l The favourable attitude of distributors that list some products of the brand because of their rotation system. In fact a retailer may lose customers if it does not stock products of a well-known brand that by definition is present everywhere. That is to say, certain customers will go else- where to look for the brand. This goodwill ensures the presence of the brand at the point of sale.
l The support of wholesalers and resellers in the market for slow-moving or industrial goods. This is especially true when they are seen as being an exclusive brand with which they are able to associate themselves in the eyes of their customers.
l The desire of consumers or end-users to buy the product. It is their favourable attitude and in certain cases the attachment or even
loyalty to the brand that is the key to future sales. Brand loyalty may be reduced to a minimum as the price difference between the brand and its competitors increases but attachment to the brand does not vanish so fast; it resists time.
The brand is a focal point for all the positive and negative impressions created by the buyer over time as he or she comes into contact with the brand’s products, distribution channel, personnel and communication. On top of this, by concentrating all its marketing effort on a single name, the latter acquires an aura of exclusivity. The brand continues to be, at least in the short term, a byword for quality even after the patent has expired. The life of the patent is extended thanks to the brand, thus explaining the importance of brands in the pharmaceutical or the chemical industry (see page 108).
Brands are stored in clients’ memories, so they exert a lasting influence. Because of this, they are seen as an asset from an accounting point of view: their economic effects extend far beyond the mere consumption of the product.
In order to understand in what way a strong brand (having acquired distribution, awareness and image) is a generator of growth and profitability it is first necessary to under- stand the functions that it performs with the consumers themselves, and which are the source of their valuable goodwill.
How brands create value for the customer
Although this book deals primarily with brands and their optimisation, it is important to clarify that brands do not necessarily exist in all markets. Even if brands exist in the legal sense they do not always play a role in the buying decision process of consumers. Other factors may be more important. For example, Table 1.3 Brand financial valuation, 2007
Rank Brand Value (US$ billion)
1 Google 66,434
2 GE 61,880
3 Microsoft 54,951
4 Coca Cola 44,134
5 China Mobile 41,214
6 Marlboro 39,166
7 Wal-Mart 36,880
8 Citi 33,706
9 IBM 33,572
10 Toyota 33,427
11 McDonald’s 33,138
12 Nokia 31,670
13 Bank of America 28,767
14 BMW 25,751
15 Hewlett-Packard 24,987
16 Apple 24,728
17 UPS 24,580
Sources:Brand Z, Milward Brown
research on ‘brand sensitivity’ (Kapferer and Laurent, 1988) shows that in several product categories, buyers do not look at the brand when they are making their choice. Who is concerned about the brand when they are buying a writing pad, a rubber, felt-tip pens, markers or photocopy paper? Neither private individuals nor companies. There are no strong brands in such markets as sugar and socks. In Germany there is no national brand of flour. Even the beer brands are mostly regional. Location is key with the choice of a bank.
Brands reduce perceived risk, and exist as soon as there is perceived risk. Once the risk perceived by the buyer disappears, the brand no longer has any benefit. It is only a name on a product, and it ceases to be a choice cue, a guide or a source of added value. The perceived risk is greater if the unit price is higher or the repercussions of a bad choice are more severe. Thus the purchase of durable goods is a long-term commitment. On top of this, because humans are social animals, we judge ourselves on certain choices that we make and this explains why a large part of our social identity is built around the logos and the brands that we wear. As far as food is concerned, there is a certain amount of intrinsic risk involved whenever we ingest something and allow it to enter our bodies.
The brand’s function is to overcome this anxiety, which explains, for example, the importance of brands in the market for spirits such as vodka and gin.
The importance of perceived risk as a generator of the legitimacy of a brand is high- lighted by the categories within which distrib- utors’ own-brands (and perhaps tomorrow’s discount products) dominate: canned vegetables, milk, orange juice, frozen pizzas, bottled water, kitchen roll, toilet paper and petrol. At the same time producers’ brands still have a dominant position in the following categories: coffee, tea, cereals, toothpaste, deodorant, cold sauces, fresh pasta, baby food, beauty products, washing
powder, etc. For these products the consumer has high involvement and does not want to take any risks, be they physical or psycho- logical.
Nothing is ever acquired permanently, and the degree of perceived risk evolves over time.
In certain sectors, as the technology becomes commonplace, all the products comply with standards of quality. Therefore we are moving from a situation where some products ‘failed’
whereas others ‘passed’, towards one where all competitors are excellent, but some are ‘more excellent’ than others. The degree of perceived risk will change depending on the situation.
For example, there is less risk involved in buying rum or vodka for a cocktail than for a rum or vodka on the rocks. Lastly, all consumers do not have the same level of involvement. Those who have high involvement are those that worry about small differences between products or who wish to optimise their choice: they will talk for hours about the merits of such and such a computer or of a certain brand of coffee. Those who are less involved are satisfied with a basic product which isn’t too expensive, such as a gin or a whisky which may be unknown but seems to be good value for money and is sold in their local shop. The problem for most buyers who feel a certain risk and fear making a mistake is that many products are opaque: we can only discover their inner qualities once we buy the products and consume them. However, many consumers are reluctant to take this step.
Therefore it is imperative that the external signs highlight the internal qualities of these opaque products. A reputable brand is the most efficient of these external signals.
Examples of other such external indicators are:
price, quality marks, the retail outlet where the product is sold and which guarantees it, the style and design of the packaging.
How brand awareness means value
Recent marketing research shows that brand awareness is not a mere cognitive measure. It is
in fact correlated with many valuable image dimensions. Awareness carries a reassuring message: although it is measured at the indi- vidual level, brand awareness is in fact a collective phenomenon. When a brand is known, each individual knows it is known.
This leads to spontaneous inferences. As is shown in Table 1.4, awareness is mostly corre- lated with aspects such as high quality, trust, reliability, closeness to people, a good quality/
price ratio, accessibility and traditional styling.
However it has a zero correlation with innova- tiveness, superior class, style, seduction: if aspects such as these are key differentiation facets of the brand, they must be earned on their own merit.
Transparent and opaque products
At this stage it is interesting to remind ourselves of the classifications drawn up by Nelson (1970) and by Darby and Kami (1973).
These authors make the distinction between three types of product characteristics:
l the qualities which are noticed by contact, before buying;
l the qualities which are noticed uniquely by experience, thus after buying;
l credence qualities which cannot be verified even after consumption and which you have to take on trust.
The first type of quality can be seen in the decision to buy a pair of men’s socks. The choice is made according to the visible charac- teristics: the pattern, the style, the material, the feel, the elasticity and the price. There is hardly a need for brands in this market. In fact those that do exist only have a very small market share and target those people who are looking for proof of durability (difficult to tell before buying) or those who wish to be fash- ionable. This is how Burlington socks work as a hallmark of chic style. Producers’ brands do exist but their differential advantage compared to distributors’ brands (Marks &
Spencer or C&A) is weak, especially if the latter have a good style department and offer a wide variety at a competitive price.
A good example of the second type of quality is the automobile market. Of course, performance, consumption and style can all be assessed before buying, as can the avail- ability of options and the interior space.
However, road-holding, the pleasure of driving, reliability and quality cannot be entirely appreciated during a test drive. The response comes from brand image; that is, the collective representation which is shaped over time by the accumulated experiences of oneself, of close relations, by word of mouth and advertising.
Finally, in the market for upmarket cars, the feeling that you have made it, that feeling of fulfilment and personal success through owning a BMW is typically the result of pure faith. It cannot be substantiated by any of the Table 1.4 How brand awareness creates
value and image dimensions (correlations between awareness and image)
Good quality/price ratio 0.52
Trust 0.46
Reliable 0.44
Quality 0.43
Traditional 0.43
Best 0.40
Down to earth 0.37
Client oriented 0.37
Friendly 0.35
Accessible 0.32
Distinct 0.31
A leader 0.29
Popular 0.29
Fun 0.29
Original 0.27
Energetic 0.25
Friendly 0.25
Performing 0.22
Seductive 0.08
Innovative 0.02
(Base: 9,739 persons, 507 brands) Source: Schuiling and Kapferer, 2004
post-purchase driving experiences: it is a collective belief, which is more or less shared by the buyers and the non-buyers. The same logic applies to the feeling of authenticity and inner masculinity which is supposed to result from smoking Marlboro cigarettes.
The role of brands is made clearer by this classification of sought-after qualities. The brand is a sign (therefore external) whose function is to disclose the hidden qualities of the product which are inaccessible to contact (sight, touch, hearing, smell) and possibly those which are accessible through experience but where the consumer does not want to take the risk of trying the product. Lastly, a brand, when it is well known, adds an aura of make- believe when it is consumed, for example the authentic America and rebellious youth of Levi’s, the rugged masculinity of Marlboro, the English style of Dunhill, the Californian myth of Apple.
The informational role of the brand varies according to the product or service, the consumption situation and the individual.
Thus, a brand is not always useful. On the other hand, a brand becomes necessary once the
consumer loses his or her traditional reference points. This is why there is an increase in the demand for branded wine. Consumers were put off by too many small chateaux which were rarely the same and had limited production of varying quality and which sometimes sprung some unpleasant surprises. This paved the way for brands such as Jacob’s Creek and Gallo.
A brand provides not only a source of infor- mation (thus revealing its values) but performs certain other functions which justify its attractiveness and its monetary return (higher price) when they are valued by buyers.
What are these functions? How does a brand create value in the eyes of the consumer? The eight functions of a brand are presented in Table 1.5. The first two are mechanical and concern the essence of the brand; that is, to function as a recognised symbol in order to facilitate choice and to gain time. The following three functions reduce the perceived risk. The last three have a more pleasurable side to them. Ethics show that buyers are expecting, more and more, respon- sible behaviour from their brands. Many Swedish consumers still refuse Nestlé’s
Table 1.5 The functions of the brand for the consumer Function Consumer benefit
Identification To be clearly seen, to quickly identify the sought-after products, to structure the shelf perception.
Practicality To allow savings of time and energy through identical repurchasing and loyalty.
Guarantee To be sure of finding the same quality no matter where or when you buy the product or service.
Optimisation To be sure of buying the best product in its category, the best performer for a particular purpose.
Badge To have confirmation of your self-image or the image that you present to others.
Continuity Satisfaction created by a relationship of familiarity and intimacy with the brand that you have been consuming for years.
Hedonistic Enchantment linked to the attractiveness of the brand, to its logo, to its communication and its experiential rewards.
Ethical Satisfaction linked to the responsible behaviour of the brand in its relationship with society (ecology, employment, citizenship, advertising which doesn’t shock).
products due to the issue of selling Nestlé’s baby milk to poor mothers in Africa.
These functions are neither laws nor dues, nor are they automatic; they must be defended at all times. Only a few brands are successful in each market thanks to their supporting investments in quality, R&D, productivity, communication and research in order to better understand foreseeable changes in demand. A priori, nothing confines these functions to producers’ brands.
Moreover, several producers’ brands do not perform these functions. In Great Britain, Marks & Spencer (St Michael) is seen as an important brand and performs these func- tions, as do Migros in Switzerland, the Gap, Zara, Ikea and others.
The usefulness of these functions depends on the product category. There is less need for reference points or risk reducers when the product is transparent (ie its inner qualities are accessible through contact). The price premium is at its lowest and trial costs very little when there is low involvement and the purchase is seen as a chore, eg trying a new, cheaper roll of kitchen paper or aluminium foil. Certain kinds of shops aim primarily at fulfilling certain of these functions, for example hard discounters who have 650 lines with no brands, a product for every need, at the lowest prices and offering excellent quality for the price (thanks to the work on
reducing all the costs which do not add value carried out in conjunction with suppliers).
This formula offers another alternative to the first five functions: ease of identification on the shelf, practicality, guarantee, optimisation at the chosen price level and characterisation (refusal to be manipulated by marketing). The absence of other functions is compensated for by the very low price.
Functional analysis of brand role can facil- itate the understanding of the rise of distrib- utors’ own brands. Whenever brands are just trademarks and operate merely as a recog- nition signal or as a mere guarantee of quality, distributors’ brands can fulfil these functions as well and at a cheaper price.
Table 1.6 summarises the relationships between brand role and distributors’ own- brands’ market share.