Sunday, December 11, 2011

Brand - A strategic tool

Branding is today a vital part of almost every companies strategy. It is essentially used by companies to differentiate their products from their competitors. Branding has become even more important in industries and markets where the competition has resulted in development of products , which are similar in quality and utility. Brands were initially built to give products a human touch and reassure the consumer about the concept of factory –produced-goods. With time the influence of brands has became so powerful that in today’s world , it is at times more important than the product itself. Consumers make decision’s based on the brand rather than the product. People today tend to get emotionally attached to the brands and the values that the brand stands for. This has both , a positive and a negative side to it. While brands today have become a larger than life version and at times more valuable than the companies physical assets, it also means that they can lose their value overnight.

Take for example the Coca-Cola brand. The executives at Coca-Cola had decided to replace the old coke with a new flavor in order to counter Pepsi’s growing market share. Extensive and in-depth research was carried out by coke to make sure that the new flavor would be liked by people. Blind tests were conducted on groups of consumers and it was concluded without doubt that the consumers preferred the new, less sweet flavor of coke as compared to the older one. What the executives did not expect was the huge backlash and anger there was when they released the new coke. Loyal coke fans , who in blind tests actually liked the new coke ,threatened to stop drinking coke altogether and coke feared losing its loyal customers to Pepsi. As a result just 3 months later the old flavor of coke was released and eventually the new flavor was pulled from the market. After the re-release of the old flavor ,the market share of coke increased by about 20% as compared to its share before releasing the new coke flavor. This is a classic example of the emotional quotient related to brands today. Coke had always branded itself as ‘the real thing’ and when the company tried to replace it ,the consumers felt betrayed. They refused to accept the new version of coke , even if it was a better product.

The consumers also tends to associate immense importance to how a brand differentiates itself and the core values it is built up on. This is something any companies strategy development team should keep in mind while formulating a company’s growth strategy. An excellent example is when the executives at Harley Davidson decided to increase their product line by lending their brand name to various products such as perfumes, clothes and other apparel. This change was not well received by the loyal Harley Davidson consumer base as it took away from the rugged masculine brand reputation that Harley Davidson had. The company soon realized its mistake and pulled its brand name of products which did not gel with its reputation. The lesson learnt is that while expanding ones line of product, a company should ensure that it does not weaken its brand or takes away from its core reputation .In today’s competitive world it is very important for one brand to differentiate itself from the other. Each brand essentially differentiates itself based on its core values , and there is always the risk of these core values getting dilutes as a result of adding more products to the brand.

This however does not mean that a brand cannot expand itself or add to its product line. A classic case in point is apple which has done exactly this with resounding success. However ,it is important to note that while apple increased its product line it stayed true to its core brand value , which was and has been an easy and simplified user experience even if it drives the cost high. However after reading about how brands can affect a company’s strategy I am compelled to think about how the values that a brand is built on are conceived. Should the company build its brand based on its basic and inherent core values , or should it decide those values strategically so that it can blend in with its long term strategy , or even help it to expand across multiple markets. Does the key lie in branding oneself on values which can be upheld across multiple markets such as quality rather than the the more restrictive values on which brands like Harley Davidson are built. However building ones brand on more generalized values also means that it would be less differentiated from other competitors in the market. What do you think ?

- Kailash Pande

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