Branding And Its Dangers And Advantages.

“When choices become vast, the only things that matter are brand names.” (Michael Eisner, CEO, Disney)….“Amazon.com will sell its fixed assets to focus on managing its brand, becoming the вЂ?Coca-Cola’ of the web” (Jeff Bezos, CEO, Amamzon.com).

a. Does every company need to �brand’ itself and its products as these quotes above suggest?

b. What added �dangers’/advantages are brought about by branding in a global marketplace? Supplement your answer with examples where possible.

Brands have existed since forever. In a time before fences were used in ranching to keep one's cattle separate from other people's cattle, ranch owners branded, or marked, their cattle so they could later identify their herd as their own. The value of branding in the age of globalisation and the Internet is much, much more than just creating a way to identify a product or company. Brands today spell reliability, quality and trust. It is this value that explains why all companies need to brand themselves or their products.

This essay weighs the benefits and costs of branding to reach the conclusion that branding is all pervasive and needed for all companies. It draws from consumer behaviour theory to show how branding works. It’s found that the advantages of branding are essentially the same as global branding. So the second half deals with the major disadvantages and concludes that inspite of them branding is necessary due to the highly competitive and constantly changing environment.

The American marketing association defines a brand as “a name, term, sign, symbol or design, or a combination of them, intended to identify the goods and services of one seller or groups of sellers and to differentiate them from those of competitors.”

According to Kotler a brand can convey up to six levels of meaning- Attributes, Benefits, Values, Culture, Personality and User. One mistake is to focus only on attributes- they can be easily copied by competitors or benefits-which can be easily topped. The most enduring meanings of a brand are its values, culture and personality.

Even though branding means many kinds of costs why is it that companies still brand? The main benefit of a properly devised and implemented branding effort is that it creates and cements customer loyalty and retention. These days, customer satisfaction is simply not enough. To quote W. Edwards Deming, “...it will not suffice to have customers that are merely satisfied. Satisfied customers switch, for no good reason, just to try something else. Profit and growth come from customers that can boast about your product or service - the loyal customer. He requires no advertising or other persuasion, and he brings a friend along with him.”

Branding is very important from the seller’s point of view. It makes it easier to process orders and track down problems, it provides legal protection of unique product features, it provides protection from competition, it helps segmenting the market, and it helps build a corporate image, making it easier to identify quality differences and shop more efficiently. Distributors and retailers want brand names because brand makes the product easier to handle, hold production to certain quality standards, strengthen buyer preferences, and makes it easier to identify suppliers. In Britain, two large supermarket chains have developed popular store-brand colas- Sainsbury cola (from Sainsbury) and classic cola (from Tesco). Sainsbury, Britain’s largest food chain, sells 50 percent sore-label goods: its operating margins are six times that of US retailer operating margins (Kotler 2000).

The bottom-line benefits of branding for a company is that, properly managed, branding can create customers for life, offer long-term profitable growth, and increase shareholder value and stakeholder worth.

From a marketing perspective, branding increases the Product Life Cycle (PLC) of the product. Many network externalities come to play in the initial take-off of the product and can possibly carry through the product or brand for some time. The life cycle is however maintained for longer periods of time through building brand loyalty. The ability to gain brand premium leads to higher profitability, which in turn leads to the ability to further increase branding efforts. If this cycle continues effectively, power brands like Nike, Coke, and Mc Donald’s are created.

Branding is designed to increase a firm’s profitability by increasing the premium associated with the pricing of a good or service, and or by increasing the sales of a product over and above those sales that would have occurred through standard marketing efforts. However the biggest incentive to brand is that the cost of branding declines over a period over a period of time. In the short term the cost of branded good is more that non-branded goods but over a period of time these costs decline and the premium earned from branding is much higher. Thus it can be said that it’s much easier to maintain a brand (reputation) than to build one up. One of the reasons for declining costs could be increase in trust of the consumer. The fact that branding costs decline overtime earns a company �brand equity’. Brand Equity is a function of both the intensity of the branding efforts and the amount of branding saturation that occurs. So a company may be willing to brand and incur higher initial opportunity costs, and lower expected profits, in order to achieve a greater stream of profits in the future.

In such a dynamic sense, there is also Brand risk and uncertainty over branding. To most brand managers the notion of brand risk evokes something catastrophic-a natural disaster, an act of sabotage, a technological meltdown- when in fact, the risks most companies face are from strategic missteps. In a study of Fortune 1000 companies that lost at least 25% of their market capitalization in four weeks or less during the mid to late 1990’s, 58 percent of those declines were from strategic error and many were brand related (see chart). Brand uncertainty can also come from factors such as luck, ability, social capital, networks etc. So there is a probability of success associated with branding a product, just as there is a probability associated with any firm strategy, that goes beyond the �effort’ expended in branding a product.

High brand equity also provides with a number of other competitive advantages (Kotler 2000). These are, increase in a firm’s profitability and market share by providing a