How to sustain a long term brand name for an Organization?
The long lasting appeal
of various brands do remind us from time and again that although products
and services are mortal and that they are governed by a more or less life
cycle which can be delayed but nevertheless avoided various brands can
sometimes escape from the clutches of time. It is this resistance to the
course of time that leads certain countries to consider in terns of accounting
that when a brand is entered as an asset in the balance sheet, it should
not be depreciated. Nevertheless, brand can also disappear. If badly managed,
any brand is doomed. This phenomenon existed long before the economics
crisis: the latter only accentuated the factors leading to decline.
More over, in all developed countries, since market as well as customers come to maturity, fierce competition from DOBs (Distributor Own Brands) can be seen. They not only arise in the food, kitchen appliances, TVs and VCRs, Clothing and banking services. DOBs can now even be found selling to companies themselves. Office stationery , for example , is dominated by DOBs and it is ironic to see big food brand manufacturers buy from the Gilbert company , one of the biggest Distributors of office furniture in france, whose products , bought from 3M for instance, are sold under its own store name .
There are DOBs in all distribution in all distribution channels: wholesalers in car equipment and spare parts develop their own DOB. They have surfaced in electrical equipment and are impacting on the market leadership of the Legrand Company . This new form of competition which acquires de facto a share of shelf space makes the struggle for the remaining space even fiercer, putting of course, brand on short allowance. Many great and well know brands have disappeared, others are struggling. Why do some brands last through out time and seems forever young, where as other do not?
Time is but a proxy variable, a convenient indicator of the changes that affect society as well as markets, subjecting the brand to the risk of obsolescence on a double front technological and cultural. With time, technological advances become more widely available and new cheaper entrants arrive that destabilize the balance of added value of established brands, forcing them in to never ending cycle of constant improvement.
For instance, the sudden growth of Daewoo in the car market is due to the fact that this conglomerate had access to GM assembly lines which were already obsolete although they were just a few years old and were sold by GM at a low price. With the passing of time, consumers either become more sophisticated and expect customized offers, or become blasé and prefer a simplified and cheaper offer. Time also goes by, current clients grow older and new generation emerges which has to be won over from scratch all over again. Finally, time also wears down the signs, the words the symbols and the advertising campaigns of brands.
Is there a common feature of the seemingly ever lasting nature of some brands? For convenience, one could say that an understanding of the brand logic, A brand is not a once for all construction, but the aim of a constant effort to reconstruct the added value. The Current products had to be continuously adapted to meer changing demand while at the same time the new concepts of the future have to be invented that will sustain the growth of the brand . An analysis of the numerous brands that have survived the crises and lasted down the year may point to the key success factors of this virtuous spiral.
The Equilibrium of Added Value
to product difference, is brand bring added values to the market. This
can have a tangible basis and an intangible or immaterial basis, It is
the later that makes us go to Mc. Donalds Even if the Big Mac is
no better than a quicks Giant , or that makes us naturally buy a
pair of Levis even though the item is fairly uncomfortable . It is the
added value which justifies the difference in price to the customer.
Either you want yoghurt or you want a Danone! There is a natural equilibrium
between material and intangible added value on the hand and prices on
The approach of the cheese manufacturing company Bongrain is a typical Example. The company has created more than ten new brands of cheese, in each case systematically taking a generic category and adding a tangible quality edge to it. For example, the cheese caprice des Dieux provides a never failing melt in you mouth experience which other camemberts cannot offers as their quality fluctuates too much. More over, the company adds on big value in terms of image, through name, packaging and advertising, as a basis for its unique proposition and to maximize its attractiveness. These two elements justify a high price premium, which when multiplied by the sales volume sustains a long term profit rate reinvested in the manufacturing plant and research and development for quality innovations and partly in brand advertising.
The problem is that
the competition does not remain inactive. The basic level of the whole
generic category improves at least as far as quality is concerned. This
erodes the perceived quality difference of the brand, but it also improves
its image, for instance, because of the progress made in terns of presentation
by the DOBs. Unfortunately, since the price differential remains the same
increased by the arrival on the market of good products which are cheaper
the equilibrium of added value is upset, resulting in a drop in the volume
The company then responds by greatly reducing advertising spend, and so the image differential. The price premium of the brand remains but no longer corresponds to the added value. This is what happened to Bongrain during the recession and forced it to stop advertising support for some of it s many products brands, leading to a downward spiral. Which strategies can stop? First of all, one should consider returning to ones original vocation. The Manufacturers brand should excel in manufacturing. This means completely rethinking production, manufacturing plant and value analysis.
All sources of cost which do not translate in to value for the customer, all the squandering of resources which increases the brand premium, should be tracked down. Benchmarking and re- engineering may also find propitious ground for consideration. Productivity gains may also stem from eliminating any marginal products in extended lines which have been mismanaged , thus cutting out the so called costs incurred way too many promotions ( in terms of logistics, complexity and management costs) .
The example of Procter and Gamble is quite revealing. In 1992 and 1993 Procter and Gamble launched a gigantic productivity programme.
· First of all, it withdrew some week brand and merged others. More over, seven of the 17 varieties of the famous Luvs diapers disappeared and Camay did the same, letting go of one third of its products in the line.
· Secondly, the firm adopted a policy called EDLP (Every Day Low Price), thus preferring a constant low price all year round to a multitude of promotional operations which only induced costs and made managing more complex.
· Thirdly , Procter under took staff reductions and closed some of its plan ( 30 plants were closed over 3 years)
All of these economics,
which amounted to several hundred million dollars, were used to reduce
retail prices spectacularly: 33% on Camay soap, 26 % on Luvs diapers,
16% on Pamper, and so on. In doing so, the brands came back in to the
core of the market, from which they had gradually been pushed out by an
increasing price difference. Kelloggs also cut its prices in May
1996. How ever, it would be a mistake to believe that all the savings
in productivity were passed on to distribution. One does not build a long
term brand loyalty by lowering prices this is achieved by creating
and injecting added value in to brand.
The main part of the productivity gains should be re invested in research, in the launching of new products or in renewing existing products by boosting their attractiveness through advertising. In 1992 to 1995, Procter increased its financial efforts in favour of new products by 30%. At Bongrain also, boosting the brand meant reinvesting a major part of the productivity gains back in to the brands. Granting these savings to distributors who in turn would pass them directly on to customers would have mistake. Since distributors is often engaged on a path that leads it to the point of selling at a loss and to absolute discounting. Selling at a lower price does not resolve the quest for the means to increases added value.