Why do Companies Create Brands? Strategies and Examples
Brand and branding
A brand is a name, a
symbol, a designation identifying the products or services of the manufacturer.
There is also the concept of brand-building - building, creating a brand. The
concept of branding is directly the formation and development of the brand.
With the help of branding, buyers distinguish goods; allocate for themselves
their key properties. For sellers, branding allows to promote products and
services and, what is very important, to establish long-term relationships with
the buyer due to the actual values incorporated in the brand. In other words,
branding is a combination of actions performed consistently, in order to create
a holistic and popular image of the goods. If you still reduce interpretation,
branding is the art of brand management. The main goal of branding is to form a
clear brand image and identify the target audience with which to interact. In
the framework of branding, that is brand management, experts examine the market
environment, position products, create a brand name, a slogan, a descriptor,
visual and verbal perception systems (think of developing a corporate identity,
packaging, trademark, special sounds), use identification and communication
media, reflecting the main idea of the brand. Experts develop branding from
strategy to brand book. Note that the brand itself can stretch and expand.
Stretch it, if there is a new product under the same trademark. In this case,
in the product category, target audience, brand identity and purpose, nothing
changes. Changes are related only to the benefit of the buyer. With the
expansion of the brand, the brand extends to an adjacent group of products or
products offering a new category of buyers. As an example, you can bring
cosmetics "Nivea", originally aimed at a female audience. After a
certain amount of time, the company began to produce cosmetics for men. Often,
companies develop a brand in a brand, or a sub brand. Manufacturers produce
products of the mass market segment, more simplified in comparison with the
main products. There is also the notion of a vintage family. What it is? A brand
family is a complex of products manufactured and sold under one brand. When
producers promote a vintage family, they use common distribution channels,
which save on promotion. Often, several enterprises develop together using
joint branding and while saving money.
What gives Branding
Price premium
The first thing that branding brings to the company
immediately is the price premium, the opportunity to sell with a larger margin
than similar "faceless" competitors' products. A quick effect in this
case is provided only by a more careful attitude to the development of the
name, the packaging of the product, its promotion, which makes it possible to
stand out against the general background. The main impact of product branding
will come as consumers realize those ideas that were laid down in the brand.
This can be high quality goods, respectability and safety. Consumers, without
knowing it, pay for compliance with their expectations and for the emotions
that give them an acquisition. And the main task of branding is to meet their
expectations and give them these emotions. Dear watches differ from the average
in price by no means the accuracy of the move and not the value of the
materials used (of course, if we are not talking about watches that are
jewelry). Often, there is no special advantage in design. The only difference
is in how a consumer perceives a particular brand. In the way he assesses the
"moral benefit" of putting on a watch of this brand, he could boast
of acquaintances or simply be proud of himself. At the same time, it is well
known that for the products and services, united by the notion of
"luxury", the additional emotional component of the brand is
important; sometimes it even prevails over functionality. So, the car Ferrari
and the like are not the most suitable vehicles for traveling on the roads of
Russia, but they enjoy steady popularity. The presence of a queue for Bentley
cars does not repel motorists at all, but, on the contrary, is an integral part
of the marketing policy of the manufacturer, which forms besides the price the
image of the brand "not for everyone". Examples with products and
services designed primarily for "conspicuous" consumption are
obvious, so I would like to draw attention to the importance of branding for
products aimed at broader groups of consumers. Even in the market of a product
of daily demand, which are included in the basket of the subsistence minimum,
at the expense of branding it is possible to receive additional income. Vodka
"Russian Standard" - a vivid example of the recoverable price
premium. After all, the supplier of this drink - the company "Rust
Inc." - when launching the product did not even have its own capacities
for bottling and the history of the presence in the vodka market. But due to
successful application of branding tools the company managed to overcome both
the craving for consumers to local products, and a high level of trust in
brands manufactured by well-known manufacturers. Another example could be the
St. Petersburg enterprise Parnas-Agro. Parnas-Agro was already present in the
market, however, the margin received did not suit him. The development of a new
trademark included several stages: the definition of a target group, ready to
pay extra for the additional advantages of the product; determination of these
advantages, identification of consumer expectations, development of
positioning; creation of the corresponding name, packing; their testing;
formation of promotion strategy. The full development cycle - from the initial
research to the receipt of the product on the shelves - took about six months.
The result for the company was a steady growth in sales volumes and an
outpacing increase in the selling price of the egg compared to the leaders,
which ultimately made it the highest on the market. Thus, the price premium as
a result of branding is the lot of not only the manufacturers of yachts and
golf clubs. But, working on the brand of mass goods, it is necessary to
remember that for the Russian consumer in this segment the quality and consumer
properties of the product are determining. And if the western marketing gurus
claim that first and foremost the brand is important, and then the product
itself, then they mean the situation when all production and business processes
have already been worked out and standardized.
Customer Loyalty
Another plus of branding is the increase in customer
loyalty. Most companies price competition leads to a dead end. Striving to beat
competitors at the expense of lower prices, manufacturers "corrupt"
the consumer. That is why this form of competition becomes the lot of only the
lowest price segments. Despite this, most of the so-called loyalty programs
also use the price tag of buyers, most often based on the accumulation of
discounts. Their downside is the very principle of loyalty, based on
self-interest. It would be right to note that this, in fact, is not loyalty
and, as a consequence, not loyalty programs, but the myth of some marketers.
After all, with a better offer of competitors, you can lose such
"loyal" customers in a short time. The basis of any loyalty should be
branding - the emotional binding of buyers. The power of loyalty can be
observed in regional food markets. Many national producers of beverages,
confectionery, ice cream and especially beer and vodka find it very difficult
to win positions in the regional markets of Russia (this applies to other
product groups). In addition to the administrative resource and proximity to
the consumer, the reason is largely the loyalty of customers to local
producers, which was brought up from generation to generation. It is under the
invisible pressure of regional consumers' loyalty that large national and
international retail chains are forced to include locally produced products in
their assortment of matrices.
Reducing advertising costs
Traditionally it is believed that advertising gives a
gradually dying out surge in sales. To maintain it, you either need a permanent
advertising presence, or periodically conduct new campaigns. This is due to the
elementary thing - the forgetfulness of consumers. Branding, however, provides
another opportunity - the creation of sustainable associations among customers.
Not everyone will remember what a new brand of beer was brought to the market
with the help of mass advertising, but the "Zhigulevskoye" is known
to everyone and has a certain relation to it - the prevailing opinion about its
properties. (It's quite another matter how much this relation corresponds to
the interests of producers, but this is already a question of the brand's
controllability and awareness of its formation.) It is much easier to identify
similar patterns in Western markets, where there are traditions of consumption
and stable patterns of consumer behavior. Attitudes toward trademarks have evolved
in the West for decades, not years, as in Russia. That is why it is possible,
for example, to "inherit" consumer traditions, when the attitude to
certain goods is passed from generation to generation according to the
principle: "I buy these cereals for breakfast, because they were bought by
my mother, and before it - my grandmother." Maintaining such brands
requires much less than trying to bring a new brand to the market. A good
example of using brand power to reduce advertising costs is Miller beer. Not
having a history of sales and consumption in Russia, Miller beer producers, in
many respects due to the legendary brand awareness, achieved the highest sales
growth rates and gained a significant share in the market. At the same time,
SAB, which produces this beer under license at its plant in Kaluga,
concentrated its efforts mainly on building distribution, practically not
advertising the product itself at first. For comparison: the market launch of a
similar brand of "Tinkoff" demanded from the company of the same name
the costs of advertising, comparable to the sales proceeds. The withdrawal of
new products under the same brand the success of the company's brand makes it
easier to deduce other goods and services under it. The main and very decent
costs fall on the first product. In the case of an expansion of the existing
brand, the costs for the withdrawal of the following goods and services are
drastically reduced, since the buyers already know the brand, they trust it and
know what to expect. At the same time, caution is needed in using this tool,
since the risks are great to blur the perception of the brand and cause it a
significant loss. Such moves are inexpensive for their performers, because the
consequences do not appear immediately, but they weaken the brand, causing the
company a significant loss. The best example illustrating the simplification of
the output of new products is the use of corporate brands rather than commodity
ones, when the consumer's image is based on the image of the company itself -
it is a brand. It was the understanding of this fact that led to a change in
the policy of the company "Hlebny Dom", which, having strong brand
names of certain products known to the citizens of St. Petersburg ("Berry
Lawn", "Krayushki"), practically abandoned them in favor of
developing a corporate brand. Among the reasons was the constant desire of the
company to produce innovative products for our market and the need to reduce
the cost of withdrawing each of them. Additional staff motivation Branding and
the brand of the product or the company itself positively affects not only
consumers, but also employees. Whatever it was, the entries in the workbook and
the work experience are given great importance. An employee who worked in a
well-known company (having a brand or being a brand) has much more advantages
over someone who worked in one of the unfamiliar offices. Therefore, successful
branding significantly increases staff loyalty, which makes it possible to
select the best specialists, not to lose revenue because of staff turnover and
in many cases not to overpay.
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