portfolio than on their own because the company has built reputation in consumers’ minds.
D) The initiative of bargaining with supplier and distributor
Since suppliers and distributors can get comparatively stable and higher profit and take less risk by trading business with global brands, they get more dependent with those brands to keep the business and compete with rivals. To this extent, company markets the brands therefore have more powerful trade leverage in bargaining with them for more efficient service and lower costs since it gets more options on choosing it’s suppliers and contributors.
E) Qualified employees-organizational culture benefit
The qualification and skill of workforce is a dominant factor to directly influence company’s performance, especially in service market. Good people want jobs with important global companies and to continue to work for them. If a company has a strong global brand, it’s in a position to recruit and retain better people than it would otherwise be able to do. Setting up in 1923, the American consultant company Mckinsey now has more than 75 branches allover the world and become the most successful company in the area of tactics consulting. It maintains its prestigious position and high profit by the commitment and coordination of its elite employees; most of them are MBA graduates from recognized universities.
4. Relationship between brand and marketing mix
The relationship between global brand and marketing mix are interdependent and integrated. Either one of them can’t succeed along without another. “Strong, favorable, and unique brand associations can be created by marketing programs in a variety of well-established ways.” (Keller 1998:72) Branding needs to be increasingly consumer-oriented and driven by the readiness to provide individual consumers with worthwhile experiences. This can only be achieved by means of product and service innovation, consumer relationship, consumer-oriented ordering and delivery systems, and brand-based employee training and guidance.
1. Product strategy: Product is the most basic and important part of brand equity. The qualities, packages, design and manufacturing of products can convince customers of successful brand association. Consumer will prefer certain brands from which they can get perceived qualities and added values, such as after-sale service. For a global brand, achieving consistent and same quality of product or service regardless of geographic location is fundamental of success. E.g. when customers walk into any McDonalds in different countries, they will have the same high quality food, clean environment, and efficient and courteous service. Because of the Firestone tire fiasco and a series of quality problem, Ford Motor Co. somewhat loses its power to attract customers and command high price in global car market. Although it’s still ranked among the top 10 global brands, by Interbrand’s calculations, the carmaker’s name is worth $30.1 billion this year – $6.3 billion less than last year. Therefore constant innovation and improvement of products are vital strategy for a successful brand.
2. Price strategy: Customers usually compare the price of product with the perceived quality to help them making purchase decision. Pricing is an important strategy that company consider for brands during product life cycle, on purpose of attracting customers and achieving the profit objectives. Look at the price war between two global brands of beverage – Coca-Cola and Pepsi, as customers’ choice between the two similar drinks is not distinct, they both tried to grasp more market share by means of price competition. However, consumers are knowledgeable about current products and know what they are looking for in terms of the ‘next generation’ product. Low price is not the main criteria for purchase so the pricing decision for launch by Microsoft is need to maximize profits to cover the cost of continuing new product development. Microsoft’s price strategy is that once the initial wave of consumers have purchased then it’s necessary to reduce price to stimulate demand before sales fall off and a competitor takes advantage of the negative publicity.
3. Distribution strategy: “channel considerations can affect brand equity of the products.” (Keller 1998:73) Firstly, customers often associate retail stores with the value of brands, quality and service etc. E.g. Channel never sold its cosmetics in supermarkets instead of in selected department stores in any countries, just to maintain its noble and high-class brand image to consumers. Secondly, retailers are powerful to influence the brand equity by the way of displaying or providing information to increase brand awareness. Thirdly, inventory based on materials requirements planning and just-in-time methods of supply chain can enable company reduce cost and enhance efficiency to ensure the brand more competitive to rivals. E.g. Dell’s rapidly strengthened it’s market position in recent years mainly by means of its JIT delivery service and no-inventory selling strategy.
4. Communication strategy: “The role of marketing communications is to communicate the essence of brand personality and provide the continuity for a partnership between the brand and the consumer.” (Pelsmacker, Geuens & Bergh 2001:51) Keeping communication with present and potential consumers is the essential policy to keep relationship between customers and product, increase brand awareness and maintain brand loyalty. The marketing communications mix consists of five major modes of communication: advertising, sales promotion, public relations, personal selling and direct and interactive marketing. (Kotler 2003:563)
To increase impressive exposure of brands and thus achieve impact on consumers’ decision making, companies use some or all these modes simultaneously. “Advertising is usually as the key tool because it can build brand awareness and association by influencing consumer’s memory structure and retrieving brand information,” (Pelsmacker, Geuens and Bergh 2001:52) Advertising nowadays not only give customers information and symbolic cues, but more often influence them by emotions. Ford replaced BMW and successfully introduced it’s three new vehicle products by showing in the popular spy movie 007 series “Die another day”, one of the three-$228,000 sports car: Aston Martin Vanquish-which is sold in 31 markets throughout the world, has got a customer waiting list of nearly two years.