• To Brand or not to Brand

• To Brand or not to Brand

The company must first decide whether it should put a brand name on its product. Branding has become so strong that today hardly anything goes trabranded. Salt is packaged in branded containers, common nuts and bolts arc packaged with a distributor's label, and automotive parts ­ spark plugs, tyres, filters ­ bear brand names that differ from those of the car makers. Even fruit and vegetables are branded ­ Sunkist oranges, Del Monte pineapples and Chiquita bananas.

574 Chapter 13 Brands, Produute, Packaging and

The World's

Under Interbrand's system,

Top Ten Brands

McDonald's scored 856 points against 849 for Coke. The most

Companies around the striking absence from the new top invest large amounts of money

ten (see Table 1) was Kellogg's, each year to create awareness and

which fell from second to 17th. preference for their top brands.

The cereal maker has been over­ Powerful brand names command

taken by high­tech arrivals such as strong consumer loyalty and pro­

Microsoft, and by old brands that vide competitive advantage in the

have done more to extend their marketplace.

appeal. Whereas Kellogg's influ­ What are the world's most

ence is confined to the breakfast powerful brands? Interbrand, a

table, names such as Disney and consultancy that specializes in branding, released

Levi's are no longer just confined to the cinema

a new piece of research in 1996, naming McDonald's and jeans. Disney also gained from being die only as the world's leading brand. Interbrand drew up

brand in an otherwise unbranded industry; an initial list of some 1,200 brands by polling staff

nobody nsks you to go and see a 'Paramount film' in its 12 offices, spread across Europe, America,

or talks about 'Warner' characters. Asia, Australia and South Africa. This long list of

Given die obvious power of brands, some brands was then trimmed down arbitrarily to 500

argue that they should be included alongside global brands and the survivors graded according

other assets in their owners' balance sheets. to four criteria to give a final score. The criteria

Various accounting standards boards (including were: brand weight (or the brand's market share

the United Kingdom's) are looking at this issue. At within its category), which accounted for 35 per

present, most balance sheets concentrate on cent of the final total; breadth (how wide a slice of

historic­cost assets, rather than trying to guess the world in terms of age, gender, religion and

the future value of intangible assets, such as nationality the brand appeals to) was another 30

brands. Interbrand is one of several firms that per cent; depth (die loyalty of its customers) was

tries to calculate the value of brands by estimat­

20 per cent; and length (how far the brand has ing each product's expected net cash flow and dis­ stretched or is likely to stretch beyond its original

counting it at a rate that reflects how secure category) was 15 per cent.

Interbrand guesses the brand's future is. The suspicion remains that putting brands on

a balance sheet would simply be an excuse for TABLE 1 TOP TEN GLOBAL BKANIIS

excessively ereafi­re accounting. Brands may be deep, but some argue that valuing them is not

necessarily meaningful. Although there is still

1 McDonald's

Coca­Cola

disagreement among business analysts and aca­

2 Coca­Co!a

Kellogg's

demics about how to measure brand power, few

3 Disney

McDonald's

marketers doubt die value of a powerful brand. As

4 Kodak

Kodak

one brand consultant states, almost anywhere in

5 Sony

Marlboro

die world, 'When you mention Kodak, I'm pretty

6 Gillette

IBM

sure everyone sees that vellow box.'

7 Mercedes­Benz American Express

Mercedes­Benz

SOURCES: 'Assessing brands: broad, deep, long and hiwy".

The Economist (16 November 1996), pp. 112­13; Jon Rees,

10 Marlboro

Nescafe'

'McDonald's heads top brands list', Marketing Week (15 November 1996), p. 10; Jiiterbrand, World's Greatest Brands

SOURCE: Intel­brand, 1996.

(New York Wiley, 1996).

Individual Product Decisions • 575

Some products, however, carry no brands. 'Generic' products are unbranded, plainly packaged, less expensive versions of common products ranging from such items as spaghetti to paper towels and canned peaehes. They often bear only

black­stencilled labels and offer prices as much as 40 per cent lower than those of main brands. The lower price is made possible by lower­quality ingredients, lower­cost packaging and lower advertising eosts.

Despite the limited popularity of generics, the issue of whether or not to brand is very much alive today. This situation highlights some key questions: Why have branding in the first place? Who benefits? How do they benefit? At what cost?

Branding helps buyers in many ways: t Brand names tell the buyer something about product quality. Buyers who

always buy the same brand know that they will get the same quality each time they buy.

» Brand names also increase the shopper's efficiency. Imagine a buyer going into a supermarket and finding thousands of generic products.

• Brand names help call consumers' attention to new products that might benefit them. The brand name becomes the basis upon which a whole story

can be built about the new product's special qualities. Branding also gives the supplier several advantages: t The brand name makes it easier for the supplier to process orders and track

down problems.

f The supplier's brand name and trademark provide legal protection for unique production features that otherwise might be copied by competitors.

• Branding enables the supplier to attract a loyal and profitable set of customers.

t Branding helps the supplier to segment markets. For example, Cadbtiry can offer Daily Milk, Milk Tray, Roses, Flake, Fruit and Nut and many other brands, not just one general confectionery product for all consumers.

Branding also adds value to consumers and society: t Those who favour branding suggest that it leads to higher and more

consistent product quality. • Branding also increases innovation by giving producers an incentive to look

for new features that can be protected against imitating competitors. Thus, branding results in more product variety and choice for consumers.

• Branding helps shoppers because it provides much more information about products and where to find them.