Brand management

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The discipline of brand management was started at Procter & Gamble PLC as a result of a famous memo by Neil H. McElroy.

Brand management is the application of marketing techniques to a specific product, product line, or brand. It seeks to increase the product's perceived value to the customer and thereby increase brand franchise and brand equity. Marketers see a brand as an implied promise that the level of quality people have come to expect from a brand will continue with present and future purchases of the same product. This may increase sales by making a comparison with competing products more favorable. It may also enable the manufacturer to charge more for the product. The value of the brand is determined by the amount of profit it generates for the manufacturer. This results from a combination of increased sales and increased price.

The annual list of the world’s most valuable brands, published by Interbrand and Business Week, indicates that the market value of companies often consists largely of brand equity. Research by McKinsey & Company, a global consulting firm, in 2000 suggested that strong, well-leveraged brands produce higher returns to shareholders than weaker, narrower brands. Taken together, this means that brands seriously impact shareholder value, which ultimately makes branding a CEO responsibility.

 

Principles

A good brand name should:

• be legally protectable
• be easy to pronounce
• be easy to remember
• be easy to recognize
• attract attention
• suggest product benefits (e.g.: Easy-Off) or suggest usage
• suggest the company or product image
• distinguish the product's positioning relative to the competition.

Types of brands

A premium brand typically costs more than other products in the category. An economy brand' is a brand targeted to a high price elasticity market segment. A fighting brand is a brand created specifically to counter a competitive threat. When a company's name is used as a product brand name, this is referred to as corporate branding. When one brand name is used for several related products, this is referred to as family branding. When all a company's products are given different brand names, this is referred to as individual branding. When a company uses the brand equity associated with an existing brand name to introduce a new product or product line, this is referred to as brand leveraging. When large retailers buy products in bulk from manufacturers and put their own brand name on them, this is called private branding, store brand, or private label. Private brands can be differentiated from manufacturers' brands (also referred to as national brands). When two or more brands work together to market their products, this is referred to as co-branding. When a company sells the rights to use a brand name to another company for use on a non-competing product or in another geographical area, this is referred to as brand licensing.

Techniques

Brand rationalization refers to reducing the number of brands marketed by a company. Some companies tend to create more brands and product variations within a brand than economies of scale would indicate. Sometimes, they will create a specific service or product brand for each market that they target. In the case of product branding, they may do this to gain retail shelf space (and reduce the amount of shelf space allocated to competing brands). A company may decide to rationalize their portfolio of brands from time to time to gain production and marketing efficiencies. They may also decide to rationalize a brand portfolio as part of corporate restructuring.

A recurring challenge for brand managers is to build a consistent brand while keeping its message fresh and relevant. An older brand identity may be misaligned to a redefined target market, a restated corporate vision statement, revisited mission statement or values of a company. Brand identities may also lose resonance with their target market through demographic evolution. Repositioning a brand (sometimes called rebranding), may cost some past brand equity, and can confuse the target market, but ideally, a brand can be repositioned while retaining existing brand equity for leverage.

Problems

There are several problems associated with setting objectives for a brand or product category.

• Many brand managers limit themselves to setting financial objectives. They ignore strategic objectives because they feel this is the responsibility of senior management.
• Most product level or brand managers limit themselves to setting short term objectives because their compensation packages are designed to reward short term behaviour. Short term objectives should be seen as milestones towards long term objectives.
• Often product level managers are not given enough information to construct strategic objectives.
• It is sometimes difficult to translate corporate level objectives into brand or product level objectives. Changes in shareholders' equity are easy for a company to calculate. It is not so easy to calculate the change in shareholders' equity that can be attributed to a product or category. More complex metrics like changes in the net present value of shareholders' equity are even more difficult for the product manager to assess.
• In a diversified company, the objectives of some brands may conflict with those of other brands. Or worse, corporate objectives may conflict with the specific needs of your brand. This is particularly true in regard to the trade-off between stability and riskiness. Corporate objectives must be broad enough that brands with high risk products are not constrained by objectives set with cash cows in mind (see B.C.G. Analysis). The brand manager also needs to know senior management's harvesting strategy. If corporate management intends to invest in brand equity and take a long term position in the market (i.e. penetration and growth strategy), it would be a mistake for the product manager to use short term cash flow objectives (ie. price skimming strategy). Only when these conflicts and tradeoffs are made explicit, is it possible for all levels of objectives to fit together in a coherent and mutually supportive manner.
• Many brand managers set objectives that optimize the performance of their unit rather than optimize overall corporate performance. This is particularly true where compensation is based primarily on unit performance. Managers tend to ignore potential synergies and inter-unit joint processes.

See also

• Predictive analytics
• Brand community

References

• Brands Trademarks and Advertising, Rodney D. Ryder, Lexis Nexis Butterworths.
• Brand Warfare, David D'alessandro, McGraw Hill, New York, 2001, ISBN 0-07-136293-2
• 100 Best Global Brands
• Philip Kotler and Waldemar Pfoertsch, B2B Brand Management, Springer, 2006.