labels: marketing - general, advertising/branding
How to understand the brandnews
27 December 2006

Experience suggests that no product can really be a lasting success unless it also makes headway towards becoming a successful brand. The distinction is crucial. Brands have a strong and mutually rewarding relationship with their users. Besides, apart from functional advantages, strong brands have many rich and varied associations. This takes time to build up, and the notion that a flood of advertising can hasten the process is foolish.

Brand leaders command loyalty and customers tend to build a long-term relationship with the values and personality of the brand, thereby reducing the total cost of acquiring and retaining customers. Research supports the claim that it is much cheaper to sell to those that are 'already sold on you' rather than to go after new customers. Brands, therefore, are not some airy-fairy nonsense.

An old saying among the brand marketing fraternity is, 'Everybody advertises for the brand leader.' This has interesting consequences. For example, in any survey, the number of people who recall seeing an ad in a prestigious publication often exceeds its readership. When it held about 50 per cent of the market for decades, the proportion of those who claimed to be using Colgate toothpaste, similarly, was unrealistically high. The simple explanation is that it was the brand at the top of respondents' minds as they were asked a question about usage or recall. Even more interestingly, in some surveys, one used to find that the brand in question was recalled as having been seen on TV where it was not even advertised!

One might conclude that the respondents either could not be bothered about accuracy, could not remember right, or perhaps simply wanted to be seen as exposed to the right media. A few decades ago, before the media explosion took place in India, almost any brand manager worth his salt wanted to be seen advertising in Readers' Digest. It was the English magazine with the high watermark of quality, and every reader's aspirational brand too. For both the advertiser and the reader, it was a sign of having arrived.

Another sign of a "strong brand" among several quoted by David Aaker, the noted authority on brand management, is how much consumers typically expected to pay for it. When General Motors launched the new model Saturn in the US, the company took a number of bold steps that made it a unique case study.

Everything broke with conventional wisdom: the location of the factory well outside the Detroit area, the type of workers chosen, the management structure and the work-culture of the place, the product design, the use of consumers as a community to help celebrate the ownership of the product, the choice of unconventional dealers, the way margins and pricing were arrived at and the dispensing with many of the so-called rules of auto marketing, including discounts.

One significant result of this was that the brand had such a good build up before its launch and was obviously so attractive in terms of features, that when asked what they expected to pay for it, people responded with numbers that were a few thousand dollars above the actual sticker price. There was an implied brand premium, which is the best signal for consumer perception. When they actually bought the car, Saturn buyers went home delighted, as we all are when we get something great at a bargain price.

In today's Indian market conditions, the two-wheeler maker Honda is similarly placed. For almost any model it launches whether under its own or the joint Hero-Honda name, buyers are willing to pay extra over an equally good, technically sound, substitute from another well-known mark like TVS or Bajaj. Besides, they expect fewer freebies, or zero-interest credit, etc. To students of economics, this should come as no surprise. Classical economics defines the consumer's willingness to part with a higher price as the consumer's surplus or 'the difference between what she pays for a product and what she would be willing to pay rather than go without', a definition that has stood the test of time and is a model of clarity and simplicity worth emulating.

Some careful thought would show that a brand premium is, in some senses, both an indicator as well as a cause of a brand becoming well established. As in the case of Honda, if there is an existing high level of goodwill for the 'corporate-brand' as a top-class entity, then the sub brand, say, the Hero-Honda Splendor motorcycle, would have a head start in the marketplace. Otherwise, the load of establishing it successfully would fall on its own shoulders, at a much higher cost.

Beware, however, of the hasty and obvious error of thinking that a strong corporate brand is easily transferred to any category - an error Pond's India made three decades ago when launching a toothpaste and a soap under the company name. Both failed miserably, even though the Ponds name was by far the best known in the field of face creams, talcum powders and other skin care products. The housewife simply refused to transfer her loyalties away from what were then equally powerful names in the two new categories. In other words, she said to the company: 'Just as I like your talcum powder and will not move away from it, I will not give up Lux or Colgate when it comes to soap and toothpaste respectively.'

Even within the overall powder category, the fierce loyalty amongst young mothers to their preferred brand of baby powder turned out to be simply unshakeable. The attempt by talcum powder brand leader Ponds to launch a baby powder also met with indifferent results. When this strikes you, you are bound to chime in with legendary adman David Ogilvy, when he cautioned marketers not to make the stupid mistake of taking the consumer for granted: "The consumer is not a moron; she is your wife!"

*IIM Ahmedabad and Harvard alumnus, S Ramachander is the author of Creativity@Work, and Ascending the Value Spiral – from insight to innovation.

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How to understand the brand