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“New exciting ideas and perspectives on building are offered that have been absent from our literature.” 4TH “New exciting ideas and perspectives on brand building!” Philip Kotler, S C Johnson & Sons Distinguished Professor of International , Northwestern University, EDITION Kellogg School of , USA Philip Kotler

“Kapferer continues to be on the leading edge.” Earl N Powell, President, Institute, Boston, USA THE NEW STRATEGIC “Managing a brand without reading this book is like driving a car without your license.” 4TH EDITION Haesun Lee, Senior Vice President of Marketing, AMOREPACIFIC Co, Korea

“The best book on !” Design Magazine

“One of the definitive resources on branding for marketing professionals worldwide.” The Economic Times, India

“One of the best books on brand management. Kapferer is thought-provoking and always able to create new insights on various brand-related topics.” THE NEW Rik Riezebos, CEO Brand Capital and director of the European Institute for Brand Management

Adopted by leading international schools, MBA programmes and marketing practitioners alike, The New Strategic Brand Management is simply the reference source for senior strategists, professionals and postgraduate students. Over the years it has not only established a reputation as one of the leading works on brand strategy but has also become synonymous with the topic itself.

This new edition builds on its impressive reputation and keeps the book at the forefront of strategic brand thinking. STRATEGIC Revealing and explaining the latest models used by companies worldwide, author Jean-Noël Kapferer covers all the leading issues faced by brand strategists today, supported by an array of international case studies. With both gravitas and intelligent insight, this book reveals new thinking on crucial topics including:

• growth in saturated markets; • positioning private labels and store brands; • decommoditisation; • globalisation and adaptation; • innovation in emerging markets; • co-branding strategies; • brand rejuvenation and turn around; • internal branding and ; BRAND • managing brand consistency and diversity; • financial evaluation of brands.

Moving beyond marketing, The New Strategic Brand Management addresses the bigger picture, integrating other components such as business models, HR and finance into brand building. It analyses the specifics of brands in B2B, services, , the internet and the luxury sector. It extends the brand concept to celebrities, universities, towns MANAGEMENT and nations. KAPFERER Jean-Noël Kapferer is one of the very few worldwide experts on brands. His book stands out from others with its unique insights, its style of exhaustive analysis and its original perspectives, stemming from his strategic vision, and his international background and experience. A professor of at HEC Paris, he holds a PhD from Northwestern University (USA) and is an active consultant to many European, US and Asian corporations. He also gives executive seminars in the US, China, Japan, Korea and India. He is the author of six books on branding, and communication, including Reinventing the Brand, also Creating and sustaining long term published by Kogan Page. You can contact him at www.kapferer.com. £35.00 ISBN: 978-0-7494-5085-4 US $70.00 Kogan Page Kogan Page US J N KAPFERER 120 Pentonville Road 525 South 4th Street, #241 London N1 9JN Philadelphia PA 19147 United Kingdom USA www.kogan-page.co.uk Branding / Business and management I

THE NEW STRATEGIC BRAND MANAGEMENT ii

‘After reading Kapferer’s book, you’ll never again think of a brand as just a name. Several exciting new ideas and perspectives on brand building are offered that have been absent from our literature.’ Philip Kotler, Northwestern University ‘A real thought provoker for marketing and business people. Strategic Brand Management is an essential tool to develop strong marketing strategy.’ P Desaulles, Vice President, Du Pont de Nemours Europe ‘A solid contribution written with depth and insight. I recommend it to all those who desire a further understanding of the various dimensions of brand management.’ David A Aaker, University of California at Berkeley, and author of Managing Brand Equity ‘The best book on brands yet. It is an invaluable reference for designers, marketing and brand managers.’ Design Magazine ‘‘One of the best books on brand management. Kapferer is thought provoking and always able to create new insights on various brand related topics.’ Rik Riezebos, CEO Brand Capital and director of EURIB/European Institute for Brand Management

‘One of the definitive resources on branding for marketing professionals worldwide.’ The Economic Times, India

‘Jean Noel Kapferer’s hierarchy of brands with six levels of brands is an extraordinary insight.’ Sam Hill and Chris Lederer, authors of The Infinite Asset, Harvard Press

‘A fresh perspective on branding that is easy to understand and inspirational. I believe it to be the finest book on the subject in the today.’ Marsha Lindsay, President and CEO, Lindsay, Stone and Briggs

‘The treatment of brand-product strategies, brand extensions and financial evaluations are also strengths of the book.’ Journal of Marketing ‘A “think book”. It deals with the very essence and culture of branding.’ International Journal of Research in Marketing ‘An authoritative analysis about establishing an identity and exploiting it.’ Daily Telegraph ‘A full and highly informative text… well written and brought to life through numerous appropriate examples.’ Journal of the Society III

THE NEW STRATEGIC BRAND MANAGEMENT

Creating and Sustaining Brand Equity Long Term

JEAN-NOËL KAPFERER

London and Philadelphia iv

Publisher’s note Every possible effort has been made to ensure that the information contained in this book is accurate at the time of going to press, and the publishers and authors cannot accept responsi- bility for any errors or omissions, however caused. No responsibility for loss or damage occa- sioned to any person acting, or refraining from action, as a result of the material in this publication can be accepted by the editor, the publisher or any of the authors. First published in France in hardback in 1992 and in paperback in 1995 by Les Editions d’Organisation Second edition published in Great Britain in 1997 by Kogan Page Limited Third edition 2004 Reprinted 2005, 2007 Fourth edition 2008 Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned addresses: 120 Pentonville Road 525 South 4th Street, #241 London N1 9JN Philadelphia PA 19147 United Kingdom USA www.kogan-page.co.uk © Les Editions d’Organisation, 1992, 1995, 1997, 2004, 2007, 2008 The right of Jean-Noel Kapferer to be identified as the author of this work has been asserted by him in accordance with the Copyright, Designs and Patents Act 1988. ISBN 978 0 7494 5085 4

British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Kapferer, Jean-Noël. New strategic brand management : creating and sustaining brand equity long term / Jean- Noël Kapferer. – 4th ed. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-7494-5085-4 (alk. paper) 1. Brand name products–Management. I. Title. HD69.B7K37 2008 658.8'343–dc22 2007037849

Typeset by Saxon Graphics Ltd, Derby Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall V

Contents

List of figures ix List of tables xii Preface to the fourth edition xiv

Introduction: Building the brand when the clients are empowered 1

Part One: Why is branding so strategic? 7

1. Brand equity in question 9 What is a brand? 9; Differentiating between brand assets, strength and 13; Tracking brand equity 15; Goodwill: the convergence of finance and marketing 18; How brands create value for the customer 19; How brands create value for the company 23; Corporate reputation and the corporate brand 26

2. Strategic implications of branding 31 What does branding really mean? 31; Permanently nurturing the difference 35; Brands act as a genetic programme 36; Respect the brand ‘contract’ 38; The product and the brand 39; Each brand needs a flagship product 41; Advertising products through the brand prism 42; Brands and other signs of quality 44; Obstacles to the implications of branding 45

3. Brand and business building 51 Are brands for all companies? 51; Building a market leader without advertising 52; Brand building: from product to values, and vice versa 55; Are leading brands the best products or the best value? 57; Understanding the value curve of the target 58; Breaking the rule and acting fast 58; Comparing brands and business models: cola drinks 59 vi CONTENTS

4. From private labels to store brands 65 Evolution of the distributor’s brand 66; Are they brands like the others? 69; Why have distributors’ brands? 74; The financial equation of the distributor’s brand 75; The three stages of the distributor’s brand 77; The case of Decathlon 79; Factors in the success of distributors’ brands 82; Optimising the DOB marketing mix 84; The real brand issue for distributors 85; Competing against distributors’ brands 87; Facing the low-cost revolution 90; Should manufacturers produce goods for DOBs? 93

5. Brand diversity: the types of brands 95 Luxury, brand and griffe 95; Service brands 103; Brand and nature: fresh produce 106; Pharmaceutical brands 108; The business-to-business brand 113; The internet brand 119; Country brands 123; Thinking of towns as brands 125; Universities and business schools are brands 128; Thinking of celebrities as brands 131; Thinking of programmes as brands 132

Part Two: The challenges of modern markets 135

6. The new rules of brand management 137 The limits of a certain type of marketing 139; About brand equity 141; The new brand realities 144; We have entered the B to B to C phase 152; Brand or power? 153; Building the brand in reverse? 154; The power of passions 155; Beginning with the strong 360° experience 156; Beginning with the shop 158; The company must be more human, more open 158; Experimenting for more efficiency 159; The enlarged scope of brand management 160; Licensing: a strategic lever 164; How co-branding grows the business 166

7. Brand identity and positioning 171 Brand identity: a necessary concept 171; Identity and positioning 175; Why brands need identity and positioning 178; The six facets of brand identity 182; Sources of identity: brand DNA 188; Brand essence 197

Part Three: Creating and sustaining brand equity 201

8. Launching the brand 203 Launching a brand and launching a product are not the same 203; Defining the brand’s platform 204; The process of brand positioning 207; Determining the flagship product 209; Brand campaign or product campaign? 210; Brand language and territory of communication 210; Choosing a name for a strong brand 211; Making creative 360° communications work for the brand 214; Building brand foundations through opinion leaders and communities 215

9. The challenge of growth in mature markets 219 Growth through existing customers 219; Line extensions: necessity and limits 222; Growth through innovation 227; Disrupting markets through value innovation 230; Managing fragmented markets 232; Growth through cross-selling between brands 234; Growth through internationalisation 234 CONTENTS vii

10. Sustaining a brand long term 237 Is there a brand life cycle? 238; Nurturing a perceived difference 240; Investing in communication 243; No one is free from price comparisons 245; Branding is an art at retail 247; Creating entry barriers 248; Defending against brand counterfeiting 250; Brand equity versus customer equity: one needs the other 252; Sustaining proximity with influencers 260; Should all brands follow their customers? 262; Reinventing the brand: Salomon 263

11. Adapting to the market: identity and change 269 Bigger or better brands? 270; From reassurance to stimulation 271; Consistency is not mere repetition 272; Brand and products: integration and differentiation 273; Specialist brands and generalist brands 275; Building the brand through coherence 279; The three layers of a brand: kernel, codes and promises 290; Respecting the brand DNA 292; Managing two levels of branding 293

12. Growth through brand extensions 295 What is new about brand extensions? 296; Brand or line extensions? 298; The limits of the classical conception of a brand 300; Why are brand extensions necessary? 303; Building the brand through systematic extensions: Nivea 306; Extending the brand to internationalise it 309; Identifying potential extensions 310; The economics of 312; What research tells us about brand extensions 316; What did the research reveal? 324; How extensions impact the brand: a typology 324; Avoiding the risk of dilution 326; Balancing identity and adaptation to the extension market segments 330; Assessing what should not change: the brand kernel 332; Preparing the brand for remote extensions 333; Keys to successful brand extensions 336; Is the market really attractive? 340; An extension-based business model: Virgin 342; How execution kills a good idea: easyCar 345

13. 347 The key questions of brand architecture 347; Type and role of brands 349; The main types of brand architecture 356; Choosing the appropriate branding strategy 372; New trends in branding strategies 376; Internationalising the architecture of the brand 379; Some classic dysfunctions 379; What name for new products? 381; Group and corporate brands 385; Corporate brands and product brands 388

14. Multi-brand portfolios 391 Inherited complex portfolios 392; From single to multiple brands: Michelin 393; The benefits of multiple entries 395; Linking the portfolio to segmentation 396; Global portfolio strategy 401; The case of industrial brand portfolios 402; Linking the brand portfolio to the corporate strategy 405; Key rules to manage a multi-brand portfolio 406; The growing role of design in portfolio management 409; Does the corporate organisation match the brand portfolio? 410; Auditing the portfolio strategically 411; A local and global portfolio – Nestlé 413 viii CONTENTS

15. Handling name changes and brand transfers 415 Brand transfers are more than a name change 415; Reasons for brand transfers 416; The challenge of brand transfers 418; When one should not switch 419; When brand transfer fails 420; Analysing best practices 421; Transferring a service brand 426; How soon after an acquisition should transfer take place? 428; Managing resistance to change 431; Factors of successful brand transfers 433; Changing the corporate brand 435

16. Brand turnaround and rejuvenation 437 The decay of brand equity 438; The factors of decline 439; Distribution factors 442; When the brand becomes generic 443; Preventing the brand from ageing 443; Rejuvenating a brand 445; Growing older but not ageing 450

17. Managing global brands 455 The latest on globalisation 456; Patterns of brand globalisation 459; Why globalise? 461; The benefits of a global image 466; Conditions favouring global brands 468; The excess of globalisation 470; Barriers to globalisation 471; Coping with local diversity 473; Building the brand in emerging countries 478; Naming problems 479; Achieving the delicate local–global balance 480; Being perceived as local: the new ideal of global brands? 483; Local brands can strike back 485; The process of brand globalisation 487; Globalising communications: processes and problems 495; Making local brands converge 498

Part Four: Brand valuation 501

18. Financial valuation and for brands 503 Accounting for brands: the debate 504; What is financial brand equity? 507; Evaluating brand valuation methods 513; The nine steps to brand valuation 525; The evaluation of complex cases 528; What about the brand values published annually in the press? 529

Bibliography 531 Index 545 IX

Figures

1.1 The brand system 12 1.2 The levers of brand profitability 25 1.3 Branding and 26 2.1 The brand system 34 2.2 The cycle of brand management 36 2.3 The product and the brand 41 2.4 Product line overlap among brands 42 2.5 Brands give innovations meaning and purpose 43 3.1 The two models of brand building through time 56 4.1 Relative positioning of the different distributors’ brands 68 5.1 The pyramid brand and business model in the luxury market 98 5.2 The constellation model of luxury brands 100 5.3 History-based and story-based approaches to luxury 101 5.4 How brands impact on medical prescription 112 6.1 Limits of traditional marketing 140 6.2 From brand values to brand value 143 6.3 Brand equity 144 6.4 The extension of brand management 162 7.1 Identity and image 174 7.2 Positioning a brand 176 7.3 The McDonald’s positioning ladder 180 7.4 Brand identity prism 183 7.5 Sample brand identity prisms 188 7.6 Example of brand platform: Jack Daniel’s 199 8.1 Transfer of company identity to brand identity when company and brand names coincide 206 8.2 From brand platform to activation 210 x FIGURES

8.3 Consumer empowerment 217 9.1 Increasing volume per capita 221 9.2 Segmenting by situation 222 9.3 Brands’ dual management process 229 9.4 A disruptive value curve: Formule 1 hotels 231 10.1 Innovation: the key to competitiveness 241 10.2 Paths of brand growth and decline 242 10.3 Penetration of distributors’ brands and advertising intensity 244 10.4 Sources of price differentiation between brands and hard-discount products 246 10.5 Brand capital and customer capital: matching preferences and purchase behaviour 255 11.1 The identity versus diversity dilemma 271 11.2 The double role of brand integration and differentiation 274 11.3 Differentiate what is variable from what is non-negotiable in the brand identity 276 11.4 Generalists and specialists 278 11.5 The different relationships between brands and products 285 11.6 How brands incorporate change: kernel and peripheral traits 287 11.7 Product lines must embody the core facets and each adds its own specific facets 288 11.8 Organisation of Mars masterbrand and products 289 11.9 How the brand is carried by its products 290 11.10 Identity and pyramid models 291 12.1 The Nivea extensions galaxy 307 12.2 Perimeters of brand extension 311 12.3 Rate of success of new brands vs brand extensions (OC&C) 313 12.4 The impact of brand extension on the consumer adoption process (OC&C) 313 12.5 Ayer model: how a family name impacts the sales of a new product 314 12.6 Comparative sales performance during the first two years (Nielsen) 315 12.7 The brand extension decision 317 12.8 The consequences of product and concept fit and misfit 322 12.9 Type of brand and ability to extend further 334 12.10 The process of extension 335 12.11 Framework for evaluating extensions 336 12.12 The Virgin extension model 343 13.1 Positioning alternative branding strategies 352 13.2 The six brand architecture strategies 354 13.3 The product-brand strategy 356 13.4 Range brand formation 360 13.5 Range brand structured in lines 362 13.6 Endorsing brand strategy 363 13.7 strategy 364 13.8 Source brand or parent brand strategy 367 13.9 A case of brand proliferation or dilution of identity 371 13.10 3M branding options review 376 13.11 Which brand architecture is suitable for brand innovation? 382 13.12 Corporate and product branding at ICI 390 14.1 Segmenting the brand portfolio by price spectrum 400 15.1 When fails: from Fairy to Dawn (P&G) 421 FIGURES xi

15.2 A stepwise approach to brand transfers (relating the type of transfer to the image gap) 431 16.1 Analysing the potential of an old brand 446 16.2 Sustaining brand equity long term : dual management in practice 451 17.1 Managing the globalisation process between headquarters and subsidiaries 498 18.1 What is ‘brand equity’? 504 18.2 The issue of fair valuation of brands 505 18.3 Positioning brand valuation methods 513 18.4 A multi-step approach to brand valuation 518 18.5 The Interbrand S-curve – relation between brand strength and multiple 521 18.6 Stepped graph showing relationship between brand strength and multiple 524 xii

Tables

1.1 From awareness to financial value 14 1.2 Result of a brand tracking study 17 1.3 Brand financial valuation, August 2006 19 1.4 How creates value and image dimensions 21 1.5 The functions of the brand for the consumer 22 1.6 Brand functions and the distributor/manufacturer power equilibrium 23 2.1 The brand as genetic programme 36 3.1 Consumer price (in euros/litre) of various orange-flavour drinks in Europe 59 4.1 Brand attachment: the 10 winning brands 72 4.2 Determinants of attachment to distributors’ and producers’ brands 73 4.3 How copycat resemblance influences consumers’ perceptions 79 4.4 In which sectors do big brands resist brands and where are they defeated? 84 4.5 Percentage of consumers who intend to buy the distributor’s product 85 5.1 Consumers’ four concepts of luxury 97 5.2 Brand personality is related to prescription levels 110 5.3 The brand influence in medical prescription 111 5.4 The top ten European business schools 129 6.1 Evolution of brand indicators over 10 years 142 6.2 Evolution of brand capital for Coca-Cola and Danone 142 6.3 Strategic uses of co-branding 170 7.1 How to evaluate and choose a brand positioning 177 7.2 Sub-brand and master brand positioning 182 7.3 The most typical products of two mega-brands 191 7.4 Brand laddering process: the Benetton case 193 8.1 Underlying the brand is its programme 205 8.2 Comparing positioning scenarios: typical positioning scenarios for a new Cuban rum brand 208 TABLES xiii

9.1 Addressing market fragmentation 233 10.1 Advertising weight and trade brands’ penetration 245 11.1 From risk to desire: the dilemma of modern branding 271 12.1 Relating extensions to strategy 296 12.2 Brand extension impact on launching costs 315 12.3 Success rate of two alternative branding policies 318 12.4 Extension strategic evaluation grid 341 13.1 ‘House of brands’ or ‘branded house’ 353 13.2 Shared roles of the corporate and product brand 389 16.1 How brand equity decays over time 439 17.1 From global to local: eight alternative patterns of globalisation 459 17.2 Globalisation matrix 461 17.3 How Absolut copes with the grey market: corridor 466 17.4 How global and local brands differ 468 17.5 What differences between countries would compel you to adapt the marketing mix of the brand? 472 17.6 Which facets of the brand mix are most often globalised? 473 17.7 Barilla’s international and domestic range 489 17.8 How to make local brands converge 499 18.1 A method of valuing brand strength 520 18.2 Another estimate of the financial value of brands (2007) 524 18.3 Assessing brand strength: strategic diagnosis 527 xiv

Preface to the fourth edition

Integrating brand and business

This is a book on strategic brand management. It capitalises on the success of the former three editions. As far as we understand from our readers worldwide (marketers, advertisers, lawyers, MBA students and so on), this success was based on six attributes which we have of course maintained: l Originality. Strategic Brand Management is quite different from all the other books on brand management. This is due to its comprehensiveness and its unique balance between theory and cases. It also promotes strong and unique working models. l Relevance. The cases and illustrations are new, unusual, and not over-exposed. They often represent business situations readers will relate to and understand more readily than over used examples using Coke, , Cisco, Fedex, BMW and other great classics of most books and conferences on brands. l Breadth of scope. We have tried to address most of the key decisions faced by brands. l Depth of treatment. Each facet of brand management receives a deep analysis, hence the size of this edition. This is a book to consult. l Diversity. Our examples cover the fast-moving consumer goods sector (FMCG) as well as , business-to-business brands, pharmaceutical brands, luxury brands, service brands, e-brands, and distributors’ brands – which are brands almost like the others. l International scope, with examples from the United States, Europe and Asia.

This fourth edition is much more than a revision of the previous one. It is a whole new book for understanding today’s brands and managing them efficiently in today’s markets. Sixteen years after the first edition, so much change has happened in the world of brands! This is why this new edition has been thoroughly updated, transformed and enriched. Of course, our models and methodologies have not changed in essence, but they have been adapted to reflect current and issues. PREFACE xv

This edition concentrates on internationalisation and globalisation (how to implement these in practice), on portfolio concentration (managing brand transfers or switches), on the creation of megabrands through brand extensions, on the development of competitive advantage and dominant position through an adequate brand portfolio, and on the efficient management of the relationships between the brand, the corporation and the product (the issue of brand archi- tectures). There are many other significant new features in this edition, which reflect the new branding environment: l Because distributors’ brands (often wrongly described as private labels) are everywhere and often hold a dominant market share, they need their own chapter. In addition, in each chapter we have addressed in depth how the recommendations do or do not apply to distrib- utors’ brands. l Significantly, this edition develops its new section on innovation. Curiously, the topic of brands and innovation is almost totally absent from most books on branding. This seems at odds with the fact that innovation and branding has become the number one topic for companies. In fact, as we shall demonstrate, brands grow out of innovation, and innovation is the lifeblood of the brand. Furthermore, contrary to what is often said or thought, the issue of innovation is not merely about creativity. It is about reinventing the brand. l This new edition is also sensitive to the fact that many modern markets are saturated. How can brands grow in such competitive environments? A full chapter on growth is included, starting with growth from the brand’s existing customers. l The issue of corporate brands and their increasing importance is also tackled, as is their rela- tionship with classic brand management. l We also stress much more than previously the implementation side: how to build interesting brand platforms that are able to stimulate powerful creative advertising that both sells and builds a salient brand; how to activate the brand; how to energise it at contact points; and how to create more bonding. We provide new models to help managers.

This book also reflects the evolution of the author’s thought. Our perspective on brands has changed. We feel that the whole domain of branding is becoming a separate area, perhaps with a risk of being self-centered and narcissistic. Too often the history of a company’s success or even failure is seen through the single perspective of the brand, without taking into account all the conditions of this success or failure. A brand is a tool for growing the business profitably. It has been created for that purpose, but business cannot be reduced to brands. The interrelationship between the business strategy and the brand strategy needs to be highlighted, because this is the way companies operate. As a consequence, we move away from the classic partitioning of brand equity into two separate approaches. One of these is customer-based, the other cashflow-based. It is crucial to remember that a brand that produces no additional cashflow is of little value, whatever its image and the public awareness of it. In fact, it is time to think of the brand as a ‘great shared idea supported by a viable economic equation’. In this fourth edition, we try regu- larly to relate brand decisions to the economic equation of the business. Today, every business now wants to have its own brand, not for the sake of possessing it, as one possesses a painting or statue, but to grow the business profitably. We hope this book will help readers significantly, whether they are working in multinationals or in a small dynamic business, developing a global brand or a local one. xvi

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Introduction: Building the brand when the clients are empowered

It is surprising to see how brands continue to stimulate interest although so many prophets and experts have recently claimed they have no future. Today, all business managers are supposed to have attended conferences on CRM, ECR, customer equity, , customer database management, e-relationships and proximity marketing: all these new tools criticise the old brand concept and focus on the most efficient techniques to serve the most profitable customers. They claim that conquering new clients is of no value any more: profitability will come from mastering databases and loyalty programmes. Despite this, managers keep on attending conferences on brand management. Why haven’t they been convinced that brand management is an outdated tool? They have learnt that all these useful techniques soon lose their potential to create a lasting competitive advantage. The more they are diffused and shared, the more they become a standard, used by all competitors. What is customer equity without brand equity? There are very few strategic assets available to a company that can provide a long-lasting competitive advantage, and even then the time span of the advantage is getting shorter. Brands are one of them, along with R&D, a real consumer orientation, an efficiency culture (cost cutting), employee involvement, and the capacity to change and react rapidly. This is the mantra of Wal-Mart, Starbucks, Apple and Zara. Managers have also rediscovered that the best kind of loyalty is , not price loyalty or bargain loyalty, even though as a first step it is useful to create behavioural barriers to exit. Finally, A Ehrenberg (1972) has shown through 40 years of panel data analysis that product penetration is correlated with purchase frequency. In other words, big brands have both a high penetration rate and a high purchase frequency per buyer. Growth will necessarily take these two routes, and not only be triggered by customer loyalty. 2 THE NEW STRATEGIC BRAND MANAGEMENT

In our materialistic societies, people want to give meaning to their consumption. Only brands that add value to the product and tell a story about its buyers, or situate their consumption in a ladder of immaterial values, can provide this meaning. Hence the cult of luxury brands.

Pro logo?

Today, every organisation wants to have a brand. Beyond the natural brand world of producers and distributors of fast-moving consumer goods, whose brands are competing head to head, branding has become a strategic issue in all sectors: high tech, low tech, commodities, utilities, components, services, business-to-business (B2B), pharmaceutical laboratories, non-govern- mental organisations (NGOs) and non-profit organisations all see a use for branding. Amazingly, all types of organisations or even persons now want to be managed like brands: David Beckham, the English soccer star, is an example. Los Angeles Galaxy paid US$250 million to acquire this soccer hero. It expects to recoup this sum through the profits from licensed products using the name, face or signature of David Beckham, which are sold throughout the world. Everything David Beckham does is aimed at reinforcing his image and identity, and thus making sales and profits for the ‘Beckham brand’. Recently, the mayor of Paris decided to define the city as a destination brand and to manage this brand for profit. Many other towns had already done this. Countries also think of them- selves in brand terms (Kotler et al, 2002). They are right to do so. Whether they want it or not, they act de facto as a brand, a summary of unique values and benefits. India had a choice between allowing uncontrolled news and information to act (perhaps negatively) on world public opinion, or choosing to try to manage its image by promoting a common set of strategic values (its brand meaning), which might be differentiated by market. Countries compete in a number of markets, just as a conventional brand competes for profitable clients: in the private economic and financial investments market, various raw materials and agricultural markets, the tourism market, the immigration market and so on.

It takes more than branding to build a brand

Companies and organisations from all kinds of sectors ask whether or not a brand could consol- idate their business or increase its profitability, and what they should do to create a brand, or become a corporate brand. What steps should be followed, with what investments and using what skills? What are realistic objectives and expectations? Having based their success on mastering production or , they may feel they lack the methods and know-how to implement a brand creation plan. They also feel it is not simply a matter of communication. Although communication is necessary to create a brand, it is far from being sufficient. Certainly a brand encapsulates in its name and its visual symbol all the goodwill created by the positive experiences of clients or prospects with the organisation, its products, its channels, its stores, its communication and its people. However, this means that it is necessary to manage these points of contact (from product or service to channel management, to advertising, to Internet site, to word of mouth, the organisation’s ethics, and so on) in an integrated and focused way. This is the core skill needed. This is why, in this fourth edition of Strategic Brand Management, while we look in depth at branding decisions as such, we also insist on the ‘non-branding’ facets of creating a brand. Paradoxically, it takes more than branding to build a brand. INTRODUCTION 3

Today clients are empowered as never before. It is the end for average brands. Only those that maximise satisfaction will survive, whether they offer extremely low prices, or rewarding expe- rience or service or performance. It is the end of hollow brands, without identity. The trader is also more powerful than many of the brands it distributes: all brands that do not master their channel are now in a B to B to C situation, and must never forget it.

Building both business and brand

Hit parades of the financial value of brands (brand equity) are regularly published in business, financial and economics magazines. Whatever doubts one may have on their validity (see Chapter 18), they do at least stress the essentially financial intentions behind building a brand. Companies do not build brands to have authors write books on them, or to make the streets livelier thanks to billboard advertising. They do it to grow the business still more profitably. One does not make money by selling products, but brands: that is to say a unique set of values, both tangible and intangible. Even low-cost operators need to compete on trust. Our feeling is that, little by little, branding has been constructed as a separate field. There is a risk however of the branding community falling in love with its own image: looking at the considerable number of books published on brands, and at the list of most recent brand equity values, one could think that brands are the one and only issue of importance. Indeed branding professionals may become infatuated and forget the sources of brand equity: production, serv- icing, staffing, distributing, innovating, pricing and advertising, all of which help to create value associations and effects which become embedded in clients’ long-term memory. Looking at one of the stars of this hit parade, Dell, whose brand is valued so highly, one question arises: is Dell’s success due to its brand or to its business model? It could be argued that it was not the Dell brand but Dell activities in a broader sense that allowed the company to announce more price cuts in 2006, putting Hewlett-Packard in a difficult position between two ‘boa constrictors’, Dell and IBM. The brand is not all: it captures the fame but it is made possible by the business model. It is time to recreate a balance in accounting for success and failures. It is the end of fairy tales; let’s introduce the time of fair accounts. Throughout this new edition of Strategic Brand Management, we relate the brand to the business, for both are intimately intertwined. We regularly demonstrate how branding decisions are determined by the business model and cannot be understood without this perspective. In fact in a growing number of advanced companies, top managers’ salaries are based on three critical criteria: sales, profitability and brand equity. They are determined in part by how fast these managers are building the strategic competitive asset called a brand. The goal of strategy is to build a sustainable advantage over competition, and brands are one of the very few ways of achieving this. The business model is another. This is why tracking brands, product or corporate, is so important.

Looking at brands as strategic assets

The 1980s marked a turning point in the conception of brands. Management came to realise that the principal asset of a company was in fact its brand names. Several articles in both the American and European press dealt with the discovery of ‘brand equity’, or the financial value of the brand. In fact, the emergence of brands in activities which previously had resisted or were 4 THE NEW STRATEGIC BRAND MANAGEMENT foreign to such concepts (industry, banking, the service sector, etc) vouched for the new impor- tance of brands. This is confirmed by the importance that so many distributors place on the promotion of their own brands. For decades the value of a company was measured in terms of its buildings and land, and then its tangible assets (plant and equipment). It is only recently that we have realised that its real value lies outside, in the minds of potential customers. In July 1990, the man who bought the Adidas company summarised his reasons in one sentence: after Coca-Cola and Marlboro, Adidas was the best-known brand in the world. The truth contained in what many observers took simply to be a clever remark has become increasingly apparent since 1985. In a wave of mergers and acquisitions, triggered by attempts to take up advantageous positions in the future single European market, market transactions pushed prices way above what could have been expected. For example, Nestlé bought Rowntree for almost three times its stock market value and 26 times its earnings. The Buitoni group was sold for 35 times its earnings. Until then, prices had been on a scale of 8 to 10 times the earnings of the bought-out company. Paradoxically, what justified these prices and these new standards was invisible, appearing nowhere in the companies’ balance sheets. The only assets displayed on corporate balance sheets were fixed, tangible ones, such as machinery and inventory. There was no mention of the brands for which buyers offered sums much greater than the net value of the assets. The acquiring companies generally posted this extra value or goodwill in their consolidated accounts. The actual object of these gigantic and relentless takeovers was invisible, intangible and unwritten: they were aimed at acquiring brands. What changed in the course of the 1980s was awareness. Before, in a takeover bid, merger or acquisition, the buyer acquired a pasta manufacturer, a chocolate manufacturer or a producer of microwave ovens or abrasives. Now companies want to buy Buitoni, Rowntree (that is, KitKat, After Eight), Moulinex or Orange. The strength of a company like Heineken is not solely in knowing how to brew beer; it is that people all over the world want to drink Heineken. The same logic applies for IBM, Sony, McDonald’s, Barclays Bank or Dior. By paying very high prices for companies with brands, buyers are actually purchasing posi- tions in the minds of potential consumers. Brand awareness, image, trust and reputation, all painstakingly built up over the years, are the best guarantee of future earnings, thus justifying the prices paid. The value of a brand lies in its capacity to generate such cashflows. Hardly had this management revolution been born than conflicting arguments arose regarding the reality and the durability of brand equity. With the systematic rise in distributors’ own brands it was argued that the capacity of brands had been exaggerated. The fall in the price of Marlboro cigarettes in the USA in April 1993 created panic on Wall Street, with the share prices of all consumer goods firms falling. This mini-Pearl Harbor proved healthy. At the height of recession we realised that it was not the brand – registered – as such that created value, but all the marketing and communication done by the firm. Consumers don’t just buy the brand name, they buy branded products that promise tangible and intangible benefits created by the efforts of the company. Given time, the brand may evoke a number of associations, qualities and differences, but these alone do not comprise the whole offer. A map alone is not the underlying territory. In the 1990s, because of recession and saturated markets, the emphasis shifted from brands to customer equity. New techniques, based on one-to-one targeting, replaced the emphasis on classic media advertising. They could prove their effectiveness and targeted heavy buyers. Just as some have exaggerated the overwhelming power of brands, so the opposition to brands has been short-lived. The value of brands comes from their ability continuously to add value and INTRODUCTION 5 deliver profits through corporate focus and cohesiveness. Another question is, who is best placed to make use of brands? Is it the producer or the distributor? You must be very wary as regards ideological preferences; for example, there are very few manufacturers’ brands on the furniture market other than those of Italian designers, yet everybody talks about Habitat or Ikea, two distributors. They are seen as agents offering strong value-added style in the first case and competitive prices and youth appeal in the second. With manufacturers integrating their distribution, and distributors thinking of themselves as brands, the world of brands is moving permanently, looking for new brand and business models, sources of sustainable advantage and added value for clients. We shall explore these new models that define the winning brands of today and tomorrow. 6

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Why is branding so strategic? 8

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Brand equity in question

Brands have become a major player in What is a brand? modern society. In fact they are everywhere. They penetrate all spheres of our life: Curiously, one of the hottest points of economic, social, cultural, sporting, even disagreement between experts is the definition religion. Because of this pervasiveness they of a brand. Each expert comes up with his or her have come under growing criticism (Klein, own definition, or nuance to the definition. 1999). As a major symbol of our economies The problem gets more acute when it comes to and postmodern societies, they can and measurement: how should one measure the should be analysed through a number of strength of a brand? What limited numbers of perspectives: macroeconomics, microeco- indicators should one use to evaluate what is nomics, sociology, psychology, anthro- commonly called brand equity? In addition pology, history, semiotics, philosophy and so there is a major schism between two paradigms. on. In fact our first book on brands was a One is customer-based and focuses exclusively collection of essays by eminent scholars from on the relationship customers have with the all these disciplines (Kapferer and Thoenig, brand (from total indifference to attachment, 1989). loyalty, and willingness to buy and rebuy based This book focuses on the managerial on beliefs of superiority and evoked emotions). perspective: how best to manage brands for The other aims at producing measures in profit. Since brands are now recognised as part dollars, euros or yen. Both approaches have of a company’s capital (hence the concept of their own champions. It is the goal of this brand equity), they should be exploited. fourth edition of Strategic Brand Management to Brands are intangible assets, assets that unify these two approaches. produce added benefits for the business. This is the domain of strategic brand management: Customer-based definitions how to create value with proper brand management. Before we proceed, we need to The financial approach measures brand value clarify the brand concept. by isolating the net additional cashflows 10 WHY IS BRANDING SO STRATEGIC? created by the brand. These additional cash the financial perspective help us in defining flows are the result of customers’ willingness brands and brand equity? to buy one brand more than its competitors’, even when another brand is cheaper. Why l First, brands are intangible assets, posted then do customers want to pay more? Because eventually in the balance sheet as one of of the beliefs and bonds that are created over several types of intangible asset (a category time in their minds through the marketing of that also includes patents, databases and the brand. In brief, customer equity is the the like). preamble of financial equity. Brands have l Second, brands are conditional assets. This is financial value because they have created a key point so far overlooked. An asset is an assets in the minds and hearts of customers, element that is able to produce benefits distributors, prescribers, opinion leaders. over a long period of time. Why are brands These assets are brand awareness, beliefs of conditional assets? Because in order to exclusivity and superiority of some valued deliver their benefits, their financial value, benefit, and emotional bonding. This is what they need to work in conjunction with is expressed in the now classic definition of a other material assets such as production brand: ‘a brand is a set of mental associations, facilities. There are no brands without held by the consumer, which add to the products or services to carry them. This will perceived value of a product or service’ (Keller, have great consequences for the method of 1998). These associations should be unique measuring financial value. For now, this (exclusivity), strong (saliency) and positive reminds us that some humility is required. (desirable). Although many people claim that brands This definition focuses on the gain in are all and everything, brands cannot exist perceived value brought by the brand. How do without a support (product or service). This consumers’ evaluations of a car change when product and service becomes effectively an they know it is a Volkswagen, a Peugeot or a embodiment of the brand, that by which Toyota? Implicitly, in this definition the the brand becomes real. As such it is a main product itself is left out of the scope of the source of brand evaluation. Does it produce brand: ‘brand’ is the set of added perceptions. high or low satisfaction? Brand As a result brand management is seen as management starts with creating products, mostly a communication task. This is services and/or places that embody the incorrect. Modern brand management starts brand. Interestingly, the legal approach to with the product and service as the prime and brands also insists on their vector of perceived value, while communi- conditional nature. One should never use cation is there to structure, to orient tangible the brand name as a noun, but as an perceptions and to add intangible ones. adjective attached to a name, as for Later we analyse the relationship between instance with a Volvo car, not a Volvo. brand and product (see page 39). A second point to consider is that Keller’s now-classic definition is focused on cognitions (mental The legal perspective associations). This is not enough: strong brands have an intense emotional component. An internationally agreed legal definition for brands does exist: ‘a sign or set of signs certi- Brands as conditional asset fying the origin of a product or service and differentiating it from the competition’. Financiers and accountants have realised the Historically, brands were created to defend value of brands (see Chapter 18). How does producers from theft. A cattle brand, a sign BRAND EQUITY IN QUESTION 11 burned into the animal’s hide, identified the ciations. Are the benefits the name evokes owner and made it apparent if the animal had (a) salient, (b) exclusive and (c) trusted? been stolen. ‘Brands’ or trademarks also iden- We live in an attention economy: there is so tified the source of the olive oil or wine much choice and opacity that consumers contained in ancient Greek , and cannot spend their time comparing before created value in the eyes of the buyers by they make a choice. They have no time and building a reputation for the producer or even if they did, they cannot be certain of distributor of the oil or wine. being able to determine the right product or A key point in this legal definition is that service for them. Brands must convey trademarks have a ‘birthday’ – their regis- certitude, trust. They are a time and risk tration day. From that day they become a reducer. In fact where there is no risk there is property, which needs to be defended against no brand. We made this point in an earlier infringements and counterfeiting (see page 87 book (Kapferer and Laurent, 1995). The for defence strategies). Brand rights disappear perceived risk could be economic (linked to when they are not well enough defended, or if price), functional (linked to performance), registration is not renewed. One of the sources experiential, psychological (linked to our self- of loss of rights is degenerescence. This occurs concept), or social (linked to our social image). when a company has let a distinctive brand This is why it takes time to build the saliency name become a generic term. that is part of brand awareness, and this trust Although the legal approach is most useful (trusted beliefs about the brand’s unique for defending the company against copies of benefits). its products, it should not become the basis Brand power to influence buyers relies on of brand management. Contrary to what the representations and relationships. A represen- legal definition asserts, a brand is not born tation is a system of mental associations. We but made. It takes time to create a brand, stress the word ‘system’, for these associations even though we talk about launching are interconnected. They are in a network, so brands. In fact this means launching a that acting on one impacts some others. These product or service. Eventually it may become associations (also called brand image) cover a brand, and it can also cease to be one. What the following aspects: makes a brand recognisable? When do we know if a name has reached the status of a l What is the brand territory (perceived brand? For us, in essence, a brand is a name competence, typical products or services, that influences buyers, becoming a purchase specific know-how)? criterion. l What is its level of quality (low, middle, , luxury)? A brand is a name that influences buyers l What are its qualities? l What is its most discriminating quality or This definition captures the essence of a brand: benefit (also called perceived positioning)? a name with power to influence buyers. Of course, it is not a question of the choice of the l What typical buyer does the brand evoke? name itself. Certainly a good name helps: that What is the brand personality and brand is, one that is easily pronounceable around the imagery? world and spontaneously evokes desirable associations. But what really makes a name Beyond mental associations, the power of a become a brand are the saliency, differentia- name is also due to the specific nature of the bility, intensity and trust attached to these asso- emotional relationships it develops. A brand, it 12 WHY IS BRANDING SO STRATEGIC? could be said, is an attitude of non-indifference When talking of brands we are sometimes knitted into consumers’ hearts. This attitude referring to a single aspect such as the name or goes from emotional resonance to liking, logo, as do intellectual property lawyers. In belonging to the evoked set or consideration brand management, however, we speak of the set, preference, attachment, advocacy, to whole system, relating a concept with fanaticism. Finally, designs, patents and rights inherent value to products and services that are of course a key asset: they provide a compet- are identified by a name and set of proprietary itive advantage over a period of time. signs (that is, the logo and other symbols). In short, a brand exists when it has acquired This system reminds us of the conditional power to influence the market. This acquisition nature of the brand asset: it only exists if takes time. The time span tends to be short in products and services also exist. the case of online brands, fashion brands and Differentiation is summarised by the brand brands for teenagers, but longer for, for concept, a unique set of attributes (both example, car brands and corporate brands. tangible and intangible) that constitute the This power can be lost, if the brand has been value proposition of the brand. mismanaged in comparison with the compe- To gain market share and , the tition. Even though the brand will still have brand must be: brand awareness, image and market shares, it might not influence the market any more. l able to conjure up a big idea, and attractive; People and distributors may buy because of l experienced by people at contact points; price only, not because they are conscious of any exclusive benefit from the brand. l activated by deeds and behaviours; What makes a name acquire the power of a l communicated; brand is the product or service, together with the people at points of contact with the l distributed. market, the price, the places, the communi- cation – all the sources of cumulative brand One of the best examples of a brand is the experience. This is why one should speak of Mini. This car, worth US$14,000 in functional brands as living systems made up of three poles: value, is actually sold for US$20,000. It is one products or services, name and concept. (See of the very few car brands that gives no Figure 1.1.) rebates and discounts to prospective buyers,

Brand concept (value proposition) tangible and intangible

Brand name and symbols Product or service semiotic invariants experience

Figure 1.1 The brand system BRAND EQUITY IN QUESTION 13 who queue to get ‘their’ Mini. The Mini illus- same name around the world), or the logo, trates the role of both intangible and tangible or the product (a standardised versus qualities in the success of any brand. Since it is customised product), or the concept made by BMW, it promises reliability, power (aiming at the same global positioning)? Or and road-holding performance. But the all three pillars of the brand system, or only feelings of love towards this brand are created two of them? by the powerful memories the brand invokes in buyers of London in the ‘Swinging Sixties’. Since a brand is a name with the power to The classic and iconic design is replicated in influence the market, its power increases as the new Mini – and each Mini feels like a more people know it, are convinced by it, and personal accessory to its owner (each Mini is trust it. Brand management is about gaining customised and different). power, by making the brand concept more The brand triangle helps us to structure known, more bought, more shared. most of the issues of brand management: In summary, a brand is a shared desirable and exclusive idea embodied in products, l What concept should one choose, with services, places and/or experiences. The more what balance of tangible and intangible this idea is shared by a larger number of benefits? This is the issue of identity and people, the more power the brand has. It is positioning. Should the brand concept because everyone knows ‘BMW’ and its idea – evolve through time? Or across borders what it stands for – even those who will never (the issue of globalisation)? buy a BMW car, that the brand BMW has a great deal of power. l How should the brand concept be The word ‘idea’ is important. Do we sell embodied in its products and services, and products and services, or values? Of course, its places? How should a product or service the answer is values. For example, ‘Volvo’ is of the brand be different, look different? attached to an idea: cars with the highest What products can this brand concept possible safety levels. ‘Absolut’ conjures encompass? This is the issue of brand another idea: a fashionable vodka. Levi’s used extension or brand stretch. to be regarded as the rebel’s jeans. l How should the product and/or services be identified? And where? Should they be identified by the brand name, or by the Differentiating between brand logo only, as Nike does now? Should organ- assets, strength and value isations create differentiated sets of logos and names as a means of indicating It is time to structure and organise the many internal differences within their product or terms related to brands and their strength, service lines? What semiotic variants? and to the measurement of brand equity. Some restrict the use of the phrase ‘brand l What name or signs should one choose to equity’ to contexts that measure this by its convey the concept internationally? impact on consumer mental associations l How often should the brand symbols be (Keller, 1992). Others mention behaviour: for changed, updated or modernised? example this is included in Aaker’s early measures (1991), which also consider brand l Should the brand name be changed (see loyalty. In his late writings Aaker includes Chapter 15)? market share, distribution and price premium l Speaking of internationalisation, should in his 10 measures of brand equity (1996). The one globalise the name (that is, use the official Marketing Science definition of brand 14 WHY IS BRANDING SO STRATEGIC?

equity is ‘the set of associations and behavior l Brand strength at a specific point in time as a on the part of a brand’s customers, channel result of these assets within a specific members and parent corporation that permits market and competitive environment. the brand to earn greater volume or greater They are the ‘brand equity outcomes’ if one margins than it could without the brand restricts the use of the phrase ‘brand equity’ name’ (Leuthesser, 1988). to brand assets alone. Brand strength is This definition is very interesting and has captured by behavioural competitive indi- been forgotten all too quickly. It is all-encom- cators: market share, market leadership, passing, reminding us that channel members loyalty rates and price premium (if one are very important in brand equity. It also follows a price premium strategy). specifically ties margins to brand associations l Brand value is the ability of brands to and customers’ behaviour. Does it mean that deliver profits. A brand has no financial unless there is a higher volume or a higher value unless it can deliver profits. To say margin as a result of the creation of a brand, that lack of profit is not a brand problem there is no brand value? This is not clear, for but a business problem is to separate the the word ‘margin’ seems to refer to gross brand from the business, an intellectual margin only, whereas brand financial value is temptation. Certainly brands can be measured at the level of earnings before analysed from the standpoint of sociology, interest and tax (EBIT). psychology, semiotics, anthropology, To dispel the existing confusion around the philosophy and so on, but historically they phrase brand equity (Feldwick, 1996), created were created for business purposes and are by the abundance of definitions, concepts, managed with a view to producing profit. measurement tools and comments by experts, it is important to show how the consumer and Only by separating brand assets, strength and financial approaches are connected, and to value will one end the confusion of the brand use clear terms with limited boundaries (see equity domain (Feldwick, 1996 takes a similar Table 1.1): position). Brand value is the profit potential of the brand assets, mediated by brand market l Brand assets. These are the sources of strength. influence of the brand (awareness/saliency, In Table 1.1, the arrows indicate not a direct image, type of relationship with consumers), but a conditional consequence. The same and patents.

Table 1.1 From awareness to financial value Brand assets Brand strength Brand value Brand awareness Market share Net discounted cashflow attributable Brand reputation (attributes, Market leadership to the brand after paying the cost of benefits, competence, Market penetration capital invested to produce and run know-how, etc) Share of requirements the business and the cost of marketing Perceived brand personality Growth rate Perceived brand values Loyalty rate Reflected customer imagery Price premium Brand preference or attachment Percentage of products the Patents and rights trade cannot delist BRAND EQUITY IN QUESTION 15 brand assets may produce different brand This will depend very much on the ability of strength over time: this is a result of the the business model to face the future. For amount of competitive or distributive instance, Nokia lost ground at the Stock pressure. The same assets can also have no Exchange in April 2004. The market had value at all by this definition, if no business judged that the future of the world’s number will ever succeed in making them deliver one mobile phone brand was dim. Every- profits, through establishing a sufficient where in the developed countries, almost market share and price premium. For instance everyone had a mobile phone. How was the if the cost of marketing to sustain this market company still to make profits in this saturated share and price premium is too high and market? If it tried to sell to emerging countries leaves no residual profit, the brand has no it would find that price was the first purchase value. Thus the Virgin name proved of little criterion and delocalisation (that is, having value in the cola business: despite the assets of the products manufactured in a country such this brand, the Virgin organisation did not as China or Singapore) compulsory. Up to that succeed in establishing a durable and prof- point, Nokia had based its growth on its itable business through selling in production facilities in Finland. Nokia’s the many countries where this was tried. The present brand stature might be high, but what Mini was never profitable until the brand was about its value? bought by BMW. It is time now to move to the topic of Table 1.1 also shows an underlying time tracking brand equity for management dimension behind these three concepts of purposes. What should managers regularly assets, strength and value. Brand assets are measure? learnt mental associations and affects. They are acquired through time, from direct or vicarious, material or symbolic interactions Tracking brand equity with the brand. Brand strength is a measure of the present status of the brand: it is mostly What is a brand? A name that influences behavioural (market share, leadership, loyalty, buyers. What is the source of its influence? price premium). Not all of this brand stature is A set of mental associations and relationships due to the brand assets. Some brands establish built up over time among customers or a leading market share without any noticeable distributors. Brand tracking should aim at brand awareness: their price is the primary measuring these sources of brand power. The driver of preference. There are also brands role of managers is to build the brand and whose assets are superior to their market business. This is true of brand managers, but strength: that is, they have an image that is far also of local or regional managers who are in stronger than their position in the market charge of developing this competitive asset in (this is the case with Michelin, for example). addition to developing the business more The obverse can also be true, for example of generally. This is why advanced companies many retailer own brands. now link the level of variable salary not only Brand value is a projection into the future. to increments in sales and profits but also to Brand financial valuation aims to measure the brand equity. However, such a system presup- brand’s worth, that is to say, the profits it will poses that there is a tracking system for brand create in the future. To have value, brands equity, so that year after year its progress can must produce economic value added (EVA), be assessed. This system must be valid, and part of this EVA must be attributable to reliable, and not too complicated or too the brand itself, and not to other intangibles costly. What should one measure as a (such as patents, know-how or databases). minimum to evaluate brand equity? 16 WHY IS BRANDING SO STRATEGIC?

An interesting survey carried out by the preference, perceived quality, a mark for agency DDB asked marketing directors what global opinion, and an item measuring the they considered to be the characteristics of a strength of the brand’s imagery. strong brand, a significant company asset. Certain institutions, which believe that the The following were the answers in order of comparison of brands across all markets makes importance: little sense, concentrate on a single market approach and measure, for example, the l brand awareness (65 per cent); acceptable price differential for each brand. They proceed in either a global manner (what l the strength of brand positioning, concept, price difference can exist between a Lenovo PC personality, a precise and distinct image (39 and a Toshiba PC?) or by using a method of per cent); trade-off which isolates the net added value of l the strength of signs of recognition by the the brand name. Marketing directors are consumer (logo, codes, packaging) (36 per perplexed because so many different methods cent); exist. There is little more consensus among l brand authority with consumers, brand academic researchers. Sattler (1994) analysed esteem, perceived status of the brand and 49 American and European studies on brand consumer loyalty (24 per cent). equity and listed no fewer than 26 different ways of measuring it. These methods vary Numerous types of survey exist on the meas- according to several dimensions: urement of brand value (brand equity). They usually provide a national or international hit l Is the measure monetary or not? A large parade based just on one component of brand proportion of measures are classified in equity: brand awareness (the method may be non-monetary terms (brand awareness, the first brand brought to mind, aided or attitude, preference, etc). unaided depending on the research institute), brand preference, quality image, prestige, first l Does the measurement include the time and second buying preferences when the factor – that is, the future of the brand on favoured brand is not available, or liking. the market? Certain institutions may combine two of the l Does the brand measure take the compe- components: for example, Landor published tition into account – that is, the perceived an indicator of the ‘power of the brand’ which value in relation to other products on the was determined by combining brand-aided market? Most of them do not. awareness and esteem, which is the emotional component of the brand–consumer rela- l Does the measurement include the brand’s tionship. The advertising agency Young & marketing mix? When you measure brand Rubicam carried out a study called ‘Brand value, do you only include the value Asset Monitor’ which positions the brand on attached to the brand name? Most two axes: the cognitive axis is a combination measures do not include the marketing mix of salience and of the degree of perceived (past advertising expenditure, level of difference of the brand among consumers; the distribution, and so on). emotional axis is the combination of the l When estimating brand value do you include measures of familiarity and esteem (see the profits that a user or a buyer could obtain Chapter 10). TNS, in its study Megabrand due to the synergies that may exist with its System, uses six parameters to compare own existing brand portfolio (synergies of brands: brand awareness, stated use, stated distribution, production, logistics, etc)? The BRAND EQUITY IN QUESTION 17

majority of them do not include this, even Table 1.2 gives a typical result of a tracking though it is a key factor. study for a brand. l Does the measurement of brand equity include the possibility of brand extensions Table 1.2 Result of a brand tracking study outside the brand’s original market? In Brand X general, no. Japan Mexico l Finally, does the measure of brand equity Aided awareness 99% 97% take into account the possibility of Unaided awareness 48% 85% geographical extension or globalisation? Evoked set 24% 74% Again, most of the time the answer is no. Consumed 5% 40%

We recommend four indicators of brand assets There are two ways of looking at the brand (equity): equity figures in the table. One can compare the countries by line: although it has similar l Aided brand awareness. This measures aided awareness levels, this brand has very whether the brand has a minimal resonance. different status in the two countries. The second mode is vertical, and focuses on the l Spontaneous brand awareness. This is a ‘transformation ratios’. It is noticeable that in measure of saliency, of share of mind when Japan, the evoked set is 50 per cent of unaided cued by the product. brand awareness, whereas it is 87 per cent in l Evoked set, also called consideration set. Does Mexico. the brand belong to the shortlist of two or Although there is a regular pattern of three brands one would surely consider decreasing figures, from the top line to the buying? bottom line, this is not always the case. For instance in Europe, Pepsi Cola is not a strong l Has the brand been already consumed or brand: its market share is gained through not? push marketing and trade offers. As a result, Pepsi Cola certainly grows its business but Some companies add other items like most not its intrinsic desirability. In tracking preferred brand. Empirical research has studies Pepsi Cola has a trial rate far higher shown that this item is very much correlated than the brand’s preference rate (evoked set). to spontaneous brand awareness, the latter At the opposite end of the spectrum there are being much more than a mere cognitive brands that have an equity far superior to measure, but it also captures proximity to the their consumption rate. In Europe, Michelin person. Other companies add the item has a clear edge over rival tyre brands as far as consumed most often. Of course this is image is concerned. However, image does not typical of fast moving consumer goods; the transform itself into market share if people item is irrelevant for durables. In addition, in like the Michelin brand but deem that the use empirical research the item is also correlated they make of their cars does not justify to evoked set. One should never forget that buying tyres of such a quality and at such a tracking studies dwell on the customer’s price. memory. This memory is itself very much Tracking studies are not simply tools for inferential. Do people really know what . They are tools for diagnosis and brand they bought last? They infer from their action. Transformation ratios tell us where to preferences, that logically it should have been act. brand X or Y. 18 WHY IS BRANDING SO STRATEGIC?

Goodwill: the convergence of The vision has changed from one where finance and marketing only tangible assets had value to one where companies now believe that their most important asset is their brands, which are The 1980s witnessed a Copernican revolution intangible (see Tables 1.3 and 18.2). These in the understanding of the workings of intangible assets account for 61 per cent of the brands. Before this, ratios of seven or eight value of Kellogg’s, 57 per cent of Sara Lee and were typical in mergers and acquisitions, 52 per cent of General Mills. This explains the meaning that the price paid for a company paradox that even though a company is was seven to eight times its earnings. After making a loss it is bought for a very high price 1980 these multiples increased considerably because of its well-known brands. Before to reach their peak. For example, Groupe 1980, if the value of the brand had been Danone paid $2.5 billion for Nabisco Europe, included in the company’s earnings, it would which was equivalent to a price:earnings ratio have been bought for a penny. Nowadays of 27. Nestlé bought Rowntree for brand value is determined independently of three times its stock market value and 26 the firm’s net value and thus can sometimes times its earnings. It was becoming the norm be hidden by the poor financial results of the to see multiples of 20 to 25. Even today when, company. The net income of a company is the because of the recession, financial valuations sum of all the financial effects, be they have become more prudent, the existence of positive or negative, and thus includes the strong brands still gives a real added value to effect of the brand. The reason why Apple lost companies. What happened between the money in 1996 was not because its brand was beginning and the end of the 1980s? What weak, but because its strategy was bad. explanations can be given for this sudden Therefore it is not simply because a company change in the methods of financial analysts? is making a loss that its brand is not adding The prospect of a single European market value. Just as the managers of Ebel-Jellinek, an certainly played a significant role, as can be American-Swiss group, said when they bought seen by the fact that large companies were the Look brand: the company is making a loss looking for brands that were ready to be but the brand hasn’t lost its potential. Balance European or, even better, global. This explains sheets reflect bad management decisions in why Nestlé bought Buitoni, Lever bought the past, whereas the brand is a potential Boursin, l’Oréal bought Lanvin, Seagram source of future profits. This potential will bought Martell, etc. The increase in the become actual profit only if it can meet a multiples can also be explained in part by the viable economic equation. opposing bids of rival companies wishing to It is important to realise that in accounting take over the few brand leaders that existed in and finance, goodwill is in fact the difference their markets and which were for sale. Apart between the price paid and the book value of from the European factor, there was a marked the company. This difference is brought about change in the attitude towards the brands of by the psychological goodwill of consumers, the principal players. Prior to 1980, distributors and all the actors in the channels: companies wished to buy a producer of that is to say, favourable attitudes and predis- chocolate or pasta: after 1980, they wanted to position. Thus, a close relationship exists buy KitKat or Buitoni. This distinction is very between financial and marketing analyses of important; in the first case firms wish to buy brands. Accounting goodwill is the monetary production capacity and in the second they value of the psychological goodwill that the want to buy a place in the mind of the brand has created over time through commu- consumer. nication investment and consistent focus on BRAND EQUITY IN QUESTION 19

Table 1.3 Brand financial valuation, 2007 loyalty to the brand that is the key to future sales. Brand loyalty may be reduced to a Rank Brand Value (US$ billion) minimum as the price difference between 1 Google 66,434 the brand and its competitors increases but 2 GE 61,880 attachment to the brand does not vanish so 3 Microsoft 54,951 fast; it resists time. 4 Coca Cola 44,134 5 China Mobile 41,214 6 Marlboro 39,166 The brand is a focal point for all the positive 7 Wal-Mart 36,880 and negative impressions created by the buyer 8 Citi 33,706 over time as he or she comes into contact with 9 IBM 33,572 the brand’s products, distribution channel, 10 Toyota 33,427 personnel and communication. On top of 11 McDonald’s 33,138 this, by concentrating all its marketing effort 12 Nokia 31,670 on a single name, the latter acquires an aura of 13 Bank of America 28,767 exclusivity. The brand continues to be, at least 14 BMW 25,751 in the short term, a byword for quality even 15 Hewlett-Packard 24,987 after the patent has expired. The life of the 16 Apple 24,728 patent is extended thanks to the brand, thus 17 UPS 24,580 explaining the importance of brands in the Sources: Brand Z, Milward Brown pharmaceutical or the chemical industry (see page 108). Brands are stored in clients’ memories, so product satsifaction, both of which help build they exert a lasting influence. Because of this, the reputation of the name. they are seen as an asset from an accounting What exactly are the effects of this point of view: their economic effects extend customer and distributor goodwill?: far beyond the mere consumption of the product. l The favourable attitude of distributors In order to understand in what way a strong that list some products of the brand brand (having acquired distribution, because of their rotation system. In fact a awareness and image) is a generator of growth retailer may lose customers if it does not and profitability it is first necessary to under- stock products of a well-known brand that stand the functions that it performs with the by definition is present everywhere. That consumers themselves, and which are the is to say, certain customers will go else- source of their valuable goodwill. where to look for the brand. This goodwill ensures the presence of the brand at the . How brands create value for the l The support of wholesalers and resellers in customer the market for slow-moving or industrial goods. This is especially true when they are Although this book deals primarily with seen as being an exclusive brand with brands and their optimisation, it is important which they are able to associate themselves to clarify that brands do not necessarily exist in the eyes of their customers. in all markets. Even if brands exist in the legal l The desire of consumers or end-users to buy sense they do not always play a role in the the product. It is their favourable attitude buying decision process of consumers. Other and in certain cases the attachment or even factors may be more important. For example, 20 WHY IS BRANDING SO STRATEGIC? research on ‘brand sensitivity’ (Kapferer and powder, etc. For these products the consumer Laurent, 1988) shows that in several product has high involvement and does not want to categories, buyers do not look at the brand take any risks, be they physical or psycho- when they are making their choice. Who is logical. concerned about the brand when they are Nothing is ever acquired permanently, and buying a writing pad, a rubber, felt-tip pens, the degree of perceived risk evolves over time. markers or photocopy paper? Neither private In certain sectors, as the technology becomes individuals nor companies. There are no commonplace, all the products comply with strong brands in such markets as sugar and standards of quality. Therefore we are moving socks. In Germany there is no national brand from a situation where some products ‘failed’ of flour. Even the beer brands are mostly whereas others ‘passed’, towards one where all regional. Location is key with the choice of a competitors are excellent, but some are ‘more bank. excellent’ than others. The degree of perceived Brands reduce perceived risk, and exist as risk will change depending on the situation. soon as there is perceived risk. Once the risk For example, there is less risk involved in perceived by the buyer disappears, the brand buying rum or vodka for a cocktail than for a no longer has any benefit. It is only a name on rum or vodka on the rocks. Lastly, all a product, and it ceases to be a choice cue, a consumers do not have the same level of guide or a source of added value. The involvement. Those who have high perceived risk is greater if the unit price is involvement are those that worry about small higher or the repercussions of a bad choice are differences between products or who wish to more severe. Thus the purchase of durable optimise their choice: they will talk for hours goods is a long-term commitment. On top of about the merits of such and such a computer this, because humans are social animals, we or of a certain brand of coffee. Those who are judge ourselves on certain choices that we less involved are satisfied with a basic product make and this explains why a large part of our which isn’t too expensive, such as a gin or a social identity is built around the logos and whisky which may be unknown but seems to the brands that we wear. As far as food is be good value for money and is sold in their concerned, there is a certain amount of local shop. The problem for most buyers who intrinsic risk involved whenever we ingest feel a certain risk and fear making a mistake is something and allow it to enter our bodies. that many products are opaque: we can only The brand’s function is to overcome this discover their inner qualities once we buy the anxiety, which explains, for example, the products and consume them. However, many importance of brands in the market for spirits consumers are reluctant to take this step. such as vodka and gin. Therefore it is imperative that the external The importance of perceived risk as a signs highlight the internal qualities of these generator of the legitimacy of a brand is high- opaque products. A reputable brand is the lighted by the categories within which distrib- most efficient of these external signals. utors’ own-brands (and perhaps tomorrow’s Examples of other such external indicators are: discount products) dominate: canned price, quality marks, the retail outlet where the vegetables, milk, orange juice, frozen pizzas, product is sold and which guarantees it, the bottled water, kitchen roll, toilet paper and style and design of the packaging. petrol. At the same time producers’ brands still have a dominant position in the How brand awareness means value following categories: coffee, tea, cereals, toothpaste, deodorant, cold sauces, fresh Recent shows that brand pasta, baby food, beauty products, washing awareness is not a mere cognitive measure. It is BRAND EQUITY IN QUESTION 21 in fact correlated with many valuable image These authors make the distinction between dimensions. Awareness carries a reassuring three types of product characteristics: message: although it is measured at the indi- vidual level, brand awareness is in fact a l the qualities which are noticed by contact, collective phenomenon. When a brand is before buying; known, each individual knows it is known. l the qualities which are noticed uniquely by This leads to spontaneous inferences. As is experience, thus after buying; shown in Table 1.4, awareness is mostly corre- lated with aspects such as high quality, trust, l credence qualities which cannot be verified reliability, closeness to people, a good quality/ even after consumption and which you price ratio, accessibility and traditional styling. have to take on trust. However it has a zero correlation with innova- tiveness, superior class, style, seduction: if The first type of quality can be seen in the aspects such as these are key differentiation decision to buy a pair of men’s socks. The facets of the brand, they must be earned on choice is made according to the visible charac- their own merit. teristics: the pattern, the style, the material, the feel, the elasticity and the price. There is Table 1.4 How brand awareness creates hardly a need for brands in this market. In fact value and image dimensions (correlations those that do exist only have a very small between awareness and image) market share and target those people who are looking for proof of durability (difficult to tell Good quality/price ratio 0.52 Trust 0.46 before buying) or those who wish to be fash- Reliable 0.44 ionable. This is how Burlington socks work as Quality 0.43 a of chic style. Producers’ brands do Traditional 0.43 exist but their differential advantage Best 0.40 compared to distributors’ brands (Marks & Down to earth 0.37 Spencer or C&A) is weak, especially if the Client oriented 0.37 latter have a good style department and offer a Friendly 0.35 wide variety at a competitive price. Accessible 0.32 A good example of the second type of Distinct 0.31 quality is the automobile market. Of course, A leader 0.29 performance, consumption and style can all Popular 0.29 Fun 0.29 be assessed before buying, as can the avail- Original 0.27 ability of options and the interior space. Energetic 0.25 However, road-holding, the pleasure of Friendly 0.25 driving, reliability and quality cannot be Performing 0.22 entirely appreciated during a test drive. The Seductive 0.08 response comes from brand image; that is, the Innovative 0.02 collective representation which is shaped over

(Base: 9,739 persons, 507 brands) time by the accumulated experiences of Source: Schuiling and Kapferer, 2004 oneself, of close relations, by word of mouth and advertising. Transparent and opaque products Finally, in the market for upmarket cars, the feeling that you have made it, that feeling of At this stage it is interesting to remind fulfilment and personal success through ourselves of the classifications drawn up by owning a BMW is typically the result of pure Nelson (1970) and by Darby and Kami (1973). faith. It cannot be substantiated by any of the 22 WHY IS BRANDING SO STRATEGIC? post-purchase driving experiences: it is a consumer loses his or her traditional reference collective belief, which is more or less shared points. This is why there is an increase in the by the buyers and the non-buyers. The same demand for branded wine. Consumers were logic applies to the feeling of authenticity and put off by too many small chateaux which were inner masculinity which is supposed to result rarely the same and had limited production of from smoking Marlboro cigarettes. varying quality and which sometimes sprung The role of brands is made clearer by this some unpleasant surprises. This paved the way classification of sought-after qualities. The for brands such as Jacob’s Creek and Gallo. brand is a sign (therefore external) whose A brand provides not only a source of infor- function is to disclose the hidden qualities of mation (thus revealing its values) but the product which are inaccessible to contact performs certain other functions which justify (sight, touch, hearing, smell) and possibly its attractiveness and its monetary return those which are accessible through experience (higher price) when they are valued by buyers. but where the consumer does not want to take What are these functions? How does a brand the risk of trying the product. Lastly, a brand, create value in the eyes of the consumer? The when it is well known, adds an aura of make- eight functions of a brand are presented in believe when it is consumed, for example the Table 1.5. The first two are mechanical and authentic America and rebellious youth of concern the essence of the brand; that is, to Levi’s, the rugged masculinity of Marlboro, function as a recognised symbol in order to the English style of Dunhill, the Californian facilitate choice and to gain time. The myth of Apple. following three functions reduce the The informational role of the brand varies perceived risk. The last three have a more according to the product or service, the pleasurable side to them. Ethics show that consumption situation and the individual. buyers are expecting, more and more, respon- Thus, a brand is not always useful. On the other sible behaviour from their brands. Many hand, a brand becomes necessary once the Swedish consumers still refuse Nestlé’s

Table 1.5 The functions of the brand for the consumer Function Consumer benefit Identification To be clearly seen, to quickly identify the sought-after products, to structure the shelf perception. Practicality To allow savings of time and energy through identical repurchasing and loyalty. Guarantee To be sure of finding the same quality no matter where or when you buy the product or service. Optimisation To be sure of buying the best product in its category, the best performer for a particular purpose. Badge To have confirmation of your self-image or the image that you present to others. Continuity Satisfaction created by a relationship of familiarity and intimacy with the brand that you have been consuming for years. Hedonistic Enchantment linked to the attractiveness of the brand, to its logo, to its communication and its experiential rewards. Ethical Satisfaction linked to the responsible behaviour of the brand in its relationship with society (ecology, employment, citizenship, advertising which doesn’t shock). BRAND EQUITY IN QUESTION 23 products due to the issue of selling Nestlé’s reducing all the costs which do not add value baby milk to poor mothers in Africa. carried out in conjunction with suppliers). These functions are neither laws nor dues, This formula offers another alternative to the nor are they automatic; they must be first five functions: ease of identification on defended at all times. Only a few brands are the shelf, practicality, guarantee, optimisation successful in each market thanks to their at the chosen price level and characterisation supporting investments in quality, R&D, (refusal to be manipulated by marketing). The productivity, communication and research in absence of other functions is compensated for order to better understand foreseeable by the very low price. changes in demand. A priori, nothing Functional analysis of brand role can facil- confines these functions to producers’ brands. itate the understanding of the rise of distrib- Moreover, several producers’ brands do not utors’ own brands. Whenever brands are just perform these functions. In Great Britain, trademarks and operate merely as a recog- Marks & Spencer (St Michael) is seen as an nition signal or as a mere guarantee of quality, important brand and performs these func- distributors’ brands can fulfil these functions tions, as do Migros in Switzerland, the Gap, as well and at a cheaper price. Zara, Ikea and others. Table 1.6 summarises the relationships The usefulness of these functions depends between brand role and distributors’ own- on the product category. There is less need for brands’ market share. reference points or risk reducers when the product is transparent (ie its inner qualities are accessible through contact). The price How brands create value for the premium is at its lowest and trial costs very company little when there is low involvement and the purchase is seen as a chore, eg trying a new, cheaper roll of kitchen paper or aluminium Why do financial analysts prefer companies foil. Certain kinds of shops aim primarily at with strong brands? Because they are less risky. fulfilling certain of these functions, for Therefore, the brand works in the same way for example hard discounters who have 650 lines the financial analyst as for the consumer: the with no brands, a product for every need, at brand removes the risk. The certainty, the guar- the lowest prices and offering excellent antee and the removal of the risk are included quality for the price (thanks to the work on in the price. By paying a high price for a

Table 1.6 Brand functions and the distributor/manufacturer power equilibrium Main function of brand Typical product category of brand Power of manufacturers’ brand Recognition signal Milk, salt, flour Very weak Practicality of choice Socks Weak Guarantee of quality Food, staples Weak Optimisation of choice, sign of Cars, cosmetics, appliances, Strong high-quality performance paint, services Personalising one’s choice Perfumes, clothing Strong Permanence, bonding, Old brands Strong but challenged familiarity relationship Pleasure Polysensual brands, luxury brands Strong Ethics and social responsibility Trust brands, corporate brands Strong but challenged 24 WHY IS BRANDING SO STRATEGIC? company with brands the financial analyst is of capital invested, etc. The financial value of acquiring near certain future cashflows. the brand is the difference between the extra If the brand is strong it benefits from a high revenue generated by the brand and the asso- degree of loyalty and thus from stability of ciated costs for the next few years, which are future sales. Ten per cent of the buyers of discounted back to today. The number of Volvic mineral water are regular and loyal and years is determined by the business plan of the represent 50 per cent of the sales. The repu- valuer (the potential buyer, the auditors). The tation of the brand is a source of demand and discount rate used to weigh these future cash- lasting attractiveness, the image of superior flows is determined by the confidence or the quality and added value justifies a premium lack of it that the investor has in his or her price. A dominant brand is an entry barrier to forecasts. However, a significant fact is that competitors because it acts as a reference in its the stronger the brand, the smaller the risk. category. If it is prestigious or a trendsetter in Thus, future net cashflows are considered terms of style it can generate substantial more certain when brand strength is high. royalties by granting licences, for example, at Figure 1.2 shows the three generators of its peak, Naf-Naf, a designer brand, earned profit of the brand: the price premium, more over £6 million in net royalties. The brand can attraction and loyalty, and higher margin. enter other markets when it is well known, is a These effects work on the original market for symbol of quality and offers a certain promise the brand but they can be offered subse- which is valued by the market. The Palmolive quently on other markets and in other brand name has become symbolic of mildness product categories, either through direct and has been extended to a number of brand extension (for example, Bic moved markets besides that of soap, for example from ballpoint pens to lighters to disposable shampoo, shaving cream and washing-up razors and recently to sailboards) or through liquid. This is known as brand extension (see licensing, from which the manufacturer Chapter 12) and saves on the need to create benefits from royalties (for example all the awareness if you had to launch a new product luxury brands, and Caterpillar). on each of these markets. Once these levers are measured in euros, In determining the financial value of the yen, dollars or any other currency they may brand, the expert must take into account the serve as a base for evaluating the marginal sources of any additional revenues which are profit which is attributable to the brand. They generated by the presence of a strong brand. only emerge when the company wishes to Additional buyers may be attracted to a strategically differentiate its products. This product which appears identical to another wish can come about through three types of but which has a brand name with a strong investment: reputation. If such is the company’s strategy the brand may command a premium price in l Investment in production, productivity and addition to providing an added margin due to R&D. Thanks to these, the company can economies of scale and market domination. acquire specific know-how, a knack which Brand extensions into new markets can result cannot be imitated and which in in royalties and important leverage effects. To accounting terms is also an intangible asset. calculate this value, it is necessary to subtract Sometimes the company temporarily blocks the costs involved in brand management: the new entrants by registering a patent. This is costs involved in quality control and in the basis of marketing in the pharmaceu- investing in R&D, the costs of a national, tical industry (a patent and a brand) but also indeed international, sales force, advertising of companies like Ferrero, whose products costs, the cost of a legal registration, the cost are not easily imitated despite their success. BRAND EQUITY IN QUESTION 25

CORPORATE RESOURCES

DISTRIBUTION INVESTMENTS: MKTG INVESTMENTS INVESTMENTS PRODUCTIVITY, R&D CHANGES (PROXIMITY, KNOW-HOW, PATENTS OF CONSUMER VALUES AVAILABILITY) AND LIFE-STYLES AND COMMUNICATION

LEVEL OF BRAND RELEVANCE SHARE OF VOICE OBJECTIVE QUALITY AND ADAPTATION TO SHARE OF MIND COST OF QUALITY ITS PRESENT MARKET SHARE OF SHELF

BRAND SALIENCY COMPETITION CUSTOMERS' – OTHER BRANDS PERCEIVED VALUE – INVOLVEMENT – DOB'S VIS-À-VIS COMPETITION – PRICE SENSITIVITY – HARD DISCOUNT – BUYING CRITERIA

LEVEL OF INCREMENTAL COST ADVANTAGES SUSTAINABLE ATTRACTION DUE TO MARKET PRICE PREMIUM AND LOYALTY LEADERSHIP

EXTENDING BRAND EQUITY BEYOND ITS CATEGORY AND COUNTRY

Figure 1.2 The levers of brand profitability

Patents are on their own an intangible asset: to the logic of distributors, and developing the activity of the company benefits from good relations with the channels (even them in a lasting manner. though it is still necessary when valuing a brand to make a distinction between what l Investment in research and marketing part of its sales is due to the power of the studies in order to get new insights, to antic- company and what part to the brand itself). ipate the changes of consumers’ tastes and life-styles in order to define any important l Investment in listing allowances, in the innovations which will match these evolu- sales force and merchandising, in trade tions. Chrysler’s Minivan is an example of a marketing and, naturally, in communi- product created in anticipation of the cating to consumers to promote the demands of baby boomers with tall children. uniqueness of the brand and to endow it An understanding of the expectations of with saliency (awareness), perceived distributors is also needed, as they are an difference and esteem. The hidden intrinsic essential component of the physical prox- qualities or intangible values which are imity of brands. Nowadays a key element of associated with consumption would be brand success is understanding and adapting unknown without brand advertising. 26 WHY IS BRANDING SO STRATEGIC?

The value of the brand, and thus the legit- on market share and the ability to charge a imacy of implementing a brand policy, premium price (two indicators of brand depends on the difference between the strength) are not direct but are mediated by marginal revenues and the necessary marginal brand reputation (or esteem). In fact, as costs associated with brand management. shown by the path coefficients of Figure 1.3, brand reputation is created by familiarity How brand reputation affects the (I know it well, I use it a lot) and by brand impact of advertising perceived uniqueness (this brand is unique, is different, there is no substitute). Advertising Brands are a form of capital that can slowly be does play a key role in building sales, but it built, while in the meantime one is growing has no direct impact on gaining both market business. Of course it is very possible to grow a share and premium price. This is most inter- business without creating such brand capital: esting: in brief, it is only by building a reputa- a push strategy or a price strategy can deliver tional capital that both a higher market share high sales and market share without building and price premium can be obtained. any brand equity. This is the case for many Reputation also adds to the impact of adver- private labels or own-label brands, for tising on sales. It is well known from evalua- instance. The volume leader in the market for tions of past campaigns that the more a brand Scotch whisky in France is not Johnnie Walker is known, the more its advertisements are or Ballantines or Famous Grouse but William noticed and remembered. It is high time to Peel, a local brand that aimed all its efforts at stop treating brands and commerce as the trade (hypermarkets) and sells at a low opposing forces. price. It has almost no saliency (spontaneous brand awareness). Now managers are being asked to build Corporate reputation and the both business and brand value. Their salary is corporate brand indexed on these two yardsticks: sales and reputation. One should not see them as In 2003 Velux, which had become known as separate, leading to a kind of schizophrenia. the number one brand for roof windows in Chaudhuri’s very relevant research (2002) the world, realised it needed to create a reminds us that advertising and marketing are corporate brand. It felt that merely to compete the key levers of sales. However, their effects through its product brand was not enough to

Brand 0.42 Brand sales advertising 0.11* 0.27 Number of Market share competitors 0.23 –0.17 Brand reputation Brand 0.56 Relative price familiarity 0.19 0.41 Brand *p<0.10 uniqueness All other paths p<0.5

Figure 1.3 Branding and sales Reprinted from the Journal of , copyright 2002, by the Advertising Research Foundation BRAND EQUITY IN QUESTION 27 protect it against the growing number of me- financial investor, as client), in fact they are toos all over the world. In addition, its brand all sensitive to the global ability of the equity was stagnating. When any brand company to meet the expectations of all its reaches a level of 80 per cent of top-of-mind stakeholders. Reputation takes the company awareness in its category, part of its ‘stag- as a whole. It reunifies all stakeholders and all nation’ is certainly due to a ceiling effect: functions of the corporation. there is not much room for improvement. Because changes in reputation affect all However, the company felt that emotional stakeholders, companies monitor and manage bonding with its brand was not strong their reputation closely. Fombrun has diag- enough. Could the product brand alone nosed that global reputation is based on six improve the bond? The diagnosis was that it factors or ‘pillars’ (Fombrun, Gardberg and was high time to reveal ‘the brand behind the Sever, 2000): brand’ (Kapferer, 2000) and start building a corporate brand. l emotional appeal (trust, admiration and In fact many companies that based their respect); success on product brands have now decided l products and services (quality, innova- to create a corporate brand in order to make tiveness, value for money and so on); company actions, values and missions more salient and to diffuse specific added values. l vision and leadership; should soon develop some kind of l workplace quality (well-managed, appealing corporate visibility, as Procter & Gamble does workplace; employee talent); in Asia at this time and will probably do every- where soon. l financial performance; There is another reason that corporate l social responsibility. brands are a new hot managerial topic: the defence of reputation. Companies have Since companies cannot grow without advo- become very sensitive about their reputation. cates and the support of their many stake- Formerly they used to be sensitive about their holders, they need to build a reputational image. Why this change? Isn’t image capital among all of them; plus a global repu- (perception) the basis on which global evalua- tation, because even specialised stakeholders tions are formed (and thus reputation)? It is wish the company to be responsive to all likely that the term ‘image’ has lost its stakeholders. There is a link between repu- glamour. It seems to have fallen into disrepute tation and share performance. precisely because there was too much As a consequence of this growth of the publicity about ‘image makers’, as if image reputational concept, companies have was an artificial construction. Reputation has realised they cannot stay mute, invisible, more depth, is more involving: it is a opaque. They must manage their visibility judgement from the market which needs to be and that of their actions in order to maximise preserved. In any case reputation has become their reputational capital – in fact their a byword, as witnessed by the annual surveys goodwill, to speak like financiers. The on the most respected companies that are corporate brand will be more and more now made in almost all countries, modelled present and visible: through art sponsorship, on Fortune’s ‘America’s most admired foundations, charities, advertising. As such it companies’. Reputation signals that although addresses global targets. The corporate brand the company has many different stake- speaks on behalf of the company, signals the holders, each one reacting to a specific facet of company’s presence. Now companies are also the company (as employee, as supplier, as developing specialised corporate brands such 28 WHY IS BRANDING SO STRATEGIC? as ‘You’ (the recruiting brand of Unilever), or value of reputation, a conceptual distinction specialised campaigns (such as semi-annual must be made: at the corporate level, this is financial roadshows). called goodwill (the excess of stock value over Corporate brands have therefore taken a book value). Now, the larger part of this new importance since they speak on behalf of goodwill is attributable to the financial value the company, signal its presence and actions: of the brand as commercial brand. This in fact they draw the company’s profile in the financial value is usually measured by the eyes of all those who do not have direct inter- discounted cashflow method. This shows that actions with it. In our world people react more the financial value of the brand, be it product and more to names and reputations, to brand or corporate brand, can only be traced rumours and word of mouth. They do not see through prospective sales (see Chapter 18). the headquarters or the factories any more. How do corporate brands relate to product Often delocalised, corporations appear brands? The latter are there to create client through the press, publicity, PR, advertising, goodwill, build growth and profits. In modern financial reports, trade union reports, all sorts mature markets, consumers do not make a of communications, and of course their complete distinction between the product products and services. Managing the corporate brand and the corporation: what the corpo- brand and its communication means ration does impacts their evaluation of its managing this profile. The methods to do so brands, especially if they share the same name are not specific: they rely as do all brands on as the corporation or are visibly endorsed by identity. They also rely on the markets. the former. The issue of branding architec- What then is the difference between tures with the four structural types of rela- corporate brand methods and the product brand tionship (independence; umbrella; methods developed in this book? Companies do endorsement; source or branded house) will have an internal identity, core values that bear be covered in Chapter 13. It has strategic on the profile they wish to, or can, express implications in terms of the spillover effects outwardly. Companies and corporations are (Sullivan, 1988) the organisation might or bodies with a soul (from the Latin, corpus). (They might not want to capitalise on, and in terms are enacted by people.) Product brands are more of bolstering confidence in the product imaginary constructions, relying on intangible (Brown and Dacin, 1997), if this is necessary, values which have been invented to fulfil the which is not always the case. For instance needs of clients. Ralph Lauren’s or Marlboro’s LVMH, the world’s leading luxury group, intangible values are pure constructions. It remains separate from its 41 brands’ commu- cannot be the same for companies. Reality leaves nication and marketing: they look inde- fewer degrees of freedom. pendent. GM endorses its brands: it reveals Second, since brand management is both the powerful and respected corporation identity and market oriented, corporate behind its car marques. GE follows an brands must tailor their profile to meet the umbrella strategy: GE Capital Investment, GE expectations of multiple publics. The core Medical Services. A classic strategy, in our value must be tailored for this global audience, world of global communication and which symbolically has to ‘buy’ the company, synergies, is to use for the corporation the as a supplier, an employee or an investor. same name as its best brand. This is how BSN Managing the reputation of the name, became Danone – just as 50 years earlier, through (among other methods) the commu- Tokyo Tsuhin Kogyo became Sony. As we shall nication of the corporate brand, is aimed at see, there are strong benefits in doing this. making the company their first choice. A conceptual issue arises when one speaks, As to the very hot topic of the financial say, of Canon or Nike or Sony or Citibank. Are BRAND EQUITY IN QUESTION 29 they corporate brands? Are they commercial logo of each source of communication: brands? Since the company and the brand Nestlé’s corporate logo is not that of Nestlé as share the same name it is difficult to say. The a commercial brand (which itself is differen- answer is that they are both: it depends on the tiated by product category). context and objectives and target of commu- The case is more acute still for service nication. Naomi Klein’s book No Logo (1999) companies: can one differentiate Barclay’s Bank criticises Nike as a company, for all it tries to or Orange as a brand and as a corporate brand? hide behind the attractive images and sports Since both share the same employees this is stars of its commercial brand (for the sweat- more difficult, although looking at the objec- shops in Asia, the delocalisation of manufac- tives and target of the communication should turing to developing countries, the lack of help. This is why the issue of brand alignment reactiveness to critics). To make it clear who (Ind, 2001) has become so important: the speaks, the corporation or the brand, some corporation has to align on its brand values. Its companies have chosen to differentiate the whole business should be brand driven. 30

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Strategic implications of branding

Many companies have forgotten the funda- world that such a product or service has been mental purpose of their brands. A great deal of stamped with the mark and imprint of an attention is devoted to the marketing activity organisation. It requires a corporate long-term itself, which involves designers, graphic involvement, a high level of resources and artists, packaging and advertising agencies. skills. This activity thus becomes an end in itself, receiving most of the attention. In so doing, Branding consists in transforming the we forget that it is just a means. Branding is product category seen as the exclusive prerogative of the marketing and communications staff. This Brands are a direct consequence of the strategy undervalues the role played by the other parts of and product differenti- of the company in ensuring a successful ation. As companies seek to better fulfil the branding policy and business growth. expectations of specific customers, they Yet the marketing phase, which we now concentrate on providing the latter, consis- consider indispensable, is the terminal phase tently and repeatedly, with the ideal combi- of a process that involves the company’s nation of attributes – both tangible and resources and all of its functions, focusing intangible, functional and hedonistic, visible them on one strategic intent: creating a and invisible – under viable economic condi- difference. Only by mobilising all of its tions for their . Companies want to internal sources of added value can a stamp their mark on different sectors and set company set itself apart from its competitors. their imprint on their products. It is no wonder that the word ‘brand’ also refers to the act of burning a mark into the flesh of an animal as a What does branding really mean? means to claim ownership of it. The first task in brand analysis is to define precisely all that the Branding means much more than just giving a brand injects into the product (or service) and brand name and signalling to the outside how the brand transforms it: 32 WHY IS BRANDING SO STRATEGIC?

l What attributes materialise? thereby expecting to control it. In fact they often end up disappearing within it: Polaroid, l What advantages are created? Xerox, Caddy, Scotch, Kleenex have thus l What benefits emerge? become generic terms. According to the objective the brand sets l What ideals does it represent? itself; transforming the category implies endowing the product with its own separate This deep meaning of the brand concept is identity. In concrete terms, that means that often forgotten or wilfully omitted. That is the brand is weak when the product is ‘trans- why certain distributors are often heard saying parent’. Talking about ‘Greek olive oil, first – as a criticism of many a manufacturer’s brand cold pressing’ for example, makes the product whose added value lies only its name – ‘For us, transparent, almost entirely defined and epit- the brand is secondary, there is no need to put omised by those sole attributes, yet there are something on the product.’ Hence, the brand dozens of brands capable of marketing that is reduced to package surface and label. type of oil. Going from bulk to packaging is Branding, though, is not about being on top of also symptomatic of this phenomenon. The something, but within something. The weakness of fresh vacuum-packed food brands product or service thus enriched must stand is partially due to the fact that their pack- out well if it is to be spotted by the potential aging, though designed to reassure the buyer – buyer and if the company wants to reap the such as with sauerkraut in film-wrapped benefits of its strategy before being copied by containers – only recreates transparency. others. Significantly, Findus and l’Eggs or Hoses do Furthermore, the fact that a delabelled item not just show their products, they show them is worth more than a generic product off. This is the structural cause of Essilor’s confirms this understanding of branding. brand weakness, as perceived by the According to the ‘brand is just a superficial customers. They do not perceive how Essilor, label’ theory, the delabelled product the world leader in optical glass, transforms supposedly becomes worthless when it no the product, nor its input, its added value. To longer carries a brand name, unless it them, glass is just glass to which various continues to bear the brand within. In options can be added (anti-reflecting, passing, the brand has intrinsically altered it: unbreakable, etc). The added value seems to hence the value of Lacostes without ‘Lacoste’, be created solely by the style of the rims Adidases without ‘Adidas’. They are worth (hence the boom in licensing) or the service, more than imitations because the brand, both of which are palpable and in the store. though invisible, still prevails. Conversely, the What is invisible is not perceived and thus brand on counterfeits, though visible, is in does not exist in their eyes. However, the effect absent. This is why counterfeits are sold example of Evian reminds us that it is always so cheaply. possible to make a transparent product Some brands have succeeded in proving become opaque. The major mineral water with their slogans that they know and under- brands have been able to exist, grow and stand what their fundamental task is: to prosper only because they have made the transform the product category. A brand not invisible visible. We can no longer choose our only acts on the market, it organises the water haphazardly: good health and purity are market, driven by a vision, a calling and a associated with Evian, fitness with Contrex, clear idea of what the category should vitality with Vittel. These various positionings become. Too many brands wish only to were justified by the invisible differences in identify fully with the product category, water contents. Generally speaking, anything STRATEGIC IMPLICATIONS OF BRANDING 33 adding to the complexity of ingredients also will not carry the potential for leadership. The contributes to creating distance vis-à-vis the analytical notion of brand image does not product. In this respect, Coca-Cola is doing clearly capture this dynamic dimension, the right thing by keeping its recipe secret. which is demanded by modern brand When Orangina was taken over by Pernod- management. Ricard, its concentrate was remixed into Thus, many banks put forward the something even more complex. Antoine following image of themselves: close to their Riboud, the former CEO of Danone clients, modern, offering high-performing worldwide, expressed a similar concern when products and customer service. These features declaring: ‘It is not yoghurts that I make, but are, of course, useful to market researchers in Danones.’ charge of measuring the perceptions sent back by the market and the level of consumer satis- A brand is a long-term vision faction. But from which dynamic programme do they emanate, which vision do they The brand should have its own specific point embody? of view on the product category. Major brands Certain banks have specified what their have more than just a specific or dominating purpose is: for some it is ‘to change people’s position in the market: they hold certain posi- relationship to money’, while for others it is tions within the product category. This to remind us that money is just a ‘means position and conception both energise the towards personal development’. Several banks brand and feed the transformations that are have recently worked at redefining their implemented for matching the brand’s singular reason for existence. All of them will products with its ideals. It is this conception have to do so in the future. The Amex vision that justifies the brand’s existence, its reason of money is not that of Visa. for being on the market, and provides it with a More than most, multi-segment brands guideline for its life cycle. How many brands need to redetermine their own purpose. Cars are capable today of answering the following are a typical example. A multi-segment brand crucial question: ‘What would the market lack (also called a generalist brand) wants to cover if we did not exist?’ The company’s ultimate all market segments. Each model spawns goal is undoubtedly to generate profit and multiple versions, thereby theoretically jobs. But brand purpose is something else. maximising the number of potential buyers: Brand strategy is too often mistaken for diesel, gas, three or five doors, estate, coupé, company strategy. The latter most often cabriolet, etc. The problem is that by having results in truisms such as ‘increase customer to constantly satisfy the key criteria of each satisfaction’. Specifying brand purpose segment (bottom range, lower mid-range, consists in (re)defining its raison d’être, its upper mid-range and top range), ie to churn absolute necessity. The notion of brand out many different versions and to avoid over- purpose is missing in most marketing text- typifying a model in order to please everyone, books. It is a recent idea and conveys the companies tend to create chameleon brands. emerging conception of the brand, seen as Apart from the symbol on the car hood or the exerting a creative and powerful influence on similarities in the car designs, we no longer a given market. If there is power, there is perceive an overall plan guiding the creative energy. Naturally, a brand draws its strength and productive forces of the company in the from the company’s financial and human conception of these cars. Thus, competitors means, but it derives its energy from its fight their battles either over the price or the specific niche, vision and ideals. If it does not options offered for that price. No longer feel driven by an intense internal necessity, it brands, they become mere names on a hood 34 WHY IS BRANDING SO STRATEGIC? or on a dealer’s office walls. The word has thus and communicating. These codes should not lost most of its meaning. What does Opel or be exclusively submitted to the fluctuating Ford mean? inspiration of the creative team: they must be What unifies the products of a brand is not defined so as to reflect the brand’s unique their marque or common external signs, it is character. The next level presents the brand’s their ‘religion’: what common spirit, vision strategic image features: amounting to four or and ideals are embodied in them. five, they result from the overall vision and Major brands can be compared to a pyramid materialise in the brand’s products, communi- (see Figure 2.1). The top states the brand’s cation and actions. This refers, for example, to vision and purpose – its conception of auto- the positioning of Volvo as a secure, reliable mobiles, for instance, its idea of the types of and robust brand, or of BMW as a dynamic, cars it wants, and has always wanted, to classy prestigious one. Lastly, the product create, as well as its very own values which level, at the bottom of the pyramid, consists either can or cannot be expressed by a slogan. of each model’s positioning in its respective This level leads to the next one down, which segment. shows the general brand style of communi- The problem is that consumers look at the cation. Indeed, brand personality and style are pyramid from the bottom up. They start with conveyed less by words than by a way of being what is real and tangible. The wider the

Brand vision Brand and purpose Brand management perception process: top-down process: bottom-up

Core brand values

Brand personality codes Semiotic invariants

Strategic benefits and attributes (four or five prioritised)

Physical signature: family resemblance

Outside of Outside of brand Product A ... Product B ... Product N ... Typical brand actions brand territory territory

Permanent fluctuations of the market Evolution of competition, life-styles, technology

Figure 2.1 The brand system STRATEGIC IMPLICATIONS OF BRANDING 35 pyramid base is, the more the customers is nothing but a ‘bluff’, a gimmick used to try doubt that all these cars do indeed emanate to stand out in a market flooded with barely from the same automobile concept, that they differentiated products. carry the same brand essence and bear the This view fails to take into account both the stamp of the same automobile project. Brand time factor and the rules of dynamic compe- management consists, for its part, in starting tition. Brands draw attention through the from the top and defining the way the car is new products they create and bring onto the conceived by the brand, in order to determine market. Any brand innovation necessarily exactly when a car is deserving of the brand generates plagiarism. Any progress made name and when it no longer is – in which quickly becomes a standard to which buyers case, the car should logically no longer bear grow accustomed: competing brands must the brand name, as it then slips out of its then adopt it themselves if they do not want brand territory. to fall short of market expectations. For a As automobile history is made of great while, the innovative brand will thus be able successes followed by bitter failures, major to enjoy a fragile monopoly, which is bound multi-segment brands regularly question their to be quickly challenged unless the inno- vision. Thus, after its smash hit models, the vation is or can be patented. The role of the 205 and 405, Peugeot was somewhat brand name is precisely to protect the inno- perturbed, both internally and externally, by vation: it acts as a mental patent, by becoming the series of setbacks with the 605 and the the prototype of the new segment it creates – slow take-off of the 106 and 306. A basic advantage of being a pioneer. question was then asked: ‘Are Peugeots still If it is true that a snapshot of a given market Peugeots?’ Answering it implied redefining often shows similar products, a dynamic view the long-term meaning of the statement ‘It’s a of it reveals in turn who innovated first, and Peugeot’, ie the brand’s long-lasting auto- who has simply followed the leader: brands mobile concept. protect innovators, granting them Internal hesitation about brand identity is momentary exclusiveness and rewarding often revealed when searching for slogans. them for their risk-taking attitude. Thus, the There is no longer a trend toward obvious and accumulation of these momentary differences meaningless slogans such as ‘the automobile over time serves to reveal the meaning and spirit’, which neither tell us anything about purpose of a brand and to justify its economic the brand’s automobile ideal, nor help to function, hence its price premium. guide inventors, creators, developers or Brands cannot, therefore, be reduced to a producers in making concrete choices mere sign on a product, a mere graphic between mutually exclusive features: comfort cosmetic touch: they guide a creative process, and road adherence, aerodynamism and which yields the new product A today, the feeling of sturdiness, etc. new products B and C tomorrow, and so on. Products come to life, live and disappear, but brands endure. The permanent factors of this Permanently nurturing the creative process are what gives a brand its meaning and purpose, its content and difference attributes. A brand requires time in order for this accumulation of innovations to yield a Our era is one of temporary advantages. It is meaning and a purpose. often argued that certain products of different As shown in Figure 2.2, brand management brands are identical. Some observers thus alternates between phases of product differen- infer that, under these circumstances, a brand tiation and brand image differentiation. The 36 WHY IS BRANDING SO STRATEGIC?

Brand Weak Strong

Different

Product

Competition and me-toos, changes in customers’ Banal expectations

Figure 2.2 The cycle of brand management typical example is Sony, whose advertising structuring influence. In fact they mould the focuses on innovations when they exist, and first and long-lasting meaning of this new on image in between. word that designates Brand X or Brand Y. Once learnt, this meaning gets reinforced and stored in long-term memory. Then a number Brands act as a genetic of selective processes reinforce the meaning: selective attention, selective perception, programme selective memory. This is why brand images are hard to A brand does in fact act as a genetic change: they act like fast-setting concrete. programme. What is done at birth exerts a This process has many important managerial long-lasting influence on market perceptions. consequences. When going international, each Indeed revitalising a brand often starts with re- country reproduces it. It is of prime importance identifying its forgotten genetic programme to define the products to be launched in rela- (see Chapter 16). tionship with the image one wants to create in Table 2.1 shows how brands are built and the long term. Too often they are chosen by exert a long-term influence on customers’ local agents just because they will sell very well. memories, which in turn influence their expec- They must do both: build the business and tations, attitudes and degree of satisfaction. build the brand. Brand management intro- In the life of a brand, although they may duces long-term effects as criteria for evalu- have been forgotten, the early acts have a very ating the relevance of short-term decisions.

Table 2.1 The brand as genetic programme Early founding acts (past) Memory (present) Expectations (future) First best-selling product Brand prototype Legitimate extensions for the future First channel of distribution Associated benefits (what other areas of new products) First positioning Brand image First campaign Brand competence and know-how First events First CEO Corporate visions and values STRATEGIC IMPLICATIONS OF BRANDING 37

New generations discover the brand at contains the programme for all future different points in time. Some discovered Ford evolution, the characteristics of upcoming through the Model T, others through the models and their common traits, as well as the Mustang, others through the Mondeo, others family resemblances transcending their through the Focus. No wonder brand images diverse personalities. By understanding a differ from one generation to another. brand’s programme, we can not only trace its The memory factor also partly explains why legitimate territory but also the area in which individual preferences endure: within a given it will be able to grow beyond the products generation, people continue, even 20 years that initially gave birth to it. The brand’s later, to prefer the brands they liked between underlying programme indicates the purpose the ages of 7 and 18 (Guest, 1964; Fry et al, and meaning of both former and future 1973; Jacoby and Chestnut, 1978). products. How then can one identify this It is precisely because a brand is the programme, the brand DNA? memory of the products that it can act as a If it exists, this programme can be long-lasting and stable reference. Unlike discovered by analysing the brand’s founding advertising, in which the last message seen is acts: products, communication and the most often the only one that truly registers and is significant actions since its inception. If a best recalled, the first actions and message of a guideline or an implicit permanence exists, brand are the ones bound to leave the deepest then it must show through. Research on impression, thereby structuring long-term brand identity has a double purpose: to perception. In this respect, brands create a analyse the brand’s most typical production cognitive filter: dissonant and atypical aspects on the one hand and to analyse the reception, are declared unrepresentative, thus ie the image sent back by the market, on the discounted and forgotten. That is why failures other. The image is indeed a memory in itself, in brand extensions on atypical products do so stable that it is difficult to modify it in the not harm the brand in the end even though short run. This stability results from the they do unsettle the investors’ trust in the selective perception described above. It also company (Loken and Roedder John, 1993). has a function: to create long-lasting refer- Bic’s failure in perfume is a good example. ences guiding consumers among the Making perfumes is not typical of the know- abundant supply of consumer goods. That is how of Bic as perceived by consumers: sales of the reason a company should never turn away ball pens, lighters and razors kept on from its identity, which alone has managed to increasing. attract buyers. Customer loyalty is created by Ridding itself of atypical, dissonant respecting the brand features that initially elements, a brand acts as a selective memory, seduced the buyers. If the products slacken hence endowing people’s perceptions with an off, weaken or show a lack of investment and illusion of permanence and coherence. That is thus no longer meet customer expectations, why a brand is less elastic than its products. better try to meet them again than to change Once created, like fast-setting concrete it is expectations. In order to build customer hard to change. Hence the critical importance loyalty and capitalise on it, brands must stay of defining the brand platform. What brand true to themselves. This is called a return to meaning does one want to create? the future. A brand is both the memory and the future Questioning the past, trying to detect the of its products. The analogy with the genetic brand’s underlying programme, does not mean programme is central to understanding how ignoring the future: on the contrary, it is a way brands function and should be managed. of better preparing for it by giving it roots, legit- Indeed, the brand memory that develops imacy and continuity. The mistake is to 38 WHY IS BRANDING SO STRATEGIC? embalm the brand and to merely repeat in the quality such as quality seals and certification. present what it produced in the past, like the Quality seals officially and legally testify that new VW Beetle and other retro-innovations. In a given product meets a set of specific charac- fighting competition, a brand’s products must teristics, previously defined (in conjunction always belong intrinsically to their time, but in with public authorities, producers/manufac- their very own way. Rejuvenating Burberrys or turers and consumers) so as to guarantee a Helena Rubenstein means connecting them to higher level of quality and distinguishing it modernity, not mummifying them in from similar products. A quality seal is a deference to a past splendour that we might collective brand controlled by a certification wish to revive. agency which certifies a given product only if it complies with certain specifications. Such certification is thus never definitive and can Respect the brand ‘contract’ be withdrawn (like ISO). Brands do not legally testify that a product Brands become credible only through the meets a set of characteristics. However, persistence and repetition of their value through consistent and repeated experience proposition. BMW has had the same promise of these characteristics, a brand becomes since 1959. Through time they become a quasi synonymous with the latter. contract, unwritten but most effective. This A contract implies constraints. The brand contract binds both parties. The brand must contract assumes first of all that the various keep its identity, but permanently increase its functions in the all converge: relevance. It must be loyal to itself, to its R&D, production, methods, logistics, mission and to its clients. Each brand is free to marketing, finance. The same is true of service choose its values and positioning, but once brands: as the R&D and production aspects chosen and advertised, they become the are obviously irrelevant in this case, the benchmark for customer satisfaction. It is well responsibility for ensuring the brand’s conti- known that the prime determinant of nuity and cohesion pass to the management customer satisfaction is the gap between and staff, who play an essential role in customers’ experiences and their expecta- clientele relationships. tions. The brand’s positioning sets up these The brand contract requires internal as well expectations. as external marketing. Unlike quality seals, As a result, customers are loyal to such a brands set their own ever-increasing stan- brand. dards. Therefore, they must not only meet the This mutual commitment explains why latter but also continuously try to improve all brands, whose products have temporarily their products, even the most basic ones, espe- declined in popularity, do not necessarily cially if they represent most of their sales and disappear. A brand is judged over the long hence act as the major vehicle of brand image; term: a deficiency can always occur. Brand in so doing, they will be able to satisfy the trust gives products a chance to recover. If not, expectations of clients who will demand that Jaguar would have disappeared long ago: no the products keep pace with technological other brand could have withstood the detri- change. They must also communicate and mental effect of the decreasing quality of its make themselves known to the outside world cars during the 1970s. That is a good illus- in order to become the prototype of a tration of one of the benefits a brand brings to segment, a value or a benefit. This is a lonely a company. task for brands, yet they must do it to get the The brand contract is economic, not legal. uniqueness and lack of substitutability they Brands differ in this way from other signs of need. The brand will have to support its STRATEGIC IMPLICATIONS OF BRANDING 39 internal and external costs all on its own. either vanish or wind up as pompous phrases These are generated by the brand require- (‘a passion for excellence’) posted in ments, which are to: hallways. In any case, the corporate brand is the organisation’s external voice and, as l Closely forecast the needs and expectations such, it remains both demanding and deter- of potential buyers. This is the purpose of mined to constantly outdo itself, to aim ever market research: both to optimise existing higher. products and to discover needs and expec- Becoming aware that the brand is a contract tations that have yet to be fulfilled. also means taking up many other responsibil- ities that are all too often ignored. In the l React to technical and technological fashion market, even if creators wish to change progress as soon as it can to create a after a while, they cannot entirely forget about competitive edge both in terms of cost and their brand contract, which helped them to get performance. known initially, then recognised and even- l Provide both product (or service) volume tually praised. and quality at the same time, since those In theory, both the brand’s slogan and are the only means of ensuring repeat signature are meant to embody the brand purchases. contract. A good slogan is therefore often rejected by managing directors because it l Control supply quantity and quality. means too much commitment for the l Deliver products or services to intermedi- company and may backfire if the products/ aries (distributors), both consistently over services do not match the expectations the time and in accordance with their require- brand has created so far. In too many cases ments in terms of delivery, packaging and brands are seen as mere names: this is very overall conditions. evident in some innovations committee meetings, where new products are reallocated l Give meaning to the brand and commu- to different brands of the portfolio many nicate its meaning to the , times in the same meeting. One brand name thereby using the brand as both a signal or another is perceived as making no and reference for the product’s (or service’s) difference. Taking the brand seriously, as it is identity and exclusivity. That is what (that is, as a contract) is much more advertising budgets are for. demanding. It also provides higher returns. l Increase the experiential rewards of consumption or interaction. The product and the brand l Remain ethical and ecology-conscious. Since the early theorisation on the brand, there Strong brands thus bring about both internal has been much discussion on the relationship mobilisation and external federalisation. of brands to products. How do the concepts They create their company’s panache and differ? How are they mutually interrelated? On impetus. That is why some companies switch the one hand, many a CEO repeats to his or her their own name for that of one of their star staff that there is no brand without a great brands: BSN thus became Danone, CGE product (or service), in order to stimulate their became Alcatel. In this respect, the impact of innovativeness and make them think of the strong brands extends far beyond most product as a prime lever of brand competi- corporate strategies. These only last while tiveness. On the other hand, there is ample they are in the making, after which they evidence that market leaders are not the best 40 WHY IS BRANDING SO STRATEGIC? product in their market. To be the ‘best product’ crucial for Golf and for Volkswagen itself: this in a category means to compete in the premium model used to represent 28 per cent of its sales tier, which is rarely a large segment. Certainly and almost half its operating profit. When within the laundry detergent category, market Golf 4 sales fell by 17.9 per cent over 12 leaders such as Tide, Ariel and Skip are those months, Volkswagen’s operating profit fell delivering the best performance for heavy-duty too, by 56 per cent. laundry, but in other cases it is the brand with As all tests and garage repair records demon- the best quality/price ratio that is market leader. strate, Volkswagen quality has now been Dell is a case in point. Are Dell’s computers the matched and even bypassed by Toyota, but for best? Surely not. But who really needs a ‘best buyers, perception is reality. Brand assets are computer’? What would be the criterion for made of what people believe. As for rumours evaluation? ‘Best’ is a relative concept, (Kapferer, 2004), the more people believe a depending on the value criteria used to rumour, the more strongly their belief is held. establish comparisons and identify the ‘best’. In Why would so many people be completely fact the market is segmented: the largest wrong? It took 20 years for Toyota to shake proportion of the public, and even most of the the belief among US consumers that B2B segment, wants a modern, reliable, cheap Volkswagen cars are the most reliable: it takes computer. Thanks to its build-to-order business time to prove one’s reliability. Often, to go model, Dell was able to innovate and become faster it is best to target a new generation of the leader of that segment. Co-branded ‘Intel drivers with an open mind. inside’, it reassures buyers and surprises them by Looking at competitive behaviour, it seems its astonishing price and one-to-one customi- that brands alternate in their focus. They capi- sation: each person makes his or her own talise on their image, then innovate to computer. Is Swatch the best watch? Surely not recreate or nurture the belief of product supe- either. But in any case this is not what is asked riority (on some consumer benefit), then by Swatch buyers: they buy convenience and recapitalise on their image, and so on (Figure style, not long-lasting superior ‘performance’, 2.2). Sony’s advertising is very typical of this whatever this may mean. pendulum behaviour: it alternates ads that It is time to look deeper into the introduce new products and pure image ads brand–product relationship. Looking at with no specific material content or superi- history, most brands are born out of a product ority content. These latter ads maintain brand or service innovation which outperformed its saliency (Ehrenberg et al, 2002). competitors. A superior product/service was Figure 2.3 summarises the product–brand the determining factor of the launch relationship. campaign. Later, as the product name evolves Suppose a consumer wants to buy a new car into a brand, customers’ reasons for purchase because of the birth of his or her fourth child. may still be the brand’s ‘superior performance This major event creates a new set of expecta- image’, although in reality that performance tions, some tangible, some intangible. The has been matched by new competitors. This consumer wishes to buy a minivan, with two has been the basis of Volkswagen’s leadership sliding doors, high flexibility within the and price premium: a majority of consumers cabin, and of course a reliable, secure brand, keeps on believing that Volkswagen cars are with credentials and some status. By looking the most reliable ones. The new Golf Five, at Internet sites, at magazines and visiting launched in September 2003, 30 years after the dealers, it is possible to identify those models first Golf, is 10 per cent more expensive than with the requested visible attributes (size, flex- its two European rivals, the Peugeot 307 and ibility, sliding doors). Now what about the the Renault Megane. This quality reputation is invisible attributes, like the experiential ones STRATEGIC IMPLICATIONS OF BRANDING 41

(driving pleasure) or those one has to believe marketing. Both are needed. Marketing aims on faith, such as reliability? Obviously, these at forecasting the needs of specific consumer attributes do or do not belong to the brand’s segments, and drives the organisation to tailor reputational capital. They cannot be products and services to these needs. This is a observed. This is one of the key roles of skill: some car marques offer minivans with brands: to guarantee, to reassure customers sliding doors, some do not. However, part of about desired benefits which constitute the the willingness to pay is based on a personal exclusive strength of the brand, also called its tie with the brand. Uninvolved consumers positioning. will bargain a lot. Brand-involved consumers Psychologists have also identified the halo will bargain less. Brand image is directly effect as a major source of value created by the linked to profitability. In fact, in the brand: the fact that knowing the name of the Euromonitor car brand tracking study, meas- brand does influence consumer’s perception uring the image of all automobile brands of the product advantages beyond what the operating in Europe, it has been said that a visible cues had themselves indicated, not to positive shift of one unit on the global speak of the invisible advantages. opinion scale means there is 1 per cent less Finally, attached to the brand there are bargaining by customers. pure intangible associations, which stem from the brand’s values, vision, philosophy, its typical buyer, its brand personality and so Each brand needs a flagship on. These associations are the source of product emotional ties, beyond product satisfaction. In fact, in the car industry, they are the locus A given brand will not be jeopardised by of consumers’ desire to possess a brand. Some competitors offering similar products, unless brands sell very good products at fair price there are large quantities of the latter. It is but lack thrill or desire: they cannot indeed inevitable for certain models to be command a price premium in their segment. duplicated in the product lines of different Their dealers will have to give more rebates brands. Suppose that brand A pursues dura- (which undermine brand value and business bility, brand B practicality and brand C inno- profitability). vation: the spirit of each brand will be Figure 2.3 reminds us of the double nature especially noticeable in certain specific of brands. People buy branded products or products, those most representative or typical services, but branding is a not a substitute for of the brand meaning. They are the brand’s

Branded product

Brand’s intangible Halo Product’s visible and values and imagery effect differentiating characteristics

Brand aspiration Product satisfaction Expectations Figure 2.3 The product and the brand 42 WHY IS BRANDING SO STRATEGIC?

‘prototype’ products. Each product range thus same group overlap too much, with one must contain products demonstrating the preventing the other from asserting its brand’s guiding value and obsession, flagships identity. Using the same motors in Peugeots for the brand’s meaning and purpose. and Citroëns would harm Peugeot, built on Renault, for instance, is best epitomised by its the ‘dynamic car’ image. It is when several top minivans, Nina Ricci by its entrancing brands sell the same product that a brand can evening gowns, Lacoste by its shirts, Sony by become a caricature of itself. In order to its Walkmans and digital pocket cameras. compete against Renault’s Espace and However, there are some products within a Chrysler’s Voyager, neither Peugeot or Citroën, given line that do not manage to clearly express Fiat or Lancia could take the economic risk of the brand’s intent and attributes. In the tele- building a manufacturing plant on their own; vision industry, the cost constraints at the low neither could Ford or Volkswagen. A single end of the range are such that trying to manu- minivan was made for the first four brands. facture a model radically different from the Similarly, a Ford–Volkswagen plant in Portugal next-door neighbour’s is quite difficult. But, for was set to produce a common car. The economic reasons, brands are sometimes forced outcome, however, is that in producing a to take a stake in this very large and overall common vehicle, the brand becomes reduced highly competitive market. Likewise, each bank to a mere external gadget. The identity has had to offer its own savings plan, identical message was simply relegated to the shell. So to that of all other banks. All these similar each brand has had to exaggerate its outward products, though, should only represent a appearance in order to be easily recognised. limited aspect of each brand’s offer (see Figure 2.4). All in all, each brand stays in focus and progresses in its own direction to make original Advertising products through products. That is why communicating about the brand prism such products is so important, as they reveal the brand’s meaning and purpose. Products are mute: the brand gives them The problem arises when brands within the meaning and purpose, telling us how a

Meaning and direction of brand A Meaning and direction of brand B

Products common to all three brands

Meaning and direction of brand C

Figure 2.4 Product line overlap among brands STRATEGIC IMPLICATIONS OF BRANDING 43 product should be read. A brand is both a its participation in the European leisure car prism and a magnifying glass through which championships? By saying ‘We really test our products can be decoded. BMW invites us to products so that they last longer.’ perceive its models as ‘cars for man’s pleasure’. The minivans that Peugeot, Citroën, Fiat On the one hand, brands guide our perception and Lancia have in common has left only one of products. On the other hand, products send role for the respective brands to play: to back a signal that brands use to underwrite enhance its association with the intrinsic and build their identity. The automobile values of the respective’s brand – imagination industry is a case in point, as most technical and escape for Citroën, quality driving and innovations quickly spread among all brands. reliability for Peugeot, high class and flair for Thus the ABS system is offered by Volvo as Lancia, practicality for Fiat. (See Figure 2.5.) well as by BMW, yet it cannot be said that they Thus brand identity never results from a share the same identity. Is this a case of brand detail, yet a detail can, once interpreted, serve inconsistency? Not at all: ABS has simply to express a broader strategy. Details can only become a must for all. have an impact on a brand’s identity if they However, brands can only develop through are in synergy with it, echoing and amplifying long-term consistency, which is both the the brand’s values. That is why weak brands source and reflection of its identity. Hence the do not succeed in capitalising on their inno- same ABS will not bear the same meaning for vations: they do not manage either to two different car-makers. For Volvo, which enhance the brand’s meaning or create that epitomises total safety, ABS is an utter all-important resonance. necessity serving the brand’s values and obses- A brand is thus a prism helping us to sions: it encapsulates the brand’s essence. decipher products. It defines what and how BMW, which symbolises high-performance, much to expect from the products bearing its cannot speak of ABS in these terms: it would name. An innovation which would be amount to denying the BMW ideology and considered very original for a Fiat, for value system which has inspired the whole instance, will be considered commonplace organisation and helped generate the famous for a Ford. However, though insufficient models of the Munich brand. BMW intro- engine power may scarcely have been an duced ABS as a way to go faster. Likewise, how issue for many car-makers, for Peugeot it is a did the safety-conscious brand, Volvo, justify major problem. It disavows Peugeot’s deeply-

PEUGEOT CITROËN FIAT LANCIA

MINIVAN

ZETA (Lancia): ULYSSE (Fiat): EVASION (Citroën): 806 (Peugeot):

Standing Price Practicality Performance Upmarket Functional Imagination Reliability Price

Figure 2.5 Brands give innovations meaning and purpose 44 WHY IS BRANDING SO STRATEGIC? rooted identity and frustrates the expecta- kind of milk mixed with selected bacteria, etc. tions that have been raised. It would be at Quality seals create a vertical segmentation, odds with what should be called Peugeot’s consisting of different levels of objective ‘brand obligations’. quality. The issue here is not so much to In fact, consumers rarely evaluate innova- present typical characteristics as to satisfy a tions in an isolated way, but in relation to a stringent set of objective criteria. specific brand. Once a brand has chosen a The legal guarantee of typicality brought by specific positioning or meaning, it has to a ‘certified origin’ seal means more than a assume all of its implications and fulfil its simple designation of origin, a mere label promises. Brands should respect the contract indicating where a product comes from, in that made them successful by attracting that the latter implies no natural or social customers. They owe it to them. specificity – although it may mislead the buyer into thinking that there is one. Moreover, several modern cheese-makers Brands and other signs of quality deliberately mix up what is genuine and what is not, inventing foreign names for their new In many sectors, brands coexist with other products that are reminiscent of places or quality signs. The food industry, for instance, villages in an effort to build their own rustic, is also filled with quality seals, certificates of parochial imagery. norm compliance and controlled origin and It is interesting to see how European coun- guarantees. The proliferation of these other tries tried to reassure consumers during the signs results from a double objective: to ‘mad cow crisis’ in order to redress the 40 per promote and to protect. cent drop in beef consumption: Certifications of origin (eg real Scotch whisky) are intended to protect a branch of l Although it is not legal under EU regula- agriculture and products whose quality is tions, they reinstated designations of origin deeply rooted in a specific location and referring to a country (ie French beef). This know-how. The controlled origin guarantee did not prove fully reassuring since it was capitalises on a subjective and cultural soon heard that French cattle could have conception of quality, coupled with a touch eaten not only local grass but also contami- of mystery and of the area’s unique character. nated organic extracts imported from the It segments the market by refusing the certifi- UK. cation of origin to any goods that have not l Certifications of origin (ie Charolais beef) been produced within a certain area or raised add typicality but cannot guarantee a 100 in the traditional way. Thus in Europe since per cent safe meat. 2003, Feta cheese has been a name tied to a l Seals of quality did not exist and had to be controlled Greek origin. Even if Danish or created but it would take years to promote French cheese-makers were to produce a ‘feta’ them: however, unless full control of the cheese elsewhere that buyers were unable to entire cattle raising process is guaranteed, tell apart from the feta cheese made in Greece the output itself cannot be guaranteed. in the traditional way, their products can no longer lay claim to the name ‘feta’. l The crisis highlighted the need for meat Quality seals are promotional tools. They brands. Since 1989, alerted by early convey a different concept of quality, which is warnings, McDonald’s had indeed sought both more industrial and scientific. In this new suppliers in Europe, scrutinising the respect, a given type of cheese, for example, way in which each and every one raised involves objective know-how, using a certain and fed their cattle. STRATEGIC IMPLICATIONS OF BRANDING 45

l Retailers like Carrefour have promoted empirically they convey clusters of attributes their own signed contract with farmers. and values. In doing so, they seek to become a reference in themselves, if not the one and Whether or not official indications of quality only reference (as is the case with Bacardi, in Europe should still exist in 2010 is a bitter the epitome of rum). Thus, in essence, issue that is still being discussed among brands differentiate and share very little. northern countries (United Kingdom, Brands distinguish their products. Strong Denmark, etc) who believe that only brands brands are those that diffuse values and should prevail, and southern countries manage to segment the market with their (France, Spain, Italy) who support the idea of own means. having official collective signs of quality co- In handling the ‘mad cow’ crisis, existing with brands (Feral, 1989). McDonald’s wondered whether they should The northern European countries claim rely on their own brand only or also on the that brands alone should be allowed to collective signs and certificates of origin. segment the market and thus build a repu- On an operational level, let us once again tation for excellence around their names, underline the fact that brands do not boil thanks to their products and to their distri- down to a mere act of advertising. They bution and marketing efforts. These coun- contain recommendations regarding the tries tend to favour an objective concept of long-term specificities of the products bearing quality: it does not matter that the feta their name, such as attractive prices, efficient cheese that the Greeks prefer is made in distribution and merchandising, as well as Holland or that Smirnoff vodka is neither identity building through advertising. It is Russian nor Polish. The southern European easier for a small company to earn a quality countries believe for their part that collective seal for one of its products through strict signs enable small companies to use their efforts on quality, than it is to undertake the ranking and/or their typical characteristics as gruelling task of creating a brand, which promotional tools, since they do not have requires so many financial, human, technical their own brands. As their products do not and commercial resources. Even without an speak for themselves, their market posi- identity, the small company’s product can tioning is ensured by quality or certified thus step out of the ordinary, thanks in part to origin seals. Clearly, behind the European the legal indicators of quality. debate on whether or not brands that have built their reputation on their own should coexist with official collective signs of Obstacles to the implications of quality lies another more fundamental branding debate between the proponents of a liberal economy on the one hand, and the partisans Within the same company, brand policy often of government intervention to regulate it on conflicts with other policies. As these are the other. unwritten and implicit, they may seem From the corporate point of view, choosing innocuous, when in fact they are a hindrance between brand policy and collective signs is a to a true brand policy. matter of strategy and of available resource Current corporate accounting, as such, is allocation. unfavourable towards brands. Accounting is Often, quality certificates reduce perceived ruled by the prudence principle: conse- difference. Distributors’ brands can also quently, any outlay for which payback is receive them. Brands define their own stan- uncertain is counted as an expense rather dards: legally, they guarantee nothing, but 46 WHY IS BRANDING SO STRATEGIC? than valued as an asset. This is the case of essentially to bolster the brand as a whole, investments made in communications in when the latter serves as an umbrella and sign order to inform the general public about the for other products. Managers thus only focus brand’s identity. Because it is impossible to on one thing: any new expenditure in the measure exactly what share of the annual general interest will be charged to their own communications budget generates returns account statement. For example, Palmolive is immediately, or within a specified number of a brand covering several products: liquid years, the whole sum is taken as an operating detergent, shampoo, shaving cream, etc. The expense which is subtracted from the brand could decide to communicate only one financial year’s profits. Yet advertising, like of these products singled out as a prominent investments in machinery, talented staff and image leader, capitalising on image spillover R&D, also helps build brand capital. reciprocal effects (Balachander, 2003). But the Accounting thus creates a bias that handicaps investment made would certainly be higher brand companies because it projects an under- than could be justified solely by the sales valued image of them. Take the case of forecast of that product. This new expenditure company A, which invests heavily to develop will in fact always be on the given product, the awareness and renown of its brand name. even though its ultimate purpose is to collec- Having to write off this investment as an tively benefit all products under the umbrella expense results in low annual profits and a brand. small asset value on the balance sheet. This In order to react against the short-term bias usually occurs during a critical period in the caused by accounting practices and the under- company’s growth, when it could actually use estimation of (corporate) value as shown in some help from outside investors and the balance sheets, some British companies bankers. Now compare A to company B, have begun to list their own brands as assets which invests the same amounts in machines on their balance sheets. This has triggered a and production and nothing whatsoever in discussion on the fundamental validity of either name, image or renown. As it is allowed accounting practices that emerged in the ‘age to value these tangible investments as fixed of commodities’, when the essential part of assets and to depreciate them gradually over capital consisted of real estate and equipment. several years, B can announce higher profits Today, on the contrary, intangible assets and its balance sheet, displaying bigger assets, (know-how, patents, reputation) are what will project a more flattering image. B will make the difference in the long run. Beyond thus look better in terms of accounting, when, the need for an open debate in Europe and the in fact, A is in a better position to differentiate United States on how to capitalise brands, it its products. has become just as important to find a way for The principle of annual accounting also companies to account for the long-term pros hinders brand policy. Every product manager and cons of short-term brand decisions in is judged on his yearly results and on the net their books. It is all the more compelling as contribution generated by his product. This brand decision-makers themselves rotate leads to ‘short-termism’ in decision making: often, perhaps too often. those decisions which produce fast, meas- Even the way in which the various types of urable results are favoured over those that communication agencies are organised fails to build up brand capital, slowly no doubt, but comply with the requirements of sound brand more reliably in the long term. Moreover, policy. Even if an advertising agency has its product-based accounting discourages own network of partner companies – in product managers from putting out any addi- charge of proximity marketing, CRM, tional advertising effort that would serve e-business and so on – and can thus promote STRATEGIC IMPLICATIONS OF BRANDING 47 itself as an integrated communications group, brands: the long-lasting presence of the it remains the crux of the network. creator or founder allows for sound, long-term Furthermore, advertising agencies think only management. The same is true of major in terms of campaigns, operating in a short, retailers where senior managers often handle one-year time frame. Brand policy is different: the communication themselves or at least it develops over a long period and requires make the final decisions. As a means to alle- that all means be considered at once, in a fully viate the effects of excessive brand manager integrated way. rotation, companies aim not only at incorpo- It is clear that a company rarely finds rating brand value into their accounts, but contacts inside so-called communications also at creating a long-term brand image groups who are actually in charge of strategic charter. The latter represents both a vital safe- thinking and of providing overall recommen- guard and an instrument of continuity. dations rather than merely focusing on adver- Business organisation is sometimes an tising or on the necessity to sell campaigns. obstacle to building the brand. In 2001, the Moreover, advertising agencies are not in a very high-profile Toshiba Corporation created position to address strategic issues, such as a new and hitherto non-existent vice-pres- what should be the optimal number of brands ident post: VP Brand. Significantly, the in a portfolio. As these affect the survival of appointee was the existing VP of Research and the brands that are under their advertising Development. The fact that the world number responsibility, the agencies find themselves in one in laptops and a major player in the tele- the awkward position of being judge and jury. vision, hi-fi and lo-fi sectors should create That is why a new profession has been such a post demonstrates a strong awareness created: strategic brand management of an unfilled gap. Toshiba’s products are consulting. The time had indeed come for undeniably excellent, and until now this has companies to meet professionals with a mid- been the key to the success of Japanese term vision who are capable of providing companies in general, and Toshiba in consistent, integrated guidelines for the devel- particular. This is a company that enjoys a opment of brand portfolios without focusing dominant position in a sector as cut-throat as on one single technique. the laptop industry. So what was it missing? A high personnel turnover disrupts the conti- Worldwide studies had revealed that there nuity a brand needs. Yet companies today was no ‘magic’ to the Toshiba brand. It could actually plan for their personnel to rotate on be compared to a colleague at the office whom different brands! Thus, brands are often you would regularly consult for advice, but entrusted to young graduates with impressive would never invite home for dinner. It was a degrees but little experience and the promotion brand based on a single pillar: there was a they expect often consists of being assigned to strong rational component, but little by way yet another brand! Thus, product managers of emotional appeal, intangible values and must achieve visible results in the short term. ‘magic’. In short, it was no Sony, and could This helps to explain why there are so many not command Sony’s higher margins. A changes in advertising strategy and implemen- company can become a leader in the Toshiba tation as well as in decisions on brand mould through excellent products and prices, extension, promotion or discounts. These are in or a leader like Dell by dint of a distribution fact caused by changes in personnel. system with levels of efficiency that remain It is significant that brands that have main- head and shoulders above any (known) tained a continuous and homogeneous image competitor. But since the effect of compe- belong to companies with stable brand tition is to erode perceived difference, other decision makers. This is the case for luxury instruments are needed to attract customers 48 WHY IS BRANDING SO STRATEGIC? and keep them loyal; to ensure that they baseline: ‘Philips, tomorrow is already here’. remain customers of the brand. This desire is In order to do so, they would have needed to based on the need for security, and on intan- ban all advertising on batteries or electric light gible factors. bulbs that either trivialised the assertion, Up until 2001, there was no management of contradicted it, or reduced it to mere adver- the Toshiba brand. The company’s organi- tising . It would also have been possible sation was based on a branched structure, and to communicate only about future bulb types thus no one was responsible for the cross- rather than about the best current sales. company resource that is the brand. The Unfortunately, nobody in the organisation medical branch had one view of Toshiba, had the power (or the desire) to impose these while the computer branch had another, and kinds of constraints. When the Whirlpool so on. There was no coordination or global brand appeared, however, the managers from brand platform, to say nothing of joint Philips actually created the organisation they promotions between branches, of course. needed for implementing a real brand policy: Horizontal initiatives (such as sponsorship) as it was directly linked to general were rare, and commercial necessity dictated management, the communications that the power lay with the distribution department was able to ensure the optimal subsidiaries: the name of the game was to sell circumstances for launching the Whirlpool imported products, not to build a brand repu- brand, by banning over a three-year period tation. Local managers’ remuneration any communication about a commonplace packages were calculated on sales, not brand product or even a best-selling product. equity. Failing to manage innovations has a very Another syndrome pertains to the rela- negative impact on brand equity. Even tionship between production and sales. In the though salespeople go up in arms when they Electrolux group, for instance, production are not given the responsibility of a strong units are specialised according to product. innovation, it is a mistake to assign the latter Both mono-product and multi-market, they to a weak brand, especially in multi-brand sell their product to the sales units who are, groups. When dealing with a weak brand, on the contrary, mono-market and multi- attractive pricing must indeed be offered to product (grouped under an umbrella brand). distributors as an incentive to include the The problem is that these autonomous sales latter in their reference listing. But since the divisions, who each have their own brand, all brand’s consumers do not expect this inno- want to benefit from the latest product inno- vation (each brand defines its type and level vation so as to maximise their division’s of consumer expectations), the product turnover. What is missing is a structure for turnover is insufficient. As for the non-buyers, managing and allocating innovations in such a brand is not reassuring. If the inno- accordance with a consistent and global vation is launched a few weeks later under a vision of the brand portfolio. As we will see leading brand name, distributors will refuse to later, there is no point in entrusting a strong pay for the price premium due to a leader innovation to a weak brand. Moreover, this because they purchased it at a lower price just undermines the very basis of the brand a while back from the same company. Thus, concept: differentiation. even with the strong brand, the sales price Lastly, if words mean anything at all, eventually has to be cut. communications managers should have the Breeding many strong brands, l’Oréal allo- power to prevent actions that go against the cates its inventions to its various businesses brand’s interest. Thus, Philips never succeeded according to brand potency. Innovation is in fully taking advantage of its former brand thus first entrusted to prestigious brands sold STRATEGIC IMPLICATIONS OF BRANDING 49 in selective channels as the products’ high what customers pay more for in a brand is the prices will help cancel out the high research name and nothing else. When the brand is cost incurred. Thus, liposomes were first dissociated from the product it enhances and commercialised by Lancôme, the new sun represents, it becomes merely superficial and filter Mexoryl SX by Vichy. Innovation is then artificial, devoid of any rational legitimacy. diffused to the other channels and eventually Ultimately, companies pay a price for this as to the large retailers. By then, the selective sales decrease and distributors seize the oppor- channel brands are already likely to have tunity to declare in their advertising that launched another differentiating novelty. national brands alienate consumers, but that However, this process is affected by the fact consumers can resist by purchasing distrib- that innovation is not exclusively owned by utors’ own-brands. This also justifies the slug- any one company; it quickly spreads to gishness of public authorities regarding the competitors, which calls for immediate increasing amount of counterfeit products reaction. among distributors’ own-brands. Finally, such Along the same lines, when a producer practices foster a false collective under- supplies a distributor’s brand with the same standing of what brands are, even among product it sells under its own brand, it will opinion leaders, which contributes to the eventually erode its brand equity and, more rumour that nowadays all products are just generally, the very respectability of the the same! concept of a brand. This simply means that 50

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Brand and business building

How do companies grow both the brand and Liquide sells to industry, Somfy sells its business? What does it take to build a brand? tubular motors to window-blind installers and What are the necessary steps and phases? In fitters, Saint Gobain Gypsum and Lafarge sell this chapter we address these questions with a to companies and craftspeople in the particular emphasis on integration of efforts. construction and public works sectors, and Brand building is not done apart, it is the the William Pitters company is famous among result of a clear strategy and of excellence in retailers for the quality of its trade relation- implementation at the product, price, place, ships. people and communication levels. There are Nevertheless, these companies are affected prerequisites before a brand can be built, and by brands in a variety of ways: they need to be understood. l Stock-exchange-listed groups have to manage the widened recognition for their Are brands for all companies? products. Their corporate brand is the vehicle for this recognition. Stock The brand is not an end in itself. It needs to be exchanges operate on anticipation. By defi- managed for what it is – an instrument for nition an anticipation is not rational, but company growth and profitability, a business can be influenced by emotive factors. tool. Does branding affect all companies? Yes. l Worldwide groups should be asking them- Are all companies aware of this? No. For many selves whether it might not be time to industrial companies or sellers, complete their transformation into the concept of the brand applies only to mass worldwide buyers and distributors in order markets, high-consumption products and the to consolidate their local operators under a fast-moving consumer goods (FMCG) sector. single name. This is a misconception. A brand is a name that influences buyers and prescribers alike. l Chinese or Indian groups should be asking Industrial brands have their own markets: Air themselves how to get rid of the status of 52 WHY IS BRANDING SO STRATEGIC?

low cost supplies and take a larger part of you say to a window-blind dealer for whom the high margin segments in developed the Somfy motor makes up 35 per cent of countries: to do so they need a global the product cost and who is threatening to brand. source the part from China at half the price? Somfy fears being relegated to the l Producers should be asking themselves role of a mere OEM player: hence its whether the brand is a differentiating increasingly high-profile public ‘Somfy factor in any sector threatened by powered’ strategy. commoditisation. For this reason, it is noteworthy that BPB chose to retain the Placoplatre product brand – a local brand which had become synonymous with the product itself, and indeed a leader in its Building a market leader without own markets. Similarly, it is significant that advertising the industrial Air Liquide company asked Mr Lindsay Owen-Jones, the CEO of What does it take to build a brand? Brand defini- l’Oréal, to sit on its . tions are innumerable (see the discussion on Having worked its way through hundreds page 9), and almost every author in the field has of product names and legal trademarks for his or her own. Although they can be useful, these names, Air Liquide realised that it definitions tell us very little about how to build a had still failed to create any real value. brand. Definitions are static: they take the brand What it needed was to restructure its range for granted. Building the brand is dynamic. of high-tech products under several mega- In general, in our executive seminars, when brands, as l’Oréal had done. we ask attendees how to build a market- l Producers of intermediary goods should be leading brand, typical answers include asking themselves whether it might not be advertise, create an image, and develop time to sell to their clients’ customers, not awareness. They are mostly answers that focus through direct sales, but by instilling a on communication. brand awareness in these customers. In this Instead of answering that question way, Lafarge – a world leader in frontally, we shall look at an interesting case: construction materials – invested several how did an unknown Australian company, million euros on informing the general Orlando Wyndham, build the UK’s leading public about the advances made possible bottled wine brand, Jacob’s Creek? This brand by its innovations, in order to create a is now the leader in volume and the leader in demand for its products among people who spontaneous brand awareness, with a very would live in the flats or work in the offices strong image. All that was achieved without built by its clients. In relationships with mass-market advertising before 2000. It is intermediaries and distributors, the brand most interesting also to note that between is an instrument of power. Another typical 1984 and 2000, the UK wine market doubled example is Somfy, a world leader in motors in size. What then was needed to create a for window blinds and openings for home successful wine brand in the UK mass use: this leadership has been earned market?: through changing its OEM business model l The first condition is to have enough and refocusing the brand on the end user, volume. Addressing the mass market just as Intel, Lycra, Woolmark and others means being able to fulfil trade expecta- have successfully done. After all, what do tions. Multiple retailers hate to deal with BRAND AND BUSINESS BUILDING 53

companies that cannot provide sufficient out, store by store, to make sure everything supply if a product is a success. For a wine is in place. Only a national sales force can maker this means being able to rely on a achieve this. In addition, an intensive wet very large supply source. trial phase is needed, to encourage customers to pause in wandering up and l The second condition is to secure a stable down the store aisles and taste the product. quality. The first role of any brand is to This too requires a national sales force. reduce perceived risk: the consumer expe- rience must be the same whenever and These five steps to build a brand in the market wherever the product is bought. (This is may seem straightforward and easy to follow. why branding services is tougher than Actually they are not. French wines could not branding tangible products: human vari- meet the conditions, while New World wines, ability works against this stability.) For a and Australian wines in particular, could. Let wine maker, it means mastering the art of us examine why, for each condition. blending, to make sure consumer expecta- Old World wines are based on one principle. tions are not betrayed. Once consumers The quality of the wine is totally dependent on discover they like a specific wine taste, their natural factors: the specific type of soil, the sun, repurchase indicates a willingness to reduce the climate, the air. As a consequence, hundreds risk and re-find the same taste, the same of wines have been created, differentiated by pleasure. the wine-growing area, or even specific l For a mass-market brand, price is key: it vineyard, from which they come, and its must be mainstream. Everything must be unique characteristics. Each vineyard claims its done, at the back office level, to ensure soil is better than that of competitors, for higher productivity, and hence a lower example. As a consequence, the product is frag- production cost, while not altering the mented. For example, behind each of the 5,000 quality and taste. marques of Bordeaux wine there is a different grower, usually rather small. This prevents l It is essential to be end-user driven, and suppliers from responding to the first condition find the right taste for the particular for building a brand: enough volume. market. Many UK consumers are not long- Old World wines have tried to secure their practised wine drinkers. Their tastes have market leadership by transforming their wine- been shaped by cold soft drinks and beer. producing practices into laws. Producing a This means that they prefer wines with a Burgundy or a Bordeaux wine means obeying specific taste and in-mouth profile. In these laws. What was intended as a quality addition, if an organisation hits the right control system has become a major block local expectations it can expect to obtain against innovating to address the competition good publicity, medals and press coverage, from emerging growing areas. thus reinforcing the trade support. If a wine is to be called a Pauillac, a Graves l Another requirement is a national sales or whatever (these are subregions within force. Wine is mostly chosen at the point of Bordeaux), its producers are not permitted to purchase. On-shelf visibility and point-of- mix the grapes from this region with grapes purchase advertising are success factors. It is grown anywhere else, or only at a very small important to draw up national agreements level. If one season is dry they cannot irrigate; with the major multiple retailers (in this case nor can they add chemicals to moderate the Sainsbury, Asda, Tesco and a few others) to differences in quality caused by differences in achieve this, but even when these are in climate from year to year. Because they respect place a day-to-day check needs to be carried these laws, Old World wines have an inherent 54 WHY IS BRANDING SO STRATEGIC? variability: they are the true produce of many of them are not well versed in European nature, more than the produce of man. There languages and the cultural traditions of is much more variety of soils and variance in Continental Europe. Unlike the maze of thou- climate from year to year in Europe than in sands of hard-to-pronounce wine names from Australia, California or Argentina, and this Europe, Jacob’s Creek is an English name, and too leads to differences between one Old the wording on the wine labels is written in World wine and another. English. Until recently French wines rarely Branding means suppressing this vari- provided any labelling information in ability: to secure the same taste from year to English. Furthermore, Australia is part of the year, one must master the art of blending Commonwealth, and some English people grapes coming from very different soils – and identify more closely with it than with France. regions, if one of them is underproducing. In addition, each New World country has Australia, as a relatively newly settled country become associated with a small number of without a long wine-growing tradition, had grape varieties. This means that consumers few laws governing wine producing; it could find it easier to forecast the taste of an do it. It was not so for wine makers from Australian wine than of a French wine. The Bordeaux or Burgundy. adds its own risk-reducing The same holds true for getting the right role to the brand. quality at low production costs. French wine Last but not least, the industry’s organi- makers are not allowed to use mechanised sation in the Old World is too fragmented. harvesting: they are required to harvest by Individual growers cannot afford a dedicated hand. They cannot irrigate, and so radically sales force even in their homeland. Even increase the productivity of their soils; they when the wine is produced by of cannot make use of chemical additives. In growers, the coops tend to want to remain France too, wine is stored in barrels as a rule. independent and refuse to join larger organi- In Australia wine is kept in huge aluminium sations, the only viable path to reaching the tanks, and wood cuttings are put in the wine: critical size to create a brand. there is more wood surface in contact with the As a result, in the 16 years to 2001, Australian wine, which accelerates the process of giving wines, led by Jacob’s Creek, went from zero to a the wine the right ‘woody’ taste. Time being 16.9 per cent share by volume and a 20.1 per money, this reduces production costs. cent share by value of the British market. Point four concerns getting the right taste Meanwhile the market doubled in size. to appeal to the target market. New World Interestingly, as is shown by the value share wines have no tradition to respect: they being higher than the volume share, price is not started from the customer. They adapted their the main reason consumers choose Australian product to the taste of customers in emerging wines. The New World growers have succeeded markets, used to drinking soft drinks and in persuading customers to trade up, by offering beer. Their wine had to be fruit-driven, very higher quality brand extensions designed to soft, very smooth, easy to drink for all occa- appeal to former novice wine drinkers who are sions. Some varietals (types of grape) such as now willing to explore more complex wines. Chardonnay and Semillon Chardonnay Can Old World wines come back and stop could deliver such a taste. These were not the their sharp decline? As long as they do not varieties that made the reputation of suppress their internally based regulations, Bordeaux or Burgundy wines. their production laws, and do not encourage One other dimension of being client-driven supplier concentration, they will not be able is language. Marketing research showed that to fulfill the five conditions for building the English were still broadly an ‘island race’: brands. Bordeaux and Burgundy cannot do it. BRAND AND BUSINESS BUILDING 55

However, the Languedoc wine-growing region Wyndham, the company that owns the is the biggest in the world. As such it fulfils the brand, is far smaller than some of its first condition. In this region, which histori- Australian competitors such as Hardy’s, but all cally produced lower-status wine than its energy and efforts were focused on this one Bordeaux and Burgundy, there are very few single brand. production rules to obey. The future is in the Many brands have developed by contact hands of Languedoc’s growers if they can and retail without advertising: Google, Zara, concentrate and meet customers’ require- Amazon. This is not the only brand-building ments, not only in the UK but also in Japan, model. Yellow Tail became the number one Korea and other countries with a growing wine brand in the United States thanks to a market for wine. They might also export their huge advertising campaign, a fun personality know-how and build brands where the future and a price which strongly motivated its main market is: China. This is why so many players distributor. In addition it was aimed at the are signing joint ventures with Chinese wide field of non-experts in wine. companies and authorities, to grow grapes in China and develop brands that have none of the Old World wine industry’s self-imposed Brand building: from product to limitations. values, and vice versa What lessons can be drawn and gener- alised? New World wine brands have It takes time to build a really strong brand. succeeded because they innovated, breaking There are two routes, two models for doing so: with the competition’s conventions for from product advantage to intangible values, consumer profit. They have not stopped inno- or from values to product. However, with vating and disrupting conventions. In time, this two-way movement becomes the Australia, Jacob’s Creek recently introduced essence of brand management: brands have screw cap closures on its Riesling varieties, two legs. abandoning a sacred cow: cork closure. Most brands did not start as such: their Riesling is more likely than wines from some founders just wanted to create a business, other grape varieties to be affected by based on a very specific product or service: an problems of cork quality, and half-bottles are innovation, a good idea to start their business especially vulnerable. Both consumers and and open the distributors’ closed doors. the trade reacted favourably to this small but Through time, their name or the name of the revolutionary innovation. product became a brand: well known and A second lesson is that a part of Jacob’s endowed with market power (the ability to Creek appeal was based on one enduring influence buyers). It did not simply designate weakness of competition: it was not an elitist a product or a person, but little by little came brand, and it had no snob value. It was to be associated with imagery, with intangible approachable for everybody. benefits, with brand personality and so on. The product’s quality–price ratio was Perception had moved upwards from objects excellent, attracting praise from experts and to benefits, from tangible to intangible taste makers. This is an endless race: each year values. the brand continues to improve the quality, As is shown by the upward-pointing arrow thus winning continuous publicity. Since it in Figure 3.1, most brands start not as brands was the first of the major Australian wine but as a name on an innovative product or exporters, Jacob’s Creek benefited from the service. Nike started out as a meaningless ‘pioneer advantage’, and became the symbol name on a pair of innovative running shoes: if of Australian wine. Interestingly, Orlando they had not been innovative no distributor 56 WHY IS BRANDING SO STRATEGIC? would have paid attention to Phil Knight in but also by PR operations that accentuate the the first place. With time, that name acquired unique status of the brand. awareness, status and trust, if not respect or This first model concerns brands that liking. This is the result of all the communi- started as a product. There exists a second cation and stars which accompanied the model of brand building: many brands start as business building. Little by little an inversion concepts or ideas. This is true of all licensed takes place in the process: instead of the brands (Paloma Picasso perfume, Harry Potter product building the brand awareness and products and so on) and of many fashion reputation (the bottom-up arrow of brands, spirits or cigarette brands. The Axe influence), it is the brand that differentiates men’s hygiene line started from an insight as and endows the product/service with its well: teenagers feel insecure about their sex unique values (the top-down dotted arrow). In appeal. fact at this time the brand determines which This model also provides a reminder that new products match its desired image. Nike is even when launching a product brand (that now in the phase of brand extensions: the is, a brand based on a product advantage) it brand has stretched from running shoes to is important to incorporate from the start sports apparel and now golf clubs. the higher levels of meaning that are Through time, brand associations typically intended to attach to the brand in the longer move up a ladder (the vertical axis of Figure term. The brand should not simply acquire 3.1), from ingredient (Dove with hydrating them, by accumulation or sedimentation; cream) to attribute (softening), to benefit they should be planned from the start and (protection), to brand personality, brand incorporated at birth. Incorporating this values and even mission (Apple or Virgin have perspective from the start accelerates the a mission), at the very top intangible end. process by which products become brands. Now this does not mean that, with time, This is why product launch and brand brand management should not be concerned launch are not the same. with material issues and differentiation any This is also why brand names should never more. Brands are two-legged. Even luxury be descriptive of the product. The first reason brands, bought for the sake of show, must give is that what is descriptive soon becomes their buyers the feeling that they have bought generic, when competitors come into the a great product and that the price difference is market with the same product. Second, clients legitimate. But material differentiation is a will soon learn what the business is about. never-ending race: competitors copy your best Names should better aim at telling an intan- ideas. Attaching the brand to an intangible gible story. Amazon speaks of newness, force value adds value and prevents substitutability. and abundance (like the River Amazon), and The Mercedes price premium is permanently Orange says ‘definitely non-technical’, just as explained by product-based advertising copy, Apple Computers did 25 years earlier.

Intangible added values Values, mission Personality Benefits Attributes Ingredients Tangible added values Time

Figure 3.1 The two models of brand building through time BRAND AND BUSINESS BUILDING 57

Finally, as is illustrated by the two dotted market’, although Michelin is still the market arrows of the graph, brand management leader, its share falls to 29 per cent. It looks as if consists of a permanent coming and going Michelin is not as well oriented to the values of between tangible and intangible values. the buyers in this aftermarket, fleet owners Brands are two-legged value producing and those who maintain their trucks. systems. This means that having an excellent In the spirits market, Bacardi is world product is not enough in modern compe- number one; is it the best spirit? One could tition. (See for instance the Toshiba case, page certainly argue that it is nothing of the kind: it 47). However, neither luxury nor image has no taste, and in all blind testings it fares brands can afford to forget the functional real- very poorly. So why does it sell in such ities of products. volume? The source of its business is not experts deliberating over its taste, but casual drinkers and partygoers. They generally want Are leading brands the best a spirit that will blend well in a cocktail, and products or the best value? an ideal mixer should have a very neutral taste. This is exactly what Carta Blanca To create a brand is much more than simply delivers; it provides 90 per cent of Bacardi’s marking a product or service, the necessary sales. first step of brand differentiation. It is about Branding starts from the customer, and owning a value. asks, what does he or she value? Bacardi is It is often held to be a paradox that the certainly not the ‘better’, but it could be called number one brands are not the best products. the ‘batter’. One of its key intangible added Was the original IBM PC the best PC available values is its personality, epitomised by its at the time? No. Is Pentium the best chip? symbol: a bat. The first Bacardi factory in Who knows? Are Dell computers the best Cuba was full of bats. This became the brand’s computers? symbol, adding an enduring halo of mystery The paradox stems from the word ‘best’: best to it. for whom, and at what? Let’s take the analogy Another example can be found in the of a school class. Academic gradings are deter- educational market. The Master’s degree in mined according to well-understood criteria: (MBA) is a passport students who do well display qualities such as to success. It was first introduced in US excellent memory, the ability to solve universities. To get their MBA, students at US problems fast, to work accurately and to universities need two years of intense work: present their work well. These are the values of one year to learn the fundamentals, and one the schoolroom; and similarly, each market year to specialise in a major field. has values. To become number one in any Insead is now a respected brand in the MBA market it is necessary to understand what the market, and Europe’s best-known MBA. market values are. Of course, one cannot However its MBA course lasts less than a year. succeed without a good product or service. This is the power of branding: a strong brand Those who try the product must like it enough awareness acts as a quality cue. Because it to make repeat purchases, to refer others to it; created the MBA category in Europe, Insead the product must build brand loyalty. In the soon benefited from the pioneer advantage: truck tyre market, Michelin is certainly the its name effectively became the local number one: it holds 66 per cent of the standard, because of the lack of competition. original tyre market (that is, the tyres the The French management school HEC created manufacturer supplies with the truck). But in its MBA in 1969, while Insead had started in the replacement market, the so-called ‘after- 1957. HEC and some other late entrants made 58 WHY IS BRANDING SO STRATEGIC? another mistake: they delivered a genuine Breaking the rule and acting fast American-type MBA. The HEC MBA, which lasted two years, was arguably of too high The MBA example also illustrates another quality for European corporate recruiters, and issue: to build a brand one must quickly reach too long for European students. the critical size to create barriers to entry (such as top-of-mind awareness). By breaking the two-year rule, Insead was able to produce Understanding the value curve twice as many graduates as a US school of the of the target same size, and so to reach the critical size of alumni who act as its referees within Insead became Europe’s best-known MBA by companies in half the time. Recently it made a understanding the value curve of European strategic move by doubling the number of directors who hire young graduates produced per year, thus accentu- executives. In delivering an MBA based on the ating its market share and increasing its US model, premium schools such as HEC productivity (the number of students per showed that they did not understand the professor). It also decided to capitalise on its local value curve. In Europe, recruiters do not now well-known brand to open a branch in really care how much time students have Asia. spent on campus: the extra salary one gets Many lessons should be drawn from the after having spent two years at Harvard, above examples: Stanford or Northwestern instead of less than a year at Insead is very small. One thing l The first is that all brands start by being recruiters do value, however, is an intensive non-brands, with zero awareness and immersion in a truly international image. However, they were based on an programme, in which students learn to work innovation that succeeded. Starting a with 10 different nationalities. This mirrors brand means finding a disrupting inno- the working context for which they are being vation. hired. European companies tend to consider that they will really teach their recruits how to l Second, creating a market is the best way to do business in-house, and that a fast lead it. This is the well-known pioneer academic introduction lasting less than one advantage. However, to be able to create a year will suffice. Finally, companies prefer to market, one must break free from the rely on continuing education, providing a conventions and codes that create herdism regular stream of specialised company in the marketplace. seminars, throughout their managers’ l Third, time is an essential ingredient of working lives. success. The winners start first and move Since not all clients are alike, different fast so as to rapidly create a gap from the brands can coexist in the same sector, because incoming competition. they address the value curve of different segments. This is why groups build brand l Fourth, it is important to reach the critical portfolios. GM has a portfolio of car marques, size rapidly, to reinforce that gap from the as does the Volkswagen Group. competition. This creates more resources for advertising, communication and word of mouth. BRAND AND BUSINESS BUILDING 59

l Fifth, a brand is not a producer’s brand or a Table 3.1 Consumer price (in euros/litre) of retailer’s, as is often heard in marketing various orange-flavour drinks in Europe circles: it is the customer’s brand. A brand Brand Price epitomises values, but as we know, value lies in the eyes of the beholder, the Hard discount 0.25 customer. It is essential to be market Carrefour Standard focused and ask, what is the value curve of Orange juice 0.70 National brand 0.84 the target? Then comes the question how Sunny Delight 1.08 to address this value curve better than the Tropicana 2.45 existing competition. The best way is to Tesco Finest 2.50 create a disruption (Dru, 2002), to break the conventions of the market.

budget affordable, when selling prices are Comparing brand and business under pressure from retailer own-labels and unbranded generic products. models: cola drinks In the fruit juice market, there are not many ways of finding a favorable economic It is interesting to compare a number of brand equation. Tropicana follows a premium price and business models within the same strategy, based on permanent product innova- category. This illustrates how one cannot tions (freshly collected oranges for instance) understand market leadership simply in terms and a premium image. These are value inno- of brand image. Structural factors such as vations, increasing the price paid by production costs, the type of competition, consumers per litre. It is the premium market and the trading structure of the sector need to leader, and a global brand, but in each be incorporated into the analysis. Why not country it is a small player in volume. take as a field for analysis the very symbolic As always, Procter & Gamble followed a one of colas? Colas as a commodity have high-tech approach to differentiate its succeeded remarkably in ‘decommoditi- product. It introduced Sunny Delight as a sation’, unlike other soft drinks. They are also competitor in the fruit juice market although the market in which the largest brand in the it has almost totally artificial ingredients world, Coca-Cola, operates. (there is only 5 per cent orange in it, for legal What is a soft drink? In a material sense it reasons). These created a taste and texture that consists of water, flavourings, a sweetening beat all the competitors using natural fruit agent and carbonate. In the fruit juice market, juice. It also added vitamins to appeal to brands are having a hard time: in Germany, mothers. Thanks to its name, its colour hard-discount labels hold more than 50 per (orange, and variants for the different cent of the market. The same process is taking flavours) and logo (a round sun), Procter & place in the UK and all over Europe, where Gamble created an innovative product, which unlike in the United States, distribution is was reminiscent of orange juice and was very concentrated and discount labels do not certainly thought by some consumers to be mean poor-quality products. The problem orange-based. Its artificial chemical formula is faced by brands is how to differentiate a patentable, which creates a barrier to entry product like orange juice that seems generic. and prevents it from being directly copied. In addition, the raw cost of orange juice is Most important, it is priced high, whereas its high: this creates pressure on the margins, and raw material cost is far lower than that of as a consequence on the level of advertising natural orange juice. 60 WHY IS BRANDING SO STRATEGIC?

Coca-Cola is an opaque product: almost availability, accessibility, attractiveness, in black, mysterious, with a secret formula, it that order. Most people focus on communi- created from the start the conditions, both cation, but the key of Coke’s domination is in real and psychological, of a product that is not these three levers: fully substitutable. Also, since it is an invented rather than natural product, the brand l Availability, the distributive lever, comes became associated with the product, which first. ‘Put Coke at arms’ reach’. The aim is can be described by no other name. It has for people to find Coke everywhere: bars, since become the reference product for an fast-food restaurants, canteens, retailers, entire genre of cola drinks. Benefiting from vending machines in streets and public the pioneer advantage, throughout more than places, refrigerators in offices, classrooms a century the Coca-Cola brand has pursued soon.… An essential point to appreciate is one single objective, now on a worldwide that building both the business and the scale: to continue to grow the cola category. It brand image is tied to the active presence was in competition first with sodas in on premises. On-premise presence gives America, then with other soft drinks, and now status to a drink, and creates consumption with virtually all other types of drink, habits. In addition, unlike multiple including water in Europe or tea in Asia. retailers (Wal-Mart, Asda, Ika, Carrefour, Coke’s brand essence is ‘the refreshing bond Aldi and the like), which do not sell one between people everywhere’. In making its brand exclusively, but their clients have the brand the number one drink in the world, it choice, on-premise customers do give benefited from being made from a syrup that exclusive rights, thereby granting a local is easy to transport at low cost, with high effi- monopoly to the brand. This is why Coke ciency (that is, it can be highly concentrated, makes global alliances with McDonald’s so many litres of Coca-Cola are produced from and other synergistic organisations. One a single litre of concentrate) and remarkably condition of this type of exclusive deal is high resistance to temperature and time (it that the supplier provides, and the outlet can be stored for a long time, anywhere, agrees to stock, its full portfolio of soft unlike most fruit-based soft drinks). It is defin- drink brands. The goal is to create a barrier itively a great physical product. In addition, to entry to any soft drink competitor. the tuning of its acidity/sweetness ratio is As part of competing on availability, one optimal so customers can drink many glasses should not forget access to the bottlers: in or cans in a row without being satiated. The many countries there are few good bottlers, cola syrup itself is very cheap to produce, thus and eventually one only. Controlling this allowing high margins and as a consequence bottler is a sure way to prevent competition high marketing budgets to reinforce its top-of- entering the country. Conversely, it is a mind position (a key competitive advantage way to push competition out, as when the in this low-involvement category, where the Venezuelan bottler that had formerly buying decision is based on impulse). It is handled Pepsi decided to work for Coke. resold to bottlers at five times its production Within a day, Pepsi operations in price, so profit can be located at the company Venezuela were closed. level and pressure can be exerted on bottlers/ l Accessibility is the price factor: ‘In China, distributors to pursue a high-volume strategy in India, sell Coke at the price of tea’. This if they want to be profitable. is made possible by the low cost of syrup To grow the business through the production, its easy transportability, and expansion of the category, the strategy rests also the volume-based strategy. Economies on three facets, which are always the same: BRAND AND BUSINESS BUILDING 61

of scale create another pressure on the leader on three facets: price, product and competition, if not a total barrier to entry. image: Having located the profit at the company level (exactly as Disney Corporation does l Price: it is a dime cheaper than Coke, at through licensing royalties, while some of consumer level, but this creates a higher its foreign entertainment parks are not pressure profitability. profitable), the Coca-Cola Corporation can afford to have its local companies lose l Product: since it is not the referent, Pepsi is money for the sake of rapidly growing a more daring and permanently works on the high per capita consumption rate. In product to beat Coke on palatability and addition, to push competition out of the taste (the ‘Pepsi challenge’). Its formula is market (whether it is defined as cola drinks actually preferred to Coke in most blind or more widely), the company exerts a tests. It pushed Coca-Cola Corporation to high-price pressure on the whole market. make the ‘marketing blunder of the For instance, it seems that specific prices on century’ launching New Coke in 1985 to Coke are granted to trade distributors if replace the classic Coke, the water of the they give preference to the company’s United States. More innovating by other brands, such as Fanta, Minute Maid necessity, it practised line extensions such and Aquarius. This is why the Coca-Cola as Diet Pepsi well before Coke. Company is now being sued by the l Image: Pepsi is younger than Coke. European authorities on charges of anti- Capitalising on the only durable weakness competitive manoeuvres. of Coke, its advertising positioning makes l Attractiveness is the third factor: it is the Pepsi the choice of the new generation. communication issue. Although Coke’s Pepsi’s essence is ‘the soft drink for today’s advertising is conspicuous, non-media taste and experiences’. communication (relationship, proximity, music and sports sponsorship, and on- To secure a presence for Pepsi-Cola on premise communications) represents the premises and circumvent the barriers to entry main part of the budget. Share-of-mind created by Coke, the Pepsico Company had to domination is made possible, let us remind, diversify into restaurants and fast-food by the low production cost. Last but not chains. least, Coke’s image is not that of a product Other rivals to Coke have had an even but of a bond: it delivers both tangible harder time. In February 2000, Richard promises (refreshment) and intangible Branson of Virgin admitted defeat in its war ones (modernity, dynamism, energy, against Coca-Cola and Pepsi in the United American-ness, feeling part of the world) States, less than two years after he rode into which make it so special, much more now New York’s Times Square in a tank to launch than its secret formula. his challenge. On reviewing the brand and business model that is common to both Coke Coca-Cola’s main challenger worldwide, and Pepsi, it is easy to understand why Virgin Pepsi-Cola, is following exactly the same Cola failed everywhere but in the UK, its brand and business model. Its differentiation domestic base. Even there it won less than 5 is based on the fact that it was introduced per cent of the market. Brand is not enough. more recently than Coke, and did not create Virgin Cola bought the Canadian company the category. As a challenger, its brand image Cott’s, which was able to make a very good and market grip are lower. It challenges the syrup: it makes the cola sold under Loblaw’s 62 WHY IS BRANDING SO STRATEGIC?

President’s Choice private label. It proposed a whether that creates the basis for a long-term cheaper price than Coke or Pepsi. But Virgin preference. Also, Virgin wanted to be Cola never got the distribution, it never perceived as the anti-Coke cola. However accessed the consumer. Branson’s whole idea throughout the worldwide market this role was to save on advertising and thus make a already belonged to Pepsi. Finally, is the cheaper price possible by taking advantage of Virgin brand image that strong among the the Virgin umbrella brand. Unlike the two young generation outside the UK? world-leading carbonated soft drink What other brand and business model companies, which both follow a product could exist in this sector? At this time, two brand policy (one brand per type of flavour), alternative models are surviving: ethnic colas Virgin’s only brand asset is its core brand, and colas dedicated to trade. In its edition of which has been extended to all types of Sunday 12 January 2003, the New York Times category (see Chapter 12), and in the process published an article, ‘Ire at America helps gained extensive worldwide awareness. As create the Anti-Coke’. This announced the well as a low volume of advertising and selling creation of Mecca Cola by a young Tunisian- a large volume on promotion, Virgin had a born entrepreneur. He targeted it at the small sales force, a sure handicap for trade Muslims of France and soon of other coun- marketing and store-by-store direct relation- tries. This brand had two strengths. The first ships. Finally, Virgin Cola was not able to was immediate goodwill in the Muslim work in the market without a full portfolio of community: its identity is based on a real soft drinks to support it. This is necessary to feeling of community and resentment against access the on-premise consumption sector, what is felt as an imperialist drink and brand. and is also the only way to make a true The second was an immediate presence in the national sales force economically possible. specific channel of distribution held by this As a rule, extension failures are immediately community, innumerable small convenience attributed to some image-based reason that it stores that open long hours. is impossible for the brand to extend to the It is too early to judge its success, since this new category. The brand and business will only be evidenced by long-term durability. perspective shows us that this explanation is However, sales are skyrocketing. Interestingly, superficial. It was not the Virgin brand that other colas have burgeoned, based on the was the source of the failure, but the fact that same approach: they capitalise on religious, Virgin could not compete on the same brand ethnic or geographical feelings of community and business model as its two Goliath and identity. For instance there are Corsica competitors. Fairy tales are one thing, but Cola and Breiz’h Cola (sold in Brittany), aimed most of the time David gets killed. at two regions with strong identity and even Virgin Cola failed to get enough distri- independentist movements. This model can bution: in Europe, for instance, it never be reproduced elsewhere: Irish cola? Scottish entered the main multiple retailers. It was not cola? In the era of globalisation, regional iden- sold sufficiently in the fashionable bars and tities are revived to resist what is perceived as a restaurants. To do better in distribution terms loss of essence, soul, and quality of life. Such it would have needed a real sales force and a attempts access local distribution or the local real portfolio of brands and products. stores of national multiple retailers. No store Arguably it should have looked for alliances owner or manager wants to take the risk of with soft drink manufacturers looking for a hurting the local feelings of the community branded cola. living around its store. Without advertising, the cola was mostly Monarch Beverage Company has created an sold on a promotional basis. It is questionable interesting alternative brand and business BRAND AND BUSINESS BUILDING 63 model. It is totally trade oriented, thereby own label with profit. Even if they were given securing access to modern distribution, away free, own-label colas would not be worldwide. However it is not simply consumed: they lack authenticity, a reas- providing cola for retailers own labels. This is surance on quality and taste, and fail to a true branding approach. deliver the right intangible values. Monarch The problem for multiple retailers is to get has created a portfolio of brands, all looking free from the grip of Coke and Pepsi. American (like ‘American Cola’), and coming Unfortunately, with some exceptions from a true American company based in the (Sainsbury’s Cola in the UK, President’s Mecca of colas, Atlanta, close to Coca-Cola’s Choice Cola in Canada), market shares of own own headquarters. These brands, owned by labels remain very small. This is probably Monarch, are granted under licence to because compared with the real thing, private multiple retailers. Each mass multiple retailer labels look like faked cola. Parents who buy therefore has its own brand, different from its own-label colas to save money risk being criti- competitors’, for its operations worldwide. cised by their children. Private labels have no Carrefour for instance has American Cola. The image in a category that has been decom- syrup is made by Monarch to match each moditised by brand image. Coke’s identity retailer’s specifications. The company encapsulates the American dream, authen- provides the brand and the product; it leaves ticity and pleasure. Pepsi has the same associa- its customers totally free to manage their own tions, although to a lesser extent, and also bottlers, prices and promotion. No national means youth. Own-labels create no such value sales force is needed: negotiations are carried in the eyes of the young heavy consumers. out at the corporate level, with the category They create bad will. global manager. The Monarch Beverage Company was This in-depth comparison of alternative created in Atlanta, USA, by two former Coca- brand and business models has illustrated the Cola marketing VPs. With the help of a former benefits of enlarging the perspective on Coca-Cola chemist, it knew how to produce a competitive strategies, beyond communi- good cola syrup. Most important, instead of cation and brand image. Brand leadership is focusing on the end-consumer (the mistake of gained through the synergy of multiple levers Virgin) and running the risk of having no within a viable economic equation. Thus is access to mass distribution, it focused on the the true condition of brand equity. customer problem: to increase the share of its 64

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From private labels to store brands

Each day brings fresh news of the expansion mass consumption sector, distributors’ brands of distributors’ brands. On 28 November are now part of the competitive environment 2006, Carrefour launched its mobile phone in all sectors: even the mass prestige products range under its own brand, while praising the store Sephora has undertaken a voluntary capabilities of its Orange network, aiming to policy of own-name products over the past turn it into a tool for creating customer three years. Distributors’ brands are also loyalty that would itself be profitable and a found in automobile equipment (the Norauto channel for growth. The offer was carried by tyre is the biggest seller in France), agricultural the 218 hypermarkets under the Carrefour cooperatives, pharmacy groups and so on. For name, visited by one million clients every day. so long merely the cheapest products, they This is not an isolated phenomenon. have now become innovators which are quick Distributors’ brands are on the rise every- to offer consumers products that keep pace where, and now dominate the market in with the latest trends in society (organic many so-called mass consumption categories. farming, fair trade, exoticism, gourmet dishes For example, in France the market for self- and so on), following in the footsteps of the service packaged ham is 400,000 tonnes a Monoprix and Sainsbury’s brands. In many year. The hard-discount circuit alone, without cases, these have become inseparable from the national brands, sells 100,000 tonnes. In large store: thus Picard stores sell only the and medium-sized stores 300,000 tonnes are distributor’s brand. Clients go to Picard and sold, of which two-thirds, or 200,000 tonnes, buy Picard. The Body Shop, now part of the are ‘low-cost products’ under the store brand. l’Oréal family, sells only its own distributor’s There are only 100,000 tonnes remaining for brand. Gap began life as an exclusive retailer the major brands: Fleury Michon, Herta of Levi Strauss, stocking jeans in all sizes, but (Nestlé), Madrange, Sara Lee, etc. In Germany, changed its strategy when discount arrived in 45 per cent of organic products are sold under the United States. Now Gap only sells… Gap, distributors’ brands (Jonas and Roosen, 2006). an action that seems to have inspired Having been restricted for so long to the Decathlon. Other examples include Ikea, 66 WHY IS BRANDING SO STRATEGIC?

Habitat, Roche and Bobois, Crate & Barrel and brands have long been perceived in the William Sonoma. Marks & Spencer’s has done United States as low-cost, low-quality alterna- the same since its inception. tives, an assessment that failed to take the full In the B2B sector, distributors’ brands and measure of the phenomenon. low-cost products are also present: it is true It is revealing that the latest book published that Asian companies are competing to supply in the United States about distributors’ brands them. Thus a Facom key for a mechanic costs (Kumar and Steenkamp, 2007) chose ‘private s10, but only s3 if made in Taiwan. label’ and not ‘trade brands’ as its title: the Bubbendorf, the famous blind maker, now has notion of ‘private label’ categorises the the tubular motors for the electric automation distributor’s brand as a thing apart, and not of its blinds manufactured in Asia. Until using the word ‘brand’ therefore fails to recently, it installed automations by Somfy, account for the true reach of distributor’s the market leader: now it is its main brands. They are indeed brands in the eyes of competitor. In the office furnishings market, consumers, who are now loyal to them, even Office Depot and Guilbert have based their if, as will appear, they are not brands like the success on distributors’ brands: apart from the others. However, this situation has recently so-called obligatory products (certain Pentel changed, as can be seen from a recent products, Stabilo Boss, Post-It, Staedtler, interview with Russ Klein, the executive Dymo, Bic) they sell only the products of their director of 7-eleven, the store that invented own brand. And is there not something para- the convenience store concept some 79 years doxical about the way that the same big ago, He attests, ‘Private label has changed to companies that complain about the rise of the point where retailers are using it as the distributors’ brands, then buy the Niceday premium brand in some cases’ (quoted in brand from their Guilbert supplier instead of , July–August 2006). buying major branded products? In short, Tesco is an example of this. they are criticising consumers for doing what At Tesco, the number one distributor in they are themselves doing: managing their Britain, a survey of the fruit juice aisle is spending. revealing: far from being a product, the distributor’s brand is in reality a segmented range, from the lowest possible price (Tesco Evolution of the distributor’s Value), priced at s0.33 per litre, to s1.84 for brand the top of the range, under the label ‘Tesco Finest’. Tropicana’s product, by the way, is Academic studies have until recently failed to sold at s1.62 per litre. pay sufficient attention to distributors’ In fact, distributors are well schooled in brands. With the producer’s brand being distributors’ brands. They: considered as the only point of reference, distributors’ brands were thought of as ‘non- I allocate the majority of their shelf space to brands’, attracting price-sensitive customers. them, eliminating all weaker brands; Moreover, the distributor’s brand has been I have segmented their portfolio of distrib- even less extensive in the United States than utors’ brands in order to meet the different in Europe. In fact, in the United States, with expectations of their clients (a far cry from the exception of Wal-Mart, no distributor the ‘Soviet’ own brand, signalling the dominates: distribution is regional, and the absence of choice) without forcing them to national brands still have power in the distri- identify with the shop name (Wal-Mart bution channel. This is why distributors’ named its men’s clothing range George); FROM PRIVATE LABELS TO STORE BRANDS 67

I segment their range in order to cover not distributor: every village has its own Migros only different price levels, from the store. Migros – without exception – sells only cheapest to the highest price on the entire Migros products. The citizens of Germany, shelf, but also the emerging needs known Europe’s most powerful country, enjoy their as ‘trends’ (such as Tesco Fair Trade, Tesco luxury cars, but they buy most of their food Organic and Tesco Healthy Eating). from the Aldi and Lidl hard discounters, which also – almost without exception – sell The distributor’s brand, managed with only exclusive private-label products. It is strength and ambition, in this way contributes hard to imagine that the Germans would buy to the store’s reputation. However, as we shall poor-quality goods. Loblaw’s, a Canadian discover below, the brand issue for the distrib- chain, has built its reputation on its utors has shifted: the question now is to turn President’s Choice brand. The story is the the store itself into the brand. same at Carrefour, Albert Heijn in Holland Throughout the world, the distributor’s and Ika in Scandinavia. brand is often becoming the only true Distributors now manage their brand port- competitor to the producer’s brand, when it is folios as part of an overall vision for the not the shelf leader in volume. Too many category and for the store. They have to brand managers have not yet accepted this choose their ‘brand mix’ for each category reality: their brands are in a minority. Their segment, and make a decision with regard to enemy is not the other ‘big’ brand, but the the type of brand to offer: producer’s or distributor’s much cheaper products, with an distributor’s brand? The latter may offer either increasingly comparable quality level. To ranges of economical products, a value-for- make things worse, on hypermarket and money line (often in the distributor’s own supermarket shelves we find the producer’s name) or own brands (private labels) offering brand, the distributor’s brand and now the more flexibility in terms of positioning – lowest-price products, 60 per cent cheaper. perhaps even genuinely premium posi- This further heightens the urgency to act tioning. (Quelch and Harding, 1996) and position the It is true that within the meaning of the major producer’s brand firmly and squarely catch-all term ‘distributor’s brand’ there are on its pillars of differentiation: innovation distinctions to be made between very and quality on the one side, and emotional different realities. Two axes give structure to added value on the other. all the distributor’s products or brands: the Distributors’ brands occur in all countries, level of value added, and the relation to the from the richest and most developed to devel- store (see Figure 4.1). oping countries. In Eastern countries, low- In terms of added value, at the bottom of cost products and hard discount are growing the scale are the low-cost products, hastily rapidly. However, the hard discounters were designed by mass-distribution multiple also a bolt from the blue for mass distribution retailers to counter the breakthrough of the in the highly developed countries of Western so-called ‘hard-discount’ German stores (Aldi Europe: their growth in France stabilised only and Lidl) and their French counterpart (Ed). this year. And yet these are rich countries. These products are the result of a minimalist The distributor’s brand is thus not a conception of quality: low-cost sardines have phenomenon linked to low income. In the legal right to be called sardines, but make Switzerland – which has one of the highest per no pretence at anything more. Their low price capita incomes in the world – the leading food is obtained through the purchase of the brand is Migros, well ahead of Nestlé. This is cheapest sardine lots in fish auctions the hardly surprising, as Migros is a dominant world over. Low-cost gingerbread contains 68 WHY IS BRANDING SO STRATEGIC?

Strong Tesco Value Tesco Fauchon Leader Price Tesco Finest Sephora Tesco Healthy Choice

George (Wal-Mart) St Michael (Marks and Spencer)

Eco Products Aldi President’s Choice No.1 Lidl Relationship to the store

None 0% Added value

Figure 4.1 Relative positioning of the different distributors’ brands not one gram of honey. This should not be directly: confused with the business model of the hard discounters such as Aldi and Lidl, which I when its insufficient reputation is a established precise quality specifications with handicap for product sales; industrialists, aiming to obtain decent quality I when the badge function of the despite the rock-bottom prices, via economies consumption does not fit the presence of a of scale pushed to the extreme: the manufac- generalist distributor (for example wine or turer recruited will produce only one textiles); reference, in astronomical quantities. At the other extreme of added value, we find I when the level of added value of the products such as Tesco Finest, for example products is too low and could reflect nega- fresh fruit juices made less than three days tively on the store: for example, at earlier and with a limited shelf life (without Carrefour low-cost products are labelled preservatives) and Monoprix Gourmet, No. 1 or Eco, without any mention of which, as its name suggests, offers products Carrefour. with high experiential value. In the United States and Canada, the President’s Choice line Why do Leclerc hypermarkets have no store from Loblaw’s aims high in terms of quality, as brand with their name? I organised a seminar its name suggests. on this theme with the managers of this group, In terms of nominal relationship to the and it appears that this has to do with the store, a distributor’s brand may either carry the company’s culture and its historical legacy. name of the store or its own name: one or the Leclerc was conceived and grew up as a other. Thus, at Carrefour, there are ‘Carrefour discounter of major brands. Signing its products’, Tex (for textiles) and BlueSky. Of products Leclerc would not fit with this vision course, intermediate situations do exist, where of the company’s raison d’être. Nevertheless, the store endorses its own products: all customers have clearly realised that Marque Auchan products aimed at children are signed Repère (Marker Brand) is Leclerc’s distributor’s Rik et Rok, but the Auchan logo is clearly visible brand. In this regard it is interesting to note on the front of the packaging. that this brand is itself named ‘brand’, and uses We thus arrive at the matrix shown in at its second name the ontological function of Figure 4.1. The store does not impose its name any brand: to serve as a reference marker. FROM PRIVATE LABELS TO STORE BRANDS 69

Other terms are used to denote the forms of Are they brands like the others? distributors’ brands: The big brands have long regarded distrib- I The own brand or private label is a utors’ brands with condescension, and would distributor’s brand that has its own name deny their new type of products the sacred and does not generally refer to the title of ‘brands’. That would call their historic company’s name (for example Miss Helen hegemony into question, a kind of lèse- for cosmetics at Monoprix, or Jodhpur for majesté: until now, the big brands have led the textiles at Galeries Lafayette). field and dominated it. For them, stores were I The counter brand: this word designates distributors, a revealing term, since it refers a distributor’s brand, generally a private more to logistics and transport than to a label, created to divert clientele from a talent for composing an overall offer, for particular big brand, by slavishly imitating stage-managing the shelves, for business all its distinctive traits in order to play on through optimisation of the upstream and client confusion and the psychological downstream. This is why, moreover, stores principle according to which everything insist on being called retailers. The rise of the that looks very much alike is in fact very distributor’s own brand (DOB) is all the harder similar. Thus each company creates its to accept since it signifies the end of a counter brand to Ricoré – Calicoré, Incoré, particular type of marketing (see page 139): it etc – with packaging similar in all respects, therefore leads to questions that go far beyond placed just next to the national brand on the problems of gaining market share, of the shelf. which companies have not yet taken the full measure. I The positioning brand: these are ranges In order to answer the question of the exact that, far from being content with offering nature of the distributor’s brand, we can the best quality/price ratio, position them- examine either their management, or their selves on trends or in the premium status among buyers. segment. Take for example the Monoprix brands, such as Monoprix Bio (organic), Is the distributor’s brand managed Monoprix Equitable (fair trade), Monoprix like a manufacturer’s brand? Gourmet. From a managerial point of view, distributors’ Certain stores use their name in all segments: brands are, broadly speaking, brands like any Figure 4.1 shows how the highly respected other. They have all the features of a brand British company uses its name Tesco both for (thinking of a particular target, selecting a low-cost products (Tesco Value) and for the principal competitor whose clients they will top of the range (Finest) and niches and attempt to steal, defining an offer and a price, trends (Tesco Healthy Eating). Capitalising on setting themselves up with packaging and a single name makes the customer’s job easier, communication) but in addition they have to and profits the store, but of course means that respond to two different constraints simulta- high standards must be achieved in all neously. They have to find their place in the segments, even at low prices. French stores distributor’s marketing mix, in which they prefer not to run the risk to their reputation, now represent a key component of identity, and do not use their name on the cheapest differentiation and loyalty generation products. (although the effect on customers’ loyalty to the store has not yet been proven: see 70 WHY IS BRANDING SO STRATEGIC?

Corstjens and Lal, 2000). And they generally that this should be carried out based on a use price as the driving force behind their own category that creates reputation (the marketing mix, even when, exceptionally, prototype) first and foremost for those they are positioned in a premium segment. products that are considered to be close to For this reason, management of these each other, because they are either comple- brands does not have the same autonomy as a mentary or substitutable. Bringing everything producer’s brand. Their image positioning is together under the umbrella of a name is not based on that of the company. As for their an end in itself: the brand is there not to save price positioning, it is generally relative, set money, but to create value for customers. between the two client benchmarks of the big From this point of view, it is revealing that the brand prices and hard-discount product big supermarkets develop a portfolio of prices. umbrella brands, in order to cover the whole In formal terms, the distributor’s brand scope of their offer while also seeking the level often takes on the form of the umbrella brand: and type of client involvement (Kapferer and Carrefour products, or Auchan or Tesco Laurent, 1988). At Monoprix Miss Helen is the products. Admittedly, there are also private feminine beauty and hygiene brand, just as at labels that make no reference to the store but Wal-Mart George is the male clothing brand. present themselves as isolated, thematic In contrast, Monoprix aims to associate its brands. The hypermarket chain Intermarché name with emerging consumer trends: has its own boats and factories: it sells seafood organic, sustainable development, gourmet, under the Captain Cook brand, and its openness to the world, healthy eating, etc in processed meats under the name Monique the form of ‘line brands’, as does Tesco Ranoux. Carrefour sells a range of over 100 (healthy choice, organic, sustainable devel- regional products under the brand Reflets de opment etc). France (Reflections of France). This cross-cutting status of the distributor’s To concentrate on the store brand, also brand explains the difficulty of managing the known as the banner, since it capitalises on store brand entirely like a brand. In fact, there the reputation of the store’s name to define a is no brand without positioning: thus at tangible offer at the product level, it typically Carrefour First Line was the brand of the most covers a large number of products, or even recent progress in television, hi-fi, white shelves: through its extension, it brings a goods and computing, at the cheapest price. service of practicality to the customer, who Among the big distributors, it is still often the can find it by passing from shelf to shelf. It purchasers and not the marketers who have functions like a common factor, a decisional the power. The former, and this is their key marker across the store. strength, react by seizing opportunities (an The manufacturer’s brand, on the other exceptional lot of goods here, filling a gap in hand, signifies competence: its extension is the range there), and by optimising the therefore necessarily more limited (see difference between the purchase and the sales Chapter 13). Fleury Michon, the French price. specialist in processed meat and fresh deli- The marketing viewpoint is to install the catessen products, would not dream of selling necessary brand coherence, which goes far jam. The maker’s mark has a trade, an beyond the logo, in all the aisles. The brand expertise, and a savoir-faire that underpin its must not depart from its positioning, its progress, materialised through innovations. platform (same price range, same level of tech- This does not mean that a distributor’s nology, etc). These two points of view are on a brand may serve as an umbrella for anything collision course. Often the store brand is asked and everything. We shall see (in Chapter 13) to put its name to products that are not FROM PRIVATE LABELS TO STORE BRANDS 71 entirely in line with its positioning in order to brand product are up to 80 per cent defined avoid having to create an individual marque by the characteristics of the successful for them. Moreover, the distributor’s brand is product to be imitated. If Henkel invents subject to the vagaries of sourcing. To return tablets to replace washing powder, the DOB to First Line, this brand never took off, since must then manufacture identical tablets. easy as it is to imitate the top-of-the-range According to the stores, the remaining 20 per Bonne Maman jam, it is difficult to offer high- cent of the specifications will be a way of definition plasma screens at low prices. There providing differentiation linked to the store’s are simply no suppliers in the high-tech own values. However, in order to be able to market to deliver such products. This is why at appear quickly on the shelves with an iden- the end of 2005 Carrefour decided to put an tical offer at a 30 per cent lower price, it is end to First Line, and retained only its lowest- necessary to economise on marketing and price brand, BlueSky. R&D: the distributor’s brand business model It is impossible to talk about brands without is that of copying, of imitation taken to the touching on the question of innovation. In maximum. fact, the function of the national brand, the A common riposte is that distributors’ big brand, is to supply progress through inno- brands were the first to introduce such and vation, change, fashion, design and so on. such an innovation in terms of packaging: for This requires marketing expertise – long-term example, turning shampoo bottles upside thinking on the expressed, or latent and down, in accordance with their actual unconscious, expectations of future clients. position in the bathroom. However, the distri- They also have the expertise of the major bution brand, by the very construction of its industrialists. Thus in 2006, Fleury Michon, in economic model, does not seek to innovate: accordance with its brand charter, launched its price is obtained through turning the hams without preservatives, since these are efforts and investments of the manufacturer’s the future, even if today’s customer is not brand to its advantage, profiting from its aware of it. To be a brand is to be a leader, to strong position in the relationship, which look far into the client’s future. Eliminating means that the manufacturer needs the store the chemical preservatives implies replacing far more than the store needs the manufac- them with natural preservatives: it took three turer. Upon the launch of new food, hygiene years of R&D to find bouillons to carry out the and maintenance products, the mass distri- same preservative function. Some years previ- bution stores today request immediate access ously, during the mad cow crisis, Fleury to the same innovation for their own brand. Michon was able to innovate in offering ham The examples most often given to prove steaks. It is also the brand of turkey ham, and that distributor’s brands can innovate are other unusual products. Reflets de France and Escapades Gourmandes Does the distributor’s brand also innovate? (Gourmet Escapades). We know that this revo- No, since it does not have the means to do lutionary concept consists of revitalising the so. Its business model assumes light production of 100 regional recipes, having marketing – in order to reduce the costs them produced by SMEs in these regions, and linked to the dozens of product heads –and bringing them together under the same the fact that it follows quickly in the wake of brand, sold in all the Carrefour Group’s stores. what is already working, that is the innova- From this point of view, Reflets de France is a tions of the successful manufacturers, by true brand: an innovative concept, a target, a copying them to within a few details. In fact, price positioning maintained for all products, the product specifications of subcontractors a strong graphic identity, a high level of taste tasked with manufacturing a distributor’s quality and an imaginary quality (nostalgia). 72 WHY IS BRANDING SO STRATEGIC?

This example shows that, when the the brand moves from a feeling of presence distributor behaves like a true brand, it opts (awareness, recognition) to a feeling of rele- for own brands, or becomes the store of the vance (it’s for me) to the perception of brand and not the brand of the store. For performance and a clear advantage, and ulti- example, Gap, which was the exclusive seller mately to a genuine affective attachment. It is of Levi’s, began to introduce its DOB, and interesting to note that two distributors’ progressively ceased to sell anything but its brands have made it into the top 10 of English own store brand products. However, it was brands studied by Brandz: Marks & Spencer then necessary to clearly define a brand and Boots. concept, the store becoming the place where We might say, of course, that there is an the brand was expressed and experienced. affective transfer from the store to its Gap defined the concept as anti-fashion. products, a halo effect. Boots and Marks & Decathlon does the same. It is symptomatic Spencer are highly respected and historic that in order to accentuate its status as a stores in the United Kingdom, having created designer/manufacturer with its own stores, a relationship of reciprocal trust and esteem Decathlon gave up its store brand (there are with their clientele over time. However, this no longer any Decathlon products) in order to halo effect is precisely the lever on which the organise everything under what it called distributor’s brand is counting. ‘passion’ brands: that is, a portfolio of private labels. We present below this interesting case Table 4.1 Brand attachment: the 10 winning brands of a distributor becoming a designer. 1. 57 7. Nescafé 39 2. BT 56 8. Heinz 39 Consumer relationships with 3. Pampers 53 9. Kellogg’s 39 distributors’ brands 4. Marks & Spencer 42 10. Boots 37 5. McDonald’s 42 11. Colgate 32 Let us now look at the question (are 6. BBC 40 12. Royal Mail 32 distributor’s brands truly brands?) from the Source: Brandz (UK). angle of the consumers themselves. For consumers in mature countries, distributors’ brands are perceived as genuine brands, with Research carried out by one of our HEC their attributes of awareness and image always doctoral students on the sources of combined with an attractive price. engagement with the brand, depending on When asked the classic awareness question whether it is a producer’s or a distributor’s (‘What are the yoghurt or bicycle brands that brand, throws brand-new and unprecedented you know, even if only by name?’), consumers light on the matter. C Terrasse (Terrasse and name Asda or Decathlon. When asked if they Kapferer, 2006) worked on four product cate- intend to buy them (general client opinion) or gories, in order to compare engagement with buy them again (behavioural loyalty), the the Carrefour brand with that for the big scores are just as high. It is no accident that on brand in the same category. Engagement with the majority of mass-consumption shelves, the brand means more than repeat purchase. lowest-price products and distributors’ brands Panel data has long shown that distributor hold the dominant market share. Over time, products obtain repeat purchase rates (behav- some distributors’ brands are able to achieve ioural loyalty) as high as those of the big the typical brand effect, as shown by Table brands, or even higher. The same is true for 4.1, which looks at the United Kingdom, for engagement: the declared levels of many years a leader in this field. According to engagement are high in both cases, for both the Brandz study, the consumer’s proximity to DOBs and national brands. FROM PRIVATE LABELS TO STORE BRANDS 73

Engagement – personal involvement with distributor’s brand, although high, is essen- the brand – measures a strong relationship tially false loyalty (Kapferer and Laurent, 1996): with the brand, meaning that if the brand the customer is always sensitive to the price, were not there, the client would prefer to wait and keeps an eye on price differences on the than buy an alternative. For the consumer, shelf. It is not an absolute brand. there is no substitutability. The reverse is indif- Nevertheless there is an interesting difference ference, or sensitivity to the slightest rise in in the way a distributor’s brand works, price. This engagement comes from two compared with the manufacturer’s brand. As C sources. The first is attachment, measured here Levy’s research (in Levy and Kapferer, 1996) on as a strong perception of proximity (the the impact of distributors’ brand trials on atti- customer feels a closeness with the brand), and tudes showed, the satisfaction created by a the second, satisfaction linked to a perception distributor’s brand increases the credibility of all of difference in product performance. the distributors’ brands, at least in terms of As Table 4.2 demonstrates, what attitude. If a customer tastes Carrefour engagement with the store brand does is chocolate biscuits, which compete with the essentially to create closeness with the store. segment leader Pepito, and finds them to be The reverse is true for the manufacturer’s excellent, it increases the possibility that they brand: their ‘fans’ are fans because of a strong will also buy Tesco chocolate biscuits. experience of the product’s superiority. This is why distributors’ brands have diffi- C Terrasse’s doctoral thesis also examines culty creating loyalty to the store, as is often the consequences of engagement with the observed in studies: admittedly they create brand. In theory, the more people are engaged repeat purchasers within the store, but they with the producer’s or distributor’s brand, the do not appear to offer discriminating reasons, less they will seek variety when shopping in or even overriding reasons for visiting one this aisle, and the less sensitive they will be to store over another. Nor does an examination the price. This is exactly what happens with the of the reasons for purchase in people on the big brand: repeat purchase of the identical border of the two ‘regular customer’ zones product results directly from the client’s find them appearing as the number one engagement with the brand and its reductive criterion. The distributor’s brand therefore effect on two key factors of disloyalty (enjoying plays less of a role in differentiating itself from variety and being sensitive to price). For the the competition than the manufacturer’s store brand, engagement with Carrefour brand, which works only for itself. These certainly influences the repeat purchase, and results have been shown again in very recent certainly diminishes the appeal of variety, but analyses (Szymanowski, 2007). does not make the client insensitive to the This does not mean that all distributors’ price. This means that the repeat purchase of brands are perceived to be equal: the image of the distributor’s brand is always contingent on the store (quality, cleanliness, popular or the price: it is highly conditional. These shelves elitist character, and so on) reflects on every- are now seeing the advent of lowest-price thing that bears its name, therefore firstly on products. The repeat purchase rate of the the distributor’s brand.

Table 4.2 Determinants of attachment to distributors’ and producers’ brands Carrefour brand Big brand Satisfaction linked to perceived product superiority 0.161 0.539 Attachment, perceived proximity with the brand or store 0.601 0.236 Source: C Terrasse/J-N Kapferer, 2006 (correlation coefficients) 74 WHY IS BRANDING SO STRATEGIC?

Why have distributors’ brands? have a low degree of involvement (Kapferer and Laurent, 1995). Remember that brands In 2006, at the world’s number one distributor exist wherever customers perceive a high risk Wal-Mart, out of a turnover of US$285 billion, in purchasing. Conversely, where they see no 40 per cent was made from distributor’s risk, they are tempted by the distributor’s brands. This percentage is 60 per cent at Tesco, brand, particularly if they consider that the fourth-largest distributor in the world, 35 distributor to have a good reputation and an per cent at Metro, but 90 per cent at Aldi, the image of quality. For example, the butter king of the hard discounters. In the field of category is now dominated by distributors’ sports products, it is 51 per cent at Decathlon. brands. Three-quarters of all the processed Why do distributors come to set up their own meat sold in self-service stores in France is brands, to the point that – like Gap or Picard – low-cost or distributors’ brand products, but they eventually sell nothing else? the same is not true of new food products, For an answer to this question, we should such as low-fat butters and unsalted hams, not look to the consumer, who is only too which suggests product development is a happy to have finally found a cheaper source of concern, and consumers need the product. In reality, the true economic motor reassurance of a well-known brand name. In of the unstoppable growth of distributors’ all cases where the consumer expects superior brands lies with the industry: the distributors performance (cosmetics, for example), the and producers themselves. producer’s brand carries the day. The same is In the mass consumption sector, the early true wherever the product has assumed the distributors’ brands are almost always born of status of a symbol or ‘badge’: again, the a conflict between the distributor and the distributor’s brand fails to make an producer. Dissatisfied with the poor impression, except where it has become itself treatment it receives, the distributor has its a declaration of self (the Gap is the anti- goods produced elsewhere, in order to plug a fashion). gap, and sells them either under its own Now, emboldened by satisfactory past expe- name or under a private label. The atmos- riences, consumers are taking the plunge: s phere of conflict persists, particularly since – there are distributors’ brands for PCs, 120 in Europe for example – brands now typically bicycles, hi-fis and domestic appliances. depend on a very small number of distributor Consumers may want a Sony or Samsung tele- clients (four) for 60 per cent of their sales. vision for their living room, but in the kitchen Procter & Gamble makes 16 per cent of its or in a child’s bedroom they are less involved: worldwide turnover (US$51 billion) from a they may be tempted by a BlueSky single client: Wal-Mart. In some sections the (Carrefour’s low-cost hi-fi brand). The same is concentration is even higher: Decathlon true for home computing. Dell is a product accounts for more than 10 per cent of Nike’s assembler, and sells under its distributor’s sales in Europe. Furthermore, these distrib- brand. However, its products are guaranteed utors’ brands parallel the worldwide devel- ‘Intel inside’. opment of distributors, leading them to In reality, the distributor’s brand is based on match the expectations of quality products at supply, not demand. Whenever distribution is lower prices that are prevalent in emerging concentrated, and the size of the domestic countries (Brazil, Eastern Europe, Russia, market makes it economically possible, there India and so on). is no other way of increasing return on Consumers are selective. They decide in investment (ROI), as we shall analyse below. which categories they are the most tempted to On the one hand, in the previously inde- buy distributors’ brands: those in which they pendent retail sector, as trade concentration FROM PRIVATE LABELS TO STORE BRANDS 75 progresses, the first step is to buy in bulk to only too happy to save money in the short reduce purchasing costs. Next, a collective term – has led to the downfall of companies, commercial store name is applied (for entire sectors and towns, leaving thousands of example Bureau +, Qualipage). But if there is workers unemployed. This social cost has to be a collective name, there must also be a passed largely unnoticed. The salaries in mass collective range: this forms the heart of the distribution are among the lowest in the store’s product range. The last step is a logical country: the store owners are rich, but the one; the distributor’s brand – which only prospects for salary increases for a cashier over represents a small part of the offer to begin 10 years are minimal, a situation dictated by with – can only grow. It is an integrating the price war. factor. What has society gained from this frenetic Bear in mind that growth in distribution is competition between the major distributors? achieved over time, through the elimination Conscious of the collateral damage for society, of competing channels or forms of commerce, mass distributors make use of two levers to followed by the competitors themselves. In give themselves a clear conscience. Either, like this way, in Europe, small traders have Carrefour, they flatter national pride, since vanished altogether in many categories, the company has exported itself worldwide having been swamped by the supermarkets (although this does not create more jobs in and the hard discounters; this was how the France), or like Leclerc, they present them- distributors first started to grow. Having selves as the defender of SMEs, the majority reached the end of this path, distributors have suppliers of distributors’ brand products. turned to the international market and cost Having been crushed by the multinationals, reductions: hence the fashion for cost-cutting SMEs will be saved by mass distribution. We techniques such as efficient consumer know that this is provisional, since this pref- response (ECR) mode and trade marketing. erence for SMEs derives from the refusal of the The final stage is the distributor’s brand as a major industrial groups to produce DOBs. means of improving ROI. Where they do so, there are no SMEs. Now the Finally, we should not forget what the question for all boards of directors of the major distributors sometimes call upstream major industrial groups is: why leave this marketing. The distributor’s brand makes it market to the SMEs? possible for large stores to present themselves as objective allies of local and regional SMEs against the multinationals, since it is the SMEs The financial equation of the that manufacture the distributors’ brands. distributor’s brand Everyone knows that mass distribution does not always have a good image. The crushing In a competitive market, the distributor’s of small businesses has contributed in large brand is a logical stage in the growth of a measure to the desertion of town centres, and distributor. It satisfies the need to maintain of complete suburban zones: society as a ROI once all other approaches have been whole is paying a steep price for this. In their exhausted. Alternatively, it may have been the eagerness to position themselves as the key differentiating component from the cheapest, the major players in distribution outset (as in the case of Ikea, Starbucks, Body and their massive bulk buying have launched Shop and so on). themselves on the world like hunting dogs, Let us look again at the principle of ROI, in driven by a single idea: to always find it order to understand why the distributor’s cheaper and import it as quickly as possible. brand is an advisable step at a certain stage in This quest – with the approval of consumers a distributor’s growth. 76 WHY IS BRANDING SO STRATEGIC?

Net margin = Gross margin – Costs Finally, distributors hope that their distrib- utors’ brands will contribute to increasing Stock rotation = Sales per square metre/ loyalty to the store itself. In theory, these are Investment per square products that can only be found there. metre Research carried out at HEC (by the author in ROI = Net margin × Stock rotation 1998) demonstrates that this effect has not yet been proven. Among the reasons for loyalty to What does a distributor do when it wants to a store, the distributor’s brand is almost never increase ROI from 20 per cent to 22 per cent cited, except for stores that have developed (an increase of 10 per cent of the current ROI)? distributors’ brands with strong added value Suppose that this is a major distributor with a (Monoprix, Tesco) and have acquired a repu- net margin of 2 per cent and a stock rotation tation of their own. of 10 per cent. Two possible options are available: either to increase sales by 10 per Why will distributor’s brands increase cent per square metre (giving a rotation of 11), still further in future? or to increase net margin from 2 per cent to 2.2 per cent through selling private labels and Other parameters also explain why those demanding even more price concessions from distributors with distributors’ brands will brand producers, or a share of the profits from promote them still further: the hard-discount their advertising/promotional campaigns circuit. This form of commerce, based on a (which ultimately amounts to the same low-cost type of business model, saw thing). remarkable growth between 1995 and 2006, This second option – increasing the net offering prices 30 per cent lower than those of margin – is a much easier way of increasing distributors’ brands, close to home, with a ROI: everyone knows how hard it is in a new store opening every day in the town or mature market to increase turnover per square shopping centre. It appears that the turnover metre. This is why all distributors are per square metre of this form of distribution is choosing, or will choose, the distributor’s now falling, or has at least stabilised since brand if they wish to make optimal profits. In 2006: this is due to the lowest-price products fact, the first lever for improving ROI arises that the bigger stores have had to learn to from the fact that the margin on DOBs is introduce onto their aisles en masse, in order better than that on national brands (Ailawadi to keep clients in the store. Now their unitary and Harlam, 2004). margin is lower. The second reason for introducing a In France, this has been compensated for by distributor’s brand relates to the increase in the goldmine of the Galland law: the negotiating power with the manufacturer. Not backroom (deferred) margin of major brand only does the distributor improve its margins products could not be passed on to the client – on the DOB, it also receives better margins only the volume markdowns. This suppressed from makers of national brands, who wish to price wars among the brands, and even made persuade it not to go further. it easier for prices to go up. This backroom A third effect on distributor profitability margin, repaying the services of distribution, induced by the introduction of DOBs relates could amount to 40 per cent of the price to the increase in the number of innovations charged. launched by the maker. Distributors receive Since 2006, a new circular has suppressed listing fees on these products. Moreover, they these negative effects of the Galland law: the are rarely low-price innovations (Pauwels and distributor may reinject what it gained in Srinivasan, 2004). backroom margin (above a 20 per cent FROM PRIVATE LABELS TO STORE BRANDS 77 threshold) in order to bring down retail prices. example of Gap, which passed from the status Since stores can no longer protect these of a simple store to that of a store brand and margins, it is up to the DOB to protect them. finally to that of a pure brand with its own That haven of non-comparability, the stores. This change was itself the consequence distributor’s brand, is the only remaining path of an evaluation of the future profitability of to recovering financial health. This is why the the textile market for a brand distributor, at number of DOB references can only increase the moment of the opening of discount textile on all shelves. stores in the United States. The part devolved to DOBs is therefore not How far can the distributor’s brand the result of an optimisation, but the fruit of a go? voluntary strategy. Research has nevertheless analysed the impact of the increase in the What is the optimum distributor’s brand for a DOBs’ share of the offer on the frequency store? What fraction of sales, of the aisle, and (measured as the average number of purchases of the shelf should it represent? The answer per week in relation to the number of refer- depends largely on the store’s strategy – itself a ences offered) (Ilec, April 2006). For a small function of the competitive situation and the supermarket, the frequentation index is margin provided by the producers of branded continually decreasing: it is 140 when the articles, in comparison with that offered by DOB offer is situated between 8 and 18 per the distributor’s brand. cent of the overall offer, and 79 per cent when Take Decathlon, for example. This store it reaches the segment between 47 per cent began, like many others, as a simple and 57 per cent of the offer. For a large super- distributor of brands. Over time, the store’s market, the same is true. For a small hyper- mission (to allow access to the pleasure of market (under 6,000 square metres), the sport for the maximum number of people) frequentation index also falls as the share of proved easier to carry out through a greater DOBs increases, but over 20 per cent of DOBs, control over product design and production the frequentation index rises once more: it planning, even purchasing the raw materials, increases from 87 per cent to 99 per cent for a although production is still subcontracted. DOB offer rate of 22 to 29 per cent. For large Little by little, the Decathlon brand took hypermarkets, the frequentation index rises control of aisles where brands were weak. with the DOB range! The best frequentation However, it is forced to cohabit with well- (index 125) is found with an average DOB rate known brands in sections such as running, of 19 per cent, then the frequentation index tennis, skiing, and golf. Having become aware falls again for any increment in the presence that a single, uniform brand harmed the desir- of DOBs. ability of the store itself and therefore the number of visitors, Decathlon abandoned its single brand in 1998 and exchanged it for a The three stages of the portfolio of passion brands. Today these distributor’s brand brands represent more than 50 per cent of turnover. The store’s deep desire is to become Once the decision has been taken, there are a major producer of sports brands, and three stages in the business growth of distrib- therefore to always push its specialised brands utors’ brands: oblative, imitative and identity. through sport. Decathlon still needs major The first stage is known as reactive or brands in certain sections, but less so in oblative: historically, it results from the refusal others. If its brands become genuine brands, it of sale by the major industrialists. This is how will have reached its objectives, following the many own-brand products are born. However, 78 WHY IS BRANDING SO STRATEGIC? it is also strengthened through identifying profiting from the average attention span of gaps in the ranges of the major producers. A the shopper in the aisle. Through lack of category management approach quickly iden- attention, the consumer may take the tifies those segments where something should distributor’s brand instead of the major brand be offered to the client, but where the major product. brands have nothing to offer, since it is not The InVivo company has actually calcu- their strategy. These gaps need to be filled. lated that, for mass consumption products, in The second stage is imitative: here, the hypermarkets, consumers spend 7 seconds on distributor examines its competitors’ each purchase: speed matters to them. When distributor’s brand ranges, and sets about there is intentionally strong resemblance imitating them, producing the same products between the packaging, a hurried buyer with typically supplied by its other competition. By an average attention span can be confused. means of this emulative method, the Our research into the imitation of brand distributor’s brand core offer is constructed, packaging (trade dress) by distributor’s brands created from all the references common to all (Kapferer, 1997; Kapferer and Thoenig, 1992) the distributors’ brands. We should add that has shown that the unconscious recognition this is also typically a phase during which the factors in the aisle were, in decreasing order of distributor, for lack of investment in its own importance: distributor’s brand identity, chooses to imitate, trait for trait, the packaging of the 1. Colour. brand products that it is targeting (generally 2. Packaging shape. the category leader). The objective of this copycat approach is clear: a deliberate intent 3. Key designs. to take market share from the big brands by 4. Name, typography and so on. allocating more space to one’s own distributor’s brand, a similar copy, and to This is exactly what distributors’ brand increase the average price of the big brands in products copy: Ricoré’s packaging is yellow, order to attract clients to the distributor’s and so Calicoré’s. There is an image of a small brand (Pauwels and Srinivasan, 2002). Mexican on Pepito, the leader in biscuits for This imitative or ‘copycat’ approach borders children. There is a very similar character on on trademark infringement, and sometimes Rik and Rok, Auchan’s children’s brand, and so gives rise to court cases by the outraged and on. wronged producers, complaining of either an As our results (shown in Table 4.3) demon- infringement of their brand rights, or unfair strate, where the private label copy/original competition (see page 270), or economic para- product pairs are placed in decreasing order of sitism. A visit to the aisles of mass distribution resemblance, the stronger the perceived is enough to note the striking similarity resemblance in trade dress, the more the between the copy and the brand packaging. In consumer infers that the producer of the two most cases, however, disputes – arising from products is one and the same – and the more the overzealousness of the designers – are confidence the copy inspires. resolved amicably. Furthermore, the Another study has shown that the discovery distributor takes refuge in the fact that the of a quality distributor’s brand created a less issue is not brand codes, but rather category positive attitude towards to the leading brand. codes. The real aim of this approach (the J Zaichowsky and R Simpson (1996) imitation of the essential attributes of conducted consumer trials with Lora Cola, a branded product packaging), which domi- distributor’s brand imitating the appearance nates mass distribution, is to cause confusion, of Coca-Cola cans. The taste of the product FROM PRIVATE LABELS TO STORE BRANDS 79

Table 4.3 How copycat resemblance influences consumers’ perceptions They are made by the same manufacturer (%) I trust the private label (%) Rank of packaging resemblance Definitely Probably Total Yes 1 Panzani/Padori (pastas) 39 41 80 78 2 Martini/Fortini (spirits) 30 31 61 56 3 Amora/Mama (ketchup) 21 46 67 62 4 Ricore/Incore (coffee) 16 17 33 38 Source: Kapferer (1995a)

was manipulated in such a way that one (distributor’s) store. To this end, it offers one section of consumers would find it very good, or more components of added value, based on while others would find it bad. Among the the ingredients, packaging, traceability, latter group, the Coca-Cola evaluation, concept and so on. measured twice (before and after trying Lora This is generally the point at which brands Cola) did not change (5.41 versus 5.71). appear for which the main sales argument is However, it did fall significantly in the case no longer price, but the concept itself. It is where the consumers liked the taste of the true that often they have no equivalent copy (falling from 5.67 to 5.22, or a drop of among the branded producers, for a simple –0.45). reason: these are specialised by category, The third stage is the identity stage: the product or trade. For example, what producer distributor’s brand is used to capture market could construct an umbrella brand around the share from competitors. It becomes a genuine concept of ‘Pleasures of yesterday’, bringing instrument of strategic differentiation, together more than a hundred of the best expressing the identity, values and posi- products from every region of the country, tioning of the store itself. It should generate along with rediscovered recipes and method loyalty not just to itself (through its effect on of manufacture? Nestlé would be incapable of the share of requirements), but also – more doing this, as it does not produce oils, jams, challengingly – to the store. biscuits and the like. The same is true of During this stage, the brand’s power and Unilever, Philip Morris and Danone. management is no longer in the hands of the Carrefour, however, can: all it needs to do is purchaser alone. The purchaser strives for an promote the concept among small regional optimal mix of purchase and resale condi- companies in each country where it operates. tions. Making the brand into an instrument for shaping identity and positioning presup- poses genuine marketing strategy, and also The case of Decathlon the construction of a range that reflects the brand’s ability to communicate the Few stores reveal as much about modern distributor’s own values and identity. Here, distribution as Decathlon and the key role the trick is to effect the shift from purchase that its own brands play in its growth. In a driven by confusion to one driven by pref- recent article, Anglo-Saxon academic research erence. notes that the share of shelf space given In this situation, the distributor’s brand over to distributor’s brands among US distrib- holds key positioning importance, since its utors is less than among European distributors content and products express the values of the (Corstjens et al, 2006). The US distributors 80 WHY IS BRANDING SO STRATEGIC? allocate shelf space according to a simple in the camping department: all the rucksacks, short-term profit equation. It is true that in sleeping bags, and tents are private label the United States distributors’ brands have a products. In order to succeed, Decathlon poor reputation, and are all considered ‘sub- needs to do much more than buy and sell: it brands’. They do not allow for positioning of needs to innovate, design, establish its own the store or the loyalty generation through production plans, and choose its own attachment to the store. The situation is partners. This is why Decathlon is now the different in Europe and Canada, where, very world’s fifth largest producer of sports goods. early in their brand history, distributor’s Its business model is the integration of brands had a combative vocation: fighting design/production/distribution. not to launch a price war, but to offer the Decathlon began life 30 years ago as a consumer genuine value. Just think of Migros, simple discount store. It sold all branded the dominant chain in Switzerland, which products, and only branded products, in all does not sell products by Nestlé, the world’s sports. Today, more than 55 per cent of its leading food company with its headquarters turnover is made on store brands, although, in Switzerland, but rather Migros products. In in accordance with its company culture, this case, the long-term strategic dimension Decathlon never speaks of store brands, only takes precedence in decisions on shelf space of passion brands. The word ‘passion’ here is allocation: this is the best way to get not a slogan, but a true understanding of the consumers to try the product, and therefore to brand in sport. The sports brand is built first begin a cycle of loyalty generation. internally; it is a true culture. Then it is In our view, the main difference between carried outward by those who are passionate the approaches of the distributors themselves about it. in the United States and in Europe is that, in Moreover, few stores take their own brands the United States, it is a question of selling the as seriously as Decathlon does. Decathlon store’s brand alongside the big brands, shows how the organisation must be able to whereas in Europe it is a question of making it adapt to the brand, rather than the reverse. the store of the brand, with a few other brands Finally, Decathlon enacts its brand policy alongside it. Decathlon has now become a worldwide, which is all the more challenging designer of brands that controls its own distri- since Decathlon dominates its original bution. This is what differentiates it from the market, France, by some distance, but is only sports section of Wal-Mart or Sports just making its debut in China, where its Unlimited. Even its lowest-price products are products are produced, and has pulled out of labelled as ‘best-price technical’ products, to the United States. It has 340 stores. remind us that the ethics of sport forbid sacri- Decathlon’s vocation is to give as many ficing everything for money: there is a people as possible access to the pleasure of threshold below which a football is no longer sport. The key values are vitality, truth, a genuine football in terms of quality and fraternity and responsibility. It is a low-cost security. Others might sell it anyway, in order operator, but one that has always favoured to maintain the image of always having the product quality over selling at the lowest lowest price, but not Decathlon. possible price. Loyalty is not generated This process, which transformed the store through prices, but through client satis- into a brand, may also be illustrated by Gap. faction. At the same time, it is the best way of The Decathlon ideal is the same as Gap’s – to defending the chain against the entry of reduce its main manufacturer brand (in this discounters from the food sector, such as Wal- case, Nike) to 10 per cent of sales in the Mart Sport. This policy is a success: in the running department. This is already the case bicycle sector, for example, not only is FROM PRIVATE LABELS TO STORE BRANDS 81

Decathlon the brand that first comes to mind the beach, on the ski lift, while hiking in the for French consumers, but in addition it is also forest, everyone wore Decathlon-branded the one that is necessarily taken into account products. Customers increasingly got the when making the next purchase, with a impression of a lack of choice. consideration score double that of the first The strength of distributors, often family- producer’s brand (Raleigh or Peugeot Cycles). type businesses, is their ability to take deci- The store was founded in 1976 by Michel sions quickly, and to enact radical changes. Leclerq. It quickly took the distributor’s brand These are enacted in order to produce option, capitalising on the strong name tangible, measurable results, allowing them to awareness of the Decathlon company, and its take the necessary corrective measures. This is dominant distribution. Decathlon seeks the what Decathlon did: development of the largest possible number of its clients through sport. The store is posi- I It abandoned nearly 25 years of store brand tioned on the hedonistic side of sport, and policy, in France and abroad, to move designs very comfortable products, aimed at towards a portfolio of brands segmented by wellbeing, with emphasis on safety. It is a sport. In order to create these brands, it diffuser of pleasure. began with the observation that there were The components of its success in France 60 sports under Decathlon’s roof. For each were like those of any store: the quality of its brand to reach critical mass and justify its store sites, the range (that is, the choice of overheads, a shortlist of 17 was drawn up, goods for 60 sports under the same roof), combined into seven finally. Then it was unprecedented low prices, remarkable decided to increase this number, since computerised logistics that avoid stock break- modern sports are ‘tribes’ that cannot downs by supplying stores once or twice daily, easily be brought under the same tent in young, helpful and competent salespeople, the name of ‘critical mass’. Thus Domyos and finally the freedom to choose, with aisles was separated into roller sports and so well constructed that customers could running. Tennis and golf were also sepa- easily dispense with the salesperson. The rated, having previously been united under defeat suffered in the United States also the common brand Inesis. hinged on the fact that the majority of these I These brands are autonomous, decen- success factors could not be implemented in tralised business units, with dedicated the discount chain acquired, first among teams. Their goal is for each to become them being the site quality. Secondly, the US recognised leaders in its sport. Now three- discount store was renamed Decathlon before quarters of the operational budgets are the stores could be ‘Decathlonised’. It is not spent on the brands, with one quarter easy in the United States, a country with low remaining for transverse tasks. Decathlon unemployment, to find passionate and moti- abandoned its historical organisation at vated young people, genuinely attached to Villeneuve d’Ascq in order to turn these their store. brands not into labels on products, but In 1999 in France, after 23 years of uninter- forces for creative proposals at the best rupted growth, for the first time in its history prices, based on passionate men and its turnover per square metre fell. The diag- women. At Decathlon, semantics are nosis was simple: the policy of a single brand, crucial: these brands are named passion Decathlon, strongly emphasised in all its brands, not as a slogan or an advertising stores, together with its of the gimmick but as a profound reality, first national market, created a monopolistic situ- internally, and then externally. ation and a ‘Soviet-like’ brand. Whether on 82 WHY IS BRANDING SO STRATEGIC?

I These brands need to be located close to Decathlon’s challenge is international. where the sports are practised, so that the Decathlon is currently the 10th largest sports internal teams can live them out, and local distributor in the world: the margin of opinion leaders can play a role in their progression is still strong. The brand policy creation: Tribord by the sea, Quechua in described above is global. Decathlon’s the mountains. They communicate inde- strength was built in France, progressively pendently of one another. For example, (over 30 years) using a different model – that Chulanka is Quechua’s magazine, of the single brand (Decathlon) which was distributed in stores: it circulates 2 million also the name of the store. This contributed to copies. This is the highest circulation of creating enormous communication synergies. any of the mountain magazines. The country manager’s situation, for example in China, Hungary or the United I The 15 brands are named passion brands States, will be very different. The start-up will because they are each entrusted to a be implemented with the passion brands: in passionate manager, who creates and China they represent 70 per cent of the range. carries them, with a dedicated team, on However, the store is not known there, and autonomous sites, with a genuine business will not have 20 years to build recognition. plan and a high degree of autonomy. In the Therefore the pricing policy must be more stores, the salespeople are also passionate. discount-based. The name Decathlon, In time, the goods may be distributed however, should no longer in theory be visible beyond the flagship Decathlon store. In on the products, since they all now stem from December 2006, Decathlon announced a one of the passion brands. The principle of the historic agreement with independent ski passion brand, as with any brand, is in fact equipment hire stores in the mountains. autonomy. Only the back office cuts across all This very lucrative market had previously brands. This consideration, a pragmatic one at been locked up by the manufacturer the international level, explains the mainte- brands. This will make it possible for skiers nance of a ‘Decathlon creation’ brand inside and snowboarders to try Quechua products the product, in order to establish the link in the stations themselves. The internet between the store and its brands. will be the medium for hiring: clients can reserve in advance and at low prices. I In order to build these passion brands, with Factors in the success of imaginary qualities that are weaker than distributors’ brands those of the major brands, the only thing that matters is product innovation and As always, the rise of a new brand is also the quality levels. This is why the Decathlon result of the actions (or lack of action) taken Group also invests in ingredient brands by the competition. For example, distributors’ that lend credibility to the offer, becoming brands have strong market share in the technological labels themselves. It is a cosmetics sector in Germany. The reverse is question of prying open the vicelike grip true in France, and yet both are among the on costs exerted by the technological more highly developed countries. Setting brands such as Lycra, Goretex and aside any possible differences between the Coolmax. For this reason, the ingredient two countries’ relative conceptions of beauty, brands of the Decathlon group are also one explanation lies in an analysis of the autonomous business units, seeking to competition. In France, l’Oréal has dragged all increase their opportunities outside the other brands into a war fought on scientifi- Group. cally proven performance, supported by FROM PRIVATE LABELS TO STORE BRANDS 83 colossal advertising budgets. In Germany the chain of stores selling spare parts and services leading national brand is Nivea, which relies to motorists) are manufactured by the much more on empathy, softness and a close Michelin Group; it is inconceivable that they relationship than on the rational approach of should be low-quality products. proven results. We believe this explains why In this way, the success of distributors’ distributors’ brands have found it easier to brands is linked to a supply effect (by strong make inroads there: consumers have not promotion on distributors’ shelves and the perceived them to be all that different from creation of ‘me-toos’ that ape big-brand Nivea. products) but also by a lack of competitiveness Hoch and Banerji (1993) have analysed the from high-profile brands, which are too used factors behind distributor’s brands’ market to high margins, and do not innovate. share. Lastly, this penetration depends on the These are: specific range and category. It is strong in basic products, but no longer unique to them. I the size of the potential market: the Kapferer and Laurent (1995) linked the attrac- distributor opts for long production runs; tiveness of distributors’ brands to consumers’ degree of involvement, either in an enduring I the high margin in the sector; sense (interest in the product) or as a I the low advertising expenditure; temporary feeling at the moment of purchase (Is the purchase a risky one? Does it have I the ability to achieve quality (few or no badge value? Will it give me pleasure?). It is patents); therefore hardly surprising to find that the I consumers’ price sensitivity. categories listed in Table 4.4 are those in which DOBs have the highest penetration. However, these authors also maintain that Note that studies on distributors’ brand market fragmentation does not appear to customers have shown that their penetration constitute a barrier to the growth of distrib- has now reached all segments of the popu- utors’ brands. lation. Nevertheless, there is a core target of Conversely, it is known that a factor that people in reduced financial circumstances does affect the penetration of distributors’ who have a low sensitivity to quality. In C brands is the rate of innovation in a sector Lewi’s thesis at HEC (Lewi and Kapferer, (measured by the share of new products in 1996), even though they were given a biscuit companies’ turnover): it forces product ranges that was objectively poor (in the light of to be continually renewed, and is associated results in blind tests), 18 per cent of these with a large amount of advertising. In fact, it people decided to buy it anyway because it is also the most natural reaction by producers was cheap. Furthermore, these are the people confronted with distributors’ brands: to who least noticed the difference in flavour. increase their rate of innovation. Garretson’s (2002) and Ajawadi’s (2001) As has been observed, most of the factors works provide an interesting new path for mentioned above are linked to management study: according to these authors, customers deficits among the producers: insufficient rate who resist distributors’ brands are those who of innovation, high margins, low advertising. link price with quality. For these people, the When the brand is treated as a ‘cash cow’, the price is the measure of the quality. It should be door is opened to distributors’ brands. added here that hard discount itself finds its Moreover, many brand companies are willing most frequent shoppers, and those whose to manufacture distributors’ branded average basket is fullest, among families with products. For example, the tyres at Norauto (a several teenagers still living at home. 84 WHY IS BRANDING SO STRATEGIC?

Table 4.4 In which sectors do big brands resist trade brands and where are they defeated? Sector Big-brand share (%) Sector Big-brand share (%) Make-up 99 Cookies 4 Hair colourants 98 Frozen vegetables 6 Baby food 96 Garbage bags 15 Chewing gums 92 Cotton wool 21 Shaving products 90 Fruit juice 23 Insecticides 89 Kitchen paper 25 Deodorants 89 Ham 26 Floor washing products 88 Pasta 35 Cola 82 Soft-drink concentrates 36 Tea 81 Soups 81 Beer, cider 80 Laundry detergent 79 Source : TNS sofres, 2007

Optimising the DOB marketing I level of price difference with Pepito: index mix 50, 65 and 80. The combination of these variables makes it The notion of a distributor’s brand is therefore possible to reproduce any form of distributor’s heterogeneous, offering the store a range of brand currently active on this market. The key possibilities for getting its overall offer across. findings of this research were: Research has analysed how each type of distributor’s brand was able to increase its I The quality of the distributor product has a market share to the detriment of the leading strong and positive impact on the brands of the segment, and also to reduce the intention to purchase the distributor price differential between the two, thereby product. It increases from 16 per cent when boosting profitability (Levy and Kapferer, the product tasted is inferior to Pepito, to 1998). More than 500 mothers, in a simulated 34 per cent when it is equal. store, were presented with a choice between the leader in chocolate biscuits (Pepito by I The store’s reputation also has a bearing on Lu/Danone group) and a distributor’s brand. the intention to purchase. When the store This choice varied from one customer to the name is masked (private label strategy), the next according to four criteria: average intention to purchase is only 20 per cent. It increases to 30 per cent once the I presence or absence of the store name itself name is known. in the brand name (DOB or private label); It is the interactions, however, that prove I whether there was a ‘copycat’ of the Pepito most interesting in practice, as Table 4.5 packaging, or clearly differentiated pack- demonstrates. Each line refers to a different aging; form of distributor’s brand: I objective quality of the distributor biscuit I The first line concerns a DOB that carries (established through blind tests): identical the store name, therefore bringing its repu- or markedly inferior to Pepito; tation into play, and packaging that is not a FROM PRIVATE LABELS TO STORE BRANDS 85

copy of Pepito’s. It is acting like a true since the packaging is so alike. Demand brand (reputation and differentiation and follows an inverted U-shaped curve, with quality). What do we observe? This is the best intention to purchase scores for where the demand for the distributor the distributor product (31 per cent of product is strongest (38 per cent). intentions) at the intermediate price level Furthermore, it is the strongest even (35 per cent cheaper). though the price difference is less (20 per I In the fourth line the store is unknown but cent cheaper): therefore the profitability is the packaging is different from the leader’s. maximal. Interestingly, the demand does Here the distributor’s brand resembles a not increase when the price is lowered (35 small, unknown brand, and the client has per cent cheaper); on the contrary, it no point of reference for evaluating it. It is decreases to 28 per cent when the price is therefore not surprising that price is the lowered still further (50 per cent cheaper), only motivator: demand grows as the price probably as a result of the anxiety that this falls. This is typically the case for lowest- price arouses in mothers (this is a product price products, created to counter the for children, after all). The moral is that the products on the hard-discount circuit. DOB is most dangerous to national brands, and also most profitable, when it behaves What can we draw from this analysis? When most like a true brand. the distributor’s brand behaves like a true big brand, it reaps the benefits (market share and I The second line shows a store brand copy: profitability): however, it must have the will this is the most common form of a and the means to do so. Not everyone can be distributor’s brand in the food departments Decathlon or Tesco. of superstores. Here the demand only increases if the price decreases. Although it also reaches 38 per cent of pure demand, The real brand issue for this time it is only at a rock-bottom price distributors (50 per cent cheaper): profitability is therefore not as good as with the previous As has been shown above, the distributor’s line. brand is not a brand like the others. It is I The third line is what is known as a ‘coun- subject to three conditions: it must express terbrand’: the store name is absent, and the the values of the store, position itself in product is marked by an unknown brand relation to the big brands, and finally deliver a (that is, a private label). Furthermore, its ‘plus’ compared with low-cost products. It is only option is to slavishly copy the pack- therefore more like a quality label attached to aging of the leader, in order to create a price. To increase its financial results, it is confusion and allow clients to think that certainly possible to increase its share of the there is a similarity between the products, shelf and have the goods appear in great

Table 4.5 Percentage of consumers who intend to buy the distributor’s product Brand and packaging type Price gap from segment leader –20% –35% –50% Store brand (not copycat) 38 38 28 Store brand (copycat) 17 28 38 Private label (copycat) 26 31 27 Private label (not copycat) 21 24 31 86 WHY IS BRANDING SO STRATEGIC? numbers, which can give the impression of a implemented worldwide, distributors must Soviet store. It is better, however, to increase innovate more reactively. Of course techno- the client’s preference for it. How? logical innovation is beyond them. But Table 4.5 indicates how a better purchasing customers do not expect it of them: on the and promotion policy can contribute to this. contrary, it is their job to render customers’ Above all, however, it is necessary to sell it lives more pleasant, even more liveable. This through greater brand strength. Since the is achieved through recognising that the distributor’s brand carries the store name, customer segments are fragmented and that it value must therefore be created through the is therefore necessary to adapt the distribution store itself, its positioning and its identity. Too brand to this variety. Second, the distributors many stores are devoid of meaning: they are must be ahead of the curve on trends: it is up businesses and nothing more. The hyper- to them to lead in terms of ecology, organic market, like a cathedral, must decide which produce, fair trade and so on. These are all god it serves: the generic god of the consumer profound movements that destabilise the society, or an intimate desire on the part of status quo. The risk is much less for distrib- the distributor to modify its relationship with utors: the distributor’s brand should be its clients? For example, Carrefour venerates segmented to fill these niches. This is how a rationalism: its entire crusade is aimed at the close affective relationship is forged: client by enlightenment of the audience. client. Remember that a big brand is built through The brand-store must go further, into the intangible: it is embodied in the tangible, personal service. Remember the remarkable and forms the basis of a durable relationship, phrase of Howard Schultze, the founder of a community of values among its clients. The Starbucks. Asked about the success of first task that the store should set itself during Starbucks, which will soon have more outlets this work is to identify its project, its vision: worldwide than McDonald’s, he replied: ‘We what in its customers’ lives does it want to are not in the business of coffee serving change? Although it will be necessary to people, but of people serving coffee.’ compete on price, on choice and on service, it Starbucks does not sell coffee to people – it is will also require an internal energy: this is at their service, and serves them coffee, of found through the vision and the battle that good quality, in recyclable cups, using fair- the store takes as its own. What is the battle trade coffee beans, in a peaceful, calm envi- for most stores? When an organisation does ronment and with genuinely happy staff. It is not have critical mass, it is necessary to easy to understand why Starbucks had no compensate through goodwill, and therefore need to advertise: its customers took care of through the power of the brand. that. It is time to stop talking about ‘distrib- Once this has been defined, it must be utors’; the ambition now should be to place implemented through 360 degrees, and not ‘life centres’ at the customers’ disposal, facili- only through the distributor’s brand products. tating and stimulating places where they can For example, what service innovations will also do their shopping. embody it in stores, and also beyond? It is ‘The tail does not wag the dog’, as the these that will spark off word of mouth, turn proverb goes (it is the other way around). The customers into ambassadors and carry the real issue is to turn the store itself into a brand’s point of view. brand. Among distributors, the brand In comparison to the weight and inertia of manager is no longer there to manage DOBs, the multinationals, which can only innovate but to ensure the coherence of all the brand once they have confirmed that the inno- project’s activities. This presupposes that vation will be profitable because it can be there is a brand project, with a vision, a FROM PRIVATE LABELS TO STORE BRANDS 87 mission, strong values that are felt internally, Imitations can come either from competing and implementation well beyond the store producers, or from the product’s own distrib- itself and the private label products. utors – and the response must vary depending on the individual case. Most big companies would in fact be reluctant to take action Competing against distributors’ against their distributor if they believed that brands one of its distributor’s brand products, placed alongside one of their own branded products, We are frequently asked, how is it best to was imitating it too closely and constituting compete with distributors’ brands, which are an act of unfair competition. It is true (see – as their market share attests – the number page 78) that the second phase in the imple- one competitor of the big brands? Procter & mentation of a distributor’s brand policy is Gamble Europe has long believed that it was generally to imitate the targeted market leader competing against Unilever, Henkel or on a shelf by shelf, reference by reference Colgate, old friends which share the same basis. It can even be the case that distributors’ business model, the same cultural references, brands within a given group copy one and even the same HEC MBA’s. The consumer another. Bicycles sold by Auchan superstores sees things differently. Moreover, it has been have borne an extremely close resemblance to shown that an excess of price-based promo- a best-seller at Decathlon (the ‘be-twin’): the tions created sensitivity to price and led two stores form part of the same group. consumers to try distributors’ brand products, Actual legal proceedings against the itself a preliminary step to trying low-cost distributor are rarer still. Big companies, many products. There are different levels of response of whose products are stocked by the to the question above, some tactical, others distributor, fear a Pyrrhic victory and prefer to involving a revision, not of the brand, but of build up a dossier with the aim of avoiding the business model. legal action and resolving disputes amicably. The dossier consists of a form of proof that A precondition: do not tolerate brand could be produced as legal evidence if imitations required, for it is in fact possible to devise a scientific approach to prove illegal imitation. In developed countries, brands fall victim to Two methods exist. unfair competition on the part of distributors’ The first works on the legal definition: the brand products, in the form of imitations of imitation is illegal if it is likely to create their distinctive symbols. This imitation is confusion in a consumer of average atten- anything but accidental, as the design and pack- tiveness. There are two techniques capable of aging agencies recruited for the purpose well demonstrating such a risk of confusion, know. The national brand product is used as a without actually asking customers directly brief, not for what to avoid – according to good whether they would be confused by the brand principles – but what the rival should copycat (an invalid method). The first is the most resemble. This is where competitors use of a tachistoscope, which ‘flashes’ a increase their ‘me-too’ product’s chances of picture of the copy at consumers, first at high success, by closely imitating – albeit with a few speed, then at slower speeds. They are then differences – the characteristics of the targeted simply asked to describe or name what they brand product, as well as its distinctive marks. have seen (Kapferer, 1995b), and the number To be considered as an unfair threat, the of times the copy is mistaken for the original imitation must be likely to cause confusion in a is measured. The second method is to start consumer of average attentiveness. with a computer-degraded image of the copy, 88 WHY IS BRANDING SO STRATEGIC? and to build it up, step by step, using In general terms, brand management must computer software. Consumers indicate what plan for these phenomena and put the brand they think they can see on the computer in a position to be able to defend itself screen (Kapferer, 1995a). These two tech- strongly. Thus, in order for a brand colour to niques produce a working imitation of be defensible, the brand itself must also consumers of average attentiveness, either by defend it internally. For example, the brand’s limiting the length of their exposure to the product lines are very often segmented: this product, and then increasing it (the tachisto- leads to the use of different colours to identify scope) or by presenting low-resolution each segment. In this way, the ability to claim pictures (computer method) and steadily that the brand is characterised by a particular increasing the resolution. Using the first colour is reduced. Thus, if a Coke label is red, method, we have found confusion scores of and a Diet Coke label is silver, red is no longer 40 per cent. the colour of the Coca-Cola brand: after all, The second approach ignores the legal when producing their own colas, distributors concept of confusion. Indeed, although they always start by producing red packaging. pay lip service to it in their rulings, judges do In general terms, the brand must become a not truly use the concept of confusion. moving target through innovation and Rather, they concentrate on excessive regular modifications to its packaging and its manifest resemblance. They pay more characteristic components. However, it must attention to resemblances and less to differ- always be remembered that the aim of these ences (as advanced by the imitator’s lawyer). modifications is to bring more value to the Objective proof of an excessive resemblance consumer. The difficulty that this permanent can be obtained by asking one group of movement creates for copies is a secondary consumers to describe the original, and then effect. asking an identical group of consumers to On the design front, the brand must accen- describe the copy. An analysis is made of tuate and radicalise the signs of its own indi- which aspects were mentioned first, second, viduality, in order to be able to defend them third and so on, for each of the two products, better, and at the same time make them recog- and the level of agreement between the nisable to consumers of average attentiveness. aspects stated first by each group. It is significant that the often-imitated Bailey’s Once these results on the reality of the pre- goes as far as to print the word ‘Original’ twice judice have been obtained, contact with the on its front label: ‘Original Irish Cream’ and distributor must be made at a high managerial ‘Bailey’s the original’. level in order to emphasise the seriousness of the matter. Furthermore, this is the level at Re-communicating the risks which long-term interests are best appre- ciated. The distributor needs big brands, a Asian imports, DOBs and discount products dynamic aspect to its store shelves, the value enter first into the categories with low innovations the brands bring to the category perceived risk. A first reaction is to remind and the margins they give the distributor. The people of the risks, to regenerate involvement manufacturer needs the distributor to gain in the category. For example, in 2005 one access to the customer. At lower managerial book became the talk of France, despite its size levels, the producer–distributor relationship is and its forbidding cover, which showed two more antagonistic. The outcome of such nutritionists (Cohen and Serog, 2006). The contact is the modification of the trade dress whole press talked about it, and television or packaging of the distributor’s disputed devoted time to it. In fact, this book revealed a products. truth that big distribution would much prefer FROM PRIVATE LABELS TO STORE BRANDS 89 to keep hidden: the lowest-price products are higher safety of a Bic and the danger of not good for your health. The drastic Chinese lighters. Bic created a magazine for its reduction in price is made by forcing through distributors in order to put the word out, and awkward compromises, where client health remind them of their legal responsibility if a and pleasure hardly enter into the equation. Chinese lighter sold by one of them were to All that matters is the price. This is where we cause physical harm to a client. At the same learnt that low-cost gingerbread contains no time, it took action to raise the level of the honey, and so on. criteria for approval for sale on European Bic did something similar in 2006 among territory. tobacconists. The brand is known as the leader in disposable cigarette lighters, Price reductions disposable razors, ballpoint pens and so on. It practises a single umbrella brand policy: Faced with a decrease in their market share, everything is sold under the same name, Bic. producers are conscious that their brand no It is essentially a company based on its sales longer justifies the price differential that it force. In Europe, the disposable lighters offers on the shelf. It is tempting to reduce the division, strengthened by its market share, price in order to restore the lost balance of lived on its reputation and spent nothing on perceived value and price. advertising. This prudent budgeting, however, This approach is logical, but carries several had a drawback: for years, there had been drawbacks. There is nothing easier than nothing to communicate to customers why lowering prices. What will they do when an they should prefer a Bic lighter. In fact, until even cheaper Asian competitor appears? then, in service stations and tobacconists, Lower them again – taking the money from there had been nothing but Bic. In 2004 which budget? Should it not be a question of Chinese products arrived, under the PROF recreating value by increasing quality and brand, which retailers bought 50 per cent price? Also in many stores, the consumers do cheaper than Bic and sold for the same price not even walk past the big brands: for them, as a Bic lighter. The increased margin for the the brand is too expensive by definition! They retailers was such that they now sold nothing would not even notice the reduced price. The but PROF. Moreover, Chinese products were anticipated effect on sales would misfire. The more fun and their decorations changed three price, and therefore the margins, would be times a year. The end consumers made no decreased without benefiting from superior complaint – they were happy to find some- volumes. thing new on the shelves, with more enter- An interesting study (Pauwels and taining products. Srinivasan, 2004) showed that the premium The decision was made to recreate the brands should not fear DOBs, since the market perceived risk. Chinese lighters are in fact is segmented. On the contrary: statistical dangerous: for example, they can explode if analysis showed that, after the introduction of left on the rear shelf of a car. This does not DOBs, their sales became less price-dependent, happen with Bic lighters, which are products and their turnover increased. The intermediate of remarkable quality. The problem is that in brands, on the other hand, saw their price marketing, perception is reality. By not sensitivity increase and their sales fall. communicating the advantages of the Several conclusions emerge at this stage. product, Bic had admittedly made savings, First, the era of systematic price increases but it had weakened the brand and paved the upon the launch of new products is over. It is way for Chinese imports, chosen by the trade, necessary to place price at the heart of the which was unconscious of the considerably innovation, and move on to a value analysis. 90 WHY IS BRANDING SO STRATEGIC?

The non-premium big brands should take Facing the low-cost revolution care to create a ladder enabling them to increase penetration through a product at an It would be hard to underestimate the rise of accessible price, and then practise trading hard-discount and lowest-price ranges as a up, once the client is aware of the quality of fundamental phenomenon in mature soci- the brand’s products. The difficulty, it must eties. Offering a reduced range or a pared-back be admitted, is the reaction of distributors, service at an unbeatable price, hard discount since these mini or economy-priced is more than just a price – it is a business products compete directly with their DOBs, model. It also represents a new attitude whose strategic role in their margins has towards consumption, and heralds a crisis for already been discussed. added value. It throws marketing itself into Thus, having bought all Colgate question, and thus brands too. This is why no Palmolive’s washing powders, Procter & organisations should consider themselves safe Gamble decided to use Gama as a ‘fighting from this phenomenon. brand’. In the second quarter of 2006, the Even in the country that invented the price of Gama was reduced by 25 per cent, hypermarket, and where this form of s s from 6.65 to 4.95 per 27-measure tub (Ariel commerce is now dominant, hard discount s is priced at 10). Gama became an ‘everyday has succeeded in capturing nearly 12 per cent low price’ brand, at a price lower than some of market share (in value) over 15 years. Given DOBs. The goal was to bring hard-discount that in food products, the price gap between purchasers back into the superstores, since discounters and the leading brands varies studies showed that they were particularly between 30 per cent and 50 per cent, it can be attracted by the cheapest washing powders. seen that this represents between 18 per cent Sales increased by 54 per cent in four months, and 24 per cent by volume. And of course – increasing market share from 3 per cent to 5.4 depending on the category – these figures may per cent. be even higher. For example, in the pre- The effect of price reductions on leader packed cold meats (ham) market, the hard brands cannot be guaranteed: thus, in order discounters’ market share by value is of the to combat the products of the hard- order of 16.5 per cent. discounter Aldi, Always (Procter & Gamble’s Hard discount is more than just a price. It is feminine hygiene brand) lowered its prices a new way of doing business, with its own in Germany, moving from an index of 240 specific retailers: German (Lidl and Aldi) or to 197, with Aldi’s index at 100. Aldi’s French (Ed, Leader Price). At present, the most market share remained stable at around 45 recent European panel figures suggest that 62 per cent. Always’ market share moved from per cent of households shop at a hard-discount 21.7 per cent to only 24.7 per cent. It was a food store. The phenomenon will reach a failure. The same tactic was successful, limit, however, reflecting the segmentation of however, for Pampers: by moving from the market: in food products, a threshold of 20 index 131 to 116, the market share jumped per cent in value market share should be from 31.1 per cent to 42.2 per cent, and expected. In the DIY sector, the major retailers Aldi’s product fell from 53.9 per cent to 45.9 have created separate hard-discount-style per cent. A significant difference between retail brands. The phenomenon now also these two cases is the far smaller difference extends to textiles: the classic discount stores in price for Pampers than for Always. Is it were well known, but now new hard-discount really worthwhile for premium brands to retailers are emerging. lower their prices? All these figures show that hard discount cannot simply be turned into a phenomenon FROM PRIVATE LABELS TO STORE BRANDS 91 that targets only lower-income groups. Hard petrol, clothing and other areas. No company discount is a necessity for the poorest in is immune to this phenomenon, because the society, but also an opportunity for the better- competition has changed: consumers have off. It offers an alternative way of living: become highly versatile, situation-driven and consumers can do the daily shop close to their pragmatic. They are quite capable of shopping home, in 10 minutes, thanks to the simplifi- both at a hard-discount store and at Harrods cation offered by a reduced range of goods, on the same day. freeing buyers from the torments of too much Modern competition is thus expanded choice. Hard discount does not represent a competition: it is no longer restricted to peers, return to asceticism, but to realism. Among identical brands or similar channels. Like the consumers who could afford to buy elsewhere, modern consumer, it is open and all- it attests to a desire to simplify, to un- embracing. In the process of experimenting complicate, and to retake control. It will exert with new channels, consumers are bound to strong pressure on brands with low added find themselves re-evaluating brands and value, the average brands, which do not their added value. possess a strong enough dream value. Hard What should our answer to this be? We discount advocates a form of intangible value: would argue that it involves heeding the the return to a kind of simplicity for people implicit message in this new form of range, who are not limited to it through a lack of while remaining true to oneself, by copying resources. Hard discount is a search for purifi- what may be copied from this competitor, cation of one’s life, de-pollution, and liber- while increasing one’s own strength. The ation from imposed constraints. brand must retaliate with a different intan- This is a genuine challenge for the major gible factor and value system: product brands, as this growing form of distribution performance on the one hand, or the emotive excludes them in favour of the discounters’ experience of the store on the other. own products. For the major brands, this Hypermarkets have no choice, either. Their further erosion of their accessibility on store own brands exist only in relation to the shelves compounds the problem created by producer brands that innovate, create and the amount of space already set aside for nurture markets, reveal tendencies, and also distributors’ brands in the hypermarkets and participate in the consumer society. supermarkets. Indeed, even retailers’ brands Remember that a brand can justify its exis- are coming under threat from this increas- tence only through the innovations it offers. ingly cut-price competition, which attracts The majority of brands are born of inno- clients to another store. This is why they have vation, and innovation continues to be the been strengthened, which will make them brand’s oxygen: it has a stimulating, euphoric even more of a danger to the major brands as effect in promoting a sense of wellbeing, well. In fact, in 2007, the distributor’s brand is pleasure, joie de vivre and hedonism. However, now typically 35 per cent cheaper than the this intangible factor will have to start earning national brand. As it increases in quality, its keep. This begins with respecting the however, its competitiveness also increases. customer: an intangible benefit that is not The hard-discount phenomenon is set to rooted in a tangible superior quality will be spread. Everyone will look for a way to weakened, and will contribute to the brand’s increase their purchasing power in an ulti- excess. There are plenty of cheap polo shirts, mately painless way, by making shrewder but only one Lacoste. A Lacoste shirt lasts 10 purchasing decisions in respect of a portion of years and, furthermore, adds distinction. This their consumption. This will affect telephone point has to be reinforced repeatedly. This communications, the internet, transport, raises the question of the visibility of brand 92 WHY IS BRANDING SO STRATEGIC? communication, governed by the advertising sible products that make it possible to exper- dogma of the USP: how, and through which iment with and to discover the brand. media, to promote the product. Thankfully, Furthermore, this contradicts the discounters’ the internet offers many opportunities. arguments, since they wish to stereotype all This new brand responsibility comprises manufacturer brands as ‘expensive’. service, citizenship, and sustainable devel- In air travel, for example, Air France has opment, which is transmitted through client shown that the famous bait-and-switch prices service via a call centre or over the internet, but of the low-cost companies (s20 flights from also through the services such as taking in Paris to London) applied only to a few seats and worn-out electrical appliances, which indicate time slots. Conversely, Air France’s promotion the brand’s high degree of social responsibility. of its lowest prices, and of reduced prices in the The brand must adopt ethical principles and case of reservation long in advance, has also demonstrate that consumption is not a demonstrated that its price range is much synonym for inefficient waste, pollution and wider than the low-cost companies had exploitation – themes to which society is claimed. The SNCF (French national rail) becoming increasingly sensitive. Even Nike has created e-TGV to reduce prices. Thanks to yield had to make changes in the wake of the revela- management and process optimisation, Air tions in Naomi Klein’s book No Logo (1999). France and British Airways can also offer a The mega-brand, with its iconic status among quota of seats at very low prices. These may be the young, may well have invented concept obtained by booking far in advance, reserving upon concept, but its social conscience left over the internet, and so on. In this way, the much to be desired, a fact that is particularly SNCF’s e-TGV puts Marseilles only a s20 unacceptable in a flourishing company. journey away from Paris. It would be a mistake to believe that hard The superstores have offered products even discount will become the norm. In France, cheaper than the hard discounters, but under Cristalline spring water, sold at a price three specific brands (the No. 1 brand at Carrefour, times cheaper than Evian, does not control 100 for example). This reduces the temptation to per cent of the market, and Evian is still the look elsewhere by capitalising on the hyper- leader by value. However, it will grow, until it market’s traditional strength, ‘one-stop reaches its threshold – and in so doing it may shopping’. The difference in terminology is lead to a re-evaluation of attitudes and revealing: ‘low-cost’ is a business model; ‘even behaviour. As is always the case in our modern cheaper product’ was the result of an emer- societies, contradictory tendencies appear, gency action. coexist and learn to live together – but what For 50 years Aldi and Lidl have been they cannot do any longer is ignore each other. designing an efficient business model in order An examination of the specific strategies of to provide a quality product at the lowest companies and brands to combat hard price, based on the elimination of all unnec- discount reveals the following themes, all of essary costs, and on a new vision: long-term which capitalise on the enduring weakness of agreements with suppliers, dedicated factories hard-discount. with a common design, not to mention a store What link is there between Ryanair, Virgin concept without flourishes, with a greatly Express, and Asda or Aldi? They are all so- reduced range of goods. If Aldi’s fruit juice is called low-cost companies. How have the still the market leader in Germany, it is traditional competitors responded? Through because it is good: its quality/price ratio is the introduction of a new, lowest-price unbeatable. product offer to its existing range. The brand Conversely, the lowest price products at must create a stepped price range, with acces- Carrefour, sold under a brand that (signifi- FROM PRIVATE LABELS TO STORE BRANDS 93 cantly) makes no reference to Carrefour, were of all necessary to innovate on pillar products, created in haste to block the client drain, and those products that achieve the volume and obtained through increased pressure on the margin, and are essential to the distributor. suppliers, and therefore on the quality of In short, faced with supermarket shelves where constituents. Thus the fruit juice at this price space is at a premium due to the introduction will only have perhaps the legal minimum of low-cost products, and in order to retain required amount of fruit juice. This is why clients who might be tempted by the vista of hard discount, unlike the hypermarket’s hard-discount stores, it is important to lowest price range, satisfies its clients. remember that an essential reference remains At the communications level, it is necessary essential only when supported through inno- to constantly recreate the perceived risk, by vation and communication. revealing the invisible and the unspoken It is also vital to track the costs that do not aspects of ‘low cost’. Perceived risk is a key lever carry added value, even imitating the best of brand sensitivity (Kapferer and Laurent, practices of the low-cost competitors. Thus Air 1995). The book written by two nutritionists France is constantly reducing the time clients was therefore a timely arrival in 2005. It showed must wait before they can board, via machines that drastic price-cutting on food products was that deliver boarding cards: this also helps to bound to negatively affect the intrinsic quality economise on personnel. The same is true for of the products. Thus, low-cost gingerbread the growing use of the internet to book and to contained not a single gram of honey. Low-cost pay. For low-cost companies, as is well known, ham contained high levels of chemicals. Low- everything is done at a distance. cost chicken is raised in the worst conditions Finally, the brand must react through a and barely has time to grow up (40 days), and so specific business model. Air France adopted the on. In the air travel sector, a degree of doubt will hub-style business model: it allows any trav- inevitably remain regarding the maintenance, eller from the French regions to travel to Paris the quality of the equipment, and the heavy on an Air France flight and to make use of very usage of the airplanes. convenient international connections (with The brand must react to attacks on price by short waiting times), not to mention the imme- playing its trump cards: innovation and diate transfer of baggage, and moving within a creating desire. In order to see off the chal- single terminal. All these added values lenge of the cheapest possible industrial discourage the internal traveller from flying to chicken, the brand must offer halal chicken, Paris with a low-cost company, then being organic chicken, regional chicken, and so on. forced to change airports or terminals, without To oppose the cheapest possible yoghurt, it guaranteed immediate connections to interna- must offer one that does you good: Actimel, tional flights – not to mention the air miles. Danacol, Bio-Activia. To oppose a s5 cafetière in Carrefour, imported from China, it must offer Nespresso, or Senseo by Philips, or Krups. Should manufacturers produce To oppose the cheapest MP3 player, it must goods for DOBs? offer the iPod and its continual innovation (images, nano, mini, access to iTunes, iPhone, One of the questions all company managers and the like). ask concerns the opportunity to work for Value innovations are low volume, at least distributors’ brands. This question is even initially. Without volume there can be no more urgent today, since with the shrinking of strong brand, since it is volume that creates the shelf space allocated to branded industri- the financial resources for R&D, marketing, alists, their economic model is under threat. communication and so on. It is therefore first How can they maintain the volumes that 94 WHY IS BRANDING SO STRATEGIC? create profitability? order to defend already strong brands (7.90 Those industrialists in favour of producing per cent). If the brands are weak and the DOB goods advance the following arguments: DOB manufacturing approach is an attempt to save them, the profitability in I It relieves the burden of fixed costs. the sample is less (3.50 per cent). I It allows them to benefit from economies I The profitability is maximal if this is the of scale. dominant or even exclusive activity of the industrialist (7.51 per cent). I It may be intrinsically profitable, since there is no need for marketing, communi- I The profitability is maximal if the market is cation, or sales force. not a commodity market (7.64 per cent). I If they do not do it, their competitors will. I The profitability is weakened by the fact that the industrialist does not make a In contrast, those who oppose it are right to distinction between its brand and the argue that it will undermine the long-term distributor’s brand it is producing: this is an legitimacy of the company’s own brands, important point, since many industrialists since the industrialist will not be capable of distinguish between the two only through producing a bad product. For a while the the packaging, in order to make the most of product Olympia manufactured for Carrefour the economies of scale and long was superior to the comparable product of the production runs. brand itself. An examination of the figures in I The profitability is better when the manu- the cheese sector also shows that the most facturer works with distributors that profitable cheese maker is Bel, which sells promote quality. only branded products (Laughing Cow, Mini Babybel, Leerdammer, etc). What can we draw from this HEC research Rather than drawing up a pointless balance data? Whether or not to manufacture sheet for and against, it is worth turning to distributor’s brand products is a strategic research in this case. HEC has carried out choice, and should be analysed as such. several specific studies on this important Should they do it? Refusal to do so is clearly theme for companies in all sectors, under the the result of a long-term vision: Procter & direction of M Santi (Santi, 1996). The Gamble, Gillette and l’Oréal all invest too much selected criterion is operational profitability in research to wish to share the benefits they compared with turnover, and the sample reap from it. They reserve the first fruits for their comprised 167 cases drawn from numerous own brands, within a structured portfolio. mass-consumption sectors. What does this Which companies should do it? There is no research have to teach us? correlation between any classic company description and profitability in DOB I The profitability level is maximal when the production: rather, profitability is linked to policy is the result of a voluntary strategy (9 the manner in which it is implemented. per cent) and not an opportunistic reaction In which segments should they operate? to a short-term demand (5.19 per cent) or a The least commoditised possible, those where survival strategy (6.53 per cent). there is still innovation. I The profitability level also depends on the Which distributors should they work with? underlying motivations: it is at its highest Here, too, selectivity in the choice of distrib- when the company is seeking to create a utors proves to be rewarding in terms of prof- genuine with distributors, in itability over turnover. 95 5

Brand diversity: the types of brands

What becomes of these brand principles in Luxury, brand and griffe specific markets? It is worth asking the question, given the disparities between Recently there has been a surge of interest in markets as varied as industry, business-to- luxury brands. It is true that they are the polar business (B2B) and medical prescription on opposite of low cost: here, the company has one side, and the world of service and luxury complete freedom to fix its prices – as high as on the other. Are internet brands controlled possible. How much does a bottle of Royal using the same levers? What should we think Salute cost in a Shanghai disco? The answer is of the emergence of the brand in sectors such s1,000. This is why financial groups have as fresh produce, previously the domain of been set up to relaunch luxury brands – the generic products or a variety resulting from world number one, LVMH, was born from the nature and regional tendencies? Finally, we talent of its founder, B Arnault, who acquired should examine these new extensions of the a fading star, Dior, at a low price. Then he got brand domain: countries, towns, educational his hands on Vuitton, now the world’s leading establishments, and also television pro- luxury brand in terms of financial value. grammes and sporting heroes. But what is luxury? How is it different from These questions on the adaptation of premium brands, such as Victoria’s Secret brand principles to specific sectors are raised lingerie, Callaway golf clubs, Belvedere vodka by sector managers themselves, since they or Nespresso coffee? These brands are typical all recognise the trans-sectoral validity of of trading up, as consumers move up the brand logic, its points of application, and range. Admittedly there is a little of luxury’s the brand activation modes, which are ingredients in these brands (better quality, bound to differ according to the different selective distribution, emotive value), but markets. This chapter is dedicated to these luxury is elsewhere. Let us return to its differences. etymology. The word ‘luxury’ derives from the Latin luxatio, meaning distance: luxury is 96 WHY IS BRANDING SO STRATEGIC? an enormous distance. There is a disconti- Our research has delved more deeply into nuity between premium and luxury. the notion of luxury among consumers. There To return to the essence of luxury, it is are profound differences between people customers’ desire to mark their difference. The questioned on their concept of luxury. first luxury manager was King Louis XIV of Analysis of the traits that – in their minds – France. Aristocracy is now dead, but it has define luxury reveals four concepts of luxury, been replaced by the power of money. each with its most representative brand(s) Everywhere in China, in Russia, in the United (that is, those that are judged the best States and in Dubai, recent fortunes grant example of the type of luxury by interviewees) more than unlimited purchasing power: they (Kapferer, 1998). grant power, pure and simple. This is the heart The first type of luxury, according to this of luxury: giving men and women of power international sample of affluent young execu- the privileges that accompany it. For power tives with high purchasing power, is the must be shown off in our democratic societies. closest to the general hierarchy, the average Once upon a time, the mere name of the emerging from our studies. It gives promi- noble marked the unbridgeable distance nence to the beauty of the object and the between him or her and an ordinary person. excellence and uniqueness of the product, Nowadays, the frontier still exists and it must more so than all the other types. The brand be marked. most representative of this type of luxury is Russian oligarchs, Chinese billionaires and Rolls-Royce, but Cartier and Hermès also show Wall Street’s golden boys do not buy Victoria’s these characteristics. The second concept of Secret or Belvedere vodka for their partners. luxury in the world exalts creativity, the They want Dior, la Perla, Elit by Stolichnaya or sensuality of the products. Its luxury ‘proto- Krug’s le Clos du Mesnil, which has deposed types’ are Gucci, Boss and J-P Gaultier. The Dom Perignon. Luxury, like power, is a quest third vision of luxury values timelessness and for the absolute. international reputation more than any other The luxury business model aims to outgrow facets. Its symbols are Porsche, with its this niche in order to exploit the fundamental immutable design, Vuitton and Dunhill. mechanism described by R Girard: desire born Finally, the fourth type values the feeling of of imitating a model. Luxury brands know rarity attached to the possession and how to create more accessible product lines consumption of the brand. In their eyes, the for those who wish to introduce a little luxury prototype of the brand purchased by the into their lives, to enliven their daily grind select few is Chivas. from time to time. These are luxury’s ‘day We also find Mercedes in this category: trippers’. This created the luxury business. this might seem curious, given the recent diffusion of Mercedes – now more than What does luxury mean to consumers? 1,300,000 vehicles sold worldwide each year. However, our study dates from 1998, when Luxury can vary as widely as East from West. Mercedes produced only 700,000 cars per Everyone can see where it is, but it is year, and its dynamism and product attrac- constantly on the move. Luxury is relative. tiveness were called into question. This is For a modest individual, luxury is eating in a what led to the revolution we all know about good restaurant once a year. For one of the (multiplication of models, introduction of City’s golden boys, it is buying a Ferrari with aesthetics, the A class, the M class and so your annual bonus. For Bill Gates, it is playing on). Its presence as a symbol of this fourth tennis with the world number one or buying a type of luxury testifies to the brand’s Picasso. problems. Only a few years ago, its only BRAND DIVERSITY: THE TYPES OF BRANDS 97

Table 5.1 Consumers’ four concepts of luxury Consumer group Type 1 Type 2 Type 3 Type 4 What defines luxury (percentage giving each answer): Beauty of an object 97 63 86 44 Excellence of the products 88 3 9 38 Magic 76 50 88 75 Uniqueness 59 10 3 6 Tradition and savoir faire 26 40 40 38 Creativity 35 100 38 6 Sensuality of the products 26 83 21 6 Feeling of exceptionality 23 23 31 31 Never out of fashion 21 27 78 19 International reputation 15 27 78 19 Produced by a craftsperson 12 30 9 3 Long history 6 7 16 13 Likeable creator 6 7 10 13 Belonging to a minority 6 3 2 63 Very few purchasers 0 3 2 69 At the cutting edge of fashion 0 17 36 31 Typical luxury brands of this type according to interviewees: Rolls-Royce Gucci Vuitton Chivas Cartier Boss Porsche Mercedes Hermès Gaultier Dunhill Source: Kapferer (1998b) potential market was among those looking is evidence of their attractiveness to customers for the luxury, not of a sensory pleasure, but the world over. We need to distinguish between of status, the badge of belonging in a class two different business models for brands. The with money and a desire to flaunt it. We first includes brands with a ‘history’ behind should add, however, that in China, India, them, while the second covers brands that, Brazil and Russia, it is the very expensive lacking such a history of their own, have and status-loaded Mercedes S Class that invented a ‘story’ for themselves. It comes as sells. These are de facto inaccessible cars. no surprise that these companies are US-based: this young, modern country is a past master in Two different approaches to luxury the art of weaving dreams from stories. After brand building all, both Hollywood and Disneyland are American inventions. The only real success is commercial, yet there Furthermore, the European luxury brands – are many roads to this destination. An exami- rooted as they are in a craftsperson-based nation of ‘new luxury’ brands such as Ralph tradition predicated upon rare, unique pieces of Lauren, Calvin Klein and DKNY proves that it is work – place considerable emphasis on the possible to become an overnight success in the actual product as a factor in their success, while luxury market without the long pedigree of a the US brands concentrate much more on Christian Dior, Chanel or Givenchy. True, these merchandising, and the atmosphere and image newer brands have not yet demonstrated their created by the outlets dedicated to their brand, ability to endure and survive beyond the death in the realm of customer contact and distri- of their founders, but their commercial success bution. What we see is the creation of a 98 WHY IS BRANDING SO STRATEGIC? dichotomy between ‘history’ and the product level, and on their licensing to industrial on the one hand, and ‘stories’ and distribution groups able to create, launch and distribute on the other. Let us examine and compare these worldwide products at the third level (such as two brand and business models in more detail. P&G, Unilever and l’Oréal ). Profit accrues at The first brand and business model may be this level, and is the only means to make the represented by the luxury pyramid (see Figure huge investments on the griffe pay off. These 5.1). At the top of the pyramid, there is the investments are necessary to recreate the griffe – the creator’s signature engraved on a dream around the brand. Reality consumes unique work. This explains what it fears most: dreams: the more we buy a luxury brand, the copies. Brands, on the other hand, particu- less we dream of it. Hence, somewhat para- larly fear fakes or counterfeits. The second doxically, the more a luxury brand gets level is that of luxury brands produced in purchased, the more its aura needs to be small series within a workshop: a ‘manu- permanently recreated. facture’ in its etymological sense, which is This is exactly how the LVMH group seen as the sole warrant of a ‘good-facture’. operates. The model is best explained in the Examples include Hermès, Rolls-Royce and actual words of Bernard Arnault, the CEO of Cartier. The third level is that of streamlined LVMH, the world’s leading luxury group, mass production: here we find Dior and Yves which owns 41 luxury brands. What are the Saint Laurent cosmetics, and YSL Diffusion key factors in the success of its brands? clothes. At this level of industrialisation, the Arnault (2000: p 65) lists them in the brand’s fame generates an aura of intangible following order: added values for expensive and prime quality products, which nonetheless gradually tend l product quality; to look more and more like the rest of the l creativity; market. Hence its name equals mass prestige. l image; In this model, luxury management is based on the interactions between the three levels. l company spirit; The perpetuation of griffes depends on their l a drive to reinvent oneself and to be the integration in financial groups that are able to best. provide the necessary resources for the first

Relations Attributes

The Pure creation, unique work, materialised perfection Aura griffe

Money The Small series, workshop, handmade work, luxury brand very fine craftsmanship

The upper-range brand Series, factory, highest quality in the category

The brand Mass series, cost pressure, the spiral of quality

Figure 5.1 The pyramid brand and business model in the luxury market BRAND DIVERSITY: THE TYPES OF BRANDS 99

Writing earlier in his book with reference to have originated in the United States, but we Dior, the ultimate luxury brand, he notes, should also include the likes of Armani and ‘Behind Dior, there is a legitimacy … roots … Boss in this category, which is characterised an exceptional evocative power … a genuine by its flat, circular, constellation-like model. magic, to say nothing of its potential for At the centre is the brand ideal, while all economic growth’ (p 26). manifestations of the brand (its extensions, As we can see, in this pyramid model, with licences, and so on) are around the edge, at a its base which expands to feed the brand’s more or less equal distance from the centre. overall cashflow (through licensing, exten- Consequently, these extensions are all treated sions and a less elective distribution system), with equal care, since each of them brings its there must be a constant regeneration of value own individual expression of this ideal to its at the tip. This is where creativity, signature target market. Each portrays the brand in an and creator come in, supplying the brand equally important way, and plays its own part with its artistic inventiveness. Here we are in in shaping it. For example, Ralph Lauren’s the realm of art, not mere styling. Each show home textile extension (bed sheets, blankets, is a pure artistic event. Unlike the second tablecloths, bath towels and so on) is a brand and business model (as we shall see), it complete expression of the patrician East is not a question of presenting clothing which Coast ideal and its values: indeed, the tactic of will be worn in a year’s time. As Arnault puts merchandising the range in the corners of it, ‘One does not invite a thousand guests to department stores aims to create an idealised watch a procession of dresses which could be reconstruction of a room in a house. seen on a coat hanger or in a show room’ This second model can include brand (p 70); ‘most competitors prefer to show off ‘places’ such as The House of Ralph Lauren – mass-produced clothing on their catwalks, or superstores which not only stock the entire indulge in American-style marketing. We are brand range and its various collections and not interested in working this way’ (p 73); and extensions, but are also specifically designed ‘Marc Jacobs, John Galliano and Alexander to give flesh, structure and meaning to the McQueen are innovators; fashion inventors; brand ideal. Ralph Lifshitz, Ralph Lauren’s artists who create’ (p 75). founder, built his brand on an ideal: that of The creativity of the signature label, at the American aristocracy, symbolised by Boston tip of the pyramid, is at the heart of high society. Ralph Lauren’s flagship stores are the business model: within a few years of the three-dimensional recreations of this fanciful arrival of John Galliano at Dior, sales had illusion (Figure 5.2). increased four fold. Never before had Dior The same model is also used by brands such been talked about so much worldwide. Dior as Lacoste, created in 1933 in the days of was back at the centre of world artistic tennis champion René Lacoste, a Davis Cup creation for women. winner along with his friends ‘Les The disadvantage of this model – and after Mousquetaires’, and nicknamed ‘The all, every model has a disadvantage – is that Crocodile’ for his tenacity. Ever since then, the more accessible secondary lines are the brand’s values, which are encapsulated in entrusted to other designers, and the further his famous chemise (meaning ‘shirt’: the word away you move from the tip of the pyramid, itself is important), have been upheld by the the less creativity there is. In this model, there Lacoste family and a collection of partners, is a strong danger that brand extensions will their licensed producers and distributors. show little of the creativity of the brand itself: Lacoste thus has a certain authenticity and a they will merely exploit its name. genuine history, yet at the same time follows The second brand and business model may this second business model. 100 WHY IS BRANDING SO STRATEGIC?

Linen

Paint, home furnishing Perfumes

RLX Ralph Lauren Polo

Chaps Purple label

Ralph

Figure 5.2 The constellation model of luxury brands

Indeed, the creation of this model has to the particular segment: the high-quality nothing to do with chance: it is an economic materials used in a Club jacket explain why. necessity for any brand which continues to be Of course, the product ranges of all Lacoste’s sold at an accessible price point. There is no extensions are arranged around this same way of sustaining an exclusive distribution segmentation. network with an average purchase of around Ralph Lauren uses a similar model: its s65 or US$75 – that is, the price of a Lacoste recent Purple Collection features Italian-made shirt – or US$60, the price of a Ralph Lauren outfits produced from quality materials, and a polo shirt. The economics only become price tag to match: s3,000 per outfit. feasible with multiple extensions. Following This brand extension policy makes matters our model, this can be done in two ways. The easier for distributors, who have come to first is horizontal product extension to understand that the rate of return increases as increase brand recognition, providing that the physical sales area expands. Each store can elusive access to large-scale advertising now offer a rich assortment of products which budgets, and breaking into different distri- are no longer mere accessories, but extensions bution channels or different locations inside in their own right – and in so doing, can the same department store. This increases the increase the value of the average shopping perceived presence and status of the brand. trip. The second is vertical product extension to It should be noted that ‘pyramid-based’ increase average till prices. Today, for brands face a rather perverse problem. If they example, Lacoste has segmented its product create too many accessible extensions, they range into three groups – sport, sportswear reduce the profitability of the sales outlets. In and Club – yet has steered clear of formal a Chanel boutique, it makes more sense to wear, which is outside the brand’s sphere of spend 10 minutes selling a customer a Chanel legitimacy. This segmentation makes it bag – given the margin it offers – rather than a possible for customers to wear Lacoste in a perfume or a product from the Chanel variety of situations: sport, leisure and ‘dress- Precision range. Clearly, the extension policy down Friday wear’. At the same time, the is inseparable from the distribution policy. average product price is increasing according BRAND DIVERSITY: THE TYPES OF BRANDS 101

History-based and story-based luxury The psychology of counterfeiting

An examination of luxury brand strategies Counterfeiting is on the increase. It is now a shows two brand construction models. The global business, involving organised groups, first is based on product quality taken to the and forming part of Mafia activity as a result extreme, the cult of product and heritage, of the profits that it offers at the margin of History with a capital H, of which the brand is intellectual property and trademark the modern embodiment. The second is protection laws. It has also found a new distri- American in origin, and lacking such a history bution channel through the internet and its of its own, does not hesitate to invent one. marketplace sites such as e-Bay. However, if Ralph Lifshitz became Ralph Lauren, taking there is a market, there must be customers. on the traits and character of the Great In Asia, the phenomenon relates to local Gatsby, a direct descendant of the ultra-chic culture. Everyone knows the extent of coun- Bostonian high society. (See Figure 5.3.) These terfeiting in China. There is no trademark newcomer brands also grasped the impor- protection. Traditionally, Chinese culture tance of the store in creating an atmosphere praises those who share and vilifies people and a genuine impression, and of making the who keep things only for themselves. brand’s values palpable there. America Faithfully reproducing the master’s work is invented Disney and Hollywood – both praised in traditional Chinese education and producers of the imaginary. pedagogy. Furthermore, in the monopolistic

Cult of the product

French approach to luxury

History Stories

American approach to luxury

Merchandising in stores, at points of sale, and in corners

Figure 5.3 History-based and story-based approaches to luxury 102 WHY IS BRANDING SO STRATEGIC?

economy that dominated the Chinese I The idea of brightening up functional mentality for 50 years, even the notion of items: fake Ralph Lauren polo shirts, even if property did not exist, and it was common to they are approximate copies, are good see all Chinese factories carrying the same enough for doing household chores, name. Let us add that only the counterfeits are gardening or washing the car, for example. accessible to local consumers. In these coun- I Certain consumers willingly buy the coun- tries, everyone wants to show their neigh- terfeit, since they cannot or will not pay bours that they have finally arrived. Everyone the higher price for the original. They find has heard about the Western brands, but very it superfluous or exaggerated to buy a few actually know them: they do not realise Ralph Lauren polo shirt at s60, since they they are buying a fake. Research has are not strongly involved with the brand. confirmed this point (Lai and Zaichkowsky, 1999): local consumers choosing a counterfeit I There is also a ‘moral’ motivation among or an imitation do so because they are not some purchasers of counterfeits: they are familiar with the original. scandalised by the price of the original, Western consumers know perfectly well arguing that since it was manufactured in a which is the original: they play with imita- south-east Asian factory the cost price must tions and counterfeits (McCartney, 2005). Our be tiny. For these purchasers, it is only right qualitative research of this phenomenon and proper: since this brand is practising reveals five motivations: daylight robbery, judging by a comparison of its sales price with its cost price, stealing I The feeling of getting a bargain, since from it in return is morally justified. everyone knows that luxury and Nike I An original gift: rather than bringing home products are manufactured in factories in a cheap Thai souvenir that will go straight the developing world. These consumers into a drawer, they bring their friends a deny the difference in quality between the typical product of the country, a beautiful original and the copy, when they are both imitation, a counterfeit that can barely be produced in China, as is the case for some distinguished from the original. This Vuitton products. These are highly discrim- present always surprises the recipient, and inating shoppers. They only buy Vuitton sparks conversations on the good or bad bags ‘identical’ to the original, admiring quality of the counterfeit. Finally, it is the quality of the copy: it is this quality, certain to be used. However, this type of gift together with the price, that makes it ‘a real is becoming risky, since European customs bargain’ and enables them to carry the consider the traveller who brings home copy every day, under the gaze of friends such gifts to be a receiver of stolen goods. who will not know the difference. The purchaser of a very good imitation Bulgari watch, a close semblance to the genuine The fight against counterfeiting one she already owns, will not hesitate to give it to one of her children for their 15th Counterfeiting is the identical, trait-for-trait birthday. imitation of the brand and its identifying Revealingly, purchasers sometimes own components: it is clearly illegal, with no need a true original themselves: this is what to prove that the consumer is confused. qualifies them as experts, and gives status Perpetrators should be reported and prose- to the copy chosen for its close resem- cuted. However, longer-term action is blance. They know what they are talking necessary in certain countries where it is more about. than tolerated, even acceptable: BRAND DIVERSITY: THE TYPES OF BRANDS 103

I Collective action at the level of the Foreign under strong pressure from all quarters to Ministry or Ministry of Justice. This respect the WTO’s rules: eventually it would involves inter-state relationships. take punitive action against the counter- feiters. This is why the agreement signed stip- I Collective sensitisation efforts, for example ulated the cessation of legal action against it, at the World Trade Organization (WTO) with Crocodile Garments moreover becoming level, to develop local legal systems. Lacoste’s licensee in Hong Kong. In exchange, I Advertising of the original brand in the Lacoste insisted that the counterfeit crocodile country in question. It is necessary to must take a more rounded shape, be familiarise people with the ‘true brand’ so contained in a circle and cease to be coloured that they can distinguish it from the fakes. green, like the famous original crocodile of 1933. By signing this agreement, the two I Advertising on counterfeiting in tourists’ companies formed a common front against a countries of origin. Action among Western hundred other local counterfeiters. consumers in their country of origin is educational: they must be reminded that counterfeiting is linked to Mafia groups Service brands and laundering drug money. It is also juridical: bringing home a counterfeit There is no legal difference between product, makes someone an accomplice and is trade or service brands. These are economic therefore a crime, punishable by law. distinctions, not legal ones. By focusing only on branding per se, ie on signs only, the law This fight is shifting continually, and requires does not help us much to understand either tact and a highly developed strategic sense. A how brands and the branding process work or typical case is Lacoste v Crocodile Garments. In what the specific characteristics among the November 2003, Crocodile Garments various players are. announced at a press conference in Hong Service brands do exist: Europcar, Hertz, Ecco, Kong that it had signed an agreement with Manpower, Visa, Club Med, Marriott’s, the Lacoste shirt brand. In fact, the Crocodile Méridien, HEC, Harvard, BT, etc. Each one Garments company had registered a crocodile represents a specific cluster of attributes symbol – a strict imitation of the Lacoste croc- embodied in a quite concrete, though intan- odile, but facing to the left instead of the right gible, type of service: car rental, temporary – in Hong Kong back in the 1970s, and had work, computer services, leisure activities, hotel been exploiting this brand and the ‘Crocodile’ business or higher education. However, some store chain, not only in Hong Kong but also in service sectors seem to be just entering the Singapore and now in China. With the law on brand age. They either do not consider them- its side, Lacoste took the matter before the selves as being a part of it yet or have just started relevant courts in Singapore and China. becoming aware that they are. This evolution is However, although the judgements were fascinating to watch, as it highlights all that the always favourable, they remained unheeded brand approach involves and reveals the speci- on the ground. ficities of branding an intangible service. In the meantime, hundreds of other coun- The banking industry is a fine example. If terfeits sprang up in China, including Cartelo bank customers were asked what bank brands International with over 600 boutiques. they knew, they probably would not know or Lacoste and Crocodile Garments came to a understand what to answer. They know the pragmatic and wise agreement. The latter names of banks, but not bank brands. This is company could see that China was coming significant: for the public, these names are not 104 WHY IS BRANDING SO STRATEGIC? brands, identifying a specific service, but isfied if they are transgressed. Claiming to be corporate names or business signs linked to a the bank with a smile or the bank who cares is specific place. not enough. These attributes must be fully Until recently, bank names designated either internalised by the people who offer and the owner of the corporation entrusted with deliver the service. The fact that humans are the customers’ funds (Morgan, Rothschild) or a intrinsically and unavoidably variable is defi- specific place (Citibank) or a particular nitely a challenge for the brand approach in customer group. Name contraction often service industries. signals that a brand concept is in formation. This is why brand alignment has become so Thus, for example, Banque Nationale de Paris important if the whole organisation is to ‘live has become BNP. Some observers consider this the brand’ (Ind, 2001). Brand alignment is the as just a desire to simplify the name, as per the process by which organisations think of them- advertising principle ‘what’s easy to say is easy selves as brands. The brand experience in the to remember’, as short signatures make it easier service sector is totally driven by what to identify the signer. Such abbreviations have happens at points of contact, where definitely had an impact; however, they seem customers meet the company’s staff, sales- to reduce the whole branding concept to a people and so on. This is true of Starbucks as mere part of the writing and process well as of Citibank or HSBC. It is also crucial at solely within the realm of communication. Dell. This company is actually not a computer As they are contracted, these bank names manufacturer but a service company, identi- come to represent some kind of contract instead fying each client’s need and assembling the of a mere person or place. In order to become product to fit it. There is hardly any R&D visible, this contract may take the form of investment at Dell. All the efforts are concen- specific ‘bank products’ (or standard policies in trated on the customers and organising the the insurance industry). But these visible and company by customer segment to better listen easy-to-imitate products are not the expla- and react. People are essential in this process, nation and justification for why they have not machines. decided to build a true brand. They are merely Branding in the service sector entails a double the brand’s external manifestation. Banks and recognition. Within the company, people must insurance companies have understood the key recognise the brand values as their own. The to what makes them different: the relationships internalisation process is crucial. It means that develop between a customer and a banker explaining and justifying these values to each under the auspices of the brand. cell within the company. It also means stimu- Finally, one aspect of service brands that lating the self-discovery of how these values contrasts with product brands is that service is might modify everyday behaviour. At the client invisible (Levitt, 1981; Eiglier and Langeard, level it also means that clients recognise these 1990). What does a bank have to show, except values as those to which they are attracted. customers or consultants? Structurally, service One point must not be overlooked. Brand brands are handicapped in that they cannot management in the service sector means not be easily illustrated. That is why service only delivering a differentiated experience but brands use slogans. No wonder: slogans are ensuring that the resulting satisfaction will be indeed vocal, they are the brand’s vocatio, ie attributed to the right brand. This is why the the brand’s vocation or calling. Slogans are a design and branding of all contact points are commandment for both internal and external so important. Places of business, call centres, relations. Through a slogan, the brand defines websites and the like must all convey the its behavioural guidelines, and these guide- brand. Just posting one’s logo on the front lines give the customer the right to be dissat- door is not enough. BRAND DIVERSITY: THE TYPES OF BRANDS 105

The human component of the service produced by the immediate environment on brand what is known as the customer experience, and therefore customer satisfaction. In services, there is no difference between the Since service is carried out by people, their internal and the external. In other words, it is variability is a risk for the brand. The brand what is behind the brand that makes the promises regular and dependable quality – brand. Thus, on a return flight from Tokyo to hence the importance of defining strong Paris, customers of the airline are in contact behavioural norms, supported by plenty of with its staff for 14 hours at a time. It is the training (McDonald’s and Disney are models attentive personnel who carry the brand, not of this type). The alternative is to keep the a few seconds of stealth advertising. This is personalised connection between customers what makes passengers forget the frustration and the agents themselves, who found a of the delays that build up from the lasting relationship, based on mutual recog- beginning, disrupting executives’ best-laid nition. However, this second approach plans. What has built Starbucks’ worldwide conflicts with the need to move staff around. reputation, if not the politeness of its employees? For products it is quite the Service, process and recruitment opposite: Evian is visible in bottles, in shops brands and in advertising. We never see the factory or the workers. In the services sector, in order to carry out the The first consequence of this is that the primary function of any major brand (guaran- service brand is constructed internally. teeing the same quality of service), the brand Orange is built up through hours and hours of is necessarily linked to the setting up of training all staff how to behave in an Orange internal and customer-facing processes. To way, according to Orange’s codes and values. take the example of accounting and audit This concerns all points of contact with the consultancies, to be ‘Mazars’ is to differentiate customer, in the store, from the call centre or oneself from the big international agencies, over the internet. The second consequence is the famous ‘big four’ who are all Anglo-Saxon, that employees cannot be expected to treat and therefore offer a different culture. customers well if they are not happy them- However, it is still necessary to homogenise selves. In order to create the relaxed, warm the internal processes, to provide more regu- atmosphere that characterises Starbucks, its larity and the client experience. The brand is founder Howard Schultz innovated by not only a common seal linking profoundly responding to the worries of many part-time independent agencies in order to give an staff: with good health insurance cover, for impression of size, but the sharing of the same example. concept of the profession. In services, it is Another essential distinction between important to make the intangible tangible – services and products is that the ‘factory’ is in hence the importance of common processes. the store. The location for the service Naturally, this has an impact on what is production (or serviduction, as the late commonly known as the employer brand, lamented E Langeard called it) is also the place since the raw material of service is the person- of its consumption: post office, hospital or ality and competence of the people. For the restaurant. This is why it is so important to employer brand, the task is to develop its take care of the little details, since they lead to reputation among executives or students of expectations and feelings. The rise of architec- the top universities, based not on better tural and interior design expresses the desire salaries, but on shared values. for greater control over the impressions 106 WHY IS BRANDING SO STRATEGIC?

Brand and nature: fresh produce The Saveol brand is the banner under which dozens of tomato producers have joined Many mass-consumption food product together, united by a single desire to create a brands were born through the disappearance superior and different product, to respect the of fresh produce in bulk. Sweetcorn, peas and same innovative production processes while gherkins were all canned, giving birth to eliminating insecticides (replaced by lady- Green Giant, Saupiquet, d’Aucy, Amora, birds), and to invent a true range of flavourful Bonduelle and so on. Findus was the first products, in previously unseen forms suitable brand to freeze vegetables. Fleury Michon for different types of consumption (cherry produced plastic-wrapped ham. The big tomatoes, olive tomatoes, etc). This policy of brands were therefore born through providing innovation is accompanied by mass-media progress and practicality, precisely connected communication: Saveol’s objective is for its to the removal of the vagaries of fresh produce name to be the tomato brand spontaneously and the drawback of its perishable nature. cited by half the population by 2010. Philibon, the melon from Guadeloupe, Innovation in fresh produce guarantees exceptional flavour all year round. Mr Gillardeau is the creator of an We are present at a major event among small eponymous brand that has become retailers in the traditional markets themselves: omnipresent in restaurants in just a few years. the emergence of fresh produce brands. A The brand guarantee relates to the qualitative stroll past market stalls, or very early in the aspect of Gillardeau oysters, with guaranteed morning at Rungis, the world’s biggest taste and flesh all year round, everywhere in wholesale market, is enough to show this. the world. Gillardeau has built its brand Although they are a minority in number and through the restaurant trade, which has then market share, their innovative approach is rebounded into a reputation among the clear: they have inserted themselves into the general oyster-eating public. The market mounting campaign against poor eating insight on which the brand is based comes habits, which advises people to eat fresh fruit from an understanding of the problems faced and vegetables daily. Fresh produce, however, by restaurateurs, who wish to ensure a strong, has an intrinsic variability derived from the risk-free experience for their customers. Top- vagaries of nature: some customers prefer of-the-range restaurants made Gillardeau a more regularity and certainty. Here we find success, since these restaurants want to avoid the essence of the brand, the suppression of any possible problem or disappointment with perceived risk – here the qualitative risk of their oysters: they are committed to the pleasure and taste. pursuit of perfection. However, its market also This is what the Saveol tomato brand, the contains the small quality brasserie, which by Philibon melon brand from Guadeloupe and only offering Gillardeau oysters can reassure the Gillardeau oyster brand, to mention but a customers, who habitually mistrust the prove- few of the best known, have done: it is the nance of the oyster basket. sign of a true brand policy. It would be wrong Furthermore, Gillardeau was able to to assume that these brands are products of implement a selective and controlled distri- communication: as always, everything began bution policy, ensuring exclusivities at the through product-related innovation. They wholesaler level, so that it knows exactly are based on flavour, and the shape that where it is sold and where it is not. Control makes a food item either more practical or over its own distribution is the first condition more interesting. of the premium brand. BRAND DIVERSITY: THE TYPES OF BRANDS 107

Wine brands and above all to generate loyalty to a single name: the brand’s own; Wine may also be considered as the appli- I logical grape variety: remember that cation of a brand to a living product. The modern customers are not brought up on majority of new wine consumers in France, wine; and more particularly in other countries, justi- fiably expect no surprises from wine: they I the capacity to create a national sales force expect to find the same pleasurable taste each to visit all points of purchase and carry out time, as with Coca-Cola. The major American promotions at point of purchase (brand visi- successes of Yellow Tail, and also Two Bucks bility means the product will be picked up); Chuck (wine priced at US$2, as its name I investment in communication to cause the suggests) and the Australian Jacob’s Creek, are brand to emerge in spontaneous awareness, a specific response to this expectation. and therefore set itself apart from the thou- These wines have brushed aside the old- sands of small wine brands; world wines, since they were designed entirely I the capacity for regular innovation, in on the basis of the expectations of the modern order to make waves in the press and (generally Anglo-Saxon) customer and of the achieve good scores from juries, or in wine distributor. They are the answer to the B to B magazine categories; to C world in which we are now living (see page 152). The key components of their I labels written in English, since the wines success are these: hail from California, or Australia or New Zealand, or even from South Africa. I the ability to supply mass distribution in quantity (therefore reaching critical mass There is nothing to say that we will never see in production terms: an end to the international brands for French wine, other patchwork of small independent coopera- than the classic grands crus. B Magrez has tives, and the emergence of big capitalist provided an example, creating the generic groups); Bordeaux brand Malesan 15 years ago, followed since then by Baron de Lestaque. It is I a fruity, easy to drink flavour, designed to true that there are more than 3,000 Bordeaux please consumers who generally drink beer wines named ‘château’, and the unevenness of or soft drinks, with priority given to white the taste quality and the low prices have wine served chilled; undermined the confidence once placed in the I maintaining the taste of the wine from year ‘château’ label. Malesan owes its success to its to year, thanks to the blending of different ability to supply in quantity a product that sources; customers like, for every day, and therefore at an accessible price. The first condition for a I the lowest production costs, thanks to table wine brand is the existence of production legitimate innovations in productivity, capacity able to meet the expectations of mass which make it possible to reap higher distribution: from this point of view margins, capable of largely financing their Languedoc-Roussillon, the world’s largest distributors; vineyard, offers genuine opportunities and the I investment in the brand, rather than the necessary flexibility for adapting supply to region, so as not to be limited in quantity, demand, rather than the other way around. 108 WHY IS BRANDING SO STRATEGIC?

Pharmaceutical brands they also know the effect on sales through medical prescription, it is possible to Some might be surprised to hear talk of phar- establish a mathematical function linking maceutical brands, since the role of a drug’s inputs with outputs, causes with effects. constituents, and therefore of the intimate link I The subject is highly scientific. Even if of the active ingredients with the success of the ‘business to consumer’ communication is drug, seems to defy any other element. now sometimes permitted under certain Nevertheless, doctors do not prescribe stringent conditions, the end client has products, but brands, where the generic little say in the final prescription decision, product is not available. Science comes to us although this does not mean no say at all. not in the form of the international scientific In fact, a general public medical culture has denomination of the chemical compound, but grown up in our ageing, over-informed in the form of its brand name: Zantac, Tagamet, societies: all mass-media magazines regu- Clamoxyl, Prozac, Viagra and so on, not to larly talk about advances in the treatment mention medicines sold without prescription, of this or that ailment. Without citing the which fall under classic marketing (Malox, drug prescribed by name, they talk of active Aspro, Doliprane and so on). ingredients. The internet has also consid- The medical environment is characterised erably increased the general public’s level by several factors that outline how and why of awareness – nowadays, although people ‘brand building’ is specific to it: respect their doctor, they also have their own opinion. Furthermore, general practi- I All prescribers are known, put on file and tioners wish to generate loyalty in their stored on a database, some even visited clientele: they listen to their clients. directly several times a year (if they represent large volumes). In each country, I Prescription is increasingly influenced by there are a limited number of doctors, the final payer: this is particularly true of specialists and so on. It is therefore a closed generic drugs. Aware of the enormous and environment. Each laboratory has one or growing black hole of health spending, more sales forces, known as medical dele- public authorities have exerted pressure for gates, who personally meet with all the a compulsory switch to generic drugs, doctors in order to inform them of the where possible. The pharmacist has even progress of the medicines they are tasked been given the right of substitution: if a with promoting. generic exists, the pharmacist has authority to substitute it for the brand-name drug I The available information is almost indicated by the doctor. If the patient complete. Through doctors’ panels and refuses, he or she will receive a smaller pharmacists it is possible to know which reimbursement from their mutual fund. doctor is prescribing what, and in what quantities, for what conditions, together I It is a market where, given the short with which other drugs, and so on. lifespan of patents – 20 years – the day and year of the generic drug’s launch can be I In this market, it is possible to model predicted. Brand-name drugs attempt to demand in an econometric fashion, due to delay this date, the signal for their the completeness of the information. Each programmed decline, which may be slower laboratory is aware of the pressure it exerts or faster depending on the country: on each doctor (measured by the number of visits, the time of the visit, the number of – for example, through patenting of calls, time spent on the internet, etc). Since original medicinal forms; BRAND DIVERSITY: THE TYPES OF BRANDS 109

– or through continual modifications to Case study: How branding affects the product, in order to extend the medical prescription patent’s duration of protection; – or through hyper-segmentation of the Brands create value both for the company and range and the dosages, in order to make to those that decide to use them. This is done the generic drug less profitable; by a dual quest of differentiation on tangible dimensions but also on intangible dimen- – or through a lowering of prices at the end sions. This quest is often not simultaneous: of the product’s lifecycle to make the most brands start as the mere name of a switch less attractive. product innovation. Once they achieve Public authorities, however, tend to oppose success, they are copied and the intangible these manoeuvres, because the pressure on dimension created by the communication of public health finances demands drastic brand identity creates a form of protection: savings. products may be similar but consumers We should also note that certain countries, choose one brand instead of another. This is such as Thailand in February 2007, have the effect of habit, of proximity, of leadership decided to bypass intellectual property rights and pioneering aura, and essentially of the by authorising the manufacturing and storing need for reassurance. However, protections do of generic forms of two famous anti-AIDS not last: there is a need to recreate a material drugs, while they are still under patent differentiation by innovation that delivers protection. The Thai government invokes the tangible benefits through improved products argument of protecting its population: these or services. two drugs are too expensive and therefore not Very few sectors demonstrate the value of accessible. AIDS is causing devastation in branding as much as the pharmaceutical Thailand. Note that France did the same when sector. This sector is dominated by the it was a question of building stocks to protect ideology of progress through science. Those the French population against the risk of prescribing drugs are rational and make what anthrax, in the case of a chemical terrorist they perceive as the best choice for the attack. patient. Normally this should imply a product-driven market, in which brands are a I It is an increasingly regulated market. forbidden word. Given its low margins, if too many generic Recent research has shown however that producers offer the same product, they will medicines have a personality, as do all brands. struggle to turn a profit. Thus, in some By ‘personality’ we mean that both generalist countries, the state gives one leading doctors and specialists find it possible to generic producer leave to market even attribute human personality traits to medi- before the expiry of the patent, or to enjoy cines. Not only did they not refuse to answer a temporary monopoly. questions about brand personality, but statis- I It is a market where counterfeits now tical data analysis showed that some of the flourish. In fact, the active ingredients of personality traits they ascribed to drugs were drugs can be bought at very low prices in correlated with prescription levels (Kapferer, India or China. It is therefore easy to manu- 1998). facture counterfeits. To date they have been When looking at Table 5.2, you will see that sold via the internet, at the internet user’s the anti-ulcer medicines that are most own risk. However, they are now finding prescribed are described as more ‘dynamic’ their way into pharmaceutical channels. and ‘close’ than other forms of medication. A 110 WHY IS BRANDING SO STRATEGIC?

Table 5.2 Brand personality is related to prescription levels Personality score (1 to 3) of highly prescribed vs less prescribed medical brands Anti-hypertension Antibiotics Anti-ulcer Low P High P Low P High P Low P High P Dynamic 2.01 2.20+++ 2.17 2.37+++ 2.10 2.46+++ Creative 1.87 1.92 1.81 1.93+ 2.03 2.22+++ Optimistic 2.02 2.21+++ 2.00 2.23+++ 2.22 2.31 Prudent 2.13 2.11 2.08 1.98 2.08+++ 1.90 Hard 1.58+++ 1.39 1.70+++ 1.45 1.56+++ 1.31 Cold 1.67+++ 1.45 1.72+++ 1.40 1.60+++ 1.33 Caring 2.04 2.11 2.01 2.09 2.03 2.09 Rational 2.28 2.23 2.38 2.27 2.23 2.15 Generous 1.85 1.95 1.87 2.02+++ 1.93 2.02 Empathetic 1.88 2.09+++ 1.90 2.02++ 1.99 2.01 Close 2.06 2.09 2.16 2.25 2.08 2.13 Elegant 1.97 1.97 1.99 2.04 1.92 2.03 Class 2.01 2.04 1.87 1.94 1.93 2.20+++ Serene 2.10 2.12 2.12 2.25+ 2.20 2.11 Calm 2.15 2.07 2.16+ 2.04 2.12+++ 1.90

Source: Kapferer (1998) (+++ level of statistical significance) product, an active ingredient cannot be disposed to make optimal rational decisions. dynamic or close; a brand can. Thus brands of Choice is always a risk: products increase the drugs do have a mental existence and range of choice, and thus of perceived risk. influence in the minds of the prescribers. Brands make choice easier by reducing the Interestingly too, Table 5.3 shows that likelihood of choosing alternatives to the although they recognised the products them- market leader. selves as being totally identical and saw two The choice of the English word ‘likelihood’ brands as fully similar in the functional here is interesting because it implies both a benefits they delivered, respondents statistical concept (probability) and the medi- prescribed one three times more frequently ating process by which alternatives are being than the other. However the chosen one was more chosen (they are more ‘likeable’). endowed with significantly more ‘status’ than Branding is thus a consumer-oriented the less chosen one. Status is an intangible response to the problem of decision making in dimension created by impressions of lead- opaque and dense choice environments. ership) of presence, of proximity to the Brand spontaneous awareness and posi- doctors, of intensity of communication. It is tioning (linking to a need) are short cuts that created by marketing once the drug has been are very helpful for decision making. Brands developed. Once created, this serves as do create a decisional bias: as such they facil- competitive edge against ‘me-too’ products, at itate choice and reduce perceived risk least before a new drug replaces the existing (Kapferer and Laurent, 1988). one as market leader. These examples illustrate the relationship This example illustrates the fact that even between the product and the brand: there is a in the high-tech sector, brands are a psycho- natural interaction between them. Brand logical reality, which operate even in the mission determines what products or services context of rational decision makers who are should be created. These innovative products BRAND DIVERSITY: THE TYPES OF BRANDS 111

Table 5.3 The brand influence in medical prescription Category: anti-ulcer Brand A Me-too Product image Efficient 2.9 2.9 Rapid 2.7 2.7 Prevents recurrence 2.7 2.7 No side-effects 2.7 2.6 No anti-acid 2.6 2.6 Low cost 1.4 1.4 Brand status It is a reference product 3.7+++++ 3.1----- High reputation 3.8+++++ 3.3----- Superior quality 3.3 3.1 Major product 3.7+ 3.6-

Prescription 6.7+++++ 3.3-----

Source: Kapferer (1998)

endowed with a value-adding identity create Today, the role of the internet in the attractiveness, and encourage trials, repeat dissemination of information to patients, sales and loyalty despite incoming copies and who know more on the subject than their low-cost alternatives. However, new general practitioners do, and interrogate disruptive innovations may shift clients’ value them about the new brands and compounds, curves, hence change their preferences. This is being measured. When updating this means that the brand cannot be defended research, the patient’s own point of view only through intangible values: even the should be included as a new lever in medical much admired Jaguar brand went broke and prescription. Thanks to the internet, patients had to be bought by Ford to enable it to regain arrive at their doctor’s office already well the capacity to make high-quality and high- informed: they have heard about this tech cars for today’s exacting new affluent treatment or that drug on a blog, a forum, a consumers. website, in a women’s magazine and so on. Prescription therefore typically follows a Doctors need to generate loyalty among their ‘two-steps flow of influence’ model. clientele and are reluctant to act against the Communication with leaders creates status patient’s wishes, even if they can. For chronic and reputation, which then makes it illnesses, the patient’s feelings on the necessary for people to be informed about this unpleasantness of the treatment also play a brand that everyone is talking about: famil- part. Price should also be integrated as a new iarity with the product follows this desire lever: in fact, the preoccupation with created by its reputation. (Figure 5.4) reducing health expenditure is now shared by Tomorrow, for certain chronic illnesses, it doctors themselves. will be even easier to carry out direct to In another of our studies, we showed how consumer (DTC) information advertising, certain facets of the laboratory’s image can mentioning the laboratory and the active directly influence medical prescription. This is ingredients of the drug, but not the brand. why, in today’s global drug marketing, it is 112 WHY IS BRANDING SO STRATEGIC?

Antibiotics + Anti-ulcer + Anti-hypertension (sample of generalists)

PERSONALITY 20 IMAGE OF 37 INFORMATION 55 PRODUCT Dynamic 24 Info meetings Efficient Elegant 13 Reps visit 60 19 Hard Articles ADVERTISING 21 31 08 ATTRIBUTION 47 42 87 40 BRAND STATUS SOURCE EFFECT Reference of Leaders prescribe it ADVERTISING 22 its category IMPACT (-) 11 My colleagues prescribe it 45 55 High reputation Base: %R2 PRESCRIPTION laboratory JN KAPFERER

Figure 5.4 How brands impact on medical prescription first necessary to establish the laboratory’s be that man was no longer born to suffer? credibility, one country at a time. In this way Prozac owes its diffusion to the fact that it is it can then enjoy the source effect. now possible, even apart from genuine depression, to smooth over emotional Becoming aware of the intangible traumas (divorce, relationship breakdown and so on). It now seems that forces in the service The research outlined above shows that the of this ideology have chosen it as a target. intangible factor is also present in medical Those sects that exploit the fragility of indi- brands, and in this they are brands in the viduals in distress to recruit members have fullest sense. Big brands inspire confidence, even attacked this drug by any means and have an attractive personality. However, possible. Clearly, it is the intangible factor big brands sometimes possess an intangible that drives the emotion. dimension that escapes the laboratory, in both senses of the word: due to its rationalist The laboratory brand culture, it is not aware of it, and also it does not control it. In a second piece of research, we investigated Prozac is a major brand. Its reputation has the importance of the laboratory’s own image in many ways transcended the context of a in medical prescription. Of course the charac- medical environment. In fact, more than teristics of the brand-name drug outweigh simply a drug, it is a cultural revolution. By everything else, as they should, but the image launching Prozac, Lilly did more than launch traits of the laboratory appear in fifth place, in a new anti-depressant: without knowing it, it particular the laboratory’s perceived compe- overturned Judeo-Christian ideology. Could it tence in the field, and its ability to hear and BRAND DIVERSITY: THE TYPES OF BRANDS 113 respond to information from doctors (highly market, based on invitations to tender, is reactive services and call centres, consul- entirely different in nature. Another difference tation, the type of medical delegates, and so is linked to the question of whether the on) is also significant. They wish to know ‘the company buys personalised, made-to-measure brand behind the brand’. This means that in products or solutions, or service, or just a cost? the worldwide launch of a new drug, it is first Finally, can we really place the purchase of necessary to establish confidence in the labo- silicons from Dow, bleach from Arkema, ratory itself among opinion leaders and oxygen from Liquid Air, and customer rela- prescribers, country by country. tionship systems such as those from SAP or Sage on the same level? One thing is certain: there are indeed B2B The business-to-business brand brands. If we define the brand as a name with power, a name considered by industrial Managers working in the B2B domain regu- players as an indispensable reference in larly complain of the lack of theorisation on conjunction with a particular need, there are B2B brands. They are rarely found in academic plenty of examples. works on brands, where most examples are First, the B2B world has its product brands: drawn from mass-consumption brands, for example, the building trade buys Giproc or generally food products with low Pregipan plasterboards, Sikkens or Levi’s involvement (yoghurts, soft drinks and the paint, Agilia cement, Daikin air-conditioning, like). This is why, in this book, we have Legrand or Hager electrical equipment, purposely used different examples and intro- Technal or Wicona aluminium and so on. The duced a genuine variety of sectors, in order to automobile sector, although under constant establish the relevance of the models pressure on prices, is conscious of equipment proposed as a tool for decision making. brands such as Sekurit for windscreens and Gefco for logistics requirements: the transport Is B2B different? upstream and downstream of supply chains of industrial production. Note that these Is B2B really different? For us, the B2B product brands are often names of former argument is used as a standard, reflecting above companies that, once acquired by a group, all the need for recognition of the sector for a cease to be companies and become brand world that receives very little attention. The ranges in a catalogue. This is the case for seminars we run for B2B companies clearly Giproc – now owned by Saint Gobain – and show what their principal request is: models Merlin Gerin at Schneider Electric. Of course are attractive, but need to be demonstrated and these names alone do not ensure sales and illustrated in a B2B context. Moreover, the loyalty generation, but they contribute notion of B2B itself is illusory: it does not strongly to it. reflect a homogeneous reality. For example, the Next, studies also show the influence of so-called ‘Soho’ market (small office, home corporate reputation. This is composed of office) functions at a purchasing level very awareness and the image of power, close to the mass or general public markets. We commercial dynamism, innovation and can observe a concentration of distribution ethics. It influences the selection of a under international names such as Office company in weighty decisions – weighty Depot or Staples, which subsequently create because of both their financial total and the their own brand products and substitute them length of the commitment. There is a high for the producer’s brands wherever possible. In degree of correlation between the recognition contrast, the high-voltage electrical equipment and image of a company and the readiness to 114 WHY IS BRANDING SO STRATEGIC?

‘strongly consider this company for any future B2B, very often the products and services play tenders’, or even to refuse to do so. Of course a part in the composition of the products sold, this does not mean that it is the only factor making them components of customer satis- affecting the choice: in fact, in an industrial faction and therefore reputation. The Lafarge environment, consideration does not equal signature is important for concrete, just as the selection, and the tangible components of the word Siemens is important for turbines. Of tender and the price will of course weigh course, concrete could be considered a heavily. It does prove, however, that the name commodity, where suppliers have shifted the of these companies has acquired the power of competitive playing field towards services. In a brand as a result of the specific reputation the choice of concrete, however, engineering they have built through their expertise and consultancies issuing invitations to tender are their skill in communicating it. To be sensitive to the risks linked to failures in considered on the mental, or even the official, building infrastructure. This may not be a ‘shortlist’ is one of the major benefits of a question of an individual suburban dwelling brand – that is, the reputation that is attached in Calcutta in India, but of a new council to it. When the brand no longer possesses this housing office, or a planned new skyscraper in power, entire sectors fall to the principle of the Berlin. lowest bidder, where only the price per kilo or In B2B, every ingredient forms an integral per tonne counts. The function of a brand part of the offer that the purchasing company policy is precisely to avoid this. makes to its own clients. Its reputation Is there no difference, then, between B2B depends on them. This is why car manufac- brands and B to B to C brands? In our view turers, with their mechanical background, there is one essential difference: pressure on buy Bosch, the specialist in electrical costs. B2B purchasing generally forms part of equipment. They know that the weak link in the cost price of another product. A truck or a today’s cars is not the mechanics, but the elec- set of tyres for an articulated lorry is part of tronics. The company ‘covers itself’ by buying the price of transport, which will conse- from the top name in the sector for its clients quently affect the sale price of products trans- downstream. Furthermore, nowadays it is the ported by road. In fact, freighters are equipment makers that provide the innova- demanding ever lower prices from trans- tions. Automobile brands are designers and porters, who increasingly view their truck or builders. This is why in B2B it is so important tyre purchases from an accounting, even a for a brand to worry about the clients of its financial, perspective. This leads to a clients. This is where the big brand’s function constant B2B pressure towards commoditi- as a guarantor of quality comes in. sation. This difference has a major effect on This is its first, even its predominant three facets of the brand: the brand function, function in B2B, as the level of perceived risk the brand weight, and the brand’s point of rises. However, this is not its only function: application. the B2B brand is also an instrument of pride. It can add an intangible dimension that also Functions of the industrial brand increases the brand’s potential to attract and earn loyalty. For example, the American In our research on sensitivity to brands, with company ITW (International Tool Works) has Professor G Laurent (Kapferer and Laurent, always spurned umbrella, multi-sector brands. 1995), the brand’s role as a reducer of risk It sells equipment and tools to carpenters, quickly became apparent. This is not enough electricians and plumbers, taking care to offer in many mass consumption markets: them a brand for each trade. Thus Stihl is consumers no longer see any risk there. In dedicated to carpenters alone. This differenti- BRAND DIVERSITY: THE TYPES OF BRANDS 115 ation makes it possible to capitalise on each The weight of the industrial brand profession’s conviction that it is different, and its desire to mark that difference: tool brands An enduring suspicion regarding the real either help or hinder this. weight of the brand in industry decisions One of the problems causing the fall in sales relates to the questioning methods used in of Black & Decker – a multi-market umbrella the sector – surveys with direct questions are brand – is that it sells both to the general used. Thus, during a study on the factors public, through major stores, and also to involved in the choice of a maritime trans- professionals, forgetting the brand’s intan- porter for major shippers (such as the indus- gible function as an instrument of self- trialists Saint Gobain for glass, and Michelin expression for professionals. In the same way for tyres), the five main criteria given by that wearing Nike is a source of comfort, but logistics directors were price, dates and times, also of a symbolic association with the world reliability, capacity for last-minute delivery, of Olympic or baseball heroes, buying Stihl is and the availability of information a way of saying, ‘I am with the carpenters, the throughout the journey. The brand is the last professionals.’ Black & Decker has destroyed criterion named. In contrast, when an part of its intangible value by extending the indirect questioning method is used, of iden- umbrella so far, lumping the professionals tifying choice factors – by varying the param- together with the general public. It is reacting, eters of maritime companies’ offers and but too late, by launching a new brand dedi- examining the impact on the shippers’ cated to professionals alone, De Walt. choices – we see that reputation (or in other When the IBM PC was the best-selling PC, words, the brand) becomes a key factor, if not everyone was in agreement that the product the principal factor. was average, or in any case far from being the There is nothing irrational in this, as too best. However, in 1981 it was reassuring to many people in the industrial sector expe- company IT directors who were uncom- rience it or say it. How, in fact, can one know fortable with this new market (of personal in advance whether everything will go well computing), since it came from their supplier before and during maritime transport? None of larger systems: the giant IBM. For users, the of us are soothsayers. We must therefore make IBM seal offered them the satisfaction of hypotheses: a well-known brand is not well saying to themselves (mentalisation) or known by accident. It carries in itself the communicating to others (self-reflection) that quasi-certainty – subjective but based on they must be serious executives, since they experience – that everything will go well, or had an IBM. The recent transfer of IBM to Le better than it otherwise would. Novo (a Chinese company) reflects how much It would be wrong to suggest that repu- the PC market has been commoditised. The tation (and therefore the power of the brand) perceived risk in the purchase has shifted from is the number one criterion in all B2B selling. the assembler of the PC to the components Guilbert, the office furnishings distributor, themselves (Intel, AMD), which now become delivering direct to companies, owes its prof- parameters of choice, and the operating itability to its product policy. Guilbert sells system (Windows Vista). Hence the struggle first and foremost its remarkable service to for component manufacturers to build them- companies. Products come second, with selves up as brands: that is, as major choice Guilbert attempting as far as possible to criteria. They do this through co-branding substitute its own products for branded and major financial involvement in the products: in fact, the latter are now in a communications budgets of their partner minority. It retains only a few Scotch assembly brands. products, for example, and not all of them: it 116 WHY IS BRANDING SO STRATEGIC? offers adhesive tape under its own NiceDay strength is that it has understood this: brand. Of course, it is sometimes still obliged Legrand has made its brand such a ‘must’ for to offer Stabilo Boss, Bic Crystal and Post-Its, electricians that to Legrand, wholesalers are and the Dymo label printer, but that is all. merely stockists. It needs them only for this And yet all the brands deleted from its cata- stock function. logue are well known. Today, however, this is not enough. The end users – secretaries, The corporate and the brand managers or employees – do not even notice that the product they find on their desks is One of the characteristic traits of the B2B not the true Post-It, but a cheaper distributor’s brand is that it has a double nature. It may be brand copy. A strong brand is a brand with the company itself, or the products and indispensable products or with strong intan- ranges, or a combination of the two. However, gible added value (reassurance or pride). the level of risk is such that the reputation of What makes a product indispensable? The the source and of the company is most often patents that protect it, the communication called into play. that makes its name the key reference in the At Air Liquide, the brand is the corporate category among users themselves (down- name for the sale of commodities with little stream, therefore the professional buyers) and differentiation: the prestige attached to this prescribers (upstream), and of course the leading company cannot overcome a price innovation that maintains this status as the handicap, but where prices are the same, it key reference and gives it an advantage over will add its guarantee of seriousness and regu- distributors’ copies and low-cost Asian larity of provision. It may even be enough to products imported by the distributors. This justify a small price difference. In order to innovation may relate to the products, but move away from the ‘commoditised’ market, also to the services provided to intermediaries, Air Liquide has developed and co-created installers and distributors. A brand is more specialised lines, together with its clients, than a timely product. It is a mutual, long- such as for example the gas brand Aligal, term dedication of one business to another. intended for the preservation of fresh produce This shows us that among industrial in plastic packaging. These innovations carry distributors, and now in B2B, there is an a name that refers back to the corporate name obsession with substituting brands, as through its prefix (Al) and specifies the desti- Carrefour has done since 1967 in the mass nation market. At Gaz de France, the range of market. A study among wholesalers of electric prices and associated services has been heating indicated that they had in stock three promoted under the Provalis name, in order electric water heaters: the first because to de-commoditise it. ‘everyone asks for it’, the second because Industrial B2B companies often believe that ‘people ask for it’, and the third for its price. they can manage without the corporate brand Saying that ‘people ask for it’ clearly reveals reputation, and that only the product repu- that in the industrial sector, the brand is a tation matters. This is an error that passes prescription. All of the brand’s B2B marketing unnoticed until the day that financial analysts should focus on the distributor’s clients, or signal undervaluing on the stock exchange the professional buyer’s clients within the arising specifically from the absence of a company. If this prescription is not created, brand. This is the case with Sage. Sage is rather for example through a dedicated sales force, like Europe: an economic giant, but a political then the brand enters into a downward spiral dwarf. Sage is one of the giants of through the distributor and the buyer, who management software for companies, but it is only thinks about the price. Legrand’s great not recognised as such. It is true that the BRAND DIVERSITY: THE TYPES OF BRANDS 117 company has grown through external growth, silos: worried about the figures in their annual buying companies that became product evaluations, nobody works on the collective names within its product portfolio (of reputation, which costs money without management software). With a turnover of bringing short-term benefit. s1.4 billion, Sage is an expert in marketing products and remarkably successful at selling The activation points of the B2B brand them. Its competitors in this market are SAP, are different which turns over s8 billion, Oracle, which turns over s4 billion, and Microsoft, which The B2B brand is a relational brand. Other turns over only s0.7 billion but has the than in commodities markets, people do not highest growth rate in the software market for buy a product, but rather a supplier, with a SMEs. These figures suggest to the stock view to durable joint development. market that a consolidation is on the cards: it Wholesalers themselves do not just stock a awaits a takeover bid for Sage, which appears brand – they represent it, and are thus to show a lack of dynamism, due to its low committed to it. They therefore expect it to recognition as the key actor in the sector. The behave like a brand, with a guarantee, inno- stock market wants Sage to demonstrate that vation, services with added value, devel- it has the capacity for organic growth. opment of markets through communication, Divided by market, Sage allows its divisions and activation of networks. The carriers of the to run their own autonomous communica- brand are both products and the consultation tions: the largest divisions therefore commu- of commercial delegates, their reactions and nicate the most. These are the ones that are the quality of their follow-up and service. active on the historically best-known major Facom’s reputation was built on a fleet of markets (accounting, pay and human trucks that visited garages, not to sell, but to resources). They therefore drag Sage’s image explain the products and listen to the garage down, to the detriment of the new markets, mechanics, their comments and requests, which show promise for future organic from 7 am when the workshop opened. This is growth, but where sales are still small. The how the spread of lowest-bidder tenders, failure to take into account the reputation where the only things that matter are the needs of the parent brand itself, Sage, makes it price and the regularity of provision, can be a weak brand. It is a portfolio of products and avoided. In contrast, by going ever further clients, but not a brand. For any development afield, to China, Vietnam or Bangladesh, in of legislation or regulations relating to the search of the unknown supplier who can offer SME, governments consult Microsoft or SAP, an even lower price, buyers reject the concept not Sage: Sage is not perceived as a genuine of the brand, which represents safety. Here, actor in its sector. the first consideration is how to produce more Its reputation is less than that of its cheaply, even to the point of taking risks for products. Significantly, there are only 200 the downstream client. By chartering dubious links leading to its website, whereas it has transporters, petroleum companies expose the more than 300 licensed distributors – a sign coasts of Brittany to the serious risks with that to them, Sage is not a necessary reference. which we are all familiar. It appears that, having neglected to organise themselves and to invest in order to The B2B brand is a prescription create a reputed and recognised crossover brand, companies suffer the consequences at a Lastly, the B2B brand focuses on prescribers. given point in their growth. Organisation by The decision to buy within a company always product and by market creates sales, but also involves not one, but several people. The 118 WHY IS BRANDING SO STRATEGIC? brand is therefore built up through identi- industrial paints, Akzo Nobel, the brands have fying the key prescribers: the architect, the a single objective: to bring value to the client research offices, the consultancies, the tech- in order to move away from competition on nical departments and so on, all the way to price. Therefore it pursues a policy of global the final client. Thus Legrand does without brands, each dedicated to a target, according wholesalers, except for logistics, since it to a global segmentation built on painters’ carries out permanent promotional expectations. campaigns among electricians and the general A market is commoditised when the actors public, to let them know about innovations so have not worked hard enough on it. The that they can demand them from their elec- brand is not a miraculous answer, but the trician. All the success of Lycra, the brand that name that takes a genuine marketing de-commoditised generic elastane fibre, approach of creating value for a dedicated consisted of working first of all with those target. It is therefore necessary first of all to who acted as guides and opinion leaders for analyse the clients, to understand them – to the entire textile sector: the luxury and go beyond the machine-gun volleys of surveys premium brands. When they developed that show the client only cares about price. All common applications, the innovations made markets are segmented, even the low-cost were noticed by the entire sector. In the markets. Everything depends on what is meantime, Lycra had acquired a precious aura offered alongside the price. to justify a price much higher than generic Thus any chemical company will claim that fibres. Tactel followed the same approach to the silicones market is a purely commoditised constructing its brand, through co-creation market. In reality, as with many other indus- and the decision to target leaders with strong trial markets, there are four segments: prescriptive power. Multi-brand groups specialise their brands I those clients who want innovation in order according to their business model, which is to be able to innovate themselves for their linked to prescription. The Norwegian Norsk clients; Hydro group, a leader in aluminium applica- I those clients who want to improve their tions, has three brands in Europe for efficiency and productivity; aluminium profiles intended for construction: Wicona, Technal and Domal. The first is I those clients who want to reduce the total aimed at large projects, and therefore capi- production cost; talises on the prescriptions of architects, I those clients who want the lowest possible design offices and engineering consultants. price. Technal uses the final customer as the lever of prescription on the installers themselves. Three segments here are sensitive to price, and Domal aims at small companies directly. would probably put this criterion in first place in an opinion poll with direct questions. Moving away from a commoditised However, a more in-depth investigation market might show the client’s problem with its own client, downstream: this is where we find The risk of commoditisation is the sword of fertile soil for the added value that must be Damocles for B2B. Of course there are niches created. If we consider the fourth segment where the level of perceived risk ensures posi- lost, it is necessary to concentrate on tional income, as with companies specialising segments two and three. in the analysis of aviation fuel quality, but This is what Dow does: it has created a these are exceptions. For the world leader in business known as Xiameter, separate from BRAND DIVERSITY: THE TYPES OF BRANDS 119

Dow’s core business, aimed at the cost- billions of users who have tried it are asking oriented segment. Then began the work on for more. With Web 2.0, the internet is the value curve of the Xiameter offer. It is becoming the first interactive and interper- necessary in fact to stop talking about the sonal mass media: the rise of blogs is the product, but to envisage the delivery of sili- clearest signal, as is the rise of sites such as cones as the creation of value for the client. If MySpace and YouTube. you wish to offer a low price, but also value The pure internet brands, also known as e- alongside it, it is important to analyse the brands or dot.coms, have begun the new facets that the client is likely to neglect (and century in a very different context from that therefore reduce them to zero) in order to in which they were born. Only the best from maximise those of which the client expects that first period remain: Amazon, Google, most. This innovation, known as ‘value inno- eBay, MySpace. We must learn from them and vation’ since it redefines an attractive value from others how the online environment curve previously unseen in the sector, makes creates very specific conditions, which are it possible to innovate in the price segment themselves transforming traditional brand (see Chapter 9 on value innovation). Of management. course, in the case of Xiameter, everything was carried out via the internet, which made it The customer makes the brand possible to set prices according to stock levels, rather like yield management of prices in air One of the reasons that so many internet and TGV travel. start-ups in the first period never took off, implicating so many investors in their collapse, was that they only thought about The internet brand their flotation on the stock exchange, offering considerable prospects for increases in value. How do internet brands function, the purely The paradox, as we know, is that they still had online brands such as Google, eBay and very few loyal customers, very little income, Amazon? What are the specific mechanisms and were far from covering their running of their growth, seemingly so rapid while it is costs. The majority of those companies that taking place? We now have the benefit of boasted of their high spontaneous awareness distance to guide our analysis. The first phase scores were strangely silent about their sales. of the internet, which led to the speculative We experienced a period where valuation bubble, was that of prophets rather than preceded value. profits, business plans rather than proven use. Logically, it is the value created by the We know what happened to the thousands of customers that is the only basis for serious valu- investors who believed in an El Dorado ation. It is true that the e-brands of this internet without effort. Nevertheless, the end of the era innovated by creating a way of functioning beginning was not the beginning of the end. that was aimed more at investors than at While investors turned away from the consumers and value creation. The dominant internet as quickly as they had first picked it logic aimed to bring together a significant pool up, campus students, researchers and of several million euros in order to invest managers continued for their part to make quickly in an offline advertising campaign, increasing use of it. We now have a essentially on prime-time television, in order phenomenon that has restructured our to create interest in another pool, which society, and will remake our way of life, would be immediately reinvested in adver- redefine our expectations and our impa- tising. The spontaneous awareness thus tiences. The process is underway, since the created gave rise to curiosity, causing people 120 WHY IS BRANDING SO STRATEGIC? to click on the icon and visit the page, but This is the specificity of the Web 2.0 above all it impressed investors, sure that they internet brands: ‘brand building’, con- were getting their hands on one of tomorrow’s struction of the affect and attachment to the winners. brand, is much faster, since the company can This was neither B2C, nor B2B, but B2I, receive immediate feedback from its clientele, business to investors. The goal was to achieve segment by segment, person by person, and the initial public offering (IPO), and flotation immediately make the changes that will on the stock exchange, as quickly as possible. increase satisfaction, to the great surprise of Sadly, how many start-ups confided in us, off the people in question, who notice the the record, that the initial clicks were from improvements for themselves day by day. curious surfers who did not buy anything? It is The internet brand is both experiential and true that the internet has its aficionados, relational. It is experiential, because each young and ultra-curious, in search of the latest person forms their own idea by visiting innovations – but consequently also disloyal personally, by living the experience. One only and fickle. Since it was born from dozens of has to visit Google to be impressed by what a internet reviews, not to mention supplements simple click can obtain, time after time. It is a in the ordinary press and magazines, each typical process of loyalty generation through new campaign thrilled editors, since it gave the systematic distribution of gratifying expe- them something to talk about. These start-ups riences to the user. were surfing on a rumour effect, not on It is relational, because the great strength of reality. Rumours will always run out of steam the internet is its ability to learn from each in the end. individual, one to one, and to demonstrate During that same period, for the brands what it has learnt to that same individual. that have survived, the eBays, Amazons, Amazon is the model here: the user only has Googles and Intuits, their delighted customers to go online to see that he or she is recognised, were continually talking about them, essen- and welcomed with good, personalised news tially on the internet, chat rooms, e-mail, (new books chosen for him or her, based on forums and the like. One of the surest recent purchases). predictors of company growth is what is To this is added the positive effect of known as the NPS (net promotion score) ‘network externalities’. eBay has benefited (Reichheld, 2006). This is the difference from these, as has Kelkoo: the more visitors between the percentage of people who would there are to an auction site, the greater the recommend the brand to others around them chance that the sellers will find a better buyer (known as promoters) and those who would able to offer a better price, and likewise the criticise it to those around them (known as greater the chance that the visitors will find a detractors): the score is 40 per cent for eBay, seller with the product they have always one of the strongest. We are indebted to Jeff wanted, but had despaired of ever finding. It is Bezos for the following quote: ‘Our users a giant virtual car boot sale, like the Paris flea would tell us what was wrong during the day, market or the Portobello market in London, and we would work overnight to improve except that it is transparent: the user can tell the system.’ As for the boss of Inuit, he immediately who is offering what. Visitors to reminds us that on Web 2.0, it is useless to eBay have all the more reason to revisit the invest in advertising campaigns, since it is site, since it continues to grow – not to satisfied customers who do the work: it is mention the fact that by returning to the necessary to invest in ways to satisfy them, same site, users have no need to relearn how day after day. to use it. They already have their bearings, BRAND DIVERSITY: THE TYPES OF BRANDS 121 even when they are not recognised, spotted complicity. Do we visit Kelkoo, a price search and greeted like a dear friend. These are all engine, or Price Minister because we prefer factors that create, if not a barrier to leaving or Kelkoo or Price Minister? Or simply because to visiting rival sites, at least a mechanical they are the only names that immediately propensity to revisit. Of course the service is spring to mind, so that we click on them, and high quality, and is always improving, to then click on them again, using the economy adapt to clients that are becoming more of effort represented by a favourites list? sophisticated and whose demands are For some analysts, this lack of closeness is growing. Like any brand, the internet brand structural: the pure dot.com brands will must continually create value for each always lack the sensory, physical and palpable fragment of its clientele, almost one to one. dimension without which there can be no The internet is also a mass medium of genuine closeness. What is left of these brands affinity: users can immediately communicate once the screen is switched off? with their friends and community how For other analysts, it is a temporary satisfied they are with a particular site, and phenomenon. Relational closeness is built what they have just found or experienced over time, through repeated and extended there. Electronic word of mouth, or ‘word of use. Thus Yahoo! began as a search engine, mouse’, finds an accelerator out of all and then extended its services to local proportion to usual word of mouth, hence the weather forecasts and many other services. In recent notion of the ‘viral rumour’. doing so, it is penetrating more deeply into the internet life of individuals. Virtual closeness and psychological Brands such as eBay took four years of silent closeness work to progressively refine their concept and their services: they made little use of adver- What is a brand? Fundamentally it is a name tising, but much more of word of mouth of (and its associated symbols) that has a lasting satisfied pioneers, then early adopters and influence on purchasing behaviour. What is a finally customer-ambassadors. Their repu- big brand? A name that is also linked with tation was built through interactions with emotion by a very large number of potential enthusiastic surfers, who had the feeling of purchasers. A big brand has no effect without being listened to, which in addition to their an emotive relationship. It is this attachment, recommendation also had the effect of or commitment, that generates the desire to lending these brands an emotive dimension pursue the relationship, from the purchaser’s and closeness. point of view, which translates to loyalty to The closeness and complicity are those of the brand. The value of a brand is measured by shared values and emotions – hence the its capacity to create a personal tie of loyalty phenomenal success of a site such as MySpace with the consumer, at a particular price level. or YouTube, both bought by Google for a Are the pure internet brands brands like any king’s ransom for that reason. Amazon, for other? Studies show that closeness is still example, is a genuine brand in the sense that lacking for many brands. This might appear it carries values that extend beyond the paradoxical at a time when the internet is product. It has moved beyond the market- presented as the alpha and omega of personal- place by offering on its site a new way of inter- isation. However, those are the facts. When acting with other people on the subject of asked, consumers are hesitant to say of books, and now many other products as well. dot.coms, ‘This is a brand I feel close to’, as if It symbolises more than the new economy – it the relationship of repeat visits had not yet prefigures a new society and a new era. been translated into a genuine intimacy and 122 WHY IS BRANDING SO STRATEGIC?

How does the internet brand lation’, and in Italy it evokes something communicate? funny). The example of the first internet portal The brand’s first medium is its name, in this dedicated to women in France is also case its domain name. Two schools of thought revealing: what could be more descriptive clash on this subject. The first is afraid of than the domain name aufeminin.com? The generalism, a disease that we have often choice of this name met three objectives: to shown and castigated: wishing to describe the find an explicit name to make a quick impact, service, all actors end up with names that are a name with potential to become a brand very, if not too, similar. The purpose of a (therefore with emotional depth), and of brand name, as with a domain name, is not to course a name available on the internet (it was describe but to distinguish. According to this bought from the owner) and also able to be first school of thought, a site for small online registered as a trademark. Add a fourth, advertisements or online auctions should implicit criterion that must characterise all under no circumstances call itself ‘e-auction’, internet brands: its potential to be immedi- but rather ‘eBay’, for example (which is ately internationalisable. In fact, indeed the name of the world leader). There aufeminin.com became enfemenino.com in are in fact many competitors seeking to use Spain, alfeminile.com in Italy, and the generic term ‘auction’, which will quickly go.feminine.de in Germany. From the point create confusion in the market for consumers. of view of this fourth criterion – international- In fact, the leading European online auction isation – a non-descriptive name is easier to site was called e-bazar, which did not describe use, but has the disadvantage in the country the service but brought a touch of added value of origin of not being direct enough, if (the word bazaar invokes spontaneous mental directness is the objective. associations of profusion, excitement, After the name comes the home page, the merchandising, human relationships, brand’s lobby. Google’s example is revealing. amusement, as with the Great Bazaar in Few places on the Web have been thought Istanbul). The word ‘bazaar’ immediately through as carefully as this almost virgin, all- brings added values and emotive resonance. white page. Paradoxically, the more Google The second school of thought states that becomes in reality an ogre, a hydra that wants the appropriation of a service also occurs to buy and swallow up everything around it, through the appropriation of its name. We to become the number one mass medium in should add that the strategy of appropriation the world, the more important this page is not limited to the name, but involves a becomes. It hides the tentacular dimension of temporal advance and the exploitation of this the Google company via a very pared-back, advance at the online and offline communi- limpid, serene brand design, an adver- cation levels. Thus the leading brand in price tisement for a world where everything is comparison is named Kelkoo. To a French- simple, beautiful and easy. One only needs to speaking audience, it sounds like ‘quel coût?’ insert a word in the search box and await the (What price?), with a touch of modernity and miracle. The home page is certainly a key impertinence in the spelling. Note, however, application point for the internet brand: that for Swedes, Germans, Spaniards and Orange’s home page resembles a bazaar. It is Italians, Kelkoo is a purely connotative name, like being on the Paris metro: far from the which is evocative but means nothing. By desired personalisation, it is full of competing lucky chance, it still retains positive mental advertisements that manifestly have nothing associations (in Germany, for example, the to do with the individual. sound of the word Kelkoo evokes ‘calcu- BRAND DIVERSITY: THE TYPES OF BRANDS 123

Then the brand communicates through its through the spontaneous associations they ergonomic qualities, its arborescence, its evoke, for good or ill, and through the complication or the ease of moving through emotions that they stir up. This brand power the site itself – not to mention the back- (influence) is nevertheless linked to specific ground, the ability to move customers to the contexts: Italy is the great cultural brand, a point that they wish to return to the site, sign of quality and creativity in the fashion knowing that there will always be something market, for example. The United States has a new for them. There can be no brand wider effect: we voluntarily ‘consume’ the US without regular good news for customers and brand and its affective evocations when we visitors! buy Coca-Cola (the water of America), jeans (the clothing of America), American cinema from Hollywood, American hamburgers, Country brands when we smoke Marlboro cigarettes, the metaphor inhaled from American Westerns, Among the most spectacular extensions of the and when the whole world accepts the dollar notion of a brand, we find countries. There is as the base of international exchanges. no shortage of symbols: in New Delhi, more However we no longer buy their cars, ill suited than 100 people work full-time on ‘Brand to the era of expensive and soon to be scarce India’ and on the implementation of a global petrol. communications programme ‘Incredible As with all strong global brands, the India’, with the goal of modifying behaviour country brand encapsulates a myth, a towards this infinitely varied country by stereotype that boosts its own attractiveness working on people’s perception of it and even through an emotive resonance. The United giving it a positioning. Books such as States, a country built by immigrants, encap- Rebuilding Brand America (Martin, 2007) or The sulates worldwide the mythology of liberty Marketing of Nations (Kotler, 1997) mark how (hence the famous statue of that name) and countries have become symbols, words the self-made man, the accomplishment of charged with emotion, and sources of success through hard work and effort. In fact, influence over the actions of people who, for in the DNA of American identity, we find the most part, have never visited them. In fact, immigrants fleeing their miserable living countries are associated with snippets of conditions in their home countries in Asia history, recent or more distant, imaginary and Europe, who have rebuilt their life in this elements, the personality traits of their inhabi- new promised land. tants, key competences and accomplishments. The country brand combines information The reputation of certain countries is based at all levels: from political to social to cultural more on their history; for others it is based to economic to tourist, from the past to the more on their accomplishments. This is why present, real and imaginary, in complete companies and their commercial brands shape syncretism. Managing the country brand the country brand itself through their success, entails working specifically on the salience of and sketch out the international stereotype of these different facets, burying some (by saying their key competence. The reputation of its nothing) and making others more visible. universities also creates the country brand. With globalisation, we learn snippets of information and glean impressions of the The country’s evocative power whole world, even the most distant countries. These perceptions are malleable when they Countries are therefore names with brand are not anchored as stereotypes, or based on power: they have the power to influence striking personal experience. Thus the image 124 WHY IS BRANDING SO STRATEGIC? of Korea has evolved among elites and teaches us that the ‘country of origin effect’ is opinion leaders through the emergence of not uniform. It varies: Korean cinema, recognised at film festivals such as Cannes and Venice, an original type of I according to the sector (France for cinema at a time when the resurgence of the perfumes, Germany for machine tools); great Japanese masters is still dawdling. Korea I according to the consumer (national has ceased to be a ‘hollow’ brand, a shadow of stereotypes have more influence for Japan or hidden by its giant neighbour China: novices and laypersons: professional it is transmitting meaning. At the same time, buyers and experts rightly move beyond abandoning its policy of commoditised them to seek partners and new suppliers for products at the lowest prices, thanks to high their own company); technology but also to strong investment in design, Samsung is penetrating the United I according to the level of perceived risk States and Europe in the dynamic and highly attaching to the decision, its individual or visible market of mobile telephony. In short, collective nature (the need to prove to the ‘Korea’ brand is nurtured by successful others that the choice is a reasoned one). Korean brands, and those in turn benefit from the umbrella of their country’s image, which To recapitulate the paradigm of research into is undergoing a positive transformation, persuasion (Kapferer, 1990), the words ‘made therefore acting like a collective federating in country X’ act as a sign of specific qualities brand. We can see how much the country and faults, but also like any source of commu- brand and the ‘Made in …’ brand interact – for nication. If it is a credible source, it relieves it is also necessary to mention the ‘Made in …’ the receiver of the need to look too deeply brand. into it, and lowers his or her resistance to persuasion. If it is not credible, it has the same The ‘Made in …’ stereotype effect on information handling: it will remain superficial but here will lead directly to We have known for a long time how much the rejection. words ‘Made in Germany’ create value in the automobile industry and industrial The country brand is managed equipment worldwide. In just 10 years, ‘Made in Australia’ has become a symbol of value in In order to create a perception of value, it is the current wine market, through daily and necessary to give content to the perception relaxed usages. The words ‘Made in Korea’ that one seeks to create of the country, a have moved from a devaluating status perception profile that will be unique to this (second-rate copies) to a symbol of respected country, that can be attributed to it and that quality between 1990 and 2002. The biggest will drive behaviour both internally (in the question for the Western world today hinges country) and externally (abroad). The country on whether ‘Made in China’ has the ability to brand is by nature a collective, federalising follow the same positive trajectory in the brand: it needs to distribute its power and its same short time frame. content to its daughter brands, specialised by Marketing research itself has set up ‘country market. The Incredible India brand is in fact of origin’ as a specific, rich and prolific field, varied according to whether India is seeking demonstrating how much countries are asso- to attract tourists (the Visit India daughter ciated with attributes, competences, real or brand), industrial investment in high-tech or imaginary representations that combine to services, or positive attitudes at the political or create relevant value (or not). This research cultural level, and so on. BRAND DIVERSITY: THE TYPES OF BRANDS 125

As with any other brand, the country brand from the inside out in order to bring itself into must have an international dispersal if it is to line with the values it promotes in its adver- influence the entire world. This dispersal is tising. Bringing words and objects into carried by ambassadors, the country brand’s conformity and coherence is difficult in a ‘flagship products’: products that it exports democratic country. An early-morning arrival (for example Bollywood cinema), acknowl- from Tokyo or Shanghai into Roissy-Charles edged expertise in IT and mathematics, past de Gaulle airport, despite the fact that it is and present political figures (Gandhi), the managed by a public body (ADP, Airports of cultural identity (spirituality, castes and so Paris), is enough to note the poor image given on), the geographic (demography), politics to foreign visitors as the first contact with our (leader of the developing world), and tourist country, before they join the interminable identities (Rajasthan). queue to have their passports checked, for lack The country brand is in competition with of personnel to welcome them. The country other countries: it must be seen, perceived to brand proves itself through the facts – but it be different, credible and attractive. The can also be weakened through them. country brand must therefore have a posi- tioning based on its identity, on which it is Thinking of towns as brands promoted abroad: perceived values, perceived history, perceived competence and the Have towns and cities themselves become accomplishments that prove it make the brands? Yes – take as evidence the struggle that brand. The problem with the France brand pitted London against Paris for the organisation today occurs largely because its ambassadors of the 2012 Olympic Games. Paris’s technical hail from its history (Louis XIV, Napoleon, De dossier seemed to be superior, but even the Gaulle), its values embodied by the 1789 name of London is more attractive nowadays Revolution, its culture (the chateaux of the than that of Paris. In other words, the product Loire, Impressionism, gastronomy, etc), but its was perhaps better but the intangible compo- influence is decreasing and the giants of its nents of the London brand made the difference global industrial success (Bouygues, Vinci, with the international jury. What are these Lafarge, Alstom, Thales, Veolia, Suez and so intangible associations that make it different, on) are unknown, or are not attributed to that create its international fame and its attrac- France. There remain luxury, l’Oréal, tiveness? To say ‘London’ is to spontaneously perfumes, Danone and tourism. Even its wine evoke a group of value-bearing notions such as is no longer influential. Furthermore, the tele- multiculturalism, the intermingling of different vised images of recent events in the suburbs nationalities, economic dynamism, liberty, have shown that France as a country can no today’s cultural abundance, and youth. It is the longer live up to its own values in today’s unsurpassed brand image of London that makes reality. Under these conditions, choosing a it influential. positioning is not easy. However, if one wishes to be perceived, one needs to know how to Why introduce the concept of the define oneself. Positioning is a battle of town brand? perceptions. By not choosing, one leaves the construction of one’s image to others, to the Today, all municipalities will perforce have to competition, by default. turn to brand concepts in order to manage The considerable difficulty for the country their town more efficiently and contribute to brand is internal. In fact, a country does not its growth. Two structural factors lead them have the same levers of power and authority towards this. The first is the growth in the that enable a company to transform itself number of large transnational actors with 126 WHY IS BRANDING SO STRATEGIC? large sums of money designated for site regen- the great mining town of Bilbao, in the eration. These are the actors that the town Basque country of Spain, a sombre town that must convince – for example the World Bank, suffered the demise of its mining industry. the European Union or regional development Like the phoenix, however, it has risen from funds. Second comes the movement towards the ashes, under the impulsion of a global decentralisation and delegation of power at flagship product: the fantastical Guggenheim the local level. It is no longer a question of the Museum that was built there, bringing with it municipality lobbying Paris, but rather of it a great cohort of modern art lovers and fending for itself with its own budget. tourists, giving the town a new lease of life. How can the experience of Danone or Coca-Cola be useful in the management or Implications of the town brand notion development of these complex entities known as towns? Is there not something In order to treat a town as a brand, first of all it incongruous in linking a town’s ambition to is necessary to respecify what ‘brand’ means. develop, and the means it uses to do so, with A brand is a name that has a power, a power to these concepts issuing from the commercial influence. This power has nothing to do with sphere, and marketing, a discipline imported the name itself, with its euphony, its rhythm from the Anglo-Saxon world? Is not every- or its pronunciation, but is concerned with thing against it? what it means in the mind of the audience. A The fact that the question is even raised brand is therefore a known name with which today reveals not a ‘mercantilisation’ of the audience spontaneously associates society, or a ‘privatisation’ of public affairs, positive, attractive and unique values, both but an awareness that every organisation, and tangible (the advantages of living or working by the same token every town and even every there) and intangible (the town’s style and country, must make sure of its own growth heritage, etc). and development, attract resources, people, The further away one moves from objects, energies and means to itself. In order to attract from reality, and therefore from the towns them, it must convince them and seduce themselves, the more they are known through them – hence the brand logic. the prism of their meaning and reputation. Mayors know that they are in competition Managing a town’s communication like that with other towns on various markets: they of a brand means becoming aware of the need must therefore know how to sell themselves. to define that meaning precisely, and then By creating a good reputation for their town undertaking all necessary actions to build that they give themselves a voice. Like brands, perception among the strategic audiences on towns need to grow: they therefore need to which the town will depend for growth and attract new resources (people, workers, influence. In fact, at the same time, other companies, finances and so on). Like any towns and other countries will be polishing brand, they must also be able to define where up their own meanings and their resources to their unique attractiveness lies, or what is attract and seduce the same audiences. Some known as positioning. will retort that the decisions of these latter are Some towns have had to reposition them- taken on the basis of dossiers, analyses and selves. This is the case when an economic well-founded comparisons – but let us not crisis flattens their traditional expertise. Once deny the capacity of reputations and images all the textile factories of famous brands such to influence so-called rational evaluation as Dim, Well, Aubade, Olympia and Kindy processes: the example of the Olympic Games have moved away, what will be left to the being awarded to London is a pertinent town of Troyes? This is also what happened to reminder. BRAND DIVERSITY: THE TYPES OF BRANDS 127

Turning a town into a brand therefore These actors, who often defend specific means building perceptions among strategic points of view, issues or communities, must audiences, turning it into a unique and forget their own preserve to an extent. For attractive destination, for companies, indi- example, increasing the attractiveness of a viduals, or cultural or educational organisa- town externally, in order to ensure its devel- tions that might think of moving there. opment, consists of defining what the town Perception has to be built. In order to do this, wants to become the reference for. The brand awareness vectors and image vectors are logic is that of the ‘customer’: why choose required. The cycling race between Paris and number two if you can have number one? Roubaix each year is an awareness vector for Thinking like a brand means choosing the Roubaix, but hardly a good image vector: the advantage that the town wants to symbolise. talk is all of bicycles, mud, and the hell of the It is therefore necessary to distinguish north. In contrast, the presence there of between two types of argument, or attractive leading European mail-order companies (La element, for the town brand: positioning and Redoute and Damart) could be a strong image reassuring. The first will be the driving force, vector. A reputation can also be destroyed: a the lever of influence of the town, its crisis relayed by the media is enough to create perceived uniqueness and its attractiveness. far less positive associations that tarnish the This choice is crucial, since it defines in the image the town is seeking to build. long term the ground that the town is deter- Would a town then be managed like Coca- mined to dominate in the perception of the Cola or Pepsi? At this point it is necessary to target audiences. The second type is there to remember the specific qualities of a town, and reassure: for example infrastructure, crèches, therefore the limits of the above comparison. schools, the existence of a dynamic town Commercial brands are often artefacts: they centre and so on. invent a reality that they turn into an image, How does the town choose its positioning, for example linking a blend of coffee to an this long-term, mobilising, attractive differen- imaginary explorer named Jacques Vabre, tiation strategy? By digging deep into its own who is supposed to have travelled around the DNA, its identity. A town is a living and Earth. This imaginary aspect is sold to the complex social body, which has its own genes. consumer as much as the product itself. There is everything to be gained, not by repro- However, it is completely independent of the ducing the past and what the town once was, thousands of men and women working for but by reinventing it on the basis of the Kraft, the company that produces Jacques values, competences and ideals that have Vabre coffee, and of the reality of the moved it throughout its history. This is why it company. This, moreover, is why brands are is necessary to dig into the town’s soil, bought and sold, passing from one company identify its genes, beyond the vicissitudes of to another. A town, on the other hand, is first and recent history, in order to define its identity foremost a human, local and immovable kernel. This retrospective study is the reality (which is not to say that it is necessary prelude to selecting the positioning unchangeable), anchored in history, culture that will project the brand into its future. and its ecosystem. It can and should be altered to adapt to evolution, to the economic and A concrete example: the town of social needs of the present day. However, the Roubaix brand cannot be built without it. It must be reckoned with. The construction of the brand The town of Roubaix, in the north of France, should first of all involve a consensus among carried out such a historical study before re- the town’s key actors. founding its identity. What shape does its orig- 128 WHY IS BRANDING SO STRATEGIC? inality take, its motivation, the basis for its advanced version: mail order. La Redoute reinvention and projection into the open (based in Roubaix) is the foremost seller of economic and social world of the 21st century? female garments in France. It now takes more Before we imagine this, however, it is prudent orders over the internet than through the to remember what is at issue: the branding post. We can clearly see the sketching out of a process is part of an ambitious revitalisation legitimate territory of competence and programme for the ‘poorest town in France’, to influence that the municipality can activate. quote the words of its dynamic mayor, who This positioning is the source of coherence of was referring to the average amount of local tax present and future activities to be carried out paid per inhabitant. It is also a town with a locally, in the same way as the communica- high rate of immigration and therefore of tions that diffuse them. unemployment. It was therefore a question of As with any brand, the town has its slogan: making it attractive once again, with the stated ‘Fashion loves Roubaix’. This encapsulates the aim of revitalising its old, preserved town profound truth of the town brand: a textile centre, which had been deserted, rather than town, a town of creative entrepreneurs, and a recreating it in the suburbs, as has been done in town of good business. It is aimed both ‘inter- so many other towns. Therefore it was nally’, at the community itself, an active necessary to develop in parallel a cultural offer, partner in its own development and repu- a demand for public spaces, and a renewed tation, and at federalising all so-called commercial offer. To do so, Roubaix needed external activities. Strong perceptions can brands and companies. What identity would only be built if all these activities converge on contribute to this goal nowadays? a single direction and a single meaning. The first question in any work on branding As for the products that represent renewal is to rediscover the design, the brand’s DNA. vectors, embodying the town’s mercantile and What appears to be the design of this fashion vocation, they include the opening of northern French town? The town’s genetic the ‘La Piscine’ museum (housed in the patrimony provides the key components. It historic swimming baths), the arrival of the was always a textile town. During the period Edhec business school in Roubaix, the instal- when it did not belong to France, in 1469, it lation of a MacArthur Glen brand centre of was one of the first free trade zones created, 17,000 square metres that brings customers to thereby affirming its destiny as a great Roubaix from 50 kilometres around, merchant town, which had also been granted including from Belgium, the rehabilitation of the right to weave fabrics. Roubaix is asso- factories to create a fashion and creative ciated with the spirit of enterprise. All the big quarter, and so on. families in textiles, and then in mass distri- bution, started here: the Mothes, the Lepoutres, the Mulliezes, the Paulets, the Universities and business schools Prouvosts, and even the Arnaults, who moved are brands from textiles to luxury goods. Other than weaving, it is also the town of Nowadays, the dynamism of a country is cross-fertilisation: a pioneer in commercial judged not by its history, its monuments or its exchanges, the town was at the heart of inter- cuisine, but by its brands, in particular those national exchanges within Europe. This is that spell attraction, modernity and intel- where the deep truth and the forgotten times lectual power. The report submitted to the of Roubaix are to be found: it is the French French prime minister in November 2006 did town for textiles, for creation, fashion, mass not disagree: the name of any country is now distribution, but also today of its most attached to the image of its centres of intel- BRAND DIVERSITY: THE TYPES OF BRANDS 129 lectual excellence, its universities, its research professors. However, an objective analysis of centres, its innovative companies, its design the service that each student receives illus- centres, its hi-tech and hi-touch brands – or trates that in terms of teaching, as with any the lack thereof. brand, the intangible components are not Working on the France brand means asking enough. Major financial resources are questions about the foundation of its repu- required to bring today’s teaching up to the tation tomorrow, as a great country of the 21st standards of global excellence in education. century: that is, as the transmitter of a living, This will be the great challenge for Europe contemporary culture, therefore capable of brand: to give its universities the financial attracting students from around the world, resources to shine internationally. If the state not only to study philosophy and literature, cannot do it, then companies must, and art history or sociology, as they once did, but therefore it is necessary to change the rela- to study economics, business, management, tionships between companies and the high and new technologies. university. This is why the big business Higher education institutions are now also schools everywhere have already acquired the engaged in a brand war. Revealingly, there are status of global brands. now global comparisons on the quality of Every country has its star brands: the universities and business schools – a sign that United States has Harvard and MIT for the market is now global and the evaluators example, the United Kingdom has Oxford and are not French. The same is true for wine. In Cambridge, and China has Tsing Hua; in Europe, the Financial Times draws up the France, HEC and Insead are brands. Of course ranking of 55 European business schools. Its the United States also has other excellent 2006 ranking is shown in Table 5.4. business schools, as global comparative rankings continue to demonstrate. However, Table 5.4 The top ten European business only some of these have additional emotive schools value, strongly linked to intangible compo- nents, the vague feeling of entering into more 1 HEC Paris (France) than simply a university or school, but into a 2 London Business School (UK) very exclusive and global club. 3 IMD (Switzerland) 4 Instituto de Emprese (Spain) It is striking to see how globalisation poses 5 Iese (Spain) new problems for educational institutions, 6 ESCP-IAP (France/Germany/Spain/Italy) which were previously sheltered from it. Like 7 RSM Erasmus University (Netherlands) it or not, they must now think like global 8 Cranfield School of Management (UK) brands, and give themselves the resources to 9 Bradford/Tias Nimbas do so. What is a brand, if not a name with (UK/Netherlands/Germany) strong influence and power to attract – since 10 Insead (France) their market at least is global? Reputation is Source: Financial Times, 4 December 2006. the inevitable attraction vector: an aura attached to a name able to bring the world’s The challenge that European universities students and major executives to Europe to must meet is considerable. Their resources are round off their education at great expense. so small that they do not even appear in It is therefore necessary to know how to worldwide evaluations. Like Oxford, the export our qualifications, if Europe wishes to Sorbonne is a true brand, whose reputation remain in the hunt as a great country. has been built over centuries and diffused However, globalisation requires a complete worldwide. Its excellence in literary studies is revision of our certainties, practices and well known, carried by the excellence of its habits. It is now necessary to think globally in 130 WHY IS BRANDING SO STRATEGIC? order to remain number one. Two strategies compared: penetration This global market is now revealed by global or skimming off judges, who have drawn up their evaluations as objective rankings. In the international Reasoning like a brand also leads to drawing evaluation by the Financial Times, considered inspiration from brand management. From the reference on business schools the world this point of view, we know that to grow in a over (as summarised in Table 5.4), HEC Paris market, there are two main strategies: occupies the top European spot, just above the creaming off or penetration. It is interesting to London Business School, IMD in Switzerland compare the rapid penetration strategy of and the two Spanish business schools. Insead Insead with the strategy of creaming off the is the tenth-ranked European business school. best followed by HEC Paris. In worldwide terms, HEC is now 18th, even Founded in 1959, Insead chose the strategy ahead of the Kellogg Business School of rapid market penetration, capitalising on (Northwestern University). This evaluation by the fact that in Europe at the time, the MBA the Financial Times is based on a multi-criteria was not a concept that was either known or analysis objectifying the performance param- practised. Only the fortunate few pursued eters of each business school, its ability to their studies through an MBA at Harvard or deliver added value to its students on all Stanford. In the best business schools in the programmes, and to executives who go there United States, the country that created the to improve their competencies. MBA, it takes two years to obtain this presti- These new evaluating authorities define the gious qualification. The first year of the MBA objective criteria for their judgements: they is used for learning management in general, measure the true added value for each and the second is necessary for specialisation business school. In so doing, they impact the and further study, structured individual products and the processes. projects and so on. The discreet but systematic rise of HEC Paris For a teaching institution, the rapid pene- on the world stage is slower than many execu- tration strategy consists of acquiring a high tives would have liked. The university or market share as quickly as possible, by multi- school brand is built through its products: it plying the number of students and thereby does not flood the media with big promo- obtaining a large body of alumni, capable of tional campaigns. On the contrary, its ambas- lobbying within companies to influence their sadors are the quality and success of its recruitment. As the notion of the MBA was still students, hence the importance of selection nebulous in Europe at that time, Insead and the critical mass of the number of former decided to deliver its MBA after only one year, students, and publications by professors in which enabled it to produce twice as many the best journals, as a graduates as the true Harvard-style MBA, which way of durably impacting managerial takes two years. As a further consequence of thinking. Professor Philip Kotler has made this rapid penetration strategy, the school Northwestern known as a considerably increased its class size: it now has Mecca, and Michael Porter has strengthened 440 students per year. Finally, another campus the status of Harvard Business School. was created in Singapore, to create even more Another contribution comes from the repu- Asian graduates. tation of international pedagogical engi- The result of this very coherent strategy is neering missions by the biggest groups, and that the Insead brand acquired international the ongoing training of executives worldwide. recognition, and its ‘educational product’ is ranked in tenth place among the business BRAND DIVERSITY: THE TYPES OF BRANDS 131 schools of Europe by the Financial Times in communicate this, the brand may sometimes 2006. Compare this strategy to that of HEC associate itself with a genuine personality, Paris, now ranked number one among someone who brings their own attractiveness European business schools. and incarnates the brand’s values. Michael Beginning 10 years later in the race towards Jordan and Tiger Woods are the prototypes of internationalisation, HEC followed a strategy this practice: where would Nike be without of creaming off the best, as this brand them? L’Oréal Paris, whose personality is required. When you are the guarantor of glamour, is represented by what they call the excellence in your own country, you cannot ‘dream team’, a team of Hollywood stars and do otherwise. This is why the HEC MBA was global top models who appear in all its adver- based on the model of the best American tising. MBAs: two years were required to deliver Conversely, some celebrities became quality teaching and to train high-level genuine brands and were managed as such. By managers. The size of the first classes was also brand, we mean a name capable of generating reduced: the selection of the best students is enthusiasm, fans and customers. Think for an integral part of brands of excellence. example of James Bond or Harry Potter, virtual Dedicated MBA professors created a unique celebrities whose spin-off products create level of teaching and team spirit. Little by genuine, profitable and durable business. The little, the reputation for quality spread. failing perfume house Coty rebounded by Furthermore, HEC, through its relationship developing a new business model: creating with the Chamber of Commerce, is closely perfumes for stars (Alain Delon, Celine Dion), linked to the world of business. The result of just as others, upon leaving HEC, hit on the this highly coherent strategy, dictated by the brilliant idea of offering to create a perfume desire to maintain the brand equity attached for Salvador Dali (to their great surprise, he to HEC, is that a worldwide name awareness accepted, and it is one of the best-selling remains to be constructed, but the experts perfumes in Japan). (Human Resources directors, CEOs, the Picasso is not only the name of a famous Financial Times and the like) have recognised painter, but also a brand. The company set up the superior quality of the product. by his heirs, with its headquarters on the Place Vendôme in Paris, works constantly to prevent the name falling into the public Thinking of celebrities as brands domain. In order to prevent this, it must be in proven and meaningful commercial use. This It is common to talk about brands as we talk is why, 10 years ago, the company went about people. We will see, furthermore, that around the car manufacturers and offered one of the facets that make up the singularity them the licence to the Picasso name. Citroen and the identity of a brand is its personality, accepted: the name increased the perception its character. This derives from an increasingly of novelty and creativity of its new model, anthropomorphic conception of the brand. which would go on to successfully challenge This is one of the consequences of the need to the Renault Scenic in the segment it created. pursue so-called relational marketing: that is, The newest development is that sports stars, worrying less about the imminent sale than for example, are becoming brands. Not all of about establishing an enduring relationship them – far from it – but some of them. Michel between the customers and the brand. We Platini has not become a brand, nor has form relationships with people, not products Thierry Henry, nor Zinedine Zidane, nor – hence the notion of brand personality, as if George Best, nor Roger Federer, despite being we were describing the profile of a friend. To the world number one in tennis. In contrast, 132 WHY IS BRANDING SO STRATEGIC? the lyrical poet-footballer Eric Cantona could from the stereotype of the pure footballer. have become one, as his too-rare excursions In managerial terms, knowing that they are into cinema show. a brand leads such people to managing them- Among the great footballers, perhaps David selves as such, or even taking on an agent who Beckham, previously of Manchester United will be better placed to do so. The essential and Real Madrid, best represents the notion of requirement is to preserve the brand value, a celebrity becoming a brand (Milligan, 2004). doing nothing that would destroy even a little It is well known in football that celebrities of its attraction. The goal is for the brand to make a profit for their clubs. If Manchester outlive the sportsperson – since all champions United has 17 million fans in Asia, imagine have to retire in the end. Thus, far from the number of spin-off products that could be accepting all commercial contracts, however sold to them as objects of their cult. lucrative, it is important to know how to say How can we recognise that a celebrity no to some of them. What products should sportsperson has become a brand? It happens they create under their name: perfume, when his or her national or global influence clothing or…? emanates as much from personality as from First of all it is necessary to understand the sporting prowess. One of the key phrases in driving forces of their own brand. Each person understanding what a brand is runs thus: ‘the who becomes a celebrity-brand should ask: brand is everything that makes a product much more than a product’. Sportspeople I What are my values? become brands when not only does the I What are the facets of my identity? product (the sport at which they excel) place them above the rest (making them super- I What role do I play for the audience? products), but they are also intrinsically inter- I What myth do I embody? esting and attractive away from the stadiums and the rugby or football pitches, in their I What are my recognition signs? daily lives. Some great sportspeople, such as Zidane, never make this step: they refuse to accept that their public life is also the field for Thinking of television expression of who they are, and a source of programmes as brands their influence. Celebrity-brands are loved for what they do, but also for what they are, how Pop Idol is more than a programme, it is a they live and what they represent (the myth brand. Where does the biggest part of the that they embody). profits for TF1 (France’s leading television In this, the celebrity-brand becomes a life- channel) come from? Not from the style brand, a mediator of new behaviours commercial breaks that it sells to advertisers, offered to the audience. Think of the but what are known as spin-off products from influence that André Agassi has over how programmes. Ushuaia, the channel’s flagship American and European adolescents dress or programme dedicated to nature and ecology, cut their hair. David Beckham’s Mohican became a cult programme, attracting millions haircut legitimised this controversial hairstyle of loyal viewers each week. It also turned its in schools. By putting himself forward with star presenter into a celebrity, a defender of his children, he broke the male stereotype in the planet’s threatened biodiversity, its ozone the United Kingdom and promoted layer, its temperature, its inexhaustible acceptance of the ‘metrosexual’ sensibility. By marine resources and so on. marrying a Spice Girl, he also added a touch of Ushuaia was thus a name loaded with complexity to his image, moving it further BRAND DIVERSITY: THE TYPES OF BRANDS 133 emotive values and with power. It was of Star Academy (Pop Idol outside France) is the interest to industrialists. TF1 created a opposite example: it is the flagship specialised department to capitalise on programme among adolescents, who talk of licences from programmes viewed as brands. nothing else and make systematic use of tele- Ushuaia met l’Oreal’s urgent need for a shower phone voting (a major source of revenue for gel brand for the supermarkets. It was also of the TF1 channel), which increases their level interest to sellers of camping equipment and of involvement. Their obsession needs other the like. consumables to express their burning However, not all programmes are suited to devotion. There is now a major magazine (the becoming commercial brands. To do so, their second-biggest adolescent magazine in read- values must be able to transmute metaphori- ership terms), as well as many licences and cally into products. Thus Thalassa is a cult spin-off products. programme dedicated to the sea, sea dwellers, Disney’s business model is based on the ships and so on, which has appeared on profits created by movies which must become French television every Friday evening for brands and lead to a huge stream of licenced more than 20 years. It has a loyal audience at products. Disney would not produce a film, 8.45 pm who would not miss it for the world, such as Men in Black, that although a great and its audience share is strong and stable. movie created no profit flow from licences. However, to date, this devotion has not created a flourishing business. What could be sold under its name? 134

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The challenges of modern markets 136

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The new rules of brand management

What is actually new in strategic brand competitor of many a so-called strong management? Since the 1990s companies brand is now the trade brand. have been well aware that brands are an asset, I Deliver personalised services. and that consequently they should always be reinforced and nurtured by tangible innova- I Reward customers’ involvement to make tions and intangible added values. them become active promoters of your The 10 key principles of strategic brand brand, not simply loyalists. Word of mouth management are known: is indeed the real sign of success: when customers become active ambassadors I Capitalise on a few strategic brands, which because they feel passionate about the all convey a big idea, a vision, and are brand – as a result of what it did to them driven by the desire to change the and the community of values. Reichheld customer’s life. No brand should be (2006) has shown that the rate of without a strong intangible component. promoters among the customer base is directly correlated to the growth rate of the I Nest all variants and sub-brands under company or the brand. these mega-brands, to nurture them. I Encourage communities that share your I Act as a leader and be passionate about values. increasing the standards of the category. I Quickly globalise the brand and its I Sustain all brands by a constant flow of products. innovations (product, service etc) in line I Be ethical: big is not beautiful any more, with their positioning. and consumers have become cynical about I Create direct ties with your end customers size. Do not only adopt rapidly the to deepen the link and the attachment, perspective of individual benefits, also take especially in markets where the trade into account collective benefits (recyclable pushes its trade brands. In fact the main products, organic ingredients, ethical and sustainable trade, helping the poor, etc). 138 THE CHALLENGES OF MODERN MARKETS

If the brand principles given above have 2006 by the dominant mobile operators remained constant, their implementation has (Orange, SFR, Bouygues, etc). Of these had to adapt to new markets, new customers, 10,225,447 were to clients who had just media and technological realities, and the given up their contract with one of these effects of globalisation on costs. operators! It is true that the multiplication First of all, let us state that one traditional of advertising on lower and lower charges manner of building brands is now defunct, or can only lead to disloyalty. Moreover, in any case has lost its reference status. This was benchmarking and copying smooth over elevated to a dogma by Procter & Gamble the differences. (P&G) in the last century, at the time of the Everywhere, cheaper alternatives to the major arrival of , made possible by brands now hold significant market shares, large superstores, motorways and television. I even majority shares in mass-consumption learnt it myself at the beginning of my career, goods. This is true of both consumer and when I moved to P&G. In short, in this model industrial products: many B2B brands of ‘brand building’, everything followed from a complain at the substitution of their products superior product, which responded better than by cheaper Chinese imports in client the competition to a need expressed by companies, not to mention the generalisation customers. Then distribution was set up, and of the practice of using inverse auctions as a then a large promotional campaign was done method of selecting suppliers. Here, only the in order to promote trial, prior to re-purchase price counts. and loyalty formation. This approach corre- Let no one be deceived: even if everyone sponded to the state of the market, of thinks of Danone when the yoghurt market is customers and of technology. It is no longer mentioned, Danone is in a minority on the suitable for today’s world. Proof of this is that it shelves at Carrefour. Even if Fleury Michon is has not prevented the rise of distributors’ own the name that comes to mind in terms of brands, cheaper copies, and in particular the processed meat products, distributor-brand, discount and hard discount sectors. low-cost hams hold the dominant market This model of brand building, of share. Of course it is possible to argue that constructing and defending the brand over distributor brands are also brands, and that in time, runs into four stumbling blocks today: fact to speak of the decline of brands is deceptive: the reality is that a new type of I Are there durable, meaningful differences brand is replacing other brands on the shelves between products these days? and in customer choices. Danone yoghurts I Is there still a large amount of shelf space replaced Nestlé’s; Carrefour yoghurts replace available for brands in the big superstores Danone’s. Tesco Finest is replacing Tropicana, or with wholesalers, which are now and so on. pushing their own products? We showed in Chapter 4 that if distributor brands are brands, they are not brands exactly I Are there still mass media, taking into like the others, since their positioning is account the fractioning of the audience? always relative. They are structurally posi- I Are there still loyalists? The rise in the rate tioned between the cheapest products and the of promotions makes customers more major brands. They are therefore relative sensitive to price, less faithful, more oppor- brands. Do they have a financial value in tunistic. The case of mobile telephones is a themselves? No. typical one. In France, as everywhere in On the other hand, the rise of products on Europe, 13,800,000 sales were made in the hard discount circuit, unbranded products THE NEW RULES OF BRAND MANAGEMENT 139 and Chinese imports clearly demonstrates begins with a great product remains a pillar of that the traditional brand no longer responds the great brand. Laughing Cow has an to the needs of all buyers. It has ceased to be organoleptic quality superior to other soft universal. The market is segmented by price, cheeses. In business to business, Facom and different types of operators excel in each mechanic’s keys are the benchmarks in the price segment. The ability of brands to be market. present in each segment is a challenge. But the model begins to seize up when it Nevertheless, for example, Bic does indeed try continues ad infinitum: then we reach the to occupy the bottom-of-the-range segment, zone of diminishing returns. The cost of although it is apparent that there are now marginal improvement becomes increasingly much cheaper ballpoint pens and disposable high. Making a Michelin tyre safer than it lighters than Bic produces. already is involves considerable investments The pre-eminence of price in the factors in research and development, which must be determining consumer choice shows that a absorbed either over very large product runs certain type of marketing has reached its (hence the notion of a global product) or over limit, as has the habitual manner of managing smaller, more expensive runs. brands. This one-dimensional strategy reaches its limits: there comes to be an imbalance between the additional cost of marginal The limits of a certain type of progress, and the customer’s perceived needs. marketing In fact, with traffic jams and rising petrol prices, the majority of car owners use their car This was forged by P&G, the inventors of in town, for short journeys. Safety remains an marketing for mass-consumption products. essential function of a tyre, but the notion of Since I began my career in this company, I differentiation on safety loses its market rele- have experienced it. Traditionally, at P&G the vance if you continue to seek more and more brand is a superior product. Everything begins safety. Moreover, although the higher price is with the product and hinges upon it. It must perceptible, the safety increment remains prove its worth all alone: brutally, this invisible. It is then necessary to change the company only launches mass-consumption client benefit. products if they can speak up for themselves This product development model still seems and ‘make the difference’ in use. Hence the to work for certain brands: Gillette is a typical importance of ‘blind tests’ in this sector. In example. After the single-blade close-shave these tests clients must judge the product razor came the two-blade razor for an even without seeing the brand, so that they are not closer shave, then three blades, then the roller, biased in their perception by recognition of it. then vibrating razors. Gillette is a past master With Pampers, the baby must be drier; Always in the art of planned obsolescence in its must absorb better; Ariel must wash better, products. and the difference must be visible to the It is no accident that P&G took over Gillette naked eye; Sunny Delight, an orange- in 2004. These two companies share basically flavoured drink but without real oranges, the same product culture, and the same mode must taste infinitely better on the tongue, and of innovation: always more. To achieve this, so on. Note that in its luxury products P&G is now prepared to look beyond its own division (licensed Boss and Lacoste perfumes, walls for the innovations of tomorrow: in etc) P&G uses different rules, since the notion university laboratories, in start-ups and so on. of a ‘superior’ perfume makes very little sense. For the majority of companies, however, the In and of itself, the principle that a brand model no longer functions. 140 THE CHALLENGES OF MODERN MARKETS

Perceived difference

a Conventional Store brands brands Hard discounter

Price of an incremental perceived difference A

Figure 6.1 Limits of traditional marketing

In fact the incremental improvements are no barrier in most mass-consumption goods. longer perceptible or meaningful; on the Bear in mind that the first explanatory factor other hand, the increase in price is. of brand sensitivity in the client is the Consumers can thus make considerable thought, ‘There is a difference.’ Admittedly savings (typically 35 per cent) by buying this is a thought, the client’s belief: it can distributor brand products with an equivalent therefore be influenced by advertising and degree of functional satisfaction. The loss in recognition. Nevertheless, for frequently terms of function is minimal compared with consumed products, it is modified through the economy achieved. use. With experience, consumers see no This reasoning is also true for truck tyres. difference, except for the price. Hence the This is why, although the market share of systematic rise in all European studies of the Michelin Trucks at first tyre mounting is 65 opinion that ‘distributor brands are a better per cent in Europe and the West, it falls by 50 price/quality choice than major brands’. per cent in the second-mounting market, Agreement with this opinion is at 59 per cent when it comes to replacing the tyres in France, 57 per cent in Germany, 55 per cent (although Michelin remains the leader). in Britain, 54 per cent in Italy and so on. This The reasoning is the same in food: what is made easier by the fact that nowadays the does an even better albacore tuna at Saupiquet majority of large groups supply distributor mean? Tesco Finest sells indistinguishable brands. Some do so openly: the strategy of the albacore tuna. What does an even crustier Lactalis Group is to dominate the camembert gherkin from Amora mean? A cul-de-sac has market in two ways; via the President brand been reached. itself, and via distributor brand products. The consumer can find comparable and Other large industrial companies do the same cheaper alternatives, since distributor brands without admitting it, by delivering to front have made up their disadvantage. Consumers companies that in turn supply the major have realised this. There is no technological distributors. THE NEW RULES OF BRAND MANAGEMENT 141

Since the specifications of the distributors company that was considered by all to have are sometimes highly ambitious, the founded modern information technology distributor brand product, although cheaper, (even if it was Sperry Univac who invented can be superior to the brand product. the first computers). The brand suggested a Everyone knows of the case of the famous high ‘perceived quality’. shoemaker, none of whose own brand products is the equal of the product it makes for Carrefour. In this way, companies reduce About brand equity the objective distance between branded and unbranded products. Outsourcing to China The economic press regularly gives figures on produces the same result: Chinese factories the financial value of brands. The Coca-Cola quickly learn to match Western standards. brand might have been worth US$67 billion, The weakness of the idea of ‘best product’ is Microsoft US$60 billion, Mercedes US$22 that it is often defined without taking the billion, Marlboro US$21 billion, Louis Vuitton customer’s point of view – that is, without US$17 billion, Google and Dell US$12 billion considering the use to which it will be put. and Zara US$4 billion in 2006. These figures This is its greatest shortcoming. Take the are estimations: that of the future ability of example of DIY: given that an electric drill the brands to generate a profit surplus entirely will, on average, be used for a few seconds per based on their name – that is, on all the values year in a normal household, what point is with which the name is associated in the there in buying a Bosch-branded one? In func- mind of the public worldwide. tional terms it makes no sense. On the other Other study institutes therefore regularly hand, if the consumer picks a cheaper alter- publish the measurements of the associations native, the immaterial satisfaction of owning consumers make with the names of these ‘a Bosch’ will be frustrated: this is a key aspect brands. For example TNS measures the recog- of the strong brand. Bosch enjoys the values nition of brands, their evocative power, their associated with its country of origin perceived quality, their rate of declared use (Germany), which make the buyer proud. and the stated desire to buy the brand again in The brand that has not built in elements of future. Brandz measures the rate of presence intangible added value (trust, pride, emotion, in the customer’s mind, the perceived feeling attachment, or familiarity capital) is copiable that the brand is relevant (to the customer), and may be damaged by an attack on price. that it is effective, that it offers advantages, This is what preserves Coca-Cola; despite its and finally a sense of attachment to it. Others contribution to the rise in obesity. Of course it measure empathy scores, familiarity, has a great taste, but it is also has massive perceived difference and stature scores. distribution (a Coke should always be within Brands have never been examined in such reach) and a unique intangible capital made detail, nor have so many different measure- up of joie de vivre, youth and friendship, ments been published. It is true that the news coloured by Americanness. for certain brands is not good: something Fundamentally, at P&G the brand is in fact seems to have been damaged recently the name of a superior product. Was the IBM between the public and the major brands. PC superior? Was it the best PC? In the Let us examine the recent retrospective data experts’ opinion, no. But it was the best-seller published by TNS (in 2006) based on 300 brands of its era. It was broadly sufficient for the uses of all sectors (see Table 6.1). TNS measures both it was put to. It also had a unique intangible attitudes (familiarity with the brand, evocative value that forced the preference in the serious power, and perceived quality) and declarative world of business: it was known as ‘IBM’, the behaviours (past and future use). 142 THE CHALLENGES OF MODERN MARKETS

Table 6.1 Evolution of brand indicators over 10 years Brand Evocation Superior Declared Declared awareness quality use re-use (intention) 2005 88 61 52 22 11 2002 89 66 58 27 15 1997 86 61 56 28 18 Source: TNS, 2006, based on 300 brands of all sectors. The figures are percentages of a French sample of category consumers

What do we notice here? The basic contract of longer purely that of the brand manufacturer. brands has been eroded between 1997 and According to Interbrand, a design agency 2005: the perception of genuinely superior also involved in estimating the financial value quality has decreased, whereas the richness of of brands, the leading global brand remains evocation has remained stable. In fact, the Coca-Cola. However, even this mythical most notable absence in these types of study, figure is suffering from erosion of the strong which focus only on major brands, is the link with its audience that once characterised distributor brand. Now manufactured by the it. The TNS figures in Table 6.2 bear witness to same companies as are responsible for tradi- this. tional major brands, they have reduced the In the case of Coca-Cola and Danone in quality gap first objectively, and then, with particular, two star brands, there has been time and experience, subjectively. little erosion of the brand image itself. But on We can also note that the ratio of intention the other hand behaviour and intentions are to repurchase the brand is deteriorating: in both retreating: the strength of consumers’ 1997 it was 64 per cent (18/28), but it was no conviction that they will buy the same again more than 50 per cent (11/22) in 2005. It is as is weaker. This strengthens our diagnosis that if the link between customers and the brands brands are built in-store, and destroyed in- they use was stretching, or as if they have store. What does having a good image matter, become ‘shoppers’, and have learnt to if customers are less likely to keep buying the optimise their choices in-store. After all, what brand as a result? use is there in shopping in-store, if not to take This question will be analysed later. It must advantage of the special offers and novelties also be recognised that these measures, while of the moment? And now, in-store, the land- useful, only measure the health of brands scape has changed considerably: the shelf among themselves, rather than their reflects the distributor’s strategy, and no resistance to new competition. This is why so

Table 6.2 Evolution of brand capital for Coca-Cola and Danone (in France, %) Brand Brand Superior Declared Declared awareness evocation quality use re-use (intention) Coca-Cola 2005 99 75 62 45 26 2002 98 77 67 52 34 Danone 2005 99 83 83 66 32 2002 99 85 87 72 40 Source: TNS THE NEW RULES OF BRAND MANAGEMENT 143 many managers are disappointed: there is If there is a link between these three facets, it nothing wrong with their brand equity indi- is no longer a strict one: many brands that cators, but there is a problem with their have genuine brand capital among clients behaviour panel indicators. have low brand strength. For example, At this stage it is necessary to make a funda- Lafuma has a great reputation in France, but is mental distinction between three aspects: nowhere to be found: this brand does not meet the objectives of the dominant I Brand assets (awareness, image, consider- distributor in its sector, Decathlon. Why are ation as a whole), also known as brand Nestlé dairy products throwing in the towel in equity from a customer point of view. France and selling their factories to Lactalis? Because the price premium of the Nestlé I The strength of the brand, which integrates brand does not enable it to sell enough the distribution parameter: market share, yoghurts and ultra-fresh products: without price premium, numerical distribution of sufficient volume there can be no marketing store presence, weighted distribution (by communications, and distributors are no size and global category sales of each store), longer interested. Of course it would be growth and so on. possible to lower prices, but then the prof- I Brand equity in the strict sense of the term: itability would suffer, since it is rare to gain in that is, the current financial value of the volume and cumulative margin what is lost flow of future profits attached to the brand through dropping the price. Nestlé prefers to itself (the potential future contribution step back from the market and put its free linked to the name in the current distri- capital to more profitable uses. bution context). This flow is largely The current emphasis on measuring brand dependent on the brand’s weight in the equity from the customer’s point of view purchasing decision: people may believe alone has its limits: it neglects the true playing that Total is a superior quality brand, but field, which is distribution, and its own may not take brand into account in their decision-making factors such as its actors (the choice of service stations, basing their shoppers). It is fine to measure preferential decision more on proximity or price. choices in interviews, but in-store the

Brand Brand Brand capital strength equity

Assets of How strong is Added profits the brand its competitive created by the situation brand now and in the future

Saliency, Market share mind share Perceived leadership and heart share Price premium among the population and trade (awareness, image, values, consideration, conviction) How many of its products are mandatory for the trade

Figure 6.2 From brand values to brand value 144 THE CHALLENGES OF MODERN MARKETS distributor’s brand is omnipresent and weighs The rise of the shopper more on decisions than it does in interviews. Moreover, the shopper is sensitive to price Studies like the one discussed above, on brand differences shown on the labels. equity and image capital, measure indicators Financial brand equity, the expected future that have a certain short-term inertia, whereas revenues due to the brand itself, will certainly choice behaviours are more versatile and depend on the brand’s assets (ability to make malleable. Despite the higher brand assets of itself desired, even preferred), but will also Coca-Cola and Danone (awareness, depend also on its ability to transform this evocation, perceived superior quality), desire into an effective choice on the shelves, behaviour is changing. This translates into a with a price differential, a premium (brand fundamental change: the rise of the shopper. strength). This is illustrated in Figure 6.3. Everyone knows of Procter & Gamble – the In the wine sector, many are questioning company that invented marketing and domi- the real financial value of wine brands: in fact, nates the mass-consumption markets. What they may have a good image, but on the shelf has its managing director, A Laffley, been customers will be tempted by novelties, repeating incessantly to all its teams for two incited to do so by distributors who promote years? Think about the shopper! This is a sign new and unknown brands, perhaps of New that the shopper might have been forgotten World wines. In addition, once customers in the daily reflexes of management; that have been introduced to wine via one brand, people have concentrated their studies too they like to discover others. Is this not a much on consumers and forgotten to under- market governed by disloyalty, linked to the stand this slightly different concept: the part pleasure of discovery? of themselves that, in a shop, wanders around, scrutinises, hesitates, then decides. The shopper is now the focus of all the The new brand realities attention at P&G. This is not an isolated phenomenon. The new brand management is the fruit of the A revolution is taking hold of life-styles in adaptation of companies to their new envi- our modern societies: what we call ‘shopping’ ronment. What are its facets? has become one of the three favourite

Price premium and store presence

Anticipated future revenues due to the brand

Ability to create and sustain brand performance and growth

Figure 6.3 Brand equity THE NEW RULES OF BRAND MANAGEMENT 145 pastimes at a time when television become exciting, surprising, full of emotions, consumption is systematically decreasing, as the key being the possibility of doing is reading. Everywhere, in Western cities as in business, enjoying oneself at the same time by Asia, we like to visit shopping centres; we like wandering through places designed for the to wander through arcades, malls, brand pleasure of – the shopper. shops, factory shops. Asian tourists visiting There is a tendency to confuse the concepts France expect only one thing after the oblig- of the consumer and the shopper. In the B2B atory visits to the Eiffel Tower and the Louvre: sector, they are two separate entities: the user a visit to the shops. Airports have become and the purchaser. Each has different criteria more than ‘air malls’: they are ‘air fashion and objectives, hence they also have conflicts malls’. of interest. The rise of the shopper is general: The French language is deceptive here: it shopping is therefore no longer a race, a uses the phrase ‘faire ses courses’ where the chore, but a way to exercise one’s talent and to English use the phrase ‘to go shopping’. The gain money by spending less of it. The French has retained the dimension of speed, consumer may declare a liking and respect for of counting time, which is in fact very appro- Michelin, but the shopper will leave a car at a priate for the kind of ‘duty’ shopping carried Norauto garage and pick it up with tyres from out in supermarkets. Modern working people Norauto. have even less time than before: buying Today’s shopper may be also a businessman groceries and household consumables is or woman. He or she enjoys brands and good something that must be done quickly, business. For all the industries that have therefore shoppers rush through the aisles of adopted the cycle of fashion as the economic the supermarkets and hypermarkets. Hence engine of annually renewed client desire, the the well-known figures of the average time reduced-price brand outlets represent an spent choosing a mineral water, a washing opportunity – to sell last season’s unsold stock powder or a shampoo. This is counted in rather than slash the prices at discount traders seconds:10, 12, 16, no more. or even in factory shops. Moreover, these sales To realise the modern frenzy of shopping, it deliver a true brand message, since they take is necessary to keep in mind the expression ‘to place in branded shops, where the brand can do the shops’, in the same way that one ‘does’ be expressed through the service and the staff a painting or a museum. in addition to the product and prices. Hence It is interesting to see that marketing shows the importance of staff training, so that each little interest in the shopper. Marketing talks contact with the shopper is an opportunity to only of consumers. The two are very different, leave a positive, durable memory trace. The like two faces of the same coin. It is always brand is built through contact. consumers who are consulted in telephone Shops, like internet sites, in fact become surveys and on the internet. It is consumers complete destinations for an afternoon full of who are scrutinised in focus group meetings, what is called ‘retail-tainment’, that is, the where everyone is collectively liberated, the fusion of ‘retail’ and ‘entertainment’. In mass comfortable chairs and canapés helping this consumption, the internet, the proliferation process. The consumer writes the list of of shopping centres, factory shops and brand products and brands to buy. It is the shopper centres convey a single fact: shopping is not who decides on the spot whether to take this necessarily a chore, but a leisure activity. or that. It is the shopper who has now become People can simultaneously find pleasure, so eclectic, and who passes from a large, excitement, and an opportunity to go out as a gleaming store to a discounter or a bazaar in group and to do business. Shopping takes on the same afternoon. As a result, shopping has the air of a safari, where people seek deals, and 146 THE CHALLENGES OF MODERN MARKETS good deals. Through their internet search to the time of day and week – more or less behaviour, or in the aisles, clients now set casual or elegant – and according to sex and their own price; they are not subjected to a age. Nevertheless, this does not fragment the price offering. They can decide whether to pay brand, since it has a highly compact central the higher price on the ticket, and be certain kernel, a very clear identity, symbolised by Mr that they have found the latest thing, and in Lauren himself and created in any Ralph the right size, or wait for the sales, but take the Lauren shop. risk of not finding the desired product, or The signs of fragmentation are everywhere: finding it only in the wrong size. 10 years ago, a best-selling book sold around 350,000 copies. Nowadays, even the winner of Markets are fragmenting, and France’s prestigious Goncourt only sells volumes too 250,000. Fragmentation poses an acute problem for the ‘product brands’. They are Traditional marketing also stumbles on the typical single product specialities: Nutella, pitfall of market fragmentation. The mass Mars, M&Ms, Orangina and Boursin are market is dead, even though we continue to examples. That is, it is a very specific product speak of ‘mass-consumption products’. It is that has a name, and this name belongs to enough to look at the figures: even for a only the one product (the inverse of this being product as global as Diet Coke, in this country the umbrella brand, which covers numerous 8 per cent of purchasers represent 40 per cent products, such as Nivea or Legrand). of its volume and more than half of its profits. Numerous groups have based their strategy What product can boast a penetration rate precisely on a portfolio of specialities, so their higher than 20 per cent? brands are product brands. Nowadays we no longer talk about It was a winning strategy until now: the segments, but rather fragments. The segment volumes of each brand made it possible to remains a valid notion at a macroeconomic justify a sufficient advertising budget to give level: in the car trade, there are the segments the brand visibility and to unleash sales. With B1, B2, M1, M2 and so on. These are divisions the fragmentation of the market, and of the car market according to the range level. therefore of volumes, the brand no longer has The car makers create a platform corre- access to the major media, for example tele- sponding to each segment, on the basis of vision, which contributed to building its which they will in reality build different success. The distributors, hypermarket and models, themselves divided into highly differ- supermarket chains, become aware of this and entiated versions, each aimed at a specific realise that the brand is not in such good fragment. You might think this is nothing health, or is investing less in its future. In time new: haven’t car makers always broken down many brands, despite being well known, no their basic model into multiple peripheral longer have an advertising budget anywhere versions (coupe, cabriolet, estate)? What is near large enough. They concentrate their new is that there is no longer a basic model. action on in-store , a Peugeot initiated this strategic approach and disguised special offer price, in order to uses it for each launch. Thus the 207 is support the turnover without which even launched in seven versions, all highly their presence on the shelf is under threat. specialised according to the life-style fragment They no longer invest in their brand capital: they are aimed at; but there is no more talk of that is, in the future. a basic version. How can companies escape from this snare Ralph Lauren has created more than 10 sub- created by market fragmentation? The brands or daughter brands targeted according product brand cannot do so with any great THE NEW RULES OF BRAND MANAGEMENT 147 ease. To modify a speciality is to change that of people to introduce themselves to each speciality. Is a Boursin cheese without garlic other. Some months later Google bought still Boursin? No. Another solution is to bring YouTube.com for more than US$1 billion. together several previously disjointed, This site is the home for the spontaneous separate specialities, each with its own production of video clips by millions of identity, under a common umbrella. For internet users. The goal is to provide the example the Berchet group, owner of toy public with My Google TV, the first totally a la brands such as Berchet and Charton, thought carte television service. of bringing them together under an umbrella In short, normal advertising communica- name ‘SuperJouet’ and promoting that. The tions now face a real problem in reaching Bongrain group brought together many of its their targets. People channel-hop, they get brands under an umbrella of ‘Weight Loss and up during commercial breaks, they are Pleasure’. online or on the phone or on their A different tactical approach, chosen by PlayStation. In France and in Europe as a groups that opt to maintain their presence on whole, you might think the situation has not television at any cost, is to adopt a short yet gone so far – but it has. The audience format for ads (10 seconds instead of the monitoring figures from Mediamétrie classic 30 seconds). This maintains the demonstrate this: 50 per cent of media frequency of the brand appearances, even consumption is interactive. with a reduced advertising budget. It is also France is at the forefront in making ADSL necessary to buy the advertising at the last (broadband) generally available, even in the minute in order to optimise costs, and furthest reaches of the countryside. What is communicate during empty slots of the day or known as Web 2.0, the second internet revo- night, when the home is typically deserted by lution, is the true one. The first was a revo- the ‘homemaker under 50’, and broadcasting lution of promises and visionaries. The time is therefore much less expensive. technology existed; it was going to change our Moreover, in this ageing country, this home- lives. Sadly, it was slow and the content was maker no longer corresponds to the core missing. Hence the disappointment and the target. The limitation of the exercise is that bursting of the dot.com bubble. In the the short slots can only provide awareness. It meantime, young people continued to is difficult to build the intangible quality of consume the internet, to create exchanges the brand, the true bulwark of brands, between themselves, to turn it into their through this creative format. preferred mode of communication. They are the ones who shape its content (via MySpace, Media fragmentation YouTube and the rest), not to mention the ability to have the world on demand. Every day a typical American has a choice Everyone can see how a youth clothing between 7,000 hours of television. The 32 per brand such as Quiksilver or a sportswear brand cent of households equipped with a TiVo can such as Nike could form part of the adver- not only watch their chosen television tising of tomorrow: on the internet, the brand programmes ‘a la carte’, pre-recorded and will be highly customised thanks to the infor- available exactly when they choose, but also mation collected on each internet user cut out all the commercial breaks. As for connected to MyGoogle TV, (for example, or young people, they spend hours every day on YouSpace). The advantage is less clear, the internet. It is understandable. In 2006, however, for Herta delicatessen products, or Google bought MySpace for the fabulous sum for Saupiquet tuna. This is why television of US$900 million. This site enables millions channels are trying to remain faithful to their 148 THE CHALLENGES OF MODERN MARKETS

etymology. What is a television channel? It is I The premier digital camera brand is not simply a link. Television is no longer the ‘mad Canon or Fuji but Nokia. woman in the attic’: it still has to re-demon- I 80 per cent of Koreans have a mobile strate its ability to be an audience aggregator. phone with a digital camera. This involves the production of successful series, of talk shows that mirror today’s I More than 15 per cent of internet users visit society, where everybody is telling their life blogs. story to somebody, like a case study to be I discussed collectively among households. Nearly 20 per cent of internet users give Sport is an ideal means for reuniting the their opinions on internet sites dedicated exploded audience around an intense to the evaluation of products and services emotional ceremony. We may also see a return by the clients themselves. to soap operas: the name dates back to the I Three months after the appearance of a 1930s, when soap brands financed consumer comment on the bikeforum.com programmes themselves, precisely in order to site from someone who was amused at attract the audience and justify their adver- having been able to open a lock with a Bic tising. This seems all but certain. What is ballpoint, and the circulation through the known as the convergence of Vine and blogosphere of an amateur film proving Madison, a term taken from Vine Street in Los this could be done, the Kryptonite Angeles, where all the film actors’ agents are company, which had spent 30 years concentrated, and Madison Avenue in New building its reputation in the United States York (the avenue for advertising agencies), on safety, incurred a loss of US$10 million announces that we are moving towards brand recalling all the vulnerable locks on the communication in a different form from the market. The same was true for Apple classic 30 seconds (Donaton, 2004). This is a following the creation of the site question not of ‘’, with Appledirtysecret.com, revealing the short- which we are familiar (placing the brand in comings of the iPod battery. Blogs start the story, such as Peugeot in Taxi 1, 2, 3 and conversations, and the traditional media 4), but of inventing a new form of brand pick up on them. expression. I With a click on priceminister or kelkoo, With technology, the consumer has you can find out where to buy cheaper. seized power I With a glance at epinions.com, you can find out what other people are thinking. Technology is the consumers’ friend: this is why they have adopted it. In fact, it has All traditional marketing was founded on the modified their relationship to manufacturers, asymmetry of power in the manufacturer’s to controlled or official information, and favour. Customers found it hard to become therefore to political cant. This revolution has well informed, and therefore based their an impact on brand management, which buying decisions on the familiarity of the must also integrate this freedom technology. brands, small distributors were grateful to Some key figures are useful to depict the the major brands for letting them deliver new world that brands inhabit: their goods, and competition was waged by every means except on price. This is over: I More mobile phones are sold worldwide the consumer has never had so much than . power. THE NEW RULES OF BRAND MANAGEMENT 149

This is also true of B2B clients: involved, required not to purchase but to act as advisors, the more a genuine link, a I They are rare, and know it. They like to be genuine community will be created around seduced by a mass of brands that are often and with the brand. neighbours. Web 2.0 has set the seal on client or consumer power. The internet is no longer I They are informed: today everything is visionary or prophetic: it is easy, practical, known. They can search online to find out abounding in services and information or what is thought about such and such a games. Blogs have become the truth of the product by looking on e-pinion sites, market, the true consumer magazine, while consulting their sector community and so the brand websites, and in particular on. They can easily find the best vendor consumer magazines on glossy paper, are the sites where the product is sold for less. The ‘official’ truth. (see also Figure 8.3.) frontiers of the company and the brand are now porous. This is why IBM prefers to authorise certain key people in the The era of the choice economy company to create their own blogs, which Every 10 years or so, it is claimed that open it up to the flow of questions, and at consumers have changed. Nothing of the sort the same time make it possible to gain has happened. It is the choice that has familiarity with what is being said. changed. It is the information that has I They can form blocs, and exert pressure on changed, as a result of the technology made the company through collective internet accessible to everyone. Previously, the range action, their virtual community and e- was restricted to a few ‘me-toos’ from similar lobbying. The impact of iPoddirty competitors. Marketing was the art of making secret.com, which alerted all fans to the war while avoiding a price war. battery problems of the first iPod, is well Today consumers have the choice of an known. economy brand. They are confronted with considerable price differences for products, I They have acquired a communicative, none of which are poor quality. By dint of participative, interactive culture. This leads manufacturing everything in China or to new opportunities for brands, which will Romania, the differences between branded cease to work as before – ‘for customers but and unbranded products are reduced. without them’. Nowadays involvement is Moreover, the internet renders the offer trans- at stake: the more customers or prospective parent. This is the end of one of the brand’s customers are involved, the more they previous levers of power: a lack of familiarity nurture a genuine engagement with the on the part of customers with the available brand. choice, leading them to favour the recog- nition factor of the brand. Blogs now give The goal of any brand is to make each back to the markets the function they had customer a member, part of a virtual club of lost: that of genuine discussion between which he or she is not the centre, but where consumers, as in the of yore. the customers’ preoccupations, and their Cold hypermarkets had killed all discussion: interests, are at the club’s core. It is necessary blogs initiate discussions and the media then to go beyond the notion of technical, rela- diffuse them. tional marketing, which is admittedly useful, What, then, is left to the true brands? Two but which, like any technique, bypasses the things: product innovation and the intangible essential. The more customers feel listened to, factor. Consumers today look at brands as 150 THE CHALLENGES OF MODERN MARKETS products: it is necessary to prove their advan- community of designers and creative people tages in order to justify the price premium. At who supported Apple in its lowest periods. the same time, in the era of the mass society, Today in the United States the talk is all of there is a demand for personalisation, for ‘’. Marketing plans are services, and also for social differentiation highly differentiated according to whether through image. At its extreme, it is a search for they are addressed at African-Americans, the superlative life through the intangible, Chinese-Americans, or Americans of Hispanic pure image and luxury. or Puerto Rican origin. Another facet of the choice economy is What does the notion of community add to what Alderson has called ‘the long tail model’. the notion of segment? Why not simply talk The editor-in-chief of Wired magazine was the about the Chinese or Puerto Rican segment? A first to draw attention to the fact that the segment is a marketing abstraction desig- internet would put paid to the hit parade. It is nating people with the same profile or the because physical shops existed that hit same expectations. In contrast, a community parades of songs, or books, had to be created. is a living group, daily weaving new links It is highly expensive to stock books or CDs, through communication, exchange and and it is better to stock only a few, with a high participation. A community exists, lives, turnover. However, if music and books are grows and has an identity. A segment is downloaded, the cost of transport and defined and measured: it agglomerates. The stocking becomes nil. From this point of view community expresses, and brings together. any song, any book, even the least well The power of communities is admittedly known, now has the same ease of access as a not new: the cases of Absolut and Bombay hit. The hit parade is therefore no longer Sapphire prove it. However, the internet has necessary to the economy. Perhaps it is still given a new perspective; communities are necessary to society. We have seen it, indeed, beehives of communication. The internet is with sites like Myspace or YouTube, where their medium, as are mobile phones. The spontaneously created music circulates over power of communities therefore ceases to be a the internet. As the slogan says, ‘the world is sociological abstraction, or a recuperation now on demand’: likewise with Google, every- technique: it becomes a true lever, if the brand thing is now accessible. knows how to put itself at the community’s The era of the ego-economy is possible: disposal. For example: people creating their own programming via iPod and iTunes are the demonstration of this. I Telephone brands invest in services to be Hence the success of these alternatives. This is supplied to communities of football fans, how to manage products successfully now: by or of a particular football team (Manchester multiplying the accessories. There are several United has several million devotees). thousand possible accessories for an iPod! I Danone, via the ‘Danone and you’ website, Mini has based its advertising on ‘make it your puts itself genuinely at the service of Mini’, as has Dell. mothers of young families. The power of communities I The aluminium extrusion brand Technal has created a new profession, that of the Nowadays it is no longer consumers who aluminium worker, and places itself at its build brands, but communities. It was New service. York’s gay community that made Absolut a I The La Roche Posay brand stakes the centre success, whereas that of Los Angeles made a success of Bombay Sapphire. It was the of its communication activity on the THE NEW RULES OF BRAND MANAGEMENT 151

effective involvement of the dermato- processed meat aisle for example, it would be logical community. Herta Knackis, or Herta pate, or Label Rouge ham from Fleury Michon. I Quiksilver, Oxbow and Billabong strongly One solution to this problem is to exit the involve and become involved in the world shelf, and to move towards the client through of true surfers. promotion, through putting oneself forward. I Nike has created true niche marketing by This is the strength of Ferrero. This discreet becoming involved in the streets, with Piedmontese family company is a model of rappers or with the different tribes within growth and serenity in the mass-consumption each sport. field. Its well-known European brands are Nutella, Kinder, Mon Cheri, Rocher, Tic Tac and Duplo. Kinder is a brand systematically The limits of mono-distribution highlighted in hypermarkets. It is a question of moving towards the client, rather than Coca-Cola’s strength is its multitude of distri- expecting the client to come to the shelf. bution channels. Danone’s weakness is its Thanks to its extensive range, Kinder can mono-distribution; the bigger stores are over- economically create massive aisle-end represented in its turnover. It is possible to displays, or autonomous displays installed far follow a strategy associating the brand with a from the core shelf. Moreover, while most single distribution channel: this is the very mass-consumption brands are reducing basis of the l’Oréal group’s success. L’Oréal, investment in their sales force, encouraged to however, has turned its brands into indispen- do so by mass distribution and its centralised sable brands in their sector. This is no longer management logic, at Ferrero they understand the case for the Wal-Marts, Carrefours, Tescos, the importance of constantly watching over Targets, Dias and so on. In fact the major the total visibility of their products, whether stores are now promoting their own brands, they stand out on the shelf and so on. by providing them with a shelf space greater The other solution pursued by all brands is than their market share. This reduces by the the diversification of distribution circuits. same amount the visibility of branded Thus we find soft drinks on sale in bakers’ products. As everyone knows, if a brand is not shops, on trains and so on. In the same vein, highly visible on the shelf, it is as if it had certain brands have attempted to re-enter the never been distributed. hard discount distribution circuit, from which Now in traditional marketing, in addition they had been excluded almost by definition to a superior product, it is necessary to have by the founders of the concept – the German enlarged distribution. In mass-consumption chains Aldi and Lidl. It was still necessary to goods, visibility on the shelf is vital. Of course, have a product that could not be substituted fanatical clients will come looking for a brand and to insert themselves into the need for that is not readily visible, but the others, the differentiation of one of the actors. This is majority, will not make the effort. In order to currently the case. escape this bottleneck, it is necessary to know A non-substitutable product is a product for how to compensate for weakness on the shelf which, if it is not in-store, the client does not by means of faster turnover. This is capable of buy anything else in its place: this is the case bringing an overall margin to the distributor for mini Babybel cheese and Kinder Surprise that makes the branded product attractive. candies, for example. From this point of view, This supposes that the brand owner has a star offering such goods on the hard discount product in its range, a leading light on the circuit could prove interesting for the shelf, an indispensable reference. On the distributor, since it offers customers a genuine 152 THE CHALLENGES OF MODERN MARKETS service but does not tread on the toes of their into mass distribution was based on a double own products. On the other hand Lidl, diagnosis of the distribution: number two in the market, which conse- quently has higher costs than Aldi, needs to This shelf does not earn money: it is find a source of profit through a few brand necessary to give it value through inno- references, in order to remain competitive on vation. price with the market leader Aldi in terms of essential products. This shelf is typically threatened by hard discounters. We have entered the B to B to C phase Renova therefore did not arrive as a product but as a new partner for each The first edition of Philip Kotler’s seminal distributor/retailer, primed with a double offer. book Marketing Management in 1971 dwelt on At the top of the range it offered hydrated the revolution of B to C: the marketing share paper and soft paper, and at the bottom of the of the end client. Thirty years later, new real- range, the ability to maximise offers (12 for 8, ities have arrived and this notion must be 24 for 18). This promotional range was amended. In many sectors, we have passed presented pre-packaged on wheeled stands. from B to C (business to consumer) marketing In The Devil Wears Prada, Meryl Streep asks to B to B to C. We need to integrate the whole where her Jarlsberg is. This is the name of a chain into the discussion, and ask ourselves famous Norwegian cheese, not dissimilar to what added value we bring to it. Emmental. Its market share in the United The brand that does not have the luxury of States, where it has been sold for at least 40 independent distribution of its own must first years, is considerable. What was the key to its of all consider the manner in which it will success? The fact that its roundels only weigh help the distributor/retailer to reach its own 10 kg, whereas the Swiss ones weigh 30 kg, so objectives. It is the distributor that must be it is easier and more economical for stockists. convinced first of all. What is the use of a It is through understanding the trade’s expec- ‘major brand’ if it does not appear on the tations that Jarlsberg has made allies. shelf, like all the other brands that have disap- Everyone has heard of the phenomenal peared, not because clients no longer like success of Yellow Tail, the Australian wine, in them, but because they are no longer strategic the United States. Nobody doubts that it is a for the distributors or retailers? good product, suited to the market, at a good In a rolling market, for low-cost products price. Still, this was a wholly unexpected such as toilet paper, or paper for other uses, an success. The Australian maker, Casela, examination of a supermarket shelf might however, had had two good ideas, typical of a lead us to ask where the ‘major brands’ (Lotus, good B to B to C understanding of the market. Kleenex, Charmin, Trèfle) have gone. They First, it gave shares to the US distributor, have all been replaced by Carrefour, Tesco, which motivated it to promote the product Sainsbury and other distributor brands There everywhere in the US specialised distribution remains only one manufacturer brand, Okay, sector, and second, it fixed the price at a level positioned on its price/quality ratio. The that allowed it to pay these same distributors Portuguese brand Renova, however, managed even more than the competition. to retain this market. This SME first The indisputable fact that brands that no conquered its domestic market, then Spain, longer have their own distribution circuits are and now European mass distribution. Its entry in fact engaged in B to B to C marketing is not THE NEW RULES OF BRAND MANAGEMENT 153 given enough recognition. It is time that the where Yellow Tail arrived years after Jacob’s distributor ceased to be considered as a Creek, its strategy did not work. It was Jacob’s ‘distributor’. This word stems from the vocab- Creek that enjoyed the pioneer effect with its ulary of logistics, like stockist, dispatcher or new business model. wholesaler. A distributor is above all a retailer Easyjet and Ryanair are more than just new with its own differentiation strategy, and and reassuring brands at low prices. They offer a therefore its own brands. It is necessary to radically different business model, that the envisage it as a partner, and to start from its regular airlines are unable to copy, since it is so key problems, which are the same as those of widely opposed to their own model. This is why the brand: the differentiation of its name, British Airways failed with its subsidiary, Buzz (it creating loyalty to its name, and profitability. was perceived as a subsidiary however inde- It is concerned with the profitability of its pendent it actually was). In contrast, British own company, not of Danone or l’Oréal. Airways exploits to the fullest the structural There is no point, therefore, in multiplying advantages of the ‘hub’ business model, which the studies on brand awareness or brand offers great flexibility to international travellers. equity at the final client level if the brand is The fundamental lesson to be learnt here is no longer referenced in the supermarket. Bic that the brand is not a self-sufficient asset. By suffered the same misadventure in Europe in itself, it can do nothing: it is therefore condi- tobacconists and service stations: they have tional. It only produces its effects in inter- no need for Bic lighters, and prefer Chinese action with the business model that supports lighters that are more fun, cheaper to buy and it. This is the case for all successful new sold at the same price. The ‘strength’ of Bic in entrants: Dell, eBay, Google, Zara and so on. the European market was in fact an illusion: Take textiles as an example. Everyone for lack of other competitors, Bic was the only emphasises the extraordinary rise of the Zara one to be found. For the past five years, brand worldwide, providing high fashion at however, Chinese competition has arisen, low prices. To make this possible, however, it with a differentiated offer that has seduced was in the mode of management that Zara retailers, so they no longer sell only Bic really innovated. It managed to destabilise all lighters. Bic, enjoying its position of near- those low-price competitors, such as Promod monopoly, preferred to make profits rather and Kiabi, that ran on different business than strengthen its brand among end clients models and therefore were not able to adapt. (by telling them for example how a Bic lighter Zara is based on the fast turnover of small was better, and much safer), and the end stocks of each item. The shortage of each customers saw no reason to complain when garment is organised as a system of desir- Bic lighters disappeared from the shelves. ability promoting regular customer return to the shop. It treats the shop as a theatre stage, does no advertising, and has a remarkable Brand or business model power? system for eliciting qualitative information on the latest customer expectations. On the other Yellow Tail offered more than a new brand, hand, unlike its competitors Zara does not however: in the United States, it provided a manufacture its clothing in China, in which new business model based on distribution. case it could expect only two deliveries per This was the number one problem to be year. It needs greater flexibility, which can resolved in the United States, bearing in mind only be obtained through a swarm of dedi- that there are three levels of distribution cated SMEs producing goods close by. there, as opposed to only two in Britain. The In mass consumption goods, it is notable revolution was the business model. In Britain, that German-style hard discounters offer a 154 THE CHALLENGES OF MODERN MARKETS better quality/price ratio than cheap products and that was not sufficient to make the oper- launched by the supermarkets in an attempt ation profitable. Virgin’s brand capital is not to resist them. This is due to their business self-sufficient. model: the Germans launched on the basis of Other brands, such as Red Bull, have sought long-term agreements with reputable manu- to bet on distribution channels in compe- facturers, who could then invest in the tition with the supermarkets in order to either production of a very restricted number of loosen the stranglehold, or bypass it. The products. This therefore reduces the cost great good fortune of ready-to-wear clothing price, but the products remain of good brands with their own points of sale is not quality. The supermarkets for their part are accessible to many mass consumption resistant to anything that ties them to a single product brands. They nevertheless seek to use supplier in the long term; their business other circuits as levers of prescription, even of model is based on being able to permanently sales. Thus, Roquefort Papillon owes the dura- exert pressure on their sources, and change bility of its premium image to the fact that it them at the first opportunity. There is a funda- was launched exclusively in cheese shops at mental difference between buying the time when the market leader, Société, was merchandise at the lowest price, wherever it betting on mass distribution. In order to may come from, and creating an industrial create a shampoo brand today, it is best to and logistical system to produce a product of begin from a hairdressing label and create a acceptable quality at half the price, from complete range under licence in this name, reliable suppliers. sold in major shops: this business model was It is therefore time to recognise that the created by J Dessanges for l’Oréal. It has since great novelty of the 1990s was the appearance been taken up by J C Biguine, J F David and of radically different business models, others. At l’Oréal, every brand in fact has a opening the market to previously unknown different business model. and innovative actors. The brands already in place proved no barrier to their entry, since the newcomers’ business models completely Building the brand in reverse? overturned the range available. They provided value innovations. The brand is an active In the traditional model of brand conditional: it depends on the quality of its construction, the work is done in stages: first business model. Now, to struggle in ultra- the product, then the distribution, and finally competitive circumstances, it is therefore the marketing communication. The problem necessary to become more strategist than is that, during the second and third stages, marketer: that is, to integrate the brand into that is to say late in the process, it becomes an original and effective business model. clear that there is not enough money for The error of Virgin Cola in the United States advertising, not to mention that there are and Europe was to believe that its brand increasing doubts about its efficiency, if not its would be enough, and to opt for roughly the effectiveness. This then harms the credibility same business model as Coke and Pepsi, of the proposal made to the distributor. In without the resources and practices that it fact, mass distribution sells access to display implies. In the field of mass-consumption space and ‘associated services’ dearly – in the goods, modern marketing is no longer B to C. form of pre-margin and post-margin – which Virgin believed in the consumer. However, it further eats into the advertising investment. was the distributors that wanted none of it. Perhaps it is time to review the process The product was distributed only through itself? C Boutineau, managing director of Monoprix and Auchan in France, for example, Bongrain for many years, suggested the THE NEW RULES OF BRAND MANAGEMENT 155 concept of the brand in reverse. He is right. maximum creative freedom. These films circu- Rather than falling at these two hurdles, lated on the web and reached their intended would it not be better to begin with the addressees a thousand times better than any hurdles and build brands constructed to mass advertising campaign. It was even better overcome them (that is, contagious brands)? that everyone to whom they were passed First of all, could not rumour and word of knew which of their friends were BMW fans, mouth come to the rescue of the brand, taking or at least fans of beautiful cars. up the slack left by the faltering budgets? Japan Tobacco has become a leader in the Since my team’s work on the effectiveness of launching of new brands, such as Sakura, word of mouth and rumours (Kapferer, 1987, without advertising. It has access to a mega- 1991 etc) has become internationally known, database (bringing together several million this question is regularly asked of us, and Japanese smokers), and this makes it possible constitutes a frequent theme for management to send a high-quality boxed set, such as only seminars. In reality, in order to make a brand the Japanese can do, to very precise segments. contagious – that is, to transform its first This presents the universe of the Sakura clients into spontaneous, zealous ambas- brand, and encourages them to try the sadors – it is necessary to conceive the brand product. Nespresso has also used reverse in this manner from the beginning. You need brand building. to make it contagious, not through a viral In the automobile sector, Toyota launched marketing artifice, but intrinsically, through its Xion brand to young people without mass the idea that it represents or the experience it advertising. Mini did the same thing. Swatch, provides. less so. It is at the moment of conception of the Pernod Ricard excels in its ability to build product or service itself (of choosing a name, a brands with very strong foundations, thanks packaging and so on), that it is necessary to to the emphasis placed initially not on adver- inject the power of contagion, and not at the tising, but on direct relationships with the bar end, when it is too late. The keywords of trade, where its products are consumed, and contagion are strong idea, strong experience, where numerous, repetitive and very well- interactive direct relationship, emotion and managed events leave a durable emotional opinion leaders. It is interesting to note that trace on customers, at the same time as they in order to relaunch Converse, Nike did not understand the new product, and how to use use an advertising blitz. On the contrary, it it. In order to stage-manage a brand, it must favoured intimate, community media, and have a base: it needs to embody an idea, a the direct involvement of customers, whose strong idea. works contributed to the online Converse Gallery. When the US marketing manager of BMW The power of passions was asked how he planned to reach his sales objectives, he claimed he already had the The brand is everything that makes a product means to make them: the simple rise of more than just a product. It is in this that the current clients up the range. His role, he brand differentiates and makes itself incom- added, was to make sure that young parable: it renders the competition uncompet- Americans dreamt about BMW when they fell itive. Of course, this process often begins with asleep each night. This long-term marketing a new and highly innovative product. This is strategy led him to use the internet to carry the basis, for example, of medical brands, or long and very original films, created at his high tech, or fashion. Dell is a distributive request by famous directors with the innovation. In mass consumption, Sunny 156 THE CHALLENGES OF MODERN MARKETS

Delight was a great product launched by on the idea of preference. This stems from the Procter & Gamble. With the help of chem- fact that for many academic researchers, istry, it was possible to give an incredible taste fundamentally a brand is a product with a experience without the need for real orange name. It is true that if people are forced to juice (although orange is included in the choose between two products, they do indeed recipe, in those countries where it is in compe- express a preference based on the attributes of tition with Orangina). However, copies these products. Apple’s iBook is preferred to a quickly arrived on the scene: under distributor Toshiba Tectra because it is more attractive, brands, for example. What makes the brand has more exciting colours, and makes it incomparable then ceases to be exclusively possible to do this or that more easily – and the product or the service, but the idea that moreover it is an Apple. An iPod is more than accompanies it: the intangible. an MP3 Walkman with specific characteristics. This is why the major brands are all brands To own an Apple is an affirmation of self. Its that have a vision, that are not culturally empty. users engage with their self-concept and their They are based on an intimate and personal ‘big internal image, in relation to others. In the belief’ (Edwards and Day, 2005), which they same way, driving a Volvo truck or owning a make real through their products, services, fleet of Volvo Trucks is not the same thing as customer relations and marketing communica- driving or owning an Iveco. Too many brands tions. This strong idea, which energises all the only aim at preference via product or service brand’s activities, is communicative: it is the characteristics. Are not great brands, however, source of all conscious or unconscious adher- a big idea that is made real in products and ences. In its day, Benetton was far more than services and attention to the customer? The sweaters in all the colours of fashion; it was the whole identity process is aimed at identifying brand of tolerance and openness to all the this big idea, or essence of the brand, and then colours of the world. Admittedly, perhaps 50 transforming it into effective behaviour. per cent of clients entering a Benetton store saw Fundamentally, therefore, it is the intangible nothing but sweaters like any others, in a that must guide the tangible. similar colour. This is normal: the aspirational capital of a brand is not built through the whole of its purchasers, but on a very small part. Then Beginning with the strong 360° the mechanism of social contagion will get experience under way. Today the brand must aim to be more than a If managers think of the brand in a ‘top down’ ‘preference’ and reach the level of passion. To manner, beginning with its essence and its do this, it must itself be passionate. All entre- values, then moving towards the tangible, its preneurs would like to change the world in concrete activation, consumers proceed in the their own way: they tap into this energy to opposite manner. They begin with the make it contagious, a source of passion in tangible and the perceived. Everything begins others. For Biotherm, truth is found in water, with the concrete experience: I only believe and in plankton. For l’Oréal, women’s what I see and feel. happiness can only be found in science and its I am indebted to my colleague at Columbia ability to turn back the years. Toyota puts University, B Schmitt, for bringing my product quality above all else. If Nissan expects attention to the experiential dimension of the first and foremost a low price from its suppliers, brand (Schmitt and Zhang, 2001; Schmitt, Toyota never mistakes its own priorities: 2003). The brand is lived, felt, touched or obsessive quality comes before everything. heard: this goes without saying in the airline In marketing, consumer modelling focuses industry. Our impression of Air France or THE NEW RULES OF BRAND MANAGEMENT 157

Singapore Airlines is built during the 12 hours I Champagne makers offer visits to their of the flight from Paris to Tokyo or Singapore, cellars where the mystery of creation can be through contact with the onboard staff: they felt. are the brand during those hours. The Air I Société Roquefort constructs its cellars as France brand, however, is also tied up in the 3D shows in stone in order to accentuate treatment of customers in telephone contacts the perceptible visitor experience. with reservations, by ground hostesses, when things go well, and when they go badly and I The fabulous ascension of the Pernod there are delays. Understanding the percep- Ricard group stems from its progress into tible dimension of the brand makes us forget experiential territory. The core of brand the product alone, in order to take into investment goes on organising events in account the sum total of the client experi- bars, cafes, hotels and discos, based around ences on contact with the brand. Michelin is the brand’s values, its history and its not just tyres, nor is Citroen just cars, or Nivea imagined qualities. just a range of hygiene and care products. The I The Fedex brand has identified that the Michelin brand is built experientially through delivery person who comes to pick up the its sites, its advertising, its news on such and sealed envelopes or delivers them is the key such a strike at Clermont Ferrand, the town personality in the Fedex experience for where its headquarters are located, Formula 1, companies. To this is added the ergonomy but also through the Michelin Guide and the of the website for tracking letters and friendly Michelin Man that organises events parcels, the call centres and so on. during the holidays. Brands that are only products must add an I Sponsorship is also a perceptible expe- experiential dimension that will involve the rience: visually associating the brand with client. Involvement is the prerequisite for an event, a sporting team or the like. engagement with the brand: that is, a true I Donations to good causes can demonstrate affective loyalty and not a repeated purchase the brand is not insensitive to the world for the sake of gaining miles or points. How around it. can this experiential dimension be created? Finally, everyone will have noticed the I Putting on l’Oréal make-up is a true ritual, tendency of brands to create a brand universe using little tubs and pots which are beauti- for themselves in increasingly large sites, fully thought-out and decorated. designed as experiential places, where the client feels the brand 120 per cent. Louis I Danone gives personalised health advice Vuitton opened its two biggest shops in the on its ‘Danone and you’ website. world in Tokyo on 31 August 2006, and in I Car makers are now highly attentive to the Shanghai in 2005. On 19 May 2006, a riot experiential elements (door noises, softness took place on Fifth Avenue in New York at the of the leather, position of the armrests and opening of the Apple Megastore, beneath a so on). giant glass cube, opposite Central Park. Open day and night, clients can find all their iPod I Complaint handling is increasingly prac- accessories here, and enter into discussion, tised in advance. Scripts are prepared so that not with salespeople, but with Apple experts, the response reduces the negative effect, or all of them very young, and able to answer all even leaves customers satisfied, and so technical problems. surprised by their good experience that they Every Ralph Lauren shop could be Ralph become ambassadors for the brand. Lauren’s own house, with mahogany 158 THE CHALLENGES OF MODERN MARKETS furniture, carpets, sofas, armchairs, pictures rience? and photos, all aimed at creating a fake ‘true’ Now all product brands audit their sales history (not everyone can be Lacoste). points in order to turn them into experiential Remarkably, this perceptible Ralph Lauren and sensory levers in five dimensions. These ambience is also reproduced in the simple are also crucial links for customer relationship corners of the brand. managers (CRMs), who must connect to the Tomorrow, just as there is a first division customers’ preferred points of sale if the rela- and a second division in football, these new tionship is to be converted into sales. brand cathedrals will sort the major brands from the small brands. The company must be more human, more open Beginning with the shop We are indebted to Franklin D Roosevelt for All the exemplary cases of recent success, those the quotation ‘We have nothing to fear but that are praised to the skies worldwide in fear itself.’ In fact, one of the reasons that management seminars and symposia, are people had not explored the unknown seas brands that have integrated distribution into before the great explorers of the sixteenth their value offer. This is the case with Starbucks, century did so was the fear of this unknown. It Zara, Amazon, Dell, l’Occitane, Sephora and so was thought that there were chimeras lurking on: they are all equally brands and distributors. there. The same is true of genetically modified We go to Zara in order to buy Zara. organisms in France today: fear dominates It is interesting to note that Starbucks, Zara, thought and action. Amazon and Google, to mention but a few, For brands, a new reality is making itself did not bother with advertising. On the felt: the technology is there, it will expand, contrary, they invested in training, men, and it has already been adopted by the women, architecture, the sensory contact, customers themselves. It must therefore be ergonomy, touch and the like. used, and made into a friend. It is under- It is revealing that all the stars of modern standable that brands fear technology: it management, presented in all the profoundly changes all consumers’ habits, management seminars, are brands whose and above all gives them power. shops are a source of enjoyment for the Recall certain inescapable facts: shopper: through the environment, choice, I More mobile phones are sold worldwide atmosphere and so on. We were already than televisions. Does the brand’s media familiar with Galeries Lafayette, FNAC, the strategy take this into account? Virgin Megastore, IKEA and Nature and Discoveries, but we must now add Sephora, I In developed countries, the under-35s the Apple Store, the Nike Store, and the new- spend more time on the internet than look factory shops that have consequently watching television. become destinations in themselves for a busy I In the United States, Americans spend afternoon of what is now known as ‘retail- more time on video games than at the tainment’. cinema. What is the impact on brands? The brand today is built through retail. What use is I More than 15 per cent of people who use recognition if the brand is not to be found in the internet read blogs. distribution, or even if it passes unnoticed or does not create a value-added shopper expe- If during the first internet revolution there THE NEW RULES OF BRAND MANAGEMENT 159 were only prophecies, Web 2.0 makes its mark diffusion. The conversations, however, are because the internet works, is used every- also the best way of getting to know each where and makes money. The characteristics other better, and of appearing human. They of our world can be summed up in four words: are a way of bringing down the barricades of on demand, interactive, collaborative. mutual ignorance. The image of Microsoft in the United States has changed a great deal I Nowadays everything is provided on since Robert Scoble, a Microsoft employee, demand. With Google, everyone finds created his blog in 2004, attracting the visits what they are looking for. On iTunes, and participation of nearly 3,500,000 people. people can find the tune they have been Robert Scoble believed that Microsoft’s image seeking for years without success. On was too far removed from what he experi- tomorrow’s television, we will no longer enced within the company: it was not the ask what a channel is showing this ogre, the demon that others described it to be. evening, but say, ‘I’d like to see a Clint He was not a communications director, or a Eastwood film. Where is one being shown?’ or marketing manager. He did know how to create a community around his I Nowadays the audience have developed a blog, a trust connection. Since then taste for interactivity: they no longer wish companies have come to understand the to be passive. They want to participate value of these spontaneous corporate ambas- actively, give their opinion on everything sadors: they give the company a human face, and read the opinions of others. Blogs and and build a trust network with the forums help them to do so. community they create. I The new generation is collaborative: they help one another, and remain switched on in order to continually seek the opinions of Experimenting for more others. The blogosphere is a world of efficiency . Everyone’s opinions on everything are exchanged, circulated, and When we talk of the impact of technology, we diffuse like viruses. too often mention high-tech companies. Personally, I wonder each time: what does this For marketing, things have now come full mean to the managers of Fleury Michon, a circle. Marketing was born from the end of company from Pouzauges in the Vendée, the physical markets. The merchant and market- French number one in superior-quality ham place discussions between customers were and fresh pre-cooked meals? We can dream for replaced by self-service and television adver- a moment or two, but does all of this have a tising. Now with the internet and 3G mobiles, genuine connection to their business, and the other people’s opinions are accessible about difficulty of maintaining that number one everything. The brand no longer has the position, faced with distributor brands that monopoly on communication. Wishing to instantly copy all good ideas, and hard control everything, it must now compound discount products that are twice as cheap? with consumer, or customer, power, the power Should they continue with the traditional to broadcast another truth: their own. It is the television spots promoting their Red Label end of broken product promises. It is the end ham slices? Are there not two worlds? Should of unethical or non-citizen brands. we be asking ourselves whether the home- The internet and blogs have revived conver- maker is really high-tech? sation with an unequalled power: rumour and It is true that it is easy to escape into the word of mouth now have a weapon of mass technological dream and Silicon Valley. 160 THE CHALLENGES OF MODERN MARKETS

However, we need to recall that since 2003, I 70 per cent of investment relates to current Coca-Cola has reduced its television adver- pillar products, best-sellers, in order to tising investment by 10 per cent and brought strengthen them; a wholesale innovation in terms of media. I 20 per cent relates to experiments to test Thus it competes with iTunes in Spain and in new ways of marketing, and promote these Britain with the mycokemusic.com website. products along the way, due to techno- Coca-Cola invests in the domain of video logical progress: this is a matter of seeking games, and product placement. Its media efficiency; plan still follows its clients closely: the mobile phone has become the major point of I 10 per cent is spent on projects that have contact. no relation to current business. Returning to Fleury Michon: if the pene- tration of its fresh, vacuum-packed ready- Coca-Cola has been reducing the share of tele- cooked meals is 10 times less than that of its vision investment in its marketing budget for ham, should the company run television some time. Since television is no longer the advertisements for those products? Would it preferred medium of young people, but has not be better to be referenced on all the been replaced by the mobile phone, it is important female-oriented websites, or work necessary to adapt and to test other modes of on micro targets such as: communication. Coca-Cola is constantly experimenting: in Spain and Britain it has I parents of students who do not have time launched mycokemusic.com, in competition to cook meals in their college rooms; with iTunes, thanks to an alliance with a major player in the telephony sector. Coca- I children of grandparents who no longer Cola has also invested in space in video have the energy to cook their meals every games, product placement, proximity events day; and street marketing, in addition to its B52s of I partners or spouses who are going away sports and music sponsorship. and wish to leave high-quality meal solu- tions; I singletons of all ages. The enlarged scope of brand management How can they be involved, induced to partic- ipate, affected? Brand management itself is much influenced Nowadays market share is built through an by the revolution that has shaken marketing aggregate of niches, of distinct groups. theory and practice: a shift from a mere trans- Technology has finally made it possible to actional perspective to a relational perspective. reach these targeted groups at low cost. It is This has led theorists to ask new questions, and not a question of replacing 100 per cent of propose new working methods, new modes of television advertising with a 0 per cent tele- thinking, new tools, which often claiming to vision budget from one day to the next: even be substitutes for the former ‘old’ ones. Apple, the queen of Silicon Valley, has not done so. It is, however, time to experiment From transaction to relationships and see whether the returns on each euro invested are not better here than there. Traditionally marketing focused on consumer For example, at Google, the 70/20/10 rule is behaviour: it aimed at influencing choice. Its used to describe three types of investment: focus was on understanding purchase, and the THE NEW RULES OF BRAND MANAGEMENT 161 choice criteria that prompted it, whether they created the means to meet this demand for were tangible or intangible, product-based or more and more efficiency in tracking, image-based. Its tool for influencing demand analysing, servicing and selling to each one of was the marketing mix, with its sacred four Ps: these important customers. product, price, place and publicity. Marketing Of course, these two approaches are research aimed at identifying the attributes complementary. The best loyalties are not that predict purchase, and its typical statistical based on mere calculus and loyalty cards: they tool was a multi-attribute model. are internalised as voluntary loyalty, as brand Segmentation is another key concept of trans- commitment. On the other hand, weak actional marketing: recognising that transac- brands need to start somewhere. Behavioural tions are facilitated when expectations are loyalty programmes create the conditions for higher, and the mass market has been deepening the customer–, segmented into groups, or types with similar and create emotional connections between expectations. Then brands could be profiled consumers and the brand. and created to meet each set of expectations. Because competition is fierce, imitation From purchase to satisfaction and rapid, and consumers sometimes seemed experiential rewards overwhelmed by these very tightly tailored proposals and brands, the focus of marketing Another consequence of this shift towards has moved from conquering clients to post-purchase phenomena is the focus on keeping them, from brand capital to customer product/service satisfaction. How does what capital. The new buzz words of good efficient the product/service delivers match the expecta- brand management are share of requirements, tions of the consumer? How can this satis- shared loyalty and CRM. The focus is on faction be raised, improved relentlessly? In this building lasting relationships through time, process the conditions of the consumption and on post-purchase activities, all of which is situation need to be taken into consideration. subsumed under the term ‘relationship A product is always consumed in a context. The marketing’. The focus of research has moved nature of this context affects the degree of satis- from predicting choice to classifying the faction that the customer reports, through the different types of relationships consumers notion of a ‘rewarding experience’. In fact all have with brands (Fournier, 1998), or the marketers have known for a long time that different types of interactions companies food served in a pleasant atmosphere is judged engage in with their clients, beyond selling a to taste better than food eaten in unpleasant product or service (Rapp and Collins, 1994; surroundings. Philip Kotler (1973) has coined Peppers and Rogers, 1993). the term ‘atmospherics’ to point out this facet It should be noted that relationship of consumption, the experiential facet. Today, marketing is a financially driven concept. stores such as Niketown and the House of Customers are still segmented, but the distinc- Ralph Lauren are typical applications of this tions are behavioural. In traditional experiential concept (Kozinets, 2002). As early marketing, segmentation is aimed at as 1982, a pioneering paper by Holbrook and maximising the value created by the brand or Hirschman insisted on the necessity of company for its customers. In relationship providing modern consumers with fantasies, marketing, segmentation is based on the feelings and fun in their experiential value a customer brings to the company: only consumption. Schmitt (1999) has coined the profitable customers should receive repeated term ‘experiential marketing’ to refer to ‘how attention. Hence the concept of lifelong to get customers to sense, feel, think, act and customer value. Internet technology has relate to your company and brands’. 162 THE CHALLENGES OF MODERN MARKETS

Bonding through aspirational values long-term commitment), while the vertical axis refers to the depth of customer bonding. Beyond functional and experiential rewards, It has three tiers: product satisfaction, experi- brands must now also be aspirational. It is ential enchantment and aspirational through their intangible values that they intimacy, or the sharing of deep values. At help consumers to forge their identities, at a the intercept, it is possible to position the time when inherited identities are weaker. new tools and behaviours of modern brand The famous and elusive ‘customer bonding’ management. is based on product satisfaction, on a rewarding consumption experience (which The importance of communities includes the tailoring of proactive services even for products). It cannot exist if the How many fans does the Manchester United brand values do not fit the consumers’ football team have all around the world? Five values. All brands have to be somehow aspi- million in the UK and 50 million elsewhere in rational. Beyond materialistic and hedonistic the world? Most of these will never see the satisfactions, they say, ‘We understand each team play in the flesh, but they watch real- other, we share the same values, the same time television showings or connect to spirit.’ This is why it is so important to webcasts of the team’s matches on the specify these non-product-based values. internet. They consume merchandise such as Visions and missions are the typical source of T-shirts. In the Old Trafford stadium, UK fans these values. drink only Manchester United Cola. This is a It is therefore possible to plot the real community; thanks to it, the team can extension of the scope of brand management hire the most expensive players, such as on a two-dimensional matrix (Figure 6.4). Wayne Rooney. The income from the The horizontal axis refers to the time merchandise sold by association with the perspective of the relationship sought (from most famous players virtually covers their immediate transaction to repeat purchase to enormous wages and transfer fees.

– Image advertising – Fanzines – Intercommunity events – Co-branding – Websites (brand + clients) Aspirational – Sponsorship – Virtual communities fulfilment – Ethical growth

– Advertising – Collector’s or systematic – One-to-one – In-store animations additions tied to an event – Recognition and service Experiential – Built-in experiential (Barbie, Lego etc.) – Co-creation enchantment products (concepts) – Store-tainment

Depth of brand – Street marketing

– Product quality – Post-purchase promotions – Loyalty programmes Functional – Product advantage (cards) satisfaction – Trial promotion

Time perspective of the relationship Short-term transaction Re-purchase Long-term reciprocal commitment Figure 6.4 The extension of brand management THE NEW RULES OF BRAND MANAGEMENT 163

Traditionally, in consumer research con- customers are driven by the rewards of sumers were seen as individuals, who were community interaction and transaction. eventually aggregated into market segments. Most multi-attribute models aiming at Activating the brand at contact predicting purchase made that implicit assumption, for they were based on individual Most of our thinking about the role of adver- responses. One could argue that consumers are tising in supporting brands is based on the ‘big not isolated individuals: they belong to groups, bang model’ (Kapferer, 2001). At a time when tribes or communities, either stable or tran- there were few channels available, the core sient, durable or situational. In fact, the brand media could really be called mass media. But acquires meaning not through a summation of attention is scarce and fragmented now, individual evaluations, but after a collective because there is such a diversity of available screening made of conversations within the media channels, not to mention the internet. reference groups, the community, where The power and energy of the massive gross opinion leaders can play a determining role. rating point (GRP) campaigns is fragmented. Along with advertising, new forms of Down in the marketing channels, this energy behaviour have emerged through which arrives weakened. This is why it is necessary to brands are enacted, that is, they eventually recreate energy at contact. All brands must be ‘live’ their values with consumer commu- concerned with the energisation of their nities in a non-commercial environment. value-transmitting chain, including pre- Classical examples of this are the Michelin- scribers, VIPs, opinion leaders, professionals, sponsored races around the world, or the early triers, involved consumers and of course Harley-Davidson rally where management distributors. A brand that existed only on and bikers meet once a year. The modern shelves and on television would seem remote brand also animates communities created and lack depth. One does not create relation- around itself or a topic (parenthood for ships at a distance. Pampers, rock music for Jack Daniel’s). As a consequence, all brands now must Internet sites, ‘fanzines’, hotlines, brand think of their activation plan: clubs and events, are the classic tools to implement this new attitude and share the l Acting within communities (like Vittel brand values through servicing or anima- mineral water, which has developed part- tions. The brand becomes ‘mediactive’, it nerships with local sports clubs where helps its customers get in touch with each consumers train). other, on the net or in reality through l Acting on premises, at the point of the specific events. Building brand communities is consumption, creating memorable now part of the scope of brand management collective experiences. (Hagel, 1999). For consumers, getting together and sharing experiences is another l Acting with prescribers (that is, those who form of reward. Feather (2000) has identified recommend the brand to a user further four drivers of e-communities: they can be down the channel), to foster their cause. interest-based, transaction-based, rela- l Acting with virtual communities created tionship-based or fantasy-based. Each one around the brand. The brand must become determines a specific type of site, of content, a medium between the people in the of interaction between the brand and this community, real or virtual, and provide very involved public; it goes beyond mere more than products. It must provide real purchasing and looks for interactions with services. the brand and other customers. The 164 THE CHALLENGES OF MODERN MARKETS

Licensing: a strategic lever Second, today’s brand is community focused, as in, ‘Tell me which community you Licences are a rapidly growing phenomenon belong to, and I’ll tell you who you are.’ In (Warin and Tubiana, 2003), demonstrating an other words, the choices the brand makes in awareness of two facts. First, although brands terms of promotional agreements reveal the are a form of capital, they still have to produce community to which it belongs and whose revenue. Second, this type of partnership tastes it shares. The decision by the Suze enables the brand to acquire abilities or distri- apéritif company to launch an annual limited bution that it had previously lacked, and so to edition, teaming up with J-C de Castelbajac in be extended yet further. However, there is still 2001 and Christian Lacroix in 2002, is an an image problem with licences, which illustration of this principle, and has posi- explains why they have experienced slower tioned Suze as the drink for lovers of arts and growth in some countries than others. literature, revitalising a fundamental aspect of English-speaking countries, for example, have the product which this character brand had extensively exploited this concept. Yet in ignored for too long. numerous other countries, licences are still Third, the brand builds its status through its restricted only to the luxury sector, sport and extensions. The one-product brand has had its so-called ‘derivative’ products – knick-knacks day, and the brand is viewed no longer as a from every sector that this pejorative name product, but rather as a concept. Once implies. Furthermore, the current trend created, a concept develops and strengthens among luxury brands for announcing – as itself via extensions. Under this approach, the Gucci has done – that they are to cut the company acknowledges that the brand number of their licences has served to extension calls for industrial, logistical or strengthen this negative aura around the commercial skills that the company itself licence. For some brands, such action has probably does not possess in the short term. merely been a case of correcting the licensing However, there are many other companies excesses into which they had fallen, as part of that do have the required resources, and can a drive to recreate the rarity (and perhaps even place them at the immediate disposal of the quality) of their brand. Gucci was a typical brand. example of this. The strength of the brand is also linked to In reality, licences have now become a truly its geographical extension. Production and magnificent opportunity for improving distribution licences are necessary in order to business volume, brand capital and prof- understand and penetrate continent-sized itability. Why was this not the case before? countries such as China and India. The First, brand managers have now realised product range of a luxury ready-to-wear brand they need to focus on relationships. Beyond such as Lacoste in Japan or Korea has to take the product itself, the brand must forge links into consideration the physical size of its with its customers – and its best customers in customers and the specific sports they play. particular – which are based on a rapport and The local licensee is in the best position to mutual understanding. The products we develop an extension to the collection which currently refer to as ‘derived’ should really be improves the brand’s local relevance, while renamed as ‘customer relationship products’. creative and quality control remain in the For example, one initiative taken by Orangina hands of the talented licence holder. has been to rebuild its relationship with the In sectors eroded by the dictates of concen- young people and teenagers who had increas- trated large-scale distribution, the licence ingly been abandoning the product in the face provides an opportunity to release some of the of Coca-Cola’s relentless encroachment. pressure. This applies to any sector in which THE NEW RULES OF BRAND MANAGEMENT 165 companies have failed to create brands based West, luxury derives its desirability from being on strong, intangible values, for this is the one well known to all, yet affordable by very few; thing that the distributor brands are incapable and Dessange would not have been as of copying. The principle operates across the desirable without this licence. It is worth most diverse categories, from spectacle frames pointing out that the company has launched to men’s footwear. It also applies to SMEs that, a second, cheaper hairdressing salon brand lacking the finances to create their own brand, (Camille Albane) at the same time as releasing manufacture and distribute under licence. a line of large-scale distribution products This is how Weight Watchers has expanded its named ‘Camille Albane’. Here, the licence will world distribution. serve as a motor to accelerate recognition and However, it would be a mistake to see image, since the number of Camille Albane licences as nothing more than a godsend to salons is still small. Hence its low profile. SMEs crushed by the excessive demands of Ultimately, the very nature of a brand can concentrated large-scale distribution. They change as a result of its licences. Cacharel is an also represent an opportunity for multina- example of a licence that went on to become tionals making a late entry into a marketplace the true centre of gravity of a brand. Cacharel already dominated by other firms. Creating a started out as a woman’s ready-to-wear brand new brand makes the risk of competition too in the 1970s, positioned to appeal to romantic great. A better strategy is to use a ready-made women. A perfume licence was subsequently one, thus circumventing the barriers to entry. granted to l’Oréal, with the launch of Anaïs This is what l’Oréal did with Ushuaia, a Anaïs, a worldwide best-seller, followed by shampoo brand that has taken the name of a Loulou and Eden. In the last five years, four very famous French television programme on perfumes have been launched to appeal to Channel 1 based on the Earth, the envi- today’s young clientèle: Noa, Nemo, Gloria ronment and its preservation. The licence and Amor Amor. For l’Oréal, the problem with owned by Channel 1 enabled l’Oréal to the Cacharel licence is that it is built on compete with Unilever and Henkel in the nothing: the ready-to-wear business has since shower gels market, in which it had previ- vanished into obscurity. This is precisely the ously had no presence. opposite of the Armani and Ralph Lauren Lastly, the case of the J Dessanges hair- licences. However, for Cacharel, the situation dressing and beauty chain provides an illus- is very different: thanks to the recognition tration of a remarkable use of licensing in its generated by advertising and the worldwide strategy to increase its prestige, status and distribution of its perfumes, the company is in desirability still further. By using l’Oréal as its a position to consider other licences for its licensee to distribute a full range of large-scale brand. In this way, it plans to increase its distribution products, this upper range or royalties from s7.6 million to s12 million even luxury chain not only created an excep- over five years (Les Echos, 7 July 2003). tional source of profits, but also strengthened Cacharel has become a de facto perfume its brand via the licence. The whole of France brand and is exploited through various other is familiar with, and is now able to buy, licences (household linen, lingerie, products from the J Dessange Professional sunglasses, fine leather goods, scarves): an Range (which are, it should be said, the most original business model. expensive on hypermarket and supermarket As we can see, the licence can take many shelves), while at the same time dreaming of forms in the question of how to manage the one day being able to afford visits to the hair- brand over time: at launch, or during the dressing salons, whose spiralling prices are growth, reinforcement, maturity or relaunch driven by their luxury strategy. After all, in the phases. It provides a source of accessible, 166 THE CHALLENGES OF MODERN MARKETS creative solutions, taking competitors by How co-branding grows the surprise. It is truly a tool for increasing brand business competitiveness. No such discussion would be complete Products that have two creators, and advertise without considering the fiscal element of the the fact through double branding, are on the licence, by which many multinationals have increase: for example Inneov by Nestlé and shifted profits from their local subsidiaries l’Oréal, the first nutritional pill to prevent hair back to the head office through the mech- loss, launched in pharmacies in November anism of royalties paid in remuneration for 2006. We are already familiar with Danao, by the use of brands, logos, artwork and so on. Danone and Minute Maid. Philips created a For example, it is common knowledge that revolution with its Coolskin razor with a Disneyland Paris is a commercial success but moisturising cream, entrusted to Nivea a financial disaster. More than 12 million worldwide – a fact that appears on all the visitors a year queue up to get into the park, razor’s packaging, and in advertising. yet given the scale of the initial investment Everyone knows the ‘Intel Inside’ signature and interest rates, and thus the venture’s that appears on all computers that use Intel, current liabilities, the project could only start and in their advertising. to turn in a profit if the banks were to write The rise of co-branding is symptomatic of off their debts. Despite this, Disney our era, with its culture of networking and Corporation still draws annual royalties for . It is also the result of a desire to the concession of its brands and trademarks remain within the company’s key compe- (all of the Disney characters) to Disneyland tences, to the point of looking elsewhere for Paris. those competences that are missing. It Yet good fiscal administration knows that therefore merits an in-depth discussion. licensing may be a way to siphon profit out of a country and pay less taxes: it demands Why this rise in co-branding? proof that a genuine service is being provided. If royalties are being paid, they Co-branding is fundamentally a response to should reflect real and tangible added value. the need for continual growth. However, Thus a holding that requires its subsidiaries in whereas yesterday companies would have other countries to pay royalties for the use of sought at any price to acquire the new compe- a company name and logo may find itself tences that were missing and restricting their required to produce evidence of the value of ability to innovate, today they seek to find a the service provided to the subsidiary partner with which to co-create. This is the era through the use of this name and logo. of alliances, partnerships and the networked Paradoxically, it may be the holding itself economy, where each party retains its special- that ought to pay for such a service. The isation and its key competence, and utilises holding’s name is often unknown to those of others to the fullest extent. In the consumers; yet if it is listed on a stock pursuit of growth, it is not long before we exchange, a visible profile is essential. Unless encounter the difficulty in reconciling this the holding chooses to produce its own with maintaining the brand’s specificity and advertising (such as the LVMH group’s spon- the company’s expertise. sorship programme), such visibility can only In the West, the brand is the name for a be created further downstream, by appending specific expertise or state of mind (in Asia, the its name to all its subsidiaries’ products. brand is far less specialised). When trying to THE NEW RULES OF BRAND MANAGEMENT 167

grow, the brand can reach the limits of its own I Will the innovation be attributed to both identity and its specificity: it therefore has partners, or only to one of them? need of an ally to fill the gaps where it is not competent or legitimate. When this ally is competent but not legitimate, the partnership Typical situations that lead to co- does not give rise to co-branding. For branding example, Weight Watchers needed the indus- I Co-branding is necessary to increase the trial and distribution competences of Fleury chances of success for a brand’s extension Michon in order to develop a genuinely quali- beyond its original market. Thus, as a tative range of vacuum-packed ready meals. strongly child-centred brand, Kellogg’s However, this was not mentioned anywhere explicitly marked its new range of cereals on the packaging. In fact, not only is the for health-conscious adults with the Weight Watchers brand sufficient for diet Healthy Choice brand, already well-known disciples, its ‘marriage’ with Fleury Michon, in this segment. Danone and Motta pooled the epicure’s brand, suggestive of French-style their competences and their images to good living, is unclear and even contra- launch Yolka, a yoghurt ice cream. This was dictory. also the case for a refrigerated fruit juice In contrast, when the two images from Minute Maid/Danone, and as complement one another, both brands mentioned above, the Mattel-Compaq strongly endorse it. Thus, in order to please interactive toy. the youth of today, increasingly seduced by computer games and consoles, Lego decided I Co-branding is also necessary when the to add an electronics line to its products. brand’s image makes it difficult to commu- However Lego not only has no industrial nicate with a particular target. In that case, competence in this field (which can always be it needs an intermediary, someone to open subcontracted), crucially its brand image doors for it, another brand that has the ear would not lend credibility to the new of this target and can therefore act as a products. The signature of a brand with a relay. When Orangina, primarily thought strong reputation in electronics among young of as a child’s drink, wanted to boost its people would remove this obstacle. Mattel sales by targeting adolescents, the biggest had already worked with Compaq to create a consumers of soft drinks, its childish image line of interactive, high-tech toys. was a handicap. It created a partnership We can see therefore that several strategic with NRJ, the most popular radio station questions arise on the subject of co-branding: among young people, and a jeans brand, Lee Cooper. Orangina cans were co- I Will the visible alliance of two brands branded NRJ and Orangina. create a favourable impression among I Co-branding makes it possible to develop a clients? product line that is often sold in a separate I Is there a high degree of complementarity distribution channel. The goal, in addition to between the two brand images that will selling to a previously reluctant clientele, is to create value? nurture certain traits of the brand’s identity kernel. Thus, in order to create a relationship I Is there a good ‘fit’ between these two with ‘creative’ young women, Tefal developed brands, given the perceived status of each? a range of specific products internationally As with any successful marriage, of course with the young, unconventional, up-and- there must be complementarity, but also a coming and very media-friendly British chef, common vision and shared values. 168 THE CHALLENGES OF MODERN MARKETS

Jamie Oliver. This line is sold worldwide. I Co-branding is also a response to the frag- The partnership between Jamie Oliver and mentation of the market and the emer- Tefal is that of two – admittedly different – gence of communities. Take, for example, actors who nevertheless share the same the telephone and internet brand Orange. vision: a taste for simplicity, pleasure and How can it grow? It can sell wholesale to conviviality. The marketing positioning of virtual operators, the mobile virtual this product line will be just below the top network operations (MVNOs), which will of the range: it will only be found in act as discounters (for example Carrefour, selective channels. Darty and so on). In this first phase, the Orange brand name disappears: customers I Co-branding makes it possible to move up believe they are buying their internet a level. In food products, it is difficult for a services from Carrefour. It may also known brand to move up a level, and propose an association with those brands therefore up in price, to become a mass- that already have a captive audience, and market brand. It needs a credibility link. offer specific value-added content aimed at This is why all pre-cooked meals, even this audience. For example, loyal customers distributors’ brands, have created lines that of Fnac (a rival of Virgin Megastores) can are co-endorsed by a famous chef: Ducasse, buy Fnac telephone packages: these clearly Troisgros, Robuchon and so on. show the Orange logo. They offer more I Ingredient brands are also a way to send the than just a price – that is, services and client a message about the product’s contents aimed solely at Fnac customers. superior quality, and to lift it above the Orange reassures them, and manages the more ordinary copies, thereby justifying its whole business. higher price. Diam’s, by Dim, displays the Orange does likewise with football clubs, Lycra logo. The same goes for Goretex, creating subscriptions in the club’s name, Woolmark, Tactel, and for Nutrasweet in associated with Orange’s: fans benefit from the food sector. In B2B, the practice is also ad hoc content, with a strong football on the increase: the ‘Intel Inside’ brand is focus. When their club wins, they also win exhibited by all computer assemblers that promotions, the opportunity to send free use Intel chips and agree to say so in their SMSs, or to ‘chat’ with the star players. communications, in return for which Intel Orange has also negotiated exclusive pays half of its clients’ advertising expenses. mobile phone retransmission rights for For the distributor Decathlon, which certain major . In this way, creates its own brands, co-brands are strate- Orange has succeeded in adapting to gically valuable since they boost the market fragmentation. perceived technicality of the products of its On the internet, co-branding also has a passion brands, which are still relatively role to play. This is normal: online brands unknown to the end customer. All of reference one another, in order to mark a Damart’s structure and profitability is based community of values, interests and audi- on an ingredient brand, Thermolactyl. This ences. brand, which is owned by Damart, desig- I Co-branding, in the form of licences, was nates a generic fibre that retains heat one way to boost sales for car models at the (rhovilon): this gives Damart the end of their life-cycle, when the product appearance of exclusivity. While many itself no longer has the value of technical other distributors offer warm underwear, novelty. New value was added by only Damart has Thermolactyl! THE NEW RULES OF BRAND MANAGEMENT 169

customising the car in the style of a famous Co-branding, alliances and designer or couturier. Prominent examples partnerships include the Peugeot 205 Lacoste and the Citroen Bic. This approach is now used at The modern world is a world of alliances and the beginning of the life-cycle, in order to partnerships between groups, companies, put a sociocultural stamp on the vehicle brands and so on. Co-branding is the symbol and emphasise its positioning: Twingo of an alliance that neither party is seeking to Kenzo illustrated the car’s central propo- hide (unlike subcontracting, for example). sition, that ‘It’s up to you to invent the life An analysis of company strategies since that goes with it’, and strengthened its 1990 saw certain forms of behaviour, such as creative aspect. The Citroen Picasso was alliances, undergo considerable growth, and also a response to the desire to strengthen even saw new, hybrid forms emerge – hence Citroen’s positioning as an innovator, the creation of new concepts and terms to competing against the Renault Espace. For capture them. One of these is ‘coopetition’ – the Picasso family themselves, this main- an alliance with a competitor. tains the brand status of their surname, and Before we proceed, let us give some defini- prevents it from falling into the public tions. An alliance is indeed a strategic domain through lack of commercial use. decision, with long-term implications, aiming to bring together complementary compe- I Co-branding sometimes aims to provide a tences in order to develop innovative buzz around the brand among opinion processes and products/services, and finally leaders, to create an image. This is the case new markets. It is therefore distinct from a with the specially designed products Mark simple partnership, which is limited both in Newson has created for Tefal. In the same time and in the scope of the cooperation. As way, to give itself a fashionable, stylish for the neologism ‘coopetition’, it refers to touch, Adidas has entrusted designer Stella alliances involving two mutually competitive McCartney with the task of developing a companies. Thus it is coopetition when PSA co-branded product line. The brand is effec- and Toyota create a common manufacturing tively seeking to have a presence on the unit together in Slovenia, to produce the same style market and not only the technical small car model. It is a partnership when PSA market. This approach of co-branding with carries out various cooperation and exchange a creator is prevalent in the sportswear projects with Ford on diesel engines. It is also sector: Puma has done likewise. H&M a partnership when, in order to exist in this caused a riot by launching a limited series gigantic country, Evian entrusts its US distri- by Karl Lagerfeld: customers were queuing bution to Coca-Cola. It is apparent that this up outside from midnight. agreement may be called into question at any I Finally, co-branding is the visible – confi- time. It is also a partnership when Nestlé dence-inspiring – sign of a brand union. entrusts Krups with the European devel- Skyteam is the airline alliance formed opment of a coffee maker that uses Nespresso, around Air France and KLM, in order to the famous and vastly expensive top-of-the- standardise their loyalty programmes and range coffee capsules. Tomorrow, or in enable travellers to increase their air miles another part of the world, Krups could be still further – an additional defence against replaced by another famous brand. the low-cost airlines. Alliances are nothing new. Think back to Ariane, Airbus and Concorde – all projects on 170 THE CHALLENGES OF MODERN MARKETS such a scale that even at the planning stage between companies is not relevant to this nationalism, competition and sensitivities section. As for the alliance, it preserves the had to be forgotten in order to fuse cutting- cultures, identities and legal forms of the edge competences in a meta project that no companies that come together in a common, single company, or even single country, could large-scale project. achieve alone. In terms of visibility, the members of In strategic terms, an alliance is an alter- alliances are not always clearly identified. This native to acquisition and fusion. This latter is is the case when a new name and often a new a common type of company growth, buying collectively managed structure are created for out key competences or market shares the project in question: Airbus Industries, through the sacrosanct critical mass. All of the Eurocopter, Thalys, Eurostar or Arianespace. following companies are the result of fusions However, it is sometimes the case that the or acquisitions: Novartis, Aventis, Vinci, parents are clearly identified by their names Vivendi, Aviva, Arcelor, Entenial and Sony- and logos. In fact, many products are clearly Ericsson. An analysis of the components of endorsed by both creators: Philips Alessi, the success or – as it is admitted nowadays – Samsung B&O and so on. lack of success of fusions and acquisitions

Table 6.3 Strategic uses of co-branding Sources of growth Increasing Enhancing Enhancing frequency proximity perceived Creating a How per customer to a target quality new market Same product Co-branded Image strategy Component loyalty cards – Orangina co-branding – Air France AMEX Lee Cooper cans Collective – Smiles – Orangina (Intel/Lycra) Kookaï – Proprietary (Damart)

Line extension/ Limited series Endorsement variant – Peugeot 205 – Weight Watchers Lacoste by Fleury Michon – Renault Clio – Max Havelaar Kenzo and coffee brands

New full line Co-creation – Tefal line designed by/for Jamie Oliver – Philips–Alessi – Hilfiger–Thierry Henry

Value Co-creation innovation/ – Danoe disruption (Minute Maid– Danone) – Nespresso– Krups 171 7

Brand identity and positioning

A brand is not the name of a product. It is the regionally or internationally, without jeopar- vision that drives the creation of products and dising brand congruence? All such decisions services under that name. That vision, the key pose the problem of brand identity and defi- belief of the brands and its core values is called nition – which are essential prerequisites for identity. It drives vibrant brands able to create efficient brand management. advocates, a real cult and loyalty. Modern competition calls for two essential Brand identity: a necessary tools of brand management: ‘brand identity’, concept specifying the facets of brands’ uniqueness and value, and ‘brand positioning’, the main Like the ideas of brand vision and purpose, difference creating preference in a specific the concept of brand identity is recent. It market at a specific time for its products. started in Europe (Kapferer, 1986).The For existing brands, identity is the source of perception of its paramount importance has brand positioning. Brand positioning specifies slowly gained worldwide recognition; in the the angle used by the products of that brand most widely read American book on brand to attack a market in order to grow their equity (Aaker, 1991), the word ‘identity’ is in market share at the expense of competition. fact totally absent, as is the concept. Defining what a brand is made of helps Today, most advanced marketing answer many questions that are asked every companies have specified the identity of their day, such as: Can the brand sponsor such and brand through proprietary models such as such event or sport? Does the advertising ‘brand key’ (Unilever), ‘footprint’ (Johnson & campaign suit the brand? Is the opportunity Johnson), ‘bulls’ eyes’ and ‘brand stew- for launching a new product inside the ardship’, which organise in a specific form a brand’s boundaries or outside? How can the list of concepts related to brand identity. brand change its communication style, yet However, they are rather checklists. Is identity remain true to itself? How can decision a sheer linguistic novelty, or is it essential to making in communications be decentralised understanding what brands are? 172 THE CHALLENGES OF MODERN MARKETS

What is identity? their membership of a specific cultural entity. Brand identity may be a recent notion, but To appreciate the meaning of this significant many researchers have already delved into the concept in brand management, we shall begin organisational identity of companies by considering the many ways in which the (Schwebig, 1988; Moingeon and Soenen, word is used today. 2003). There, the simplest verbal expression of For example, we speak of ‘identity cards’ – a identity often consists in saying: ‘Oh, yes, I personal, non-transferable document that see, but it’s not the same in our company!’ In tells in a few words who we are, what our other words, is what helps name is and what distinguishable features we an organisation, or a part of it, feel that it truly have that can be instantly recognised. We also exists and that it is a coherent and unique hear of ‘identity of opinion’ between several being, with a history and a place of its own, people, meaning that they have an identical different from others. point of view. In terms of communication, From these various meanings, we can infer this second interpretation of the word that having an identity means being your true suggests brand identity is the common self, driven by a personal goal that is both element sending a single message amid the different from others’ and resistant to change. wide variety of its products, actions and Thus, brand identity will be clearly defined communications. This is important since the once the following questions are answered: more the brand expands and diversifies, the more customers are inclined to feel that they l What is the brand’s particular vision and are, in fact, dealing with several different aim? brands rather than a single one. If products l What makes it different? and communication go their separate ways, how can customers possibly perceive these l What need is the brand fulfilling? different routes as converging towards a l What is its permanent nature? common vision and brand? Speaking of identical points of view also l What are its value or values? raises the question of permanence and conti- l What is its field of competence? Of nuity. As civil status and physical appearance legitimacy? change, identity cards get updated, yet the fingerprint of their holders always remains l What are the signs which make the brand the same. The identity concept questions how recognisable? time will affect the unique and permanent quality of the sender, the brand or the retailer. These questions could indeed constitute the In this respect, psychologists speak of the brand’s charter. This type of official document ‘identity crisis’ which adolescents often go would help better brand management in the through. When their identity structure is still medium term, both in terms of form and weak, teenagers tend to move from one role content, and so better address future commu- model to another. These constant shifts create nication and extension issues. Com- a gap and force the basic question: ‘What is munication tools such as the copy strategy are the real me?’ essentially linked to advertising campaigns, Finally, in studies on social groups or and so are only committed to the short term. minorities, we often speak of ‘cultural There must be specific guidelines to ensure identity’. In seeking an identity, they are in that there is indeed only one brand forming a fact seeking a pivotal basis on which to hinge solid and coherent entity. not only their inherent difference but also BRAND IDENTITY AND POSITIONING 173

Brand identity and graphic identity that may not be the most suitable. Thus Nina charters Ricci’s identity did not necessarily relate to the company’s systematic adherence to English Many readers will make the point that their photographer David Hamilton’s style. firms already make use of graphic identity Knowing brand identity paradoxically gives ‘bibles’, either for corporate or specific brand extra freedom of expression, since it empha- purposes. We do indeed find many graphic sises the pre-eminence of substance over identity charters, books of standards and strictly formal features. Brand identity defines visual identity guides. Urged on by graphic what must stay and what is free to change. identity agencies, companies have rightly Brands are living systems. They must have sought to harmonise the messages conveyed degrees of freedom to match modern market by their brands. Such charters therefore define diversity. the norms for visual recognition of the brand, ie the brand’s colours, graphic design and type Identity: a contemporary concept of print. Although this may be a necessary first step, That a new concept – identity – has emerged in it isn’t the be all and end all. Moreover, it puts the field of management, already well versed in the cart before the horse. What really matters brand image and positioning, is really no great is the key message that we want to commu- surprise. Today’s problems are more complex nicate. Formal aspects, outward appearance than those of 10 or 20 years ago and so there is and overall looks result from the brand’s core now a need for more refined concepts that substance and intrinsic identity. Choosing allow a closer connection with reality. symbols requires a clear definition of what the First of all, we cannot overemphasise the brand means. However, while graphic fact that we are currently living in a society manuals are quite easy to find nowadays, saturated in communications. Everybody explicit definitions of brand identity per se are wants to communicate these days. If needed, still very rare. Yet, the essential questions proof is available: there have been huge above (ie the nature of the identity to be increases in advertising budgets, not only in conveyed) must be properly answered before the major media but also in the growing we begin discussing and defining what the number of professional magazines. It has communication means and what the codes of become very difficult to survive in the hurly- outward recognition should be. The brand’s burly thus created, let alone to thrive and deepest values must be reflected in the successfully convey one’s identity. For external signs of recognition, and these must communication means two things: sending be apparent at first glance. The family resem- out messages and making sure that they are blance between the various models of BMW received. Communicating nowadays is no conveys a strong identity, yet it is not the longer just a technique, it is a feat in itself. identity. This brand’s identity and essence can The second factor explaining the urgent actually be defined by addressing the issue of need to understand brand identity is the its difference, its permanence, its value and its pressure constantly put on brands. We have personal view on automobiles. now entered an age of marketing similarities. Many firms have unnecessarily constrained When a brand innovates, it creates a new their brand because they formulated a graphic standard. The other brands must then catch up charter before defining their identity. Not if they want to stay in the race, hence the knowing who they really are, they merely increasing number of ‘me-too’ products with perpetuate purely formal codes by, for similar attributes, not to mention the copies example, using a certain photographic style produced by distributors. Regulations also 174 THE CHALLENGES OF MODERN MARKETS cause similarities to spread. Bank operations, brand here and there, we are certainly unable for example, have become so much alike that to perceive its global and coherent identity. banks are now unable to fully express their individuality and identity. Market research Why speak of identity rather than also generates herdism within a given sector. As all companies base themselves on the same image? life-style studies, the conclusions they reach What does the notion of identity have to offer are bound to be similar as are the products and that the image of a brand or a company or a advertising campaigns they launch, in which retailer doesn’t have? After all, firms spend sometimes even the same words are used. large amounts of money measuring image. Finally, technology is responsible for Brand image is on the receiver’s side. Image growing similarity. Why do cars increasingly research focuses on the way in which certain look alike, in spite of their different makes? groups perceive a product, a brand, a Because car makers are all equally concerned politician, a company or a country. The image about fluidity, inner car space constraints, refers to the way in which these groups motorisation and economy, and these decode all of the signals emanating from the problems cannot be solved in all that many products, services and communication different ways. Moreover, when the models of covered by the brand. four car brands (Audi, Volkswagen, Seat and Identity is on the sender’s side. The Skoda) share many identical parts (eg chassis, purpose, in this case, is to specify the brand’s engine, gearbox), for either productivity or meaning, aim and self-image. Image is both competitiveness purposes, it is mainly brand the result and interpretation thereof. In terms identity, along with, to a lesser extent, what’s of brand management, identity precedes left of each car, which will distinguish the image. Before projecting an image to the makes from one another. public, we must know exactly what we want Diversification calls for knowing the to project. Before it is received, we must know brand’s identity. Brands launch new products, what to send and how to send it. As shown in penetrate new markets and reach new targets. Figure 7.1, an image is a synthesis made by the This may cause both fragmented communica- public of all the various brand messages, eg tions and patchwork images. Though we are brand name, visual symbols, products, adver- still able to discern bits and pieces of the tisements, sponsoring, patronage, articles. An

Sender Messages Receiver

Brand identity Signals transmitted Brand • products image • people Other sources of • places inspiration • communication • mimicry • opportunism Competition • idealism and noise Figure 7.1 Identity and image BRAND IDENTITY AND POSITIONING 175 image results from decoding a message, Yet they also know when to stay out of other extracting meaning, interpreting signs. areas. We cannot expect a brand to be Where do all these signs come from? There anything other than itself. are two possible sources: brand identity of Obviously, brands should not curl up in a course, but also extraneous factors (‘noise’) shell and cut themselves off from the public that speak in the brand’s name and thus and from market evolutions. However, an produce meaning, however disconnected obsession with image can lead them to capi- they may actually be from it. What are these talise too much on appearance and not extraneous factors? enough on essence. First, there are companies that choose to imitate competitors, as they have no clear idea of what their own brand identity is. They Identity and positioning focus on their competitors and imitate their marketing communication. It is also common to distinguish brands Second, there are companies that are according to their positioning. Positioning a obsessed with the willingness to build an brand means emphasising the distinctive appealing image that will be favourably characteristics that make it different from its perceived by all. So they focus on meeting every competitors and appealing to the public. It one of the public’s expectations. That is how the results from an analytical process based on the brand gets caught in the game of always having four following questions: to please the consumer and ends up surfing on the changing waves of social and cultural fads. l A brand for what benefit? This refers to the Yesterday, brands were into glamour, today, brand promise and consumer benefit they are into ‘cocooning’; so what’s next? The aspect: Orangina has real orange pulp, The brand can appear opportunistic and popularity Body Shop is environment friendly, Twix seeking, and thus devoid of any meaningful gets rid of hunger, Volkswagen is reliable. substance. It becomes a mere façade, a mean- ingless cosmetic camouflage. l A brand for whom? This refers to the target The third source of ‘noise’ is that of fanta- aspect. For a long time, Schweppes was the sised identity: the brand as one would ideally drink of the refined, Snapple the soft drink like to see it, but not as it actually is. As a for adults, Tango or Yoohoo the drink for result, we notice, albeit too late, that the teenagers. advertisements do not help people remember l Reason? This refers to the elements, factual the brand because they are either too remotely or subjective, that support the claimed connected to it or so radically disconnected benefit. from it that they cause perplexity or rejection. Since brand identity has now been recognised l A brand against whom? In today’s compet- as the prevailing concept, these three potential itive context, this question defines the main communication glitches can be prevented. competitor(s), ie those whose clientele we The identity concept thus serves to think we can partly capture. Tuborg and emphasise the fact that, with time, brands do other expensive imported beers thus also eventually gain their independence and their compete against whisky, gin and vodka. own meaning, even though they may start out as mere product names. As living memories of Positioning is a crucial concept (Figure 7.2). It past products and advertisements, brands do reminds us that all consumer choices are not simply fade away: they define their own made on the basis of comparison. Thus, a area of competence, potential and legitimacy. product will only be considered if it is clearly 176 THE CHALLENGES OF MODERN MARKETS

Why? For whom?

When? Against whom?

Figure 7.2 Positioning a brand

part of a selection process. Hence the four Given these characteristics, the product questions that help position the new product could be positioned in several different ways, or brand and make its contribution immedi- for example by: ately obvious to the customer. Positioning is a two-stage process: l Attacking the canned pet food market by appealing to well-to-do dog owners. The l First, indicate to what ‘competitive set’ the gist of the message would then be ‘the can brand should be associated and compared. without the can’, in other words, the benefits of meat without its inconven- l Second, indicate what the brand’s essential iences (smell, freshness constraints, etc). difference and raison d’être is in comparison to the other products and brands of that l Attacking the dehydrated pet food segment set. (dried pellets) by offering a product that would help the owner not to feel guilty for Choosing the competitive set is essential. not giving meat to the dog on the basis that While this may be quite easy to do for a new it is just not practical. The fresh-ground, toothpaste, it is not so for very original and round look could justify this positioning. unique products. The Gaines burger launched l Targeting owners who feed leftovers to their by the Gaines company, for instance, was a dogs by presenting Gaines as a complete, new dog food, a semi-dehydrated product nutritious supplement (and no longer as a presented as red ground meat in a round main meal as in the two former strategies). shape like a hamburger. Unlike normal canned pet foods, moreover, it did not need to l Targeting all dog owners by presenting this be refrigerated, nor did it exude that normal product as a nutritious treat, a kind of open-can smell. doggy Mars bar. BRAND IDENTITY AND POSITIONING 177

The choice between these alternative singularity of the brand. strategies was made by assessing each one Worse still, positioning allows communi- against certain measurable criteria (Table 7.1). cation to be entirely dictated by creative whims The firm ended up choosing the first posi- and current fads. Positioning does not say a tioning and launched this product as the word about communication style, form or ‘Gaines burger’. spirit. This is a major deficiency since brands What does the identity concept add to that have the gift of speech: they state both the of positioning? Why do we even need another objective and subjective qualities of a given concept? product. The speech they deliver – in these days In the first place, because positioning of multimedia supremacy – is made of words, focuses more on the product itself. What then of course, but even more of pictures, sounds, does positioning mean in the case of a multi- colours, movement and style. Positioning product brand? How can these four questions controls the words only, leaving the rest up to on positioning be answered if we are not the unpredictable outcome of creative hunches focusing on one particular product category? and pretests. Yet brand language should never We know how to position the various Scotch- result from creativity only. It expresses the brite scrubbing pads as well as the Scotch brand’s personality and values. videotapes, but what does the positioning Creative hunches are only useful if they are concept mean for the Scotch brand as a consistent with the brand’s legitimate territory. whole, not to mention the 3M corporate Furthermore, though pretest evaluations are brand? This is precisely where the concept of needed to verify that the brand’s message is brand identity comes in handy. well received, the public should not be allowed Second, positioning does not reveal all the to dictate brand language: its style needs to be brand’s richness of meaning nor reflect all of found within itself. Brand uniqueness often its potential. The brand is restricted once tends to get eroded by consumer expectations reduced to four questions. Positioning does and thus starts regressing to a level at which it not help fully differentiate Coca-Cola from risks losing its identity. Pepsi-Cola. The four positioning questions A brand’s message is the outward expression thus fail to encapsulate such nuances. They do of the brand’s inner substance. Thus we can no not allow us to fully explore the identity and longer dissociate brand substance from brand

Table 7.1 How to evaluate and choose a brand positioning l Are the product’s current looks and ingredients compatible with this positioning? l How strong is the assumed consumer motivation behind this positioning? (what insight?) l What size of market is involved by such a positioning? l Is this positioning credible? l Does it capitalise on a competitor’s actual or latent durable weakness? l What financial means are required by such a positioning? l Is this positioning specific and distinctive? l Is this a sustainable positioning which cannot be imitated by competitors? l Does this positioning leave any possibility for an alternative solution in case of failure? l Does this positioning justify a price premium? l Is there a growth potential under this positioning? 178 THE CHALLENGES OF MODERN MARKETS style, ie from its verbal, visual and musical way to attack competitors’ market share. It attributes. Brand identity provides the may change through time: one grows by framework for overall brand coherence. It is a expanding the field of competition. Identity is concept that serves to offset the limitations of more stable and long-lasting, for it is tied to positioning and to monitor the means of the brand roots and fixed parameters. Thus expression, the unity and durability of a brand. Coke’s positioning was ‘the original’ as long as it competed against other colas. To grow the business, it now competes against all soft Why brands need identity and drinks: its positioning is ‘the most refreshing positioning bond between people of the world’, whereas its identity remains ‘the symbol of America, A brand’s positioning is a key concept in its the essence of the American way of life’. management. It is based on one fundamental How is positioning achieved? The standard principle: all choices are comparative. positioning formula is as follows: Remember that identity expresses the brand’s tangible and intangible characteristics – every- For … (definition of target market) thing that makes the brand what it is, and Brand X is … (definition of frame of reference without which it would be something different. and subjective category) Identity draws upon the brand’s roots and Which gives the most … (promise or consumer heritage – everything that gives it its unique benefit) authority and legitimacy within a realm of Because of … (reason to believe). precise values and benefits. Positioning is competitive: when it comes to brands, Let us look at these points in detail. customers make a choice, but with products, The target specifies the nature and psycho- they make a comparison. This raises two ques- logical or sociological profile of the indi- tions. First, what do they compare it with? For viduals to be influenced, that is, buyers or this, we need to look at the field of competition: potential consumers. what area do we want to be considered as part The frame of reference is the subjective defi- of? Second, what are we offering the customer nition of the category, which will specify the as a key decision-making factor? nature of the competition. What other brands A brand that does not position itself leaves or products effectively serve the same these two questions unanswered. It is a mistake purpose? This is a strategic decision: it marks to suppose that customers will find answers out the ‘field of battle’. It must not under any themselves: there are too many choices circumstances be confused with the objective available today for customers to make the effort description of the product or category. For to work out what makes a particular brand example, there is no real rum market in the specific. Communicating this information is UK, yet Bacardi is very popular. This is because the responsibility of the brand. Remember, it is perfectly possible to drink Bacardi products increase customer choice; brands without realising that it is a rum: it is the party simplify it. This is why a brand that does not mixer par excellence. want to stand for something stands for nothing. Another example illustrates the strategic The aim of positioning is to identify, and importance of defining the frame of reference. take possession of, a strong purchasing Objectively speaking, Perrier is fizzy mineral rationale that gives us a real or perceived water. Subjectively, however, it is also a drink advantage. It implies a desire to take up a for adults. Seen in the light of this field of long-term position and defend it. Positioning reference, it acquires its strongest competitive is competition-oriented: it specifies the best advantage: a slight natural quirkiness. As we BRAND IDENTITY AND POSITIONING 179 can see, the choice of the field of competition and works perfectly for the l’Oréal Group should be informed by the strategic value of which, with its 2,500 researchers worldwide, that field: how big, how fast growing, how only ever launches new products if they are of profitable? But it also lends the brand a demonstrably superior performance. This fact competitive advantage through its identity is then promoted through advertising. and potential. Perceived as water for the table, There are cases where the brand makes no Perrier has no significant competitive promise, or where the benefit it brings could advantage over other fizzy mineral waters, sound trivial. For example, how would you even though this market is a very large one. define the positioning of a perfume such as However, when viewed in relation to a field of Obsession by Calvin Klein in a way that competition defined as ‘drinks for adults’, clearly represented its true nature and origi- Perrier becomes competitive again: it has nality? It would be wrong to claim that strong differentiating advantages. What are its Obsession makes any specific promise to its competitors? They include alcoholic drinks, customers, or that they will obtain any Diet Coke, Schweppes and tomato juice. particular benefit from the product apart from The third point specifies the aspect of feeling good (a property which is common to difference which creates the preference and all perfumes). In reality, Obsession’s attrac- the choice of a decisive competitive tiveness stems from its imagery, the imaginary advantage: it may be expressed in terms of a world of subversive androgyny which it promise (for instance, Volvo is the strongest of embodies. In the same way, Mugler appeals to all cars) or a benefit (such as, Volvo is the young people through its inherently neo- ‘safety’ brand). futuristic world, and Chanel stands for The fourth point reinforces the promise or timeless elegance. benefit, and is known as the ‘reason to What actually sells these perfumes is the believe’. For example, in the case of the Dove satisfaction derived from participating in the brand, which promises to be the most mois- symbolic world of the brand. The same is true turising, the reason is that all of its products of alcohol and spirits: Jack Daniel’s is selling a contain 25 per cent of moisturising cream. symbolic participation in an eternal, Positioning is a necessary concept, first authentic untamed America. To say that Jack because all choices are comparative, and so it Daniel’s is selling the satisfaction of being the makes sense to start off by stating the area in finest choice would be a mere commonplace, which we are strongest; and second because like the tired old cliché that customers are in marketing, perception is reality. satisfied at having made a choice that set Positioning is a concept which starts with them apart from the masses (a classic benefit customers, by putting ourselves in their stated by small brands attempting to place: faced with a plethora of brands, are emphasise their advantage over large ones). consumers able to identify the strong point of Faced with this conceptual dilemma, there each, the factor that distinguishes it from the are three possible approaches. The first of rest? This is why, ideally, a customer should these is to define positioning as the sum of be capable of paraphrasing a brand’s posi- every point that differentiates the brand. tioning: ‘Only Brand X will do this for me, This has been Unilever’s approach: the 60- because it has, or it is …’ page mini-opus known as the Brand Key, No instrument is entirely neutral. The which explains how to define a brand across above formula was created by companies such the entire world, starts with the phrase: as Kraft–General Foods, Procter & Gamble, ‘Brand Key builds on and replaces the brand and Unilever. It is designed for businesses that positioning statement …’. There are eight base competitive advantage on their products, headings to Brand Key: 180 THE CHALLENGES OF MODERN MARKETS

1. The competitive environment. uniqueness and singularity throughout the world and whatever the product. Brand 2. The target. identity has six facets, and is therefore larger 3. The consumer insight on which the brand than the mere positioning. It is represented by is based. the identity prism. At its centre one finds the 4. The benefits brought by the brand. brand essence, the central value it symbolises. Second, the brand platform comprises 5. Brand values and personality. ‘brand positioning’: choosing a market means 6. The reasons to believe. choosing a specific angle to attack it. Brand positioning must be based on a customer 7. The discriminator (single most compelling insight relevant to this market. Brand posi- reason to choose). tioning exploits one of the brand identity 8. The brand essence. facets. Positioning can be summed up in four key questions: for whom, why, when and Fundamentally, therefore, this collection forms against whom? It can be represented in the the positioning of a brand. However, the form of a diamond, the ‘positioning diamond’ concept that most closely resembles positioning (see Figure 7.2, page 176). in the strict sense of the word is referred to here In positioning, the brand/product makes a as the ‘discriminator’. McDonald’s also adopts a proposition, plus (necessarily) a promise. The similar reasoning (see Figure 7.3). Larry Light proposition may additionally be supported by defends the idea that positioning is defined a ‘reason to believe’, but this is not essential. when this chain of means–ends is completed Marlboro presents its smoker as a man – a real (this is a parallel concept to the ‘ladder’ – man, symbolised by the untamed cowboy of moving from the tangible to the intangible): the Wild West. No support is offered for this My position is that two tools are needed to proposition; no proof is necessary. It is true manage the brand. One defines the brand’s because the brand says so. And the more often identity, while the other is competitive and it is repeated, the more credible it becomes. specifies the competitive proposition made at In this way the brand’s proposition, which any given time in any given market. This is forms the basis of the chosen positioning at a the brand’s unique compelling competitive given moment in a particular market, may be proposition (UCCP). Thus the tool called fuelled by various ‘edges’ contained within ‘brand platform’ will comprise, first, the the brand’s identity: ‘brand identity’, that is to say, brand

Personality

Values

Rewards

Functions

Features

Figure 7.3 The McDonald’s positioning ladder Source: L Light BRAND IDENTITY AND POSITIONING 181

l a differentiating attribute (25 per cent and as a revitalising snack in Europe. moisturising cream in Dove, the It is this degree of freedom between smoothness and bite of Mars bars, the identity, essence and positioning that enables bubbles of Perrier); a brand to change over time while still remaining itself. Thus, over time (40 years), l an objective benefit: an iMac is user- Evian has changed its slogan and baseline on friendly, Dell offers unbeatable value for several occasions, symbolising a change in its money; angle of market attack: for indeed, the market l a subjective benefit: you feel secure with itself has changed. It has become increasingly IBM; saturated with competing brands, the original consumers have aged, and low-cost brands l an aspect of the brand’s personality: the have carved out a significant share. On each mystery of the Bacardi bat, Jack Daniel’s is occasion, these changes have led to a re-exam- macho, Axe/Lynx is cool; ination of the most compelling advantage, l the realm of the imaginary, of imagery and the angle of market attack. There has thus meaning (the American Wild West for been a shift from ‘water for babies’ to the Marlboro, Old New England for Ralph purest of waters, water from the Alps, well- Lauren); balanced water, and now the water of youth (this time round, the campaign is worldwide). l a reflection of a consumer type: successful However, each positioning has remained true people for Amex; to the essence of the Evian brand, which is l ‘deep’ values (Nike’s sports mentality, more than any other water distinguished by Nestlé’s maternal love), or even a mission its origins, its composition, its first campaign (The Body Shop, Virgin and so on). (babies) and so on. Evian is about life itself. What is the connection between the posi- A few introductory remarks should be made at tioning of the brand and the positioning of its this juncture. products? It is true that today’s brands are What is the connection between identity, increasingly based on multiple products: essence and positioning? Clearly, for existing Dove was born as a soap in the United States, brands, positioning derives from identity. But but now encompasses shampoos, shower gels, it exploits a specific aspect of identity at a moisturising cream, deodorants and so on. given point in time in a given market and The essence of Dove is ‘Femininity restored’. against a precise set of competitors. But Dove is being launched in a market via Consequently, at the level of global brands, a one or more products that have to fight for unified identity can generate various angles of their own space amid a host of competitors: attack for different markets. For example, hence when Dove soap was launched, its posi- Bacardi favours its Carta Blanca white rum tioning was: ‘Dove is a premium beauty bar product in Northern Europe – a market that for the mature women, worried about their consumes very little rum – and thus places its skin, which won’t dry your skin like soap confidence in the party spirit that surrounds because it contains one quarter moisturising the Cuba Libre cocktail drink. However, in its cream.’ Southern European market it chiefly This example is a good illustration of how the promotes its mature brown rums, with an product’s positioning promotes a consumer almost gastronomic promise. attribute or benefit, while the parent brand For 50 years, Mars was little more than a specifies the ‘terminal value’ that this attribute chocolate bar. The essence of Mars is energy; and benefit enables the consumer to reach. its positioning is as a meal substitute in the UK When a brand consists of multiple products, 182 THE CHALLENGES OF MODERN MARKETS care should be taken to ensure that their the addressee (recipient re-presentation), and respective positioning converges on attaining what specific relationship the communication the same core value (that of the parent brand). If builds between them. This is the construc- this is not the case, either the product requires tivist school of theorising about communica- repositioning, or the question should be asked tions. Since brands speak about the product, whether it is part of the right brand at all. and are perceived as sources of products, Table 7.2 illustrates the link between the services and satisfactions, communication essence of the l’Oréal Paris parent brand and theory is directly relevant. As such it reminds the positioning of its products such as Elsève us that brand identity has six facets. We call and Studio Line. this the ‘brand identity prism’.

The identity prism The six facets of brand identity Brand identity should be represented by a In order to become ‘passion brands’, or ‘love hexagonal prism (see Figure 7.4): marks’, brands must not be hollow, but have a deep inner inspiration. They must also have 1. A brand, first of all, has physical speci- character, their own beliefs, and as a result ficities and qualities – its ‘physique’. It is help consumers in their life, and also in made of a combination of either salient discovering their own identity. objective features (which immediately What is brand identity made of? Many ad come to mind when the brand is quoted hoc lists have been proposed in the brand in a survey) or emerging ones. literature, with varying items. One of the Physique is both the brand’s backbone sources of this diversity is their lack of theo- and its tangible added value. If the brand retical basis. By being too analytical, some of is a flower, its physique is the stem. these tools get their users into a muddle. Without the stem, the flower dies: it is the In fact, leaving the classical stimulus– flower’s objective and tangible basis. This response paradigm, modern brand communi- is how branding traditionally works: cation theory reminds us that when one focusing on know-how and classic posi- communicates, one builds representations of tioning, relying on certain key product who speaks (source re-presentation), of who is and brand attributes and benefits. Physical

Table 7.2 Sub-brand and master brand positioning Elsève Nutri-céramides Revitalift Studio Line l’Oréal Target Women with dry and Women aged Men and women All adults, market brittle hair over 45 under 35 men and women Market Shampoo Skin care Hair styling Beauty and segment products products hygiene products Positioning Nourishes and Reduces wrinkles Enables you to Enhances repairs damaged hair and firms the create the hairstyle consumers’ skin of your choice self image (consequence) (consequence) (consequence) (‘because you’re worth it’) BRAND IDENTITY AND POSITIONING 183

PICTURE OF SENDER

Physique Personality

Relationship Culture EXTERNALISATION INTERNALISATION

Reflection Self-image

PICTURE OF RECIPIENT

Figure 7.4 Brand identity prism

appearance is important but it is not all. There are several delicate issues Nevertheless, the first step in developing a regarding Coke’s physical facet. For brand is to define its physical aspect: What example, is the dark colour part of its is it concretely? What does it do? What identity? It is certainly a key contributor does it look like? The physical facet also to the mystery of the brand. If it belongs comprises the brand’s prototype: the to the brand’s kernel, key identity traits, flagship product that is representative of then there could never be any such thing the brand’s qualities. as colourless Crystal Coke, even though That is why the small round bottle is so there is such a thing as Crystal Pepsi. important each time Orangina is Likewise, would grapefruit Orangina in launched in a new country. The bottle the classic round bottle be possible? used today is the same as it has always Many brands have problems with their been. From the beginning, it has served to physical facet because their functional position Orangina, thanks to its unique added value is weak. Even an image-based shape and to the orange pulp that we can brand must deliver material benefits. actually see. Only later was it marketed in Brands are two-legged value-adding standard family-size PET bottles and in systems. cans. In this respect, it is also quite signif- 2. A brand has a personality. By communi- icant that there used to be a picture of the cating, it gradually builds up character. famous Coca-Cola bottle on all Coke cans. The way in which it speaks of its products It is true that modern packaging tends to or services shows what kind of person it standardise brands, making them all would be if it were human. clones of one another. Thus, in using the ‘Brand personality’ has been the main image of its traditional bottle, Coca-Cola focus of brand advertising since 1970. aims to remind us of its roots. 184 THE CHALLENGES OF MODERN MARKETS

Numerous American agencies have made brand personality is inherited from the it a prerequisite for any type of communi- old habit of advertising agencies of cation. Ted Bates had to come up with a describing as ‘brand personality’ in their new USP (now, the unique selling person- creative briefing and copy strategy every- ality), while Grey had to define brand thing that was not related to the product’s personality. This explains why the idea of tangible benefits. having a famous character represent the 3. A brand is a culture. There is no cult brand brand has become so widespread. The without a brand culture. A brand should easiest way of creating instant personality have its own culture, from which every is to give the brand a spokesperson or a product derives. The product is not only a figurehead, whether real or symbolic. concrete representation of this culture, Pepsi-Cola often uses this method, as do but also a means of communication. Here all perfume or ready-to-wear brands. culture means the set of values feeding the In the prism, brand identity is the brand’s inspiration. It is the source of the personality facet of the source. It should brand’s aspirational power. The cultural not be confused with the customer facet refers to the basic principles reflected image, which is a portrayal of governing the brand in its outward signs the ideal receiver. (products and communication). This Thus, brand personality is described essential aspect is at the core of the brand. and measured by those human person- Apple was the product of Californian ality traits that are relevant for brands (see culture in the sense that this state will page 110 for an application). Since 1996, forever symbolise the new frontier. Apple academic research has focused on brand was not interested in expanding personality, after Aaker’s (1995) creation geographically but in changing society, of a so-called ‘brand personality scale’. unlike the brands of Boston and the East However, despite its wide diffusion Coast. Even in the absence of Apple’s among scholars, this scale does not founders, everything carried on as if Apple measure brand personality in the strict still had some revolutionary plan to offer sense, but a number of intangible and to companies and to humankind. This is a tangible dimensions that are more or less source of inspiration for Apple’s original related to it, and that correspond in fact to products and services. other facets of a brand’s identity (Azoulay Major brands are certainly driven by a and Kapferer, 2003). Recent empirical culture but, in turn, they also convey this research (Romaniuk and Ehrenberg, 2003) culture (eg Benetton, Coca-Cola, IBM, etc). has corroborated this. For instance, The cultural facet is the key to under- computers or electronic equipment were standing the difference between Adidas, the categories most associated with the Nike and Reebok or between American ‘up to date’ trait, as ice creams were asso- Express and Visa. In focusing too heavily ciated with the ‘sensuous’ trait, and ener- on brand personality, research and adver- giser drinks with ‘energising’. These data tising have neglected this essential facet demonstrate that this scale is not meas- (we will also notice this with retailers: the uring personality: a lot of its traits instead leading ones are those who not only have measure a physical facet of the brand, a personality, but also a culture). Mercedes while some others relate to the cultural embodies German values: order prevails. facet of the identity prism, thus creating Even at 260 km/h, a Mercedes has perfect conceptual confusion in the field. This is handling. Even though the surrounding because Aaker’s conceptualisation of BRAND IDENTITY AND POSITIONING 185 landscape may be whizzing by, the refers to their sources, to their funda- Mercedes remains stable and unperturbed. mental ideals and to their sets of values. Symmetry governs this brand: the three- Culture is also the basis for most bank box bodywork is a strong physical charac- brands: choosing a bank means choosing teristic of Mercedes. The brand symbol set the kind of relationship with money one at the nose-tip of every Mercedes further wishes to have. Even though their services epitomises this spirit of order. are identical (physical facet), the Visa Countries of origin are also great Premier and the American Express Gold cultural reservoirs for brands: Coca-Cola cards do not belong to the same cultural stands for America, as does IBM, Nike or system. The American Express Gold card Levi’s. In other cases, however, they are symbolises dynamic, triumphant capi- ignored: thus, Mars is a worldwide brand talism. Money is shown, or even flashed like Shell. Canon and Technics deny their about. Visa Premier, on the contrary, Japanese origin whereas Mitsubishi, represents another type of capitalism, Toyota and Nissan emphasise it. One of such as the German kind, making steady, the bonuses for Evian exports is that it quiet progress. Money is handled actually represents a part of French discreetly yet efficiently, neither gingerly culture. However, this is not the only nor flamboyantly. factor adding to their value. When 4. A brand is a relationship. Indeed, brands Americans buy Evian, they are not just are often at the crux of transactions and paying for the cultural facet but for all six exchanges between people. This is partic- aspects of these brands, starting with the ularly true of brands in the service sector basic consumer benefit: Evian quenches and also of retailers, as we shall see later. thirst and promotes health. American The Yves Saint Laurent brand functions style food is McCain’s cultural and with charm: the underlying idea of a love symbolic reference; for Jack Daniel’s, it is affair permeates both its products and its the authentic untamed America. advertising (even when no man is Culture is what links the brand to the shown). Dior’s symbolises another type of firm, especially when the two bear the relationship: one that is grandiose and same name. Because of its culture, Nestlé ostentatious (not in the negative sense), has not succeeded in conveying the image flaunting the desire to shine like gold. of a fun and enjoyable food brand. Nike bears a Greek name that relates it to Indeed, its image cannot be fully disso- specific cultural values, to the Olympic ciated from that of the corporation, Games and to the glorification of the which is overall perceived as austere and human body. Nike suggests also a peculiar puritan. The degree of freedom of a brand relationship, based on provocation: it is often reduced by the corporate culture, encourages us to let loose (‘just do it’). IBM of which it becomes the most visible symbolises orderliness, whereas Apple outward sign. conveys friendliness. Moulinex defines Brand culture plays an essential role in itself as ‘the friend of women’. The differentiating brands. It indicates the Laughing Cow is at the heart of a mother– ethos whose values are embodied in the child relationship. The relationship aspect products and services of the brand. Ralph is crucial for banks, banking brands and Lauren is WASP; Calvin Klein’s mini- services in general. Service is by definition a malism expresses a different set of values. relationship. This facet defines the mode of This facet is the one that helps differen- conduct that most identifies the brand. tiate luxury brands the most because it 186 THE CHALLENGES OF MODERN MARKETS

This has a number of implications for the target is quite frequent and causes way the brand acts, delivers services, relates problems. So many managers continue to to its customers. require advertising to show the targeted buyers as they really are, ignoring the fact 5. A brand is a customer reflection. When that they do not want to be portrayed as asked for their views on certain car such, but rather as they wish to be – as a brands, people immediately answer in result of purchasing a given brand (or terms of the brand’s perceived client type: shopping at a given retailer’s). Consumers that’s a brand for young people! for indeed use brands to build their own fathers! for show-offs! for old folks! identity. In the ready-to-wear industry, Because its communication and its most the obsession to look younger should striking products build up over time, a concern the brands’ reflection, not neces- brand will always tend to build a sarily their target. reflection or an image of the buyer or user All brands must control their customer which it seems to be addressing reflection. By constantly reiterating that Reflection and target often get mixed Porsche is made for show-offs, the brand up. The target describes the brand’s has weakened. potential purchasers or users. Reflecting the customer is not describing the target; 6. Finally, a brand speaks to our self-image. If rather, the customer should be reflected as reflection is the target’s outward mirror he/she wishes to be seen as a result of (they are …), self-image is the target’s own using a brand. It provides a model with internal mirror (I feel, I am …). Through which to identify. Coca-Cola, for our attitude towards certain brands, we instance, has a much wider clientele than indeed develop a certain type of inner suggested by the narrow segment it relationship with ourselves. reflects (15- to 18-year-olds). How can In buying a Porsche, for example, many such a paradox be explained? For the Porsche owners simply want to prove to younger segment (8- to 13-year-olds), the themselves that have the ability to buy Coca-Cola protagonists embody their such a car. In fact, this purchase might be dream, what they want to become and do premature in terms of career prospects later on when they get older (and thus and to some extent a gamble on their freed from the strong parental rela- materialisation. In this sense, Porsche is tionship), ie an independent life full of constantly forcing to push beyond one’s fun, sports and friends will then become limits (hence its slogan: ‘Try racing true. Youth identifies with those heroes. against yourself, it’s the only race that will As for adults, they perceive them as repre- never have an end’). As we can see, sentatives of a certain way of life and of Porsche’s reflection is different from its certain values rather than of a narrowly consumers’ self-image: having let the defined age group. Thus, the brand also brand develop such a negative reflection succeeds in bringing 30- or 40-year-old is a major problem. consumers to identify with this special Even if they do not practise any sports, way of life. Many dairy brands positioned Lacoste clients inwardly picture themselves on lightness or fitness and based on low (so the studies show) as members of an fat products project a sporty young female elegant sports club – an open club with no customer reflection: yet they are actually race, sex or age discrimination, but which purchased in the main by older people. endows its members with distinction. This The confusion between reflection and works because sport is universal. One of the BRAND IDENTITY AND POSITIONING 187

characteristics of people who eat Gayelord The last two facets, relationship and culture, Hauser health and diet products is that they bridge the gap between sender and recipient. picture themselves not just as consumers, The brand identity prism also includes a but as proselytes. When two Gayelord vertical division (see Figure 7.4). The facets to Hauser fans meet, they can strike up a the left – physique, relationship and reflection conversation immediately as if they were of – are the social facets which give the brand its the same religious obedience. In promoting outward expression. All three are visible a brand, one pledges allegiance, demon- facets. The facets to the right – personality, strating both a community of thought and culture and self-image – are those incorpo- of self-image, which facilitates or even stim- rated within the brand itself, within its spirit. ulates communication. This prism helps us to understand the essence of both brand and retailer identities (Virgin, These are the six facets which define the K-Mart, Talbott’s). identity of a brand as well as the boundaries within which it is free to change or to develop. Clues for strong identity prisms The brand identity prism demonstrates that these facets are all interrelated and form a Identity reflects the different facets of brand well-structured entity. The content of one long-term singularity and attractiveness. As such facet echoes that of another. The identity it must be concise, sharp and interesting. Let us prism derives from one basic concept – that remember that brand charters are management brands have the gift of speech. Brands can tools: they are necessary for decentralised only exist if they communicate. As a matter of decision making. They must help all the people fact, they grow obsolete if they remain silent working on the brand to understand how the or unused for too long. Since a brand is a brand is special, in all its dimensions. They must speech in itself (as it speaks of the products it also stimulate creative ideas: they are a spring- creates and endorses the products which epit- board for brand activation. Finally, they must omise it), it can thus be analysed like any help us to decide when an action falls within the other speech or form of communication. brand territory and when it does not. Semiologists have taught us that behind any As a consequence, a good identity prism is type of communication there is a sender, either recognisable by the following formal charac- real or made up. Even when dealing with teristics: products or retailers, communication builds an image of its speaker or sender and conveys it to l There are few words to each facet. us. It is truly a building process in the sense that l The words are not the same on different brands have no real, concrete senders (unlike facets. corporate communication). Nevertheless, customers, when asked through projective l All words have strength and are not techniques, do not hesitate to describe the lukewarm: identity is what makes a brand brand’s sender, ie the person bearing the brand stand out. name. Both the physique and personality help define the sender thus built for that purpose. Too often, in our consulting activity, we Every form of communication also builds a notice just the opposite: recipient: when we speak, everything seems as l Facets are filled up with image traits that if we were addressing a certain type of person derive from the last usage and attitude or audience. Both the reflection and self- study. Let us remember that identity is not image facets help define this recipient, who, the same as image. The question is, which thus built, also belongs to the brand’s identity. 188 THE CHALLENGES OF MODERN MARKETS

Polo

From casual to formal, Self confident always comfortable

WASP Social Ralph Lauren = Boston elitism distinctiveness American Exclusive Success Luxury

They are comfortable, young men I belong to my time of good social standing, nice, I am fashionable rich: Ideal son-in-law I am the elite

Shirt 12x12 Soft, airy Well balanced Crocodile Authentic Colours Serene Aristocratic ideals Valorisation Lacoste = Sophistication and simplicity Accessible Chic Sport and classicism Individualism

They are non-conspicuous I am discreetly elegant men and women having I am always correct real class although casual

Figure 7.5 Sample brand identity prisms

of these very many image items does the Sources of identity: brand DNA brand want to identify with? l There is a lot of redundancy between facets, How can we define a brand’s identity? How the same words being used many times. can we define its boundaries, its areas of This should not be possible. Although strength and of weakness? Anyone in charge related, each facet addresses a different of managing a well-established brand is dimension of brand uniqueness. perfectly aware that the brand has little by little gained its independence and a meaning l Most of the words are looking for of its own. At birth, a brand is all potential: it consensus, instead of looking for sharpness. can develop in any possible way. With time, Consumers do not see the strategies, nor do however, it tends to lose some degree of they see the brand platforms. They do expe- freedom; while gaining in conviction, its rience the brand by its creations, or at facets take shape, delineating the brand’s contact, or in its places. To produce ideas, legitimate territory. Tests confirm this creative people need flesh: an identity with progression: certain product or communi- soul, body, forms, a real profile, not an cation concepts now seem foreign to the average excellent profile, where nothing brand. Other concepts, on the contrary, seem really stands out. BRAND IDENTITY AND POSITIONING 189 to be perfectly in tune with the brand, as it a firm to stay attuned to the market. Of course both endorses and empowers them, by giving no brand envies the destiny of Van Gogh, who them greater credibility. lived a life of misery and became famous only Brand image research does not provide any after he died. Nonetheless, present brand satisfactory answer to these questions. Neither management policy must be reappraised, do the purchasers when asked to say what because unfortunately it still assumes that they expect from the brand. Generally, they consumers are the masters of brand identity haven’t a clue. At best, they answer in terms of and strategy. Consumers are actually quite the brand’s current positioning. Thus, in the incapable of carrying out such functions. USA, and the UK, there are only very few Firms should, therefore, begin to focus more purchasers of Saab cars: the brand is not wide- on the sending side of brand marketing and spread though it is expanding its market less on the receiving side. distribution network. That is why English or Trying to define the specifics of a brand’s American owners see their Saab as unusual substance and intrinsic values naturally requires rather than foreign. When asked what they an understanding of what a real brand is all expect from the brand, they are, indeed, likely about. A brand is a plan, a vision, a project. This to answer that Saab must continue to design plan is hardly ever written down (except for the unusual, unique cars. In doing so, they expect few brands which have a brand charter). It can that the brand will reinforce their own unusu- therefore only be inferred from the marks left by ality and uniqueness which they, as the only the brand, ie the products it has chosen to few marginal Saab buyers, most definitely endorse and the symbols by which it is repre- want to demonstrate. Obviously, however, if sented. Discovering the essence of brand Saab focused exclusively on such self-centred identity, ie of the brand’s specific and unique expectations, its market share would most attributes, is the best way to understand what certainly remain restricted: the economic the brand means overall. That is why identity future of the Saab automotive division would research must start from the typical products (or then be under threat. services) endorsed by the brand as well as on the Consumers and prospects are often asked brand name itself, the brand symbol if there is what their ideal brand would be and what one, the logo, the country of origin, the adver- attributes it would need in order to get univer- tisements and the packaging. The purpose of all sally approved. This approach fails to segment this is to semiologically analyse the sending properly the expectations and thus to produce process by trying to discover the original plan any definition other than the average brand underlying the brand’s objectives, products and ideal. It is typical for consumers to expect symbols. Generally, this plan is simply uncon- banks to provide expertise and attention, scious, neither written anywhere, nor explicitly availability and competence, proximity and described. It is simply enacted in daily deci- know-how. These expectations are also ideal sions. Even creators of famous brand names in the sense that they are often incompatible. (Christian Lacroix, Yves Saint Laurent, Calvin In pursuing them, such brands may lose their Klein or Liz Claiborne) are not conscious of it: identity and regress to the average level. In when asked about the general plan, they are seeking at all costs to resemble the ideal brand indeed unable to explain it clearly, yet they can described by the consumers (or industrial easily say what their brand encompasses and buyers), brands thus often begin to downplay what it does not. Brand and creator merge. We their differences and look average. have shown (p 95) that, paradoxically, a luxury The mistake is to pursue this market ‘ideal’: brand does not really begin to exist until its it’s up to each brand to pursue an ideal of its creator dies. It then shifts from body and own. Commercial pressure naturally requires instinct to plan and programme. 190 THE CHALLENGES OF MODERN MARKETS

In conducting research on brand identity, it specify the characteristics which could help us may well be that we discover several under- identify when we are in a game situation and lying plans. The history of a brand indeed when we are not. For abstract categories, made reflects a certain discontinuity in the decisions of heterogeneous products, the difficulty is made by different brand managers over time. even greater. In this case, brands can serve as Thus Citroen changed when it was purchased examples only if they are not exclusively by Michelin, and later by Peugeot. A lot of its attached to one specific product. What is cars have left no print, although they reached Danone? When does a product deserve to be a high level of sales. Rather than attempt the named Danone and when does it not? The impossible task of making sense of all its same holds true for Philips or Whirlpool. products, brand managers must choose the Consumers can easily answer this question: sense that will best serve the brand in its they are indeed able to group products in targeted market and focus only on that one. terms of their capacity to typically represent Finally, when dealing with a weak brand, we and perfectly exemplify a large spectrum might not discover any consistent plan at all: brand. This is shown in Table 7.3, which ranks in this case, the brand is more like a name Danone’s most typical products against stuck on a product than a real player in the Yoplait’s, according to the consumers’ point of field. This situation is very similar to the initial view. The most representative product is stage of brand creation: the brand has great called the ‘brand prototype’, not in the sense latitude and almost infinite possibilities, even of an airplane or car prototype, but rather in though it has already planted the seeds of its that of the best exemplar of the brand’s potential identity in the memory of the meaning. In this respect, in Europe Danone market. has two prototypical products: plain yoghurt (natural) and the refrigerated dessert cream, The brand’s typical products Danette. The cognitive psychologists around Rosch (1978) claim that prototypes actually The product is the first source of brand transfer some of their features to the product identity. A brand indeed reveals its plan and its category (Kleiber, 1990). In other words, if uniqueness through the products (or services) there were no definition of Danone, the it chooses to endorse. A genuine brand does public would probably be able to come up not usually remain a mere name printed on a with one anyway, by taking a close look at the product, ie a mere graphic accessory added on features of Danone’s most representative at the end of a production or distribution products. This is what we call prototype process. The brand actually injects its values in semantics. It is true that each brand sponta- the production and distribution process as well neously brings to mind certain products – as in the corollary services offered at the point some more than others – and actions as well as of sale. The brand’s values must therefore be a certain style of communication. These embodied in the brand’s most highly symbolic prototype products are representative of the products. This last sentence calls for some various facets of brand identity. According to attention. Cognitive psychology (Kleiber, some cognitive psychologists, such products 1990; Rosch, 1978; Lakoff, 1987) has taught us may convey brand identity, but above all they that it is easier to define certain categories by generate it. In fact, when questioned on simply showing their most typical members Danone’s brand image, consumers are more than by specifying what product features are likely to answer in terms of Danone’s required to be considered a member of those prototype products. categories. As stated in this example, it is Historically, it is quite significant that difficult to define the ‘game’ concept, ie to Danone became famous with its plain BRAND IDENTITY AND POSITIONING 191

Table 7.3 The most typical products of two mega-brands Products Danone Yoplait Danette – dessert cream 9.33(1) 4.04 Plain yoghurt (natural) 9.16(2) 8.93(1) Fruit yoghurt 8.64(3) 8.39(5) Whole milk yoghurt 8.55(4) 8.88(2) Liquid yoghurt 8.54(4) 8.51(4) Whipped yoghurt 8.44(6) 6.76 Petit fromage frais 8.13(7) 7.98 Fromage frais 8.11(8) 8.66(3) Chocolate/coffee delight with whipped cream 8.07(9) 7.6

Key: grading from 0 to 10 (rank in parentheses if grade >9)

Source: Kapferer and Laurent (1996) yoghurt, a product which had previously been ments, ie the new colours of the season. sold in pharmacies as natural medication. Saying it is not enough though: the toughest That is where Danone’s health image origi- part is doing it, and they did. Unlike their nated. And it is now revived by the creation of competitors, Benetton innovated by dyeing the Danone Foundation. But the duality of pullovers after they were made and not prototypes has also contributed to soften before, which helped save lots of precious Danone’s image: Danette cream dessert time. By delaying their decision on the final signifies hedonism, pleasure and opulence. colours, they were indeed better prepared for Danone’s brand identity is thus dual: both the whims of fashion and last-minute health and pleasure (Table 7.3). As such it changes. If summer turned out to be magenta, captures the largest share of the market. It Benetton could immediately react and fulfil leaves the smallest shares to brands that do expectations. However, although it is an not provide this balance to consumers: they essential physical facet of Benetton’s brand offer either diet brands or sweet confectionery identity, colour is not just a question of brands. physique (in the identity prism): the colour If this theory holds, another question element also impacts on the other facets of comes to mind: just what is it, in a typical the prism, especially the cultural (which has product, that conveys meaning? A brand’s sometimes made brands look like religions), a values only convey meaning if they are at the key facet when a brand markets to youth. core of the product. Brand intangible and Colour does not merely serve to position tangible realities go hand in hand: values the brand (the colourful brand); it is the drive reality, and reality manifests these outward sign of an ideology, a set of values values. and a brand culture. In its very slogan ‘United For example, the essence of Benetton’s Colours of Benetton’, as in its posters showing brand identity is tolerance and friendship. a blond and a black baby, the brand expresses Colour is more than an advertising theme. It its inspiration and its idealistic vision of a is both the symbolic and industrial basis of united world in which all colours and races the brand. Using a technical innovation, live together in harmony. Colour then ceases dyeing sweaters at the last minute, Benetton to be a mere feature distinguishing the manu- could stay ahead of its competitors through facturer. It is a banner, a sign of allegiance. its capacity to meet the latest fashion require- Colour is celebrated by the youth who wears 192 THE CHALLENGES OF MODERN MARKETS it. Brotherhood and cultural tolerance are the the brand will discover itself. Roots last, trends brand’s values. That is why the provocative don’t. They indicate the present direction of style of Benetton’s recent advertising was so the wind, the energy that pushes disturbing: it was at odds with the brand’s past consumption. identity. The values that Orangina has conveyed Orangina is the case of a brand in search of since the beginning are: spontaneity, humour identity, substance and psychological depth. and friendliness. Orangina is a healthy, For years Orangina has been represented by natural drink, a mixture of pulp and water. It both a certain physique and a unique product: symbolises sunshine, life, warmth and energy. a fizzy orange soft drink. What makes it really All combine latently to give a typical taste and stand out is that the orange pulp is purposely feeling of the South (underlying it all, there is left in the liquid. This feature was so crucial to a common model: the Southern model). The the product that an orange-shaped bottle was word ‘model’ reminds us that a strong brand is designed especially for it and its advertising always the product of a certain culture, hence focused on the need to shake the bottle well in of a set of values which it chooses to represent. order to disperse the pulp and experience the In the case of Orangina, Southern values seem unique and best-tasting flavour of Orangina. to be a potent alternative to the North. Living The brand further developed its own person- in the South means both looking at the world ality through its TV advertising, which was and experiencing it in a different way. done in a jumpy, video-clip style so popular The Lacoste shirt now only represents 30 among young people. The last stage in this per cent of the company’s world sales. It is process consisted of conveying the full nonetheless a core product, since it conveys meaning of the brand and, to do this, the the brand’s original values. This shirt was brand/product relationship had to be indeed designed at a time when tennis was reversed. Until then, Orangina was merely the still being played in long trousers and shirts name of a soft drink containing orange pulp. with rolled-up sleeves. In 1926 (Kapferer and Thus, adopting a modern style does not Laurent 2002), René Lacoste asked his friend change the structure of this relationship. André Gilliet to make a ‘false’ shirt: something Today, the basic question is asked the other that would look like a shirt (so as not to shock way around: what are the values that a soft the Queen at Wimbledon), yet would be more drink containing orange pulp could serve to practical, ie airy (hence the cotton knit), embody? Coca-Cola’s leadership among 13- to sturdy and with straight sleeves. Thus right 18-year-olds cannot be understood on the from the beginning, and by accident, René basis of physique and personality only. Coca- Lacoste’s shirt came to embody the individu- Cola is a brand that vows an allegiance to the alistic and aristocratic ideal of living both all-American cultural model. Pepsi-Cola courageously and elegantly. Whatever the embodies the values of the new generation, as occasion, a Lacoste is always appropriate: does Virgin in the UK, hence its ability to chal- perfectly suited to the person who, overall, lenge Pepsi’s second place in terms of cola cares to respect proper dress codes, but not in market share with its own Virgin Cola. very minute detail. Lacoste is neither trendy Orangina must find its own source of inspi- nor stuffy: it is simply always appropriate. ration as well as the set of values that its All major brands thus have a core product product will embody. This search for identity in charge of conveying the brand’s meaning. is based on our fundamental axiom of brand Chanel has its gold chain, Chaumet its pearls management: the truth of a brand lies within and Van Cleef a patented technique of setting itself. It is not by interviewing consumers or stones in invisible slots. These features do not consulting oracles of sociocultural trends that merely characterise the products, they BRAND IDENTITY AND POSITIONING 193 actually embody the brands’ values. Dupont, legitimate territory. Why did Steve Jobs and on the other hand, does not seem to have Steve Wozniak choose Apple as their brand much at stake: it certainly endorses superb name? Surely, this name neither popped out lighters, but beyond them is there any of any creative research nor of any computer dynamic brand concept in evidence? In terms software for brand name creation. It is simply of ready-to-wear clothing, 501 jeans are at the the name that seemed plainly obvious to the heart of the Levi’s brand and of the carefree two creative geniuses. In one word, the Apple and unconventional ideology it represents. brand name conveyed the exact same values (On this point, it is significant that the as those which had driven them to revolu- product most frequently worn with a Lacoste tionise computer science. shirt is a pair of jeans.) Conversely, brands What must be explained is why they did such as Newman suffer from never having not go for the leading name style of that created a real core product, one exclusive to period, ie International Computers, Micro the brand which conveys its very identity. Computers Corporation or even Iris. The These examples serve to illustrate a key majority of entrepreneurs would have chosen principle for brand credibility and durability: this type of name. In deciding to call it Apple, all facets of brand identity must be closely Jobs and Wozniak wanted to emphasise the linked. Moreover, the brand’s intangible facets unconventional nature of this new brand: in must necessarily be reflected in its products’ using the name of a fruit (and the visual physique. This ‘laddering’ process is illus- symbol of a munched apple), was it taking trated by the Benetton case (Table 7.4). itself seriously? With this choice, the brand Likewise, Lacoste’s identity prism can neither demonstrated its values: in refusing to idolise be dissociated from the story behind its computer science, Apple was in fact preparing famous shirt nor from the values of its to completely overturn the traditional emblematic sport, tennis. human/machine relationship. The machine had, indeed, to become something to enjoy The power of brand names rather than to revere or to fear. Clearly, the brand name had in itself all the necessary The brand’s name is often revealing of the ingredients to produce a major breakthrough brand’s intentions. This is obviously the case and establish a new norm (which all seems so for brand names which, from the start, are obvious to us now). What worked for Apple specifically chosen to convey certain objective also worked for Orange. This name reflected or subjective characteristics of the brand the founders’ values, which materialised into (Steelcase or Pampers). But it is also true of user-friendly mobile phone services. Similarly other brand names which were chosen for Amazon conveys strength, power, richness subjective reasons rather than for any and permanent flow. apparent objective or rational ones: they The brand name is thus one of the most too have the capacity to mark the brand’s powerful sources of identity. When a brand

Table 7.4 Brand laddering process: the Benetton case l Physical attribute: colour and price. l Objective advantage: the latest fashion. l Subjective advantage: the brand for young people who want to be ‘in’. l Value: tolerance and brotherhood. 194 THE CHALLENGES OF MODERN MARKETS questions its identity, the best answer is advertising cleverly plays upon the theme of therefore to thoroughly examine its name and duplication – those stepping in from Ecco will so try to understand the reasoning behind its of course perfectly duplicate and echo those creation. In so doing, we can discover the stepping out of the company. brand’s intentions and programme. As the Generally speaking, it is best to follow the Latin saying goes: nomen est omen – a name is brand’s overall direction as well as its under- an omen. Examining the brand name thus lying identity, whenever possible. All Hugo amounts to decoding this omen, ie the Boss is entirely contained in that one short, brand’s programme, its area of legitimacy and yet international, name – Boss: it conveys know-how as well as its scope of competence. aggressive success, professional achievement, Many brands make every effort to acquire conformity and city life. Rexona is a harsh qualities which their brand name fails to name all over the world because of its abrupt reflect or simply excludes altogether. ‘Apple’ R and its sharp X: thus it implicity promises sounds fun, not serious. efficiency. Other brands simply proceed by ignoring their name. The temptation for a brand to just Brand characters forget about its name is caused by a rash inter- pretation of the principle of brand autonomy. Just as brands are a company’s capital, Experience indeed shows that brands become emblems are a brand’s capital equity. An autonomous as they start to give words emblem serves to symbolise brand identity specific meanings other than those in the through a visual figure other than the brand dictionary. Thus when hearing of ‘Bird’s Eye’, name. It has many functions such as: no one thinks of a bird. The same is true of l To help identify and recognise the brand. Nike. Mercedes is a Spanish Christian name, Emblems must identify something before yet the brand has made it a symbol of they signify anything. They are particularly Germany. This ability is not only character- useful when marketing to children, since istic of brands but also of proper nouns: we do the latter favour pictures over text, or when not think of roofing when talking of Mrs marketing worldwide (every whisky has its Thatcher. Thus, strong brands force their own own emblem). lexical definitions into the glossaries: they give words another meaning. There is no l To guarantee the brand. doubt that this process takes place, but the l To give the brand durability – since time it requires varies according to its emblems are permanent signs – thereby complexity. enabling the company to capitalise on it. A name – like an identity – has to be Thus Hermès’ legendary horse is the managed. Certain names may have a double common emblem of ‘Equipage’, ‘Amazone’ meaning. The purpose of communication and ‘Calèche’. then is to select one and drop the other. Thus, Shell naturally chose to emphasise the sea- l To help differentiate and personalise: an shell meaning (as represented in its logo) emblem transfers its personality to the rather than the bomb-shell one! Likewise, the brand. In doing so, it enhances brand international temporary employment agency, value. But it also facilitates the identifi- Ecco, has never chosen to exploit the cation process in which consumers are potential link with economy suggested in its involved. name. On the other hand, it does use its name Animal emblems are often used to perform as a natural means to reinforce its positioning this last function. Animals symbolise the in the segment of high quality service: its brand’s personality. It is quite significant, in BRAND IDENTITY AND POSITIONING 195 this respect, that both the Chinese and Such characters say a lot about brand Western horoscopes represent human char- identity. They were indeed chosen as brand acters by animals. The Greek veneration of portraits, ie as the brand’s traits, in the etymo- animals reflected their conception of a certain logical sense. They do not make the brand, yet spiritual mystery. The animal is not only alle- they define the way in which the brand brings gorical of the brand’s personality but also of to reality its traits and features. the psychological characteristics of the targeted public. Wild Turkey symbolises the Visual symbols and logotypes independent mind and free spirit of the drinker of this particular bourbon. The red Everybody knows Mercedes’ emblem, grouse, symbol of Scotland and a rare bird, has Renault’s diamond, Nike’s swoosh, Adidas’ been chosen as the emblem of Famous Grouse three stripes, Nestlé’s nest, Yoplait’s little whisky in order to reflect the aesthetic ideal of flower and Bacardi’s bat. These symbols help its consumers. us to understand the brand’s culture and Emblems epitomise more than one facet of personality. They are actually chosen as such: brand identity; that is why they play such a the corporate specifications handed over to crucial role in building identity capital. The graphic identity and design agencies mainly world of whisky is filled with wild, rare, pertain to the brand’s personality traits and untameable animals that symbolise the values. natural, pure and authentic character of this What is important about these symbols and alcohol. The associated risk perceived by the logos is not so much that they help identify customer is thus reduced. They also demon- the brand but that the brand identifies with strate, as we saw above, the brand’s person- them. When companies change logos, it ality: the red grouse is known for its noble usually means that either they or their brands gait and carriage; the wild turkey is a are about to be transformed: as soon as they stubborn and clever bird symbolising inde- no longer identify with their past style, they pendence in the US. These animals also want to start modifying it. Some companies represent the brand’s value and culture facet, proceed otherwise: to revitalise their brands either because they are geographical symbols and recover their identity, they milk their (the grouse for Scotland, the wild turkey for forlorn brand emblems for the energy and the USA) or because they refer to the brand’s aggressiveness they need in order to be able to essence itself. change. Just as human personality can be Many other brands have chosen to be reflected in a signature, brand essence and represented by a character. A character can, self-image can be reflected in symbols. for example, be either the brand’s creator and endorser (Richard Branson for Virgin) or an Geographical and historical roots endorser other than the creator (Tiger Woods for Nike). It can also be a direct symbol of the Identity is born out of the early founding acts brand’s qualities (Nestlé’s bunny rabbit, Mr of a brand. Among these one finds products, Clean, the Michelin bibendum). Some char- channels, communications and also places. acters serve to build a certain relationship and The identity of Swissair is intimately asso- an emotional, prescriptive link between the ciated with that of Switzerland. The same is brand and its public (Smack’s frog, Esso’s true of Air France abroad or of Barclay’s Bank. tiger). Others, finally, serve as brand ambas- Outside of the United States, the Chrysler sadors: though Italian, Isabella Rossellini brand represents the cars of the New World. embodied the type of French beauty that Certain brands naturally convey the identity Lancôme promises to all women. of their country of origin. Others are totally 196 THE CHALLENGES OF MODERN MARKETS international (Ford, Opel, Mars, Nuts). Others why she is so successful in South America, in still have made every possible effort to hide the US Sun Belt (Florida, Texas, California) their national identity: Canon never refers to and in Europe (Spain, France, Germany). The Japan, while Technics has adopted an Anglo- relationship between a brand and its creator Saxon identity though the company is can last far beyond the death of the creator. Japanese. Chanel is a good example of this: Karl Some brands draw their identity and Lagerfeld does not try to imitate the Chanel uniqueness from their geographical roots. It is style, but to interpret it in a modern way. The a deliberate choice on their part. What world is changing: the brand’s values must be advantage did Finlandia expect to gain, for respected, yet adapted to modern times. The example, by launching a premium vodka? As same holds true for John Galliano and Dior, or its name suggests, Finland is the country Tom Ford for Gucci. where the earth ends – a cold, austere, When its creator passes away, the brand unspoilt, remote land, where the sun scrapes becomes autonomous. The brand is the the ground. This spontaneous vision both creator’s name woven into a set of values and feeds and supports the creation of an a pattern of inspiration. Thus, it cannot be extremely pure water and vodka. used by another member of the creator’s Brands can benefit from the values of their family. This was confirmed in court in 1984 native soil. Apple has thus adopted the when Olivier Lapidus, son of the founder of Californian values of both social and techno- the Ted Lapidus ready-to-wear brand, was logical progress and innovation. There is a refused the right to use the word ‘Lapidus’. touch of alternative culture in this Californian Even blood kinship thus does not entitle one brand (which is not true of all Silicon valley to use brand name equity in the same sector. brands, such as Atari). IBM epitomises East coast order, power and conservatism. Evian’s Advertising: content and form symbolism is linked to the Alps, or rather to the image of the Alps, as projected by the Let us not forget that it is advertising which company. Roots are crucial for alcoholic drinks writes the history of a brand, retailer or too: Glenfiddich means Deer Valley, Grouse is company. Volkswagen can no longer be disso- the fetish bird of Scotland. The Malibu drink, ciated from the advertising saga that helped it on the contrary, has never defined its origin: develop. The same is true of Budweiser and only recently has its advertising specified that Nike. This is only logical: brands have the gift its home was the Caribbean. of speech and they can only exist by commu- nicating. Since they are responsible for The brand’s creator: early visions announcing their products or services, they need to speak up at all times. Brand identity cannot be dissociated from the When communicating, we always end up creator’s identity. There is still a lot of Richard saying a lot more than we think we do. Any Branson in Virgin’s brand identity. Inspired by type of communication implicitly says some- its creator, Yves Saint Laurent’s brand identity thing about the sender, the source (who is is that of a feminine, self-assured and strong- speaking?), about the recipient we are appar- minded 30-year-old woman. The YSL brand ently addressing and the relationship we are celebrates the beauty of body, of charm, of trying to build between the two. The brand surrender to romance, and is flavoured with a identity prism is based on this hard fact. hint of ostentatious indecency. Paloma How is this implicit message slipped between Picasso’s flaming Mediterranean looks the lines and conveyed to us? Simply through permeate her perfume products and explain style. In these times of audio-visual media, a BRAND IDENTITY AND POSITIONING 197

30-second TV ad says just as much about the such as product quality, durability, weather- style of the brand sending the message and of resistance, reliability, reasonable prices and the recipient apparently being targeted as good trade-in value. about the benefits of the product being But this advertising style, though created announced. Whether or not they are managed, outside the Volkswagen company, was not planned or wanted, all brands acquire a history, just artificially added to the brand. Who could a culture, a personality and a reflection possibly have created such a monstrous car through their cumulative communications. To with an insect name (the Beetle), which so manage a brand is to proactively channel this completely defied the trends in the US auto- gradual accumulation of attributes towards a mobile world at the time? It could only have given objective rather than just to sit and wait been an extremely genuine, honest creator, to inherit a given brand image. with a long-term vision. To encourage its own Yet what is inherited can also be a boon. customers to buy, the brand had not only to Volkswagen tightly controls its marketing, but flatter their ego and intelligence but also to entirely delegates its communications to its acknowledge them for breaking away – if only agency. Thus all Volkswagen cars are launched this one time – from the stylistic clichés of under the same name, no matter what the North American cars. In a tongue-in-cheek country. However, the Volkswagen style is style, the brand manages to convey its values definitely a legacy of the advertising genius, and its culture. The Volkswagen style is Bill Bernbach: indeed, he succeeded in Volkswagen, even though it was created by making the entire DDB network follow the Bernbach. stylistic guidelines which he had defined. It is thus through the memorable VW Beetle campaigns that both the brand’s specific style Brand essence and scope of communication began to take shape. Many companies and advertising agencies use Both in its advertising films and spots, the the phrase ‘brand essence’. The analysis of this VW brand has always freely played with the practice reveals that it stems from a desire to motifs of both the cars and the logo. The summarise the identity and/or the posi- brand’s style of expression is one of humour tioning. Some would say that the essence of and humour only, as shown in its attitude of Volvo is security (its positioning), others self-derision, false modesty and impertinence would say that the essence of Volvo is ‘social towards competitors as well as in the use of responsibility’ (a high-order typical paradox. Volkswagen’s advertisements have Scandinavian value), from which is derived thus built a powerfully intimate relationship the desire to build the most secure as well as with the public. They appeal to consumers’ recyclable cars. Similarly, some speak of Mars’ intelligence, reflecting the image of the prag- essence as ‘bite and smoothness, with caramel matic people who prefer functional features to and chocolate’, others as ‘vitality and energy’. fancy ones. In essence, the concept of ‘brand essence’ asks The paradox of Volkswagen is that it has in an atemporal and global way: what do you always managed to speak of a quite prosaic sell? What key value does the brand propose, product in an almost elitist, yet friendly and stand for? No more than three! humorous style. This has enabled Volkswagen Part of the discussion lies in the notion of to introduce minor modifications as major value: some speak of benefit, others of higher developments. The selling points put across in order ideals, such as those revealed in a clas- the adverts are based on facts and on certain sical means–ends questionnaire called values, which the brand has always conveyed, ‘laddering’ (see the Benetton example, page 198 THE CHALLENGES OF MODERN MARKETS

193). In fact it is possible that for some brands, of life founded on human coexistence, and essence is intimately tied to the product expe- containing strong moral values such as confi- rience, whereas it is not true for others. dence, generosity, responsibility, honesty, Let us look at an example. What is Nivea’s harmony and love. In terms of competence, it essence? To answer one needs to first specify stands for safety, nature, softness and inno- Nivea’s identity. As we have seen in this vation. Lastly, it sells itself as timeless, simple chapter, we should look to the prototype to and accessible, at a fair price. And this is the find the key values of any brand. In Nivea’s way in which the Nivea brand itself is iden- case, this is Nivea cream and its characteristic tified worldwide. Even if at any given blue box – the means via which the brand moment, within a particular group, segment gains entry to each country, and thus the or country, these values are not perceived, brand’s underpinning factor. More than a they remain the values that form the basic mere product, Nivea cream in its round box identity of the brand. What does Nivea sell in constitutes one of the first acts of love and essence? Pure love and care. protection that a mother performs for a baby. Other examples of brand essence directly After all, doesn’t everyone remember the derived from the early prototype of the brand typical scent, feel, softness and sensuality of are: this white cream, reinforced by the Nivea blue? The blue box is thus the brand’s true l masculine attractiveness (Axe/Lynx dual foundation in all senses: brand); l It is the first Nivea product people l untamed America (Jack Daniel’s); encounter in their life, from the age of four. l family preservation (Kodak); l It bears the Nivea values. l love and nutrition (Nestlé); l It constitutes the first sales of Nivea in every l sign of personal success (Amex). country where the brand is established. Do we need the brand essence concept? It has So what is the significance of this blue colour a managerial utility: trying to summarise the and this flagship moisturising cream, the richness of an identity. As such it is easier to cornerstones of the whole edifice? convey. Its inconvenience is that the meaning Remember that blue is the favourite colour of words is highly culturally specific. Thus a of more than half the population of the word as simple as ‘natural’ does not evoke the western world, including the United States same things in Asia and in Europe, and within and Canada. It is the colour of dreams (the Europe there are huge differences between sky), calm (the night), faithful, pure love (the southern countries and northern countries. As Virgin Mary has been depicted in blue since such, to understand a brand one really needs the 12th century), peace (UN peacekeepers) the full identity prism, where words acquire and the simple, universal appeal of blue jeans their meaning in relationship with others. (Pastoureau, 1992). The cream’s whiteness is Practically, the brand essence can be written the white of purity, health, discretion, in the middle of the brand identity prism or simplicity and peace (a white flag). As for the on the top of the brand pyramid, relating moisturising cream itself, it adds water to the essence, values, personality and attributes (see skin, an essential injection of a human aspect page 199). to one’s natural environment. Both identity and positioning are This reveals the values of the brand. Nivea’s summarised in the brand platform. When the philosophy penetrates to its very core: a view BRAND IDENTITY AND POSITIONING 199 brand carries multiple products, each of them and has a position that competes against expresses the values with its own weighting, specific brands (see Chapter 11).

Culture: America Authenticity Manhood

Brand identity Physique Essence: Personality Unique recipe Unchanged Macho Unique bottle Pure Deep Friendly (Jack) Unique regional America associations

Reason to Believe?: Lynchburg site (Tennessee)

For whom USP: Against what All those who want No compromise All those sissy Brand positioning a real male drink sophisticated new spirits

Consumer insight: all new European vodkas and spirits are artificial

Figure 7.6 Example of brand platform: Jack Daniel’s 200

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Creating and sustaining brand equity 202

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Launching the brand

When they came into being, all the major chosen, without any prior study or analysis: brands examined so far – Nike, Lacoste, Coca-Cola reflected the contents of the new Amazon, Orange, l’Oréal, Nivea, Ariel – were product; Mercedes was the name of Mr of course also new brands. Over the years, and Daimler’s daughter; Citroën was a family often by intuition, chance or accident, they name; Adidas is a spin-off of Adolphe Dassler; became major brands, leading brands, likewise Lip of Lippman and Harpic of Harry powerful brands. Picman. The new product had to be given a Since at one point they were all necessarily new name so that it could be advertised. new, we might ask ourselves what the estab- Advertising was then put in charge of lished brands have or have done that the presenting the advantages of the new product others don’t have or have not done. as well as the benefits which consumers could expect from it. After some time, new products usually get Launching a brand and launching copied by competitors. They then get replaced a product are not the same by new, higher quality products, which often benefit from the fame of the existing product Marketing books devote chapters to the defi- name. However, although products change, nition of new products, but none to the brands stay. In the beginning then, advertise- launching of new brands, except for an occa- ments will boast the merits of the new, initial sional word or two on how to choose the product, say X. But, since all products natu- name of a new product. This confusion rally become obsolete over time, X will soon between product and brand is an enduring come to announce that it’s about to update problem. Most famous brands, rich in and upgrade itself by lending its name to a meaning and values, started out as the higher quality product. And that’s how a new ordinary names of innovative products or brand comes to life. From then on, it is no services, different from those of competitors. longer advertising that will sell the products, These names were generally randomly but the brand itself. 204 CREATING AND SUSTAINING BRAND EQUITY

Over time, the brand will gain greater brand, rich in meaning. This entails a few autonomy and part with its original meaning fundamental principles. (often the name of the company founder or of a specific feature of the product) by developing its own way of communicating (about the Defining the brand’s platform products), of addressing the public and of behaving. Few British people think of ‘clean’ Unlike the product launch, the brand launch when saying ‘Kleenex’ and few French think of is, from the very start, a long-term project. the lotus leaf when saying ‘Lotus’. The product Such launch will modify the existing order, name has become a proper noun, meaningless values and market shares of the category. It in itself, yet loaded with associations that have aims at establishing a new order and different built up through experience (of the products values and at impacting on the market for a and services), word-of-mouth and advertising. long period of time. This can only be achieved Advertising gives us hints of who the X who is if people are convinced of the brand’s absolute now communicating really is: what is its core necessity and are ready to give it all they have. activity, its project, its cultural reference, its set In order to keep staff, management, bankers, of values, its personality, and whom is it clients, opinion leaders and salespeople addressing? Over time, the meaning of X has mobilised for the long term, the company changed: it is no longer the mere name of a must be driven by a real brand project and a product, it is the very meaning of all products true vision. The latter will indeed serve to X, present and yet to come. The famous brand, justify, internally and externally, why the X, is now the purveyor of values, from which brand is being launched and what its essential its own endorsed products can benefit (as soon purpose is. as they enter production). Creating a brand implies first drafting the In terms of brand creation, there is only one brand’s programme, which underlies the simple lesson to be learnt from this: if the new brand identity and positioning. Presenting brand does not convey its values from the the brand in a programmatic format (Table very start, ie as soon as it is created and 8.1) is fruitful. It indicates where the brand launched, it is quite unlikely that it will stems from, where it draws its energy, what manage to become a major brand. big project lies behind the brand. This is On an operational level, this means that in useful as a step in the brand thinking process launching a new brand, knowing its intan- itself, before the brand identity prism and gible values is just as important as deciding brand positioning are defined. on the product advantage. Many brands no longer know why they A successful launch requires that the new exist, so they would be quite unable to answer brand be treated as a full brand, right from the questions such as those in Table 8.1 defining very start – not as a mere product name the brand programme. Such questions reflect presented in advertising. Launching a new a philosophy at the opposite of niche tactics. brand means acting before the product name Only those who are driven by a grand project becomes a brand symbol, with a much within can actually set out on the long broader and deeper meaning than previously. journey of brand making. Modern management must show results a lot Of course, this brand project will have to be sooner. From the very beginning, the new transformed into ‘strategic image traits’. In brand must be considered in full, ie endowing the car industry, we realise that Peugeot it with both functional and non-functional cannot be defined by simply a few of its values. Creating a brand means acting features, such as dynamism, reliability and straightaway as if it is a well-established aesthetics. These image traits do help differen- LAUNCHING THE BRAND 205 tiate Peugeot from Volkswagen, which is that everything is relevant or easy. What it rather positioned in terms of reliability and does mean is that we can create the brand’s comfort. However, each brand reflects its own identity entirely from scratch. fundamental automobile project and its own In the case of company-named brands, the philosophy. As a result, Volkswagen speaks of brand becomes the major spokesperson for cars, Peugeot of automobiles. Finally, without the company. There must therefore be a rela- any industrial, marketing or commercial tionship between brand identity and expertise, or any financial means, a project is corporate identity. Brand identity has less just a wish. freedom than in the previous case. The The preliminary definition of brand company-named brand is indeed the identity is not the same for company-named company’s external showpiece: it is the brands as for brands that have their own messenger telling the company story to a name. Many companies nowadays act as larger audience. It is therefore vital for the brands. Alcatel is both company and brand, as company to identify with this brand as well as are Siemens, Toshiba, Du Pont, Philips and fully support this new spokesperson (which is IBM. On the other hand, Audi is one of different from the institutional spokesperson, Volkswagen’s brands, as Persil is one of the CEO). That is why we observe that Henkel’s and Dash one of Procter & Gamble’s. company-named brands have the same Companies become aware that their name is culture as the companies from which they actually a brand when they notice that the emanate (see Figure 8.1). purchaser and user are just as important as the Now the brand is here to sell to customers, financial analyst in the markets in which they while the corporation itself has other stake- operate. holders and markets (see Chapter 13). This is On an operational level, creating a brand why, although they share the same name, and with no direct reference to the firm offers a thus strongly interact, it is important to differ- greater degree of freedom: everything is entiate for instance Nestlé as a corporate brand possible, which does not automatically mean and Nestlé as a commercial brand. To help

Table 8.1 Underlying the brand is its programme 1. Why must this brand exist? What would customers be missing if the brand did not exist? 2. Vision. What is the brand’s vision of the product category? 3. Ambition. What does the brand want to change in people’s lives? 4. What are our values? What will the brand never compromise on? 5. Know-how. What is the brand’s specific know-how? Its unique capabilities? 6. Territory. Where can the brand legitimately provide its benefit, in which product categories? 7. Typical products or actions. Which products and actions best embody, best exemplify the brand’s values and vision? 8. Style and language. What are the brand’s stylistic idiosyncrasies? Its semiotic invariants? 9. Reflection. Who are we addressing? What image do we want to render of the clients themselves? 206 CREATING AND SUSTAINING BRAND EQUITY differentiate these two sources, the company the values which feed the brand, give it the itself has created two different visual symbols company’s outlook on the world and the for each of its two facets. The same holds true impetus to transform the product category. also for Danone, which has created a specific This ‘source-value’ gives meaning to the brand. symbol for Danone as corporation (a small Underlying Peugeot’s rigour and quality, there child looking at a star in the sky), different has always been the corporate determination from the geometric form of the Danone brand to offer more than a strictly functional product: logo. Even if they did share the same graphic a car which drivers could truly enjoy. identity (as do Shell, BP and Total), the Over time, this relationship between brand distinction remains to be made. The corpo- and company is switched around. The ration is not the brand but is nourished by the company’s outward image is reflected inside brand (and vice versa). and becomes far more effective in mobilising Nestlé as a brand could never assume a fun the workforce than all of the other here-today- and exuberant or greedy and permissive gone-tomorrow ‘company projects’. In order to identity. This is because it bears the same take advantage of this positive feedback, many name as the company, whose identity is none companies have traded in their old name for of these. Even though the public does not one of their leading brand names. Tokyo know this company, the Nestlé brand is never- Tsuhin Kogyo, for instance, has thus become theless strongly influenced by the overall Sony Inc; Tokyo Denki Kagaku adopted the Nestlé corporate identity. Final acceptance of name of its famous brand TDK. Likewise, BSN a new brand’s identity is a company prerog- became Danone throughout the world. ative. And if the latter cannot identify with The identity of strong brands reminds us the new brand, the brand identity will be that identity is not just a matter of functional modified in order to be in tune with that of attributes. That is why choosing a new brand’s the company. This does not mean that the symbolic references is just as important as two perfectly coincide, but that there is a choosing its product references. Apple is bridge between them. steeped in the Californian high-tech and Such a bridge is usually easier to build by ‘counterculture’ imagery. Toshiba promoted means of the cultural facet (see Figure 8.1). its products, but never wove them into any There is a theoretical reason for this: a particular symbolic reference. The brand has company coins its identity by focusing on one no aspiration and no vision of its own either or two key values (Schwebig, 1985). These are for the product category or for the microcom-

Brand Identity Corporate Identity

Physique Personality Founder’s values and ethics Relationship Culture Values Company focus and culture

Reflection Self-concept

Figure 8.1 Transfer of company identity to brand identity when company and brand names coincide LAUNCHING THE BRAND 207 puter industry as a whole. Mitsubishi sells for in marketing the fight is over percep- cars, but is not a brand in the full sense: we tions. Perceptual maps do produce a cannot perceive its values, its source of inspi- remarkably synthetic model of the mind ration, its project, where it is heading and of the consumer – the psychological where it is taking us. It is just a name on a car, battlefield. to which is attached the reassurance provided by the size of the industrial super-group, 2. The exploration phase is about suggesting Mitsubishi. For non-Japanese people, scenarios for the brand. Finding the brand Mitsubishi means little beyond Japan and a platform is not something that can be giant . Imported Korean cars done in one fell swoop: it takes an iter- have only their price and quality to rely on. ative approach, using repeated elimina- They are not yet real full brands, with both tions and adjustments. For example, what tangible and intangible values. would the possible scenarios be for a brand such as Havana Club? This is the only rum produced in Cuba, an island The process of brand positioning famous for the quality of its sugar cane (and thus its rum), and seeks to promote By what practical process can a brand this quality on a worldwide scale. Going platform be defined that will maximise the back to our four questions– against chances of a successful brand launch? This whom? why? for when? for whom? – we concerns local brands but also global ones can identify four major scenarios, each of with the big challenge of finding a strong which uses its own approach to express global identity, and eventually a global posi- the full richness of the imagery evoked by tioning (if not, one that can be tailored to Cuba and its capital Havana, which have different markets). There are five phases to remained authentic and intact over time this process: understanding, exploring, (see Table 8.2). Note that these four testing, strategic evaluation and selection, and scenarios do not each rely on the same implementing or activating the brand: product. As is the case with many brands, preferences can differ from one country to 1. The understanding phase is about identi- another. For example, in the case of rum, fying all potential added values for the some countries consume only white rum, brand, based on its identity, roots, while others consume only dark rum. heritage and prototypes, as well as its Evidently not all of these countries could current image. This is a self-centred be penetrated using the same product. approach: a brand’s truth lies within itself. This has a strong impact on positioning, However, in order to detect which area of as the competition faced by a white potential is most likely to be profitable for alcohol will not be the same as that facing the business, an analysis of customers and a dark rum. In one case, Havana Club will competition is required. Markets are also try to take market share away from gin analysed for this reason, as well as devel- and vodka, while in the other it will be up opments among consumers looking for against whiskies, malts and brandies. ‘insights’ – consumers’ aspirations or Within the white alcohols sector, the dissatisfactions on whom the brand can question concerning the competition build. Lastly, the aim of analysing the needs to be asked again: are we targeting competition is to identify opportunities, the leader or not? gaps, exploitables and areas of interest. It all depends on the subjective The tool for this is perceptual mapping, category and the targeted competitors: to 208 CREATING AND SUSTAINING BRAND EQUITY

define oneself as rum is already to have 4. The strategic evaluation takes the form of a specified the nature of the competition. comparison of scenarios based on criteria, In the UK, however, there is no rum followed by the economic evaluation of market – despite the fact that Bacardi sells potential sales and profits. The latter is very well there. But to drink Bacardi, do conducted in ‘bottom-up’ fashion, you necessarily have to be aware that it is through the summation of sales and a rum? It is – thanks to Cuba – perhaps the contribution of forecasts from each very epitome of the party cocktail drink. country in question and so on. The angle of attack will differ Let us look again at some of the 11 depending on whether the target is criteria for evaluating positioning (see Bacardi (the world leader), mixers and page 177). The second of these raises the quality rums, or dark spirits in general question of the strength of the ‘consumer (whiskies, brandies and so on). insight’ on which it is based. Is there a genuine business opportunity here? The 3. The test phase is the time when scenarios fifth is a reminder that all positioning has are either refined or eliminated. It to target a weakness in the competition – requires consumer studies to evaluate the and indeed, a long-term weakness. credibility and emotive resonance of each Positioning itself is a durable decision. So scenario. What are being tested at this you might ask the question, how do you stage are ideas and formulations, but find your competitor’s long-term certainly not whole campaigns. weakness? Paradoxically, through its very

Table 8.2 Comparing positioning scenarios: typical positioning scenarios for a new Cuban rum brand White mixer Dark straight AB C D Better- Experience The ‘absolute’ An original tasting mixer Cubania rum spirit than the leader Against whom? The leader All mixers Premium rums Whiskies, cognac Why? ‘Taste’ ‘The Cuban drink’ ’The best rum’ ‘Be different’ When? Cocktail/mixed Night/mixed Home/bars/ Home/after dinner straight To whom? 25/40 16/30 25/40 30/45 Spain, UK, Urban/B in Urban/heavy Urban Canada, Germany Europe and rum drinkers heavy spirit Bacardi drinkers Canada, in Canada, drinkers in Europe, non-rum Spain, Italy, UK Canada, Asia drinkers Product priority White White/3 yrs Anejo (dark) 7 yrs (dark) Pricing –10 % vs leader Par with leader Premium Par with whiskies

Communication Mass media 2-step marketing 2-step marketing 2-step marketing LAUNCHING THE BRAND 209

strength (Neyrinck, 2000). For example, This is all about defining the brand’s what is the long-term weakness of the marketing strategy, functional objectives world leader, Bacardi? It is the very fact and campaign plan. Will it be mainly mass- that it is the world leader. To sell in such media advertising, or mainly proximity quantities, you have to sell at low prices, marketing? How will the brand be acti- and thus produce everything locally. vated? Here again, choices will be deter- Bacardi may have been born in Cuba; but mined by the competitive environment. its rum no longer comes from Cuba, for a Consider the example of Dolmio – the variety of commercial and economic European leader in Italian sauces – whose reasons. marketing strategy cannot be the same for To evaluate a positioning, one must both the UK and Ireland. In the UK, Dolmio always take the trade into account. For controls a mere 20 per cent of the market, example, in the world of shampoo, would while in the latter it is the comfortable a positioning of the ‘for men’ type leader with 50 per cent. Furthermore, far constitute good positioning? The answer more proximity marketing can be carried would seem to be ‘yes’ when judged by out in a country with a small population certain strategic evaluation criteria. It than in a very large country. Activation is achieves differentiation and it represents a the phase during which strategy becomes ‘customer insight’ (a genuine purchasing behaviour and tangible actions, thus tran- motive). But adopting the philosophy of scending mere advertising and promotion. the retailer leads us to a different (See Figure 8.2.) conclusion. Retailers such as Wal-Mart, Carrefour and Asda tend to have a special men’s section for hygiene and cosmetics Determining the flagship product products. This would immediately attract those arguing for this positioning. But it In launching a new brand, companies have to tends to be women who buy for men, and be extremely careful in choosing which product these women tend to choose for their men or service to present in their first campaign and a shampoo from their own section. Thus, how to speak about it, even more so if the in terms of sales potential, it makes more overall brand is particularly ambitious. This sense to leave the product in the normal ‘star product’ should be the one that best repre- shampoo section. If it were put in the sents the brand’s intentions, ie the one that best men’s section, sales would fall by 50 per conveys the brand’s potential to bring about cent. Furthermore, let us suppose that the change in the market. Likewise, in terms of brand was in the men’s section, at which name, only those products that best support the point the ‘for men’ positioning stops overall project should prominently bear the being a source of differentiation, since that brand name. On the less typical products, the section contains nothing but products and brand name should intervene far less, serving brands for men only! only to endorse the product. Not all products of a brand equally 5. The fifth phase is that of implementation represent it. Only those which truly epitomise and activation once the platform has been the brand’s identity should be used as support chosen and drawn up. This new term in a launch campaign. Ideally, this identity clearly expresses the fact that today, a must be visible. The major car manufacturers brand’s values must be made palpable and are well aware of this. Car design must be tangible; and the brand must therefore the outward expression of the brand’s long- transform them into acts at 360°. term design. The choice of the brand’s best 210 CREATING AND SUSTAINING BRAND EQUITY

Brands are built by the sum of delights at each contact point and by their coherence

Contact points 1 2 3 4 5

KERNEL Product Identity FACETS Service Filter 1 2 3 4 5 Retail Positioning CRM

Web

Communic.

Figure 8.2 From brand platform to activation exemplar may conflict with short-term option. The Beetle plainly demonstrated the business objectives. The product that would genius of an original artist, an outsider, and sell the best might not be representative of the obviously represented a different car culture. brand identity to be fostered. In this situation In launching its brand in Europe, the long term should determine the short Whirlpool, the white goods world leader, term, since it is evident that without business decided to forbid any product ad for three there is no brand. years. It wanted to create a thrill around its name that no product campaign would have created, through a very imaginative and Brand campaign or product symbolic campaign. campaign? The reason banks prefer brand campaigns is quite logical. As service companies, they have Volkswagen has never produced communica- nothing tangible to show the potential tions about anything other than its products. customer. They can only symbolise their Since the beginning, its ads have consistently values and their identity. They also encap- reflected a deliberate choice of graphic style – sulate the essence of their identity in slogans, that of purity: hence, the motif of a car on a in this way hoping to make up for their lack of white background. So, even if the brand treats visible products. the rational arguments aloofly, humorously, impertinently or paradoxically, the car remains the ‘hero’ of the ad. Sony occasionally launches Brand language and territory of so-called ‘brand campaigns’, which aim to communication emphasise the brand’s slogan. Whenever a brand is created, there are two alternative Today’s vocabulary is no longer just verbal, it strategies: to communicate the brand’s meaning may even be said to be predominantly visual. either directly, or by focusing on a particular In this multimedia era, in which only a few product. Which path is followed depends on split-seconds’ attention are spent on adver- the company’s ability to select one product tisements in magazines, pictures are far more which will fully convey the brand’s meaning. It important than words. is no wonder that Volkswagen took the second A territory of communication does not LAUNCHING THE BRAND 211 appear from nowhere, nor can it be arbitrarily Choosing a name for a strong assigned to the brand. Brand language allows brand brands to freely express their ideology. Not knowing which language to speak, we merely Manufacturers make products; consumers buy repeat the same groups of words or pictures brands. Pharmaceutical laboratories produce over and over again, so that the whole brand chemical compounds, but doctors prescribe message eventually becomes clogged. There is brands. In an economic system where such a great urge to create unity, resemblance demand and prescription focus on brands, and a common spirit among the different brand names naturally take on a pre-eminent campaigns that in the end they all seem role. For if the brand concept encompasses all merely to repeat one another. Each specific of the brand’s distinctive signs (name, logo, campaign message thus gets obliterated by an symbol, colours, endorsing characteristics and excessive concern to find the missing code! even its slogan), it is the brand name that is The code is always rather artificial whereas talked about, asked for or prescribed. It is language is natural: it conveys the personality, therefore natural that we should devote culture and values of the sender, helping the particular attention to this facet of the brand latter either to announce products and creation process: choosing a name for the services or to charm customers. brand. Brand language finally serves as a means of What is the best name to choose to build a decentralising decisions. Thanks to the use of a strong brand? Is there anywhere a particular common glossary of terms, different type of name that can thus guarantee brand subsidiaries worldwide can adapt the theme of success? Looking at some so-called strong their messages to local market and product brands will help us answer these usual ques- requirements and yet preserve the brand’s tions: Coca-Cola, IBM, Marlboro, Perrier, Dim, overall unity and indivisible nature. Brand Kodak, Schweppes... What do these brand identity must reconcile freedom with names have in common? Coca-Cola referred coherence, a task which expression guides (also to the product’s ingredients when it was first called brand charters) are meant to facilitate. created; the original meaning of IBM These should not merely address issues such as ( Machines) has disap- the position of the brand name on the page and peared; Schweppes is hard to pronounce; so on. They must also specify the following: Marlboro is a place; Kodak, an onomatopoeia. The conclusion of this quick overview is reas- l dominant features of style; suring: to make a strong brand, any name can l the audio-visual characteristics such as a be used (or almost any), provided that there is gesture, a close-up of a customer’s face, a a consistent effort over time to give meaning jingle; to this name, ie to give the brand a meaning of its own. l the graphic layout or narrative structure Does this mean that there is no need to give codes, and the brand’s colour codes; much thought to the brand name, apart from the mere problem of ensuring that the brand l the principles determining if and how the can be registered? Not at all, because brand – and its signature, if it has one – can following some basic selection rules and be used in some circumstances. trying to choose the right name will save you Such cases must indeed be anticipated and time, perhaps several years, when it comes to defined in the expression guide. making the baby brand a big brand. The question of time is crucial: the brand has to 212 CREATING AND SUSTAINING BRAND EQUITY conquer a territory of its own. From the very specialised periodicals and the comparative start, therefore, it must anticipate all of its studies done by consumer associations. It potential changes. The brand name must be would thus be a waste to have the brand name chosen with a view to the brand’s future and merely repeat the same message that all these destiny, not in relation to the specific market communication means will convey in a much and product situation at the time of its birth. more efficient and complete way. The name, As companies generally function the other on the contrary, must serve to add extra way around, it seems more than appropriate meaning, to convey the spirit of the brand. to provide some immediate information on For products do not live forever: their life the usual pitfalls to avoid when choosing a cycle is indeed limited. The meaning of the brand name, and also to give a reminder of brand name should not get mixed up with the certain principles. product characteristics that a brand presents when it is first created. The founders of Apple Brand name or product name? were well aware of this: within a few weeks the market would know that Apple made micro- Choosing a name depends on the destiny that computers. It was therefore unnecessary to fall is assigned to the brand. One must therefore into the trap of names such as Micro- distinguish the type of research related to Computers International or Computer creating a full-fledged brand name – destined Research Systems. In calling themselves to expand internationally, to cover a large Apple, on the contrary, they could product line, to expand to other categories, straightaway convey the brand’s durable and to last – from the opposite related to uniqueness (and not just the characteristics of creating a product name with a more limited the temporary Apple-1): this uniqueness has scope in space and time. Emphasis, process to do more with the other facets of brand time and financial investments will certainly identity than with its physique (ie its culture, be different in both cases. its relationship, its personality, etc). The brand is not the product. The brand The danger of descriptive names name therefore should not describe what the product does but reveal or suggest a Ninety per cent of the time, manufacturers difference. want the brand name to describe the product which the brand is going to endorse. They like Taking the copy phenomenon into the name to describe what the product does (an account aspirin that would be called Headache) or is (a biscuit brand that would be called Biscuito; a Any strong brand has its copy or even its direct banking service called Bank Direct). This counterfeit. There is no way out of this. First preference for denotative names shows that of all, manufacturing patents end up being companies do not understand what brands are public one day. So what is left to preserve the all about and what their purpose really is. firm’s competitive advantage and provide Remember: brands do not describe products – legitimate recompense for investing in brands distinguish products. research and development and innovating? Choosing a descriptive name also amounts Well, the brand name. The pharmaceutical to missing out on all the potential of global industry is the perfect example: today, as soon communication. The product’s characteristics as patents become public, all laboratories can and qualities will be presented to the target produce the given compound at no R&D cost audience thanks to the advertisements, the and generic products start flooding the sales people, , articles in market. A brand name that simply describes LAUNCHING THE BRAND 213 the product and the product’s function will be Love Burger and Burger King have similar unable to differentiate the brand from copies names, whereas McDonald’s name is inim- and generic products entering the market. itable. Choosing a descriptive name boils down to Distributors’ own brands have greatly taken making the brand a generic product in the advantage of descriptive brands’ scarce long run. That is exactly how the first antibi- protection. Planning to win over some of the otics got trapped: they were given names indi- leading brands’ customers, distributors have cating that they were made from penicillin – chosen names for their own brands that are Vibramycine, Terramycine, etc. very similar to those of the strong brands to Today, however, the pharmaceutical which they refer: this way, consumers are industry has become aware that the name is in likely to easily mistake one for the other. itself a patent which protects the brand from Ricoré by Nestlé has thus been copied by copies. This name must therefore be different Incoré, l’Oréal’s Studio Line by Microline, etc. from that of the generic product: in becoming Because the packages look alike (Incoré is in a distinctive and unique, it also becomes inim- yellow can like Ricoré’s, with a picture of a cup itable. The Glaxo-Roche laboratory, for and table setting also like Ricoré’s ...), instance, discovered an anti-ulcer agent consumers get all the more confused as they which it called ‘ranitidine’. Yet the brand only rely on visual signs to find their way name is ‘Zantac’. Their competitor, Smith, through the store aisles. As a matter of fact, Kline and French, also identified an anti-ulcer recent research has shown that confusion agent called ‘cimetidine’, but sold it under the rates are often above 40 per cent (Kapferer, Tagamet brand name. This naming policy is a 1995 (see also page 79)). good hedge against copies and counterfeits. The way in which the pharmaceutical Doctors are under the impression that industry has been handling the copy problem is Vibramycine and Terramycine are the same extremely promising in terms of the long-term thing. Tagamet, though, seems unique, as survival of all brands. By creating at the same does Zantac. The inevitable generic products time a product name (that of a specific that will eventually take advantage of the compound) and a brand name, they have cimetidine or ranitidine patents will not use avoided the Walkman, Xerox or Scotch the Tagamet or Zantac names. syndrome. These proper nouns now tend to An original name can protect the brand since become common names, merely used to it reinforces the latter’s defence against all designate the product. In order to overcome imitations, whether they be fraudulent or not. such risk of ‘generism’, companies must create The perfume name Kerius, for example, was an adjective-brand (the Walkman pocket music- considered as a counterfeit of Kouros: in liti- player), not a noun-brand (a walkman). When gation, legal experts do not judge counterfeit in creating a brand name, it might therefore also terms of nominal or perfect similarity but in be necessary to coin a new name for the product terms of overall resemblance. Thus Kerius itself (in this case, the pocket music-player). became Xerius, while another cosmetics company had to pull out the products it had Taking time into account just launched under the name, Mieva because of Nivea. Descriptive names fail to act as Many names end up preventing the brand patents. A brand called Biscuito would be very from developing naturally over time because little protected: only the ‘o’ could be protected they are too restrictive: so as to prevent someone from naming a product ‘Biscuita’! Even Coca-Cola was unable l ‘Europ Assistance’ hinders the geographical to prevent the Pepsi-Cola name! Quickburger, extension of this brand and has also 214 CREATING AND SUSTAINING BRAND EQUITY

facilitated the creation of Mondial abstract names which, having no previous Assistance. meaning, can thus create their own. l Calor etymologically (meaning ‘heat’ in Latin) refers to heating appliance tech- Making creative 360° nology (irons, hair-dryers), and thus excludes refrigerators, The Radiola brand communications work for the never managed to impose itself in the field brand of household appliances: its brand name In the world of mature countries, advertising was much too reminiscent of one specific is a challenge: it is costly, and its results are sector. not always measurable. They are, however, l As time goes by, Sport 2000, the sporting measurable at the time of the brand’s launch, goods distributor, seems less and less at which time it quickly becomes apparent modern and futuristic. whether the public’s demand and attitudes – as well as those of the trade – have changed. l The non-fat yoghurt name, Silhouette, was The cost factor raises questions as to the too restrictive in terms of consumer appropriateness of advertising. There are benefit: slimness for the sake of slimness sectors where launches are unthinkable does not necessarily prevail anymore. This without advertising: the FMCG sector, for is why Yoplait decided to change the name example. But even in this case, it all depends to Yoplait fat-free, after having invested on the precise category. The UK’s current over 20 million dollars since 1975 in adver- number one wine, Jacob’s Creek (an tising the first brand name. Australian brand) was launched in the country in 1984, and its first large advertising Thinking internationally campaign was in 2000. The brand has since stopped advertising, and now sponsors the Any brand must be given the potential to Friends television programme. The brand’s become international in case it should want to success was built on an excellent, multiple- become so one day. Yet many brands still award-winning product, trade support, public discover quite late that, if such is their desire, relations, plenty of in-store promotions, and they are limited by their name: Suze, the bitter encouraging consumers to try it at the point French aperitif wine, almost literally means of sale, to say nothing of on-site promotions. sweet in German. Nike cannot be registered in It also develops product placement, a real certain Arab countries. The Computer lever to create and maintain the ‘cool factor’ Research Services brand name causes problems of a brand. in France, as does Toyota’s MR2. In the United Top-of-the-range brands also work on States, the almighty CGE name cannot be winning the long-term support of opinion protected against the famous GE (General leaders, capitalising on word of mouth. In the Electric) brand name. Prior to international- world of the internet, ebay – the only start-up ising a brand, one must ensure that the name company to have been profitable from the is easy to pronounce, that it has no adverse start, making it the internet’s real success story connotations and that it can be registered – operates only through online referral and without problems. These new requirements public relations. explain why there is so much interest in the When advertising is needed to give a boost 1,300 words which all seven major languages to sales and business, the familiar old maxim of the European Union have in common. It springs to mind, ‘Half of my advertising also explains the current tendency to choose budget is wasted – but I don’t know which LAUNCHING THE BRAND 215 half.’ Actually, we believe that this half can reflection. If advertising is to break out of the easily be identified. Wasted advertising is clutter, it must not present plain people. Think advertising that: of the Budweiser advertising saga ‘Wazzup’: by choosing quite radical characters in the l is not sufficiently creative, and so will not commercials, the brand showed strong signs of be seen; modernity, of reinvention and of reinvolvement of the public. This was a challenge for this main- l misses its target, so will not be seen by the stream popular brand, which all Americans have right people; known almost since they were born. l will be seen in places with no stores, where there is no distribution system in place. Building brand foundations These three points are the true causes of the through opinion leaders and waste; and the first of them is the most communities important. The question it raises is not so much the quality of the advertising agency as Unless one wants to position the brand in a that of the client/advertiser. An advertiser can niche at the very high end, high market shares make a major contribution to the creativity of and sales will come from a mass market posi- its agency – and thus to the quality of the tioning. However, paradoxically in order to campaign – in two ways: through the quality influence the mass of the market, the people of its brief, and by the ability to take creative less involved with the brand, the ‘switchers’, a risks. brand must be carried by a smaller group of To achieve a leap of creative genius, a great opinion leaders. relies creative idea, the brand proposition must be too much on an individual approach to incisive, not bland. What can a creative person consumer choice, using the paradigm of a do with a brand proposition coming from a person deciding in a social vacuum. But typical McKinsey-style brand consultancy everyone belongs to a network, a group, a output, such as ‘Brand X is the ultimate (whisky tribe. Building a brand means getting closer to for instance)’. There is a real problem with the these groups, which are mediators of tools and consulting companies that excel in influence (see Figure 8.3). analytics but produce no ideas. Because of the reduction in the demand for strategic Proximity to opinion leaders consulting, most of the big consulting companies have reoriented their staff. They In all groups there are influencers, also called want now to accompany the client all through opinion leaders. The concept of opinion lead- the executional process. However, analytical ership is not new, but its significance has been people, recruited for data processing skills, hidden by an over-reliance on advertising. In produce thick and exhaustive reports and a mass fact, to build a brand one of the first questions of matrices, but a dearth of actionable ideas. to ask is, what group(s) will carry the brand? The mistake is to think one can rely on the Here we do not speak of the market segment, agency to transform as if by a miracle the but of the group(s) who will influence the bland proposition into a great creative market segment. A brand alone cannot concept. It just does not happen this way. convince. It needs relayers, committed relayers. The second condition for a creative leap is to Modern taste makers belong to tribes: micro- realise that the advertising target must be radi- ethnic, cultural and geographical groups. These calised. It cannot be a simple description of groups need proper identification and a those who will buy, but should provide their programme of continuous direct relationship. 216 CREATING AND SUSTAINING BRAND EQUITY

They must experience the brand, its values, and New York gay community. Bombay Sapphire eventually interact with it. The brand must gin did the same in Los Angeles. understand them, and present itself as being on To reach these groups, direct contact is their sides, sharing the same values. needed and virtual intimacy on the net is Who are these influencers? Who are the necessary. One does not create strong ties at a opinion leaders? The two concepts need to distance. The goal is show that the brand is be distinguished. Recent research (Valette becoming part of their world, by means of Florence, 2004) suggests that opinion participating in occasions that show the leaders combine three necessary traits. They brand and group share the same values, in are perceived as experts, are endowed with some way or another. Eventually the brand charisma and have a desire to be different should be creating these occasions. from others, and have a high social visi- bility. Not all experts are opinion leaders: Creating a hard core of ambassadors they are influencers, as are salespeople or prescriptors. As soon as the brand is launched the reflex Influencers can be professionals. Canson must be of creating a hard core of supporters, would not have succeeded without the close involved in the brand. Clarins, a very small ties that it is permanently weaving with the cosmetic company when it started in 1954, teacher community. Pedigree (pet food) relies facing giants such as Estée Lauder and l’Oréal, on professionals too. L’Oreal relies on hair- was extremely innovative in that respect, but dressers, La Roche Posay on dermatologists. it went unnoticed up to the point when They can be hobbyists. T-fal, positioned as market research showed to its competitors tools for the successful cuisine, develops ties that the small brand was getting bigger, and with cookery schools and with all the profes- that it experienced a high rate of loyal and sionals engaged in developing a high level of even fanatical clients: with each product there skill in cuisine. was an invitation to write to the company and They can be the persons most involved in to Mr Courtin, its founder. One-to-one and the category: all consumers are not equal. CRM were already there, far before these Some are more involved, more interested in became ‘musts’ for management. all that concerns, not the product itself, but There are many frameworks that have the need. They read more, use the internet shown how consumers can be segmented on a much more, participate in chats and forums. dimension of closeness of the relationship to For instance, mothers with more children the brand. Typical segments range from hell play an influencing role. to paradise, with a mix of behavioural and Opinion leaders are to be found in specific emotional dimensions: community groups. We stress the word ‘groups’ because one should now speak of trend-setting 1. Those consumers who dislike the brand, tribes. As a result, the goal is to interact not even hate it. It is really not part of their with a sum of individuals, but with pre- world. organised groups, be they formal or informal. 2. Those who are not consumers because These groups can be met at specific places. they consider the brand is underper- Groups are organised, so it is easier to organise forming on a sought attribute. events with them. Salomon is obsessed with increasing the level of interaction with surfer 3. Those who simply are not consumers, groups all around the world, for they are trend- without a specific reason (simply the setters. Absolut Vodka succeeded because it brand has nothing salient to their eyes to came to be available at all the parties of the induce trial). LAUNCHING THE BRAND 217

4. Those who would like to buy but cannot happen to be – as Ricard was – the man who (no availability, no accessibility, price created what is now the world’s second-largest problem). spirits group. But the phrase deserves closer examination:. He did not say ‘make a 5. Those who buy from time to time, customer every day’, but ‘a friend’. Service, switching between brands. free gifts, responsiveness, personalised rela- 6. Those who buy more often. tionships, attentiveness and the sharing of enthusiasm at small and large gatherings alike 7. Those buyers who are involved, engaged are the rungs on this upward ladder. with the brand, its ambassadors. Creating word of mouth, buzz As soon as the brand is launched everything must be done to create and identify Status is not granted by oneself: it is given by consumers in segments 6 and 7, the heavy opinion leaders, experts, and the press. Virgin, buyers and the involved consumers. although it is one the very few brands known Asking for identification is a sure way to throughout the world, hardly spends a dime build the precious database that will enable on advertising. However, everybody has heard the organisation to give VIP treatment to of Virgin, or will hear about it. Paradoxically these forerunners: specific tips, a specific code Richard Branson, the founder of the Virgin number on the website, specific invitations, galaxy, is not an extrovert. However, he knew specific offers, PR events and online sales. that by seeking publicity he could avoid There is another way of creating a hard core spending a lot money on advertising – money of supporters. It can be summed up in one key he did not have in any case. phrase formulated 50 years ago by Paul Ricard: Branson has become a man of public rela- faites-vous un ami par jour (make a friend every tions: he knows how to create events that will day). Of course, this is easy to say if you become widely broadcast and diffuse the buzz.

The brand

Entertainment Co-creation Information Participation Service Inputs Customisation Feedback Coaching Conversations Conversations Attentions Internet, blogs, e-pinions The client The community

Product comparision site Search engines

Figure 8.3 Consumer empowerment provides opportunity for bonding 218 CREATING AND SUSTAINING BRAND EQUITY

Word of mouth should not however be seen from the small trade journal. The high- as an alternative to advertising. Advertising is powered editor of the future is sure to be surely not dead. Brands have two feet: shared lurking among the dozens of freelancers you emotions and renewed products. meet. Advertising remains a fantastic tool to The second approach – which should shape these common, shared imageries, or to become a discipline – is to do nothing without create instant knowledge of an innovation. considering the press fallout. As the adage How can one create the buzz, this modern, goes, every dollar you spend on public rela- fashionable word for word of mouth, or tions requires another to promote the fact. A positive rumours (Kapferer, 1991, 2004)? buzz has to be activated and energised: it does The first approach is to make plenty of time not always start on its own. for the press and media. Naturally, it is a good The third approach is always to look for the idea to recruit a specialist agent, but jour- difference and disruption in everything (Dru, nalists will be flattered to be welcomed by 2002). It is said that in the world of PR, it has managers themselves. This is where the work all been done before. This means that your job of making friends should begin: it is crucially is to surprise, because surprise is what gets important to know how to assist a journalist people talking. (for whom, as we all know, time is in short This is why brands create their own events, supply). We should also remember that engage in street marketing, tie up with everyone deserves attention, from the big- celebrities, invest in sport or music spon- name television reporter to the freelancer sorship and so on. 219 9

The challenge of growth in mature markets

Brand management is a challenge in mature are differentiated according to the distri- markets. How to build the business where bution channel. consumers have their needs amply fulfilled, However, for the long term, the two main face considerable choice, become price- options are to explore foreign markets and to sensitive and find allies in multiple retailers innovate. We turn to these strategies now. who want a larger share of the added value created by brands? Drawing from multiple cases and models, Growth through existing we look at the main strategies that can be customers followed to find growth in no-growth markets. The first source of growth is to be found The first, short-term strategy is to build on among the existing customers of the brand. existing clients. Customer relationship There are growth opportunities to be management (CRM), database management searched, evaluated and exploited. This is too and relationship marketing have not emerged often overlooked by managers who wish to so forcefully in the panoply of modern brand move quickly to some hot brand extension. management without a compelling reason. It is necessary to get still closer to the consumer, Building volume per capita one’s own consumers, who may be faced with too much choice. Seducing new customers Brand management over time is the permanent seems too costly (Reichheld, 1996). pursuit of growth. One way of achieving this is The second one is to carry out more to move from a pattern of low-volume use to a research. What needs, or lacks of satisfaction pattern of potentially higher-volume use. For or untapped uses can be better met? For example, Bailey’s Irish Cream – a worldwide instance, packaging and design innovations, spirits brand created in 1974 – suffered from a although not spectacular, are able to provide serious restriction to its growth. Its incremental sources of share, especially if they consumption was highly seasonalised, and 220 CREATING AND SUSTAINING BRAND EQUITY sales mostly took the form of Christmas and paraphernalia and specific advertising New Year presents. It was consumed mainly by designed to promote use in this context, little old ladies, partaking on their own as a sort which was placed in sports magazines. of sugary treat. It was taken neat in small Coca-Cola is a best practice exemplar in measures, on account of its sweet taste. If it was terms of increasing consumption per capita. to grow in volume, things had to change. The Its goal is to bring consumers around the brand’s future also depended on its ability to world closer to the consumption rate of compete outside its category (narrowly defined American consumers, who drink 118 litres per as Irish cream liqueur). A major campaign was person per year. Its first key strategic lever is thus launched around the concept of Bailey’s not to use a cost-plus price fixing method, but on ice. The creative idea was to communicate to target the price of the most popular drink in how the sensuousness of Bailey’s allowed you each country: the price of tea in China, for to connect to your friends and family. The instance. Because this put a strain on the prof- intention was to encourage groups of people to itability of local bottlers, the aim is to achieve drink Bailey’s on the rocks (which in fact a quick hike in sales. Profitability is guar- increases the desire for another glass). A anteed to the Coca-Cola Company itself, creative media campaign backed this new posi- because it receives the difference between the tioning, exploring how to link the brand to the cost of production of the cola syrup and its key sensual moments in the media. For resale price (five times as high) to the bottler. example, Bailey’s sponsored Sex and the City. The second key lever is to gain local monop- But most important were the on-premise olies. ‘Local’ in this context means as close as implications of the campaign. Drinking possible to a thirsty person’s impulse to drink. Bailey’s on ice required a normal-sized glass, Ideally the product should be at an arm’s not a liqueur glass as before. The marketers reach, via automatic machines or small refrig- had to persuade the trade to take the erators, everywhere: in hotels, universities, campaign seriously. They designed a new hospitals, and also in bars and cafeterias, for Bailey’s glass for bar chains, 6,000 ice on-premise consumption. consumer kits, 4,000 large-measure POS kits, The third lever is to adapt pricing to the and 16,000 optics to deliver a suitable consumption situations, so that an identical measure of Bailey’s for drinking over ice. As a litre of Coke is sold at very different prices result on-trade sales grew from a low 46,000 according to when and where it is bought. cases in December/January 1989 to 107,000 in Last but not least, specific marketing plans December/January 1996. It had become more are devoted to specific situations such as hype, young and trendy to drink Bailey’s on lunch and dinner, breakfast and evenings. In ice. many countries consumers drink tap water, In the United States Jack Daniel’s – suffering bottled water or mineral water. They do this from its stereotypically ‘macho’ image – by habit and also for health reasons: attempted to increase its per capita volume. consuming too many sugary drinks leads to To do this, the brand needed to create an asso- obesity and other health problems, which are ciation with parties (a consumption situation being faced by many Americans at present. which has a galvanising effect on volume). Coca-Cola’s plan is to modify local customs, The brand created a micro-marketing plan starting with children and young people specifically for this purpose, ‘The Jack Daniel’s whose habits are yet to be formed. Hence the occasion’. The exemplar for this was the global alliance with McDonald’s, a key social barbecue people enjoy around the back of change agent and a chain of which young their car after arriving at a sports event a few people are heavy users. Similarly, Coke has hours early. The brand developed specific another alliance with Bacardi, the world’s THE CHALLENGE OF GROWTH IN MATURE MARKETS 221 leading spirit drink. It is significant that adver- consumers wanted to drink as much Coke as tisements for Bacardi Carta Blanca show a possible but were prevented from doing so by ‘Cuba Libre’ cocktail, which is made up of rum Coke itself. Some could not have any more and Coke. sugar, while others could not take caffeine. Thus, there were huge opportunities for Building volume by addressing the increased consumption per capita among barriers to consumption Coke’s own clients. They were probably heard, but never listened to. Identifying the barriers Branding is too obsessed by image, and not of consumption and relieving them was a obsessed enough by usage. Even though Coca- service not only to clients but also to prof- Cola is held up as the paragon of good brand itability: aspartame (the sweetening ingre- management, if we are honest we have to dient in Diet Coke) is less costly than sugar. acknowledge that it took almost a century for In the Coke example, the reasons for its managers to address perhaps the most consumer’s limited consumption were important reason for its non-consumption: it known, but the company was deaf. It is perceived as an unhealthy drink containing confused the brand with the product. By too much sugar. claiming ‘Coke is it’, it had made Coke Certainly the Coca-Cola Company has symbolise one product and only one, period. realised the growth of fitness and health as In the task of growing volume through purchase motivations, in a country where higher consumption per capita, identification baby boomers were ageing. It launched Tab in of what blocks consumption is not always 1963, just after Diet Royal Crown Cola and obvious. Research is needed. One way to do it just before Diet Pepsi. However, Diet Coke was is to segment the clientele according to the launched as late as 1983. It soon became the strategic matrix shown in Figure 9.1. leader in its category, and what the company This matrix segments customers according calls ‘the world’s second soft drink’. Later to two dimensions, both related to behaviour. would come caffeine-free Coke, caffeine-free The first is the household’s share of require- Diet Coke, Cherry Coke, Vanilla Coke, Coke ments (among 100 occasions to purchase, and Lemon. Each of these products was an how many times is the specific brand answer to a consumer problem. Some bought?), and the second is the household’s

Share of requirements Occasional Frequent Dominant

Small buyer

Segment Medium buyer

10% of brand buyers Heavy buyer 50% of brand volume

Figure 9.1 Increasing volume per capita: strategic matrix 222 CREATING AND SUSTAINING BRAND EQUITY level of consumption (is it a small, medium or The result is a new marketing mix, often heavy buyer?). involving specific product improvement, This creates eight cells (not nine because one higher experiential benefits, range extensions of them is theoretically possible but empirically (formats, taste and so on), designed to target empty), and each household can be allocated each behavioral segment. to one of these cells. Of course this matrix can be used for any type of purchase, or purchaser, Growth through new uses and including companies in B to B markets. Each situations cell represents a percentage of the total number of households, and a percentage of the total Like it or not, every product is consumed volume sold of the category and of the brand. within a particular situation. This is one of These figures are important in themselves. The the four aspects of the positioning diamond key segment is the bottom right of the matrix, (see page 76). Customers are looking for solu- which represents high-consumption house- tions to problems related to highly specific holds that allocate the highest part of their situations. For example, different things are requirements to the brand. For instance, in expected of a car depending on whether it is Europe households in this cell consume 70 per intended primarily for town use, town use cent by volume of Coke Light, but only 48 per plus other short trips, or fairly long trips. The cent by volume of Coke. These two figures growth of a brand is thus often a matter of highlight how a single innovative product can tackling new situations of use, knowing that release the barriers that prevent people from these situations may well include the same consuming more. customers, as it is possible for one person to The brand manager’s task is to move as consume the same product in several many people as possible progressively in the different situations. For many companies, the direction of this bottom-right cell. This can be situation of use is now the one real criterion done, starting from other cells and going for segmentation, rather than the character- vertically or horizontally. But it is first istics of the users themselves. A product is necessary to understand the very specific always consumed in a particular situation – circumstances and motivations of consumers and it is this situation that defines the brand’s in each cell. To increase a specific type of competitive set. The situation is the brand’s behaviour requires behavioural segmentation, true battleground. Each situation is asso- then an in-depth understanding of those in ciated not only with a different subset of each of these behavioural segments. Who are competitors, but also with expectations, they? Why don’t they consume more? Is it a needs, volumes, and growth and profitability taste problem, a satiety problem, a price rates. problem, a format problem, a packaging It is understandable that brands should seek problem, an insufficient variety of line exten- to grow by breaking into high-growth-rate sions, a distribution problem? It is very rarely consumption situations in which their an image problem, because those being attributes give them a high degree of rele- considered here are already clients. In modern vance. Such a movement often requires the markets we know from panel data that even launch of a new product or line extension. for loyal customers, the brand’s share of This is why Mars launched the mini-Mars requirements is never 100 per cent. It is some- bar, a new product designed for consumers of times no more than 40 per cent. However, the brand aged over 35 who were reducing managers lack information on why these their consumption of chocolate bars. This consumers choose other brands 60 per cent of new product also changes Mars’ positioning: the time. in terms of its physical size, it is a ‘sweet’. The THE CHALLENGE OF GROWTH IN MATURE MARKETS 223

S1

NeedS2

Usage situation Si

T1 T2 Tj Customer typology

Figure 9.2 Segmenting by situation situation into which it now fits is that of service or product from the brand. Gift packs ‘indulgence’, rather than a meal substitute or and ‘special series’ capitalise on collectors’ re-energiser. motivations. Larger formats have a built-in In the United States, Captain Morgan is a attractiveness too. rum brand with a masculine personality: it is Extending the range can also be a way to the rum of ‘fun and adventure’. To achieve increase profitability. Thus if it costs s3 to growth, the market was segmented according produce a litre of three-star cognac (that is, to the situations of use. Seeking to gain a cognac aged for 3 years), s4.5 for a VSOP (4 to foothold in the so-called ‘partying’ segment – 5 years), s15 for an XO (30–35 years) and s21 a large group of friends indulging in noisy for a litre of Extra Vieux, the customer trade-up partying, dancing and drinking – the is very profitable, as consumer prices are company launched Captain Morgan Spice. It around the s15, s30, s60 and s150 mark then targeted the so-called ‘lively socialising’ respectively, according to the type of cognac. segment – a smaller group of friends getting together for a cocktail – but the first attempt was a failure. Captain Morgan Coconut Rum Line extensions: necessity and suffered too much from the Captain Morgan limits umbrella name and its highly characteristic values. In the latter use situation, the key is to Today, most new product launches are range address a more feminine, elegant, romantic or line extensions. Shelves are replete with set of values, rather than some sort of macho line extensions. As the examples we have ritual. This is why the second test product to given have demonstrated, extending the be launched was Parrot Bay, a product merely range is a necessary step in the evolution of a endorsed by Captain Morgan. brand through time. Just as living species only survive if they adapt through evolution to Growth through trading up their environment and seek to extend their ecological realm, the brand, which histori- A classic growth strategy is trading up. cally is designated by a single product (like Customers may wish to receive an upgraded Coca-Cola or McCain French fries) breaks up 224 CREATING AND SUSTAINING BRAND EQUITY into sub-species. The extension of the line or both motorcycles and pianos? Line and range range (we will address the difference between extensions represent 85 per cent of new the two concepts later) typically takes on the product launches in consumer goods. It is the following shapes: most common form of innovation in these markets. l Multiplication of formats and sizes (typical Range extension naturally follows the logic in cars but also in soft drinks). of marketing and of even finer segmentation to better adapt the offer to the specific needs l Multiplication of the variety of tastes and of consumers, needs that never stop evolving. flavours. At its beginning, we may recall, each brand l Multiplication of the type of ingredients was a unique product, in both meanings of (for example Coca-Cola with or without the word: it is different and there is only one sugar, with or without caffeine, types of form of it. This was, for example, the case with motors in the Ford Escort). the famous Ford: everyone could have it in the colour of their choice, as long as it was l Multiplication of generic forms for black. It was the same with the Coca-Cola and medicine. the Orangina bottle. With time, the brand l Multiplication of physical forms such as becomes less narrow-minded, and acknowl- Ariel in powder, liquid or micro formula. edging differentiated expectations, decides to respond to them. As the American advertising l Multiplication of product add-ons under for Burger King, the competitor of the same name, corresponding to a same McDonald’s, says, ‘Have it your way’ consumer need in what is called line (whatever way you like it, with or without extension. Thus, Basic Homme by Vichy sauce, onions, etc). Again, taking the example comprises a line of toiletries including of Coca-Cola, while retaining its identity (the shaving foam, soothing and energising dark colour, cola taste, and other physical and balm, deodorant, and shower gel. symbolic attributes of the brand), the l Multiplication of versions having a specific company was able to extend the power of application. For example, the Johnson attraction of its brand by allowing people who company transformed its successful spray up until then were reluctant to try the product polish, Pliz, which was a mono-product to indulge in Coke. The multiplication of brand for a long time, into a range called versions (with or without sugar, with or Pliz ‘Classic’, which offered products without caffeine) increased the number of specialised for the type of surface. In doing potential consumers. We therefore see that so it also seized the opportunity to reduce range extension can reinforce the brand by its brand portfolio. Favor, a weak brand, widening its market and its customer base. A became Pliz with beeswax especially for variety of formats has the same effect. In the wood. Shampoo brands multiply endlessly, world of soft drinks, the launch of a new with varieties suited to different types of format may be considered the same as hair and scalp condition. launching a new soft drink. Indeed, each new format allows the brand to enter a new usage Line or range extension must be distinguished mode. from brand extension, which is a real diversifi- In so doing, the brand proves itself to be full cation towards different product categories of energy and sensitivity. It recognises the and different clients. It is a highly sensitive different expectations of the public and and strategic choice that will be addressed in a responds to them. It follows the evolution of separate chapter. Why does Yamaha brand consumers and changes with them. Club Med THE CHALLENGE OF GROWTH IN MATURE MARKETS 225 was thus able to widen its offer beyond the longer growing and DOBs also occupy a share simple Robinson Crusoe lodge to keep or of the shelf, so the brand manager tries to attract families, then people in their forties position his product as ‘captain of the seeking more comfort, and finally older category’ by presenting a unique offer and so people, children of the baby boom. The range dominating the shelf reserved for national extension is a token of the brand’s attentive brands. and caring character. Extending the brand Distributors have an ambivalent attitude range thus makes the brand interesting and towards range extensions. On the one hand friendly and maintains through these they oppose what is now considered hyper- successive mini-launchings a strong visibility. segmentation, the proliferation of range From this point of view, instead of trying to extension. But as each brand tends to offer the force New Coke on Americans and make them same extensions, this creates bottlenecks give up the original flavour, the Coca-Cola because of the obsession each brand has to Company would have done better to have gain access to maximum distribution. This launched the New Coke as an extension fight for ever-reducing shelf space strengthens alongside the classic Coke! the power of distributors and puts them in a Range extension is a way of revitalising position to ask for increasing amounts of many failing brands, by making sure they money as a listing fee (Chinardet, 1994). move closely to meet the expectations of The problem is that the turnover of exten- today’s customers. What saved Campari was sions, because of their novelty and their price the launching onto the market of a ‘flanker’ premium, is often lower than that of the product: Campari Soda. Martini would have original product. When the distributor fallen by the wayside if it had not been for the realises this (if he ever does), he withdraws the launching of Martini Bianco, more in touch extension and awaits the offer of other with the new modes of alcohol consumption. brands, along with any kind of listing fee that Smirnoff made a step towards customers who might come with it. were not used to the strong taste of vodka by Criticised by, but at the same time popular launching Smirnoff Mule and Smirnoff Ice in with distributors, range extensions are appre- small individual bottles. ciated by product and brand managers. First of These motives may be worthy of praise, but all, the amount of time needed for devel- the current proliferation of range extensions opment is shorter than that needed for the to be observed in all consumer goods markets launching of a new brand. The costs are less results from frantic competition and from the than those for the launching of a new brand new psychology of organisations. (they are estimated to be one-fifth), and sales In these markets there is a strong rela- forecasts are more reliable. In the short term at tionship between market share and the least, it seems an almost automatic way of number of facings, ie the share of shelf space gaining market share and thus creating taken up. This is not surprising: the customer observable results that can be attributed to the involvement in these products is average if actions of the manager in a relatively short not low and the number of impulse buyers time span. This counts for quick promotion (when the choice of brand is done on-site) within the company, or on another brand in never stops growing. It is, therefore, in the another country. Few managers are willing to brand manager’s interest to take up the most take the risk of launching a new brand, but shelf space possible because it will attract even would rather extend the range. more attention from the customer, especially The proliferation of product extensions if a shelf is not extendible and competitors get produces insidious negative effects that are pushed out. In many markets, demand is no not immediately measurable or measured. 226 CREATING AND SUSTAINING BRAND EQUITY

First of all, because of small production runs Finally, brand loyalty might be undermined and the increased complexity of production, by a proliferation of extensions. The hyper- logistics and management, extensions are segmentation of shampoos according to new more expensive to produce, the cost of which hair needs, leads the customer to take into puts up the higher wholesale and retail price. account more needs in his/her choosing According to Quelch and Kenny (1994), process. The brand is but a feature in an ever compared to an index of 100 for the cost of longer list of criteria. This result was verified production of a mono-product, the corre- empirically by Rubinson (1992). sponding production cost index of differen- In reaction to the proliferation of exten- tiated products in a range is, for example, 145 sions, Procter & Gamble eliminated within 18 in the car industry, 135 for hosiery and 132 in months 15 to 25 per cent of the product the food industry. Moreover, in companies extensions that were not achieving a suffi- which do not take into account direct costs cient turnover. In the sector for cleaning (eg raw materials, advertising), many costs are products, the growth of new multi-usage considered as common to the entire range and products (all-in-one) is on the same principle are allocated to different products within it of simplification. Economies of scale apply all according to sales. The bestsellers therefore the more since the product is designed for the attract more of the costs than range exten- worldwide market. The extreme strategy of sions, which makes the profitability of the counter-segmentation is applied by hard- latter rather illusory. discounters: there is absolutely no choice and Second, non-controlled extension weakens products are generally only available in a the range logic. The first to find problems single version with no variety. Thus, there will with this are the salespeople: the salesforce of only be one type of diaper, whatever the Ariel or Dash, used to promoting the brand weight or the gender of the baby, in contrast against Skip, had to undertake within a few to Phases (boy or girl) by Pampers. On the months a complete cultural revolution. They other hand, because of this it will be 40 per had to promote Ariel in powder, in liquid and cent cheaper than, say, Pampers. in micro formula formats all together and Quelch and Kenny (1994) recommend four without ever explaining that one was superior immediate actions for better management of to the other, or what advantages one format range extensions: has in comparison to the others. The more extensions multiply, the more the specific l Improve the cost accounting system to be positioning of each extension becomes subtle. able to catch the additional costs incurred This is accentuated by the fact that extensions by a new variety all along the value chain. are added without withdrawing the existing This enables the real profitability of each versions. Organisations always have a good one to be assessed. reason for not cancelling this or that version. l Allocate resources more to high-margin The thought of losing the odd customer here products than to extensions that only and there rules the notion out. This thinking appeal to occasional buyers. overlooks the fact that product withdrawals should also be managed to gently propel l Make sure that each salesperson can sum customers towards newer, better versions. up in a few words the role of each product The range logic is also lost on the shelf: within the range. indeed, the distributor is reluctant to take on l Implement a new philosophy where the whole range. He will shop around and product withdrawals are not only accepted take only part of a range, which undermines but encouraged. Some companies only the consistency of the range on the shelf. launch an extension after having cancelled THE CHALLENGE OF GROWTH IN MATURE MARKETS 227

another with a low turnover. This with- of 0.5 per cent in market share, which, given drawal does not have to be brutal, but can the volumes involved, is gigantic. Evian was be done gradually so that clients turn to thus the first to withdraw the metal capsule other products within the range. which sealed the bottle, which the consumer ripped off more often than not. That year, its sales jumped by 12 per cent when the market Growth through innovation only grew by 7 per cent. The brand was also the first to introduce the handle which made When Moulinex was asked why its results the six-bottle pack carryable, the compactable were bad, executives answered that the bottle and so on. company had only offered 10 per cent inno- On low-involvement products, incremental vation when the average in the industry was innovations are much appreciated by the 26 per cent. consumer, the distributors amplifying the Innovation, source of growth and competi- move if competitors do not react quickly – tiveness, does not come easy. Here too, there distributors prefer novelty. are no miracles. The firms that innovate In order to de-commoditise milk and to most, such as Procter & Gamble, l’Oréal and curb the surge of hard discounters, the milk Gillette, devote on average 3.2 per cent of brand Candia multiplied its innovations, their sales to research and development. Is giving each its own specific name to accen- there a lesson here for the food companies tuate the differentiation and allow for strong competing against DOBs and price leaders? advertising support: Viva (milk with The giants in the food industry spend much vitamins), Grand Milk (enriched milk), Grand less in comparison on R&D: Unilever devotes Life Growing (for children), Future Mother (ie 1.8 per cent of its sales to R&D, Nestlé 1.2 per for pregnant women). These ‘daughter cent, Kraft General Foods 0.8 per cent and brands’ of Candia stemmed the advance of Cadbury-Schweppes 0.4 per cent (Ramsay, hard-discount products and enabled distrib- 1992). utors to work with high-margin and high- As a consequence, own-label products turnover products. These were not major account for 62 per cent of the 4,600 new technological innovations, but were add-ons product launches in the British food and drink of vitamins, minerals and so on to respond to market. In the chilled sector, own-label the expectations of demanding customers. In product launches represent 79 per cent of the doing so, Candia made the whole category 2,188 introductions! Retailers’ brands do act advance forward. Actually, nowadays Viva is as real brands. rarely bought for its vitamins but for the Innovation does not have to mean a tech- brand and for what it stands for (a dynamic nological breakthrough. Gillette is an extreme life-style, full of life, of youth). This product, case: the Sensor required 10 years in research which at first was advanced or premium, and led to 22 patents, the Sensor Excel 5 years becomes the basis of milk, the reference. and 29 patents, Sensor Plus Pour Elle 5 years Candia was thus instrumental in enhancing and 25 patents. Many innovations can be the reference level for milk. The premium linked to the service brought by the brand, in becomes a standard. its packaging for example. The head start that Evian took over Contrex Creating desire in saturated markets and Vittel lies mostly in the micro-services which it was able to provide the customer With a few exceptions (telephony, the with first. This service, although not spec- internet, the need for clean water, safety, tacular or linked to advertising, allowed a gain entertainment and so on), volumes in most 228 CREATING AND SUSTAINING BRAND EQUITY markets are stable, or even on the decline. between Nestlé and Krups. And what inno- People who eat two yoghurts a day will not be vation has done the same for vacuum induced to increase their consumption to four cleaners? Dyson, the s300 bagless vacuum or six. People will only wash their hair a cleaner, which has enabled the company to certain number of times a day. There is a limit take 30 per cent of the UK market – which was to the number of cars any country can previously assumed impregnable, as it was tolerate. The future therefore lies with ‘value controlled by the majors (Hoover, Electrolux, innovations’, to use a phrase coined by Chan Philips). and Mauborne (2000). These are innovations Which firm is currently Europe’s number that create a new value curve by suppressing two automobile manufacturer, just behind some benefits and boosting others, at an Volkswagen? The answer is not Ford, GM, unprecedented level. RyanAir and Nespresso Renault-Nissan or even Fiat. It is PSA, the are classic examples. group that jointly controls the Peugeot and Traditionally, market growth is achieved by Citroën brands. How is this possible? Between lowering prices and the associated extension 1987 and 1997, the company’s annual sales of distribution channels, which move towards rose from 1,952,474 to 2,077,965 vehicles, the mass market or even – like Dell – direct representing a growth of 6.4 per cent in 10 marketing. Reduced prices introduced by years. Sales figures soared between 1998 and Japanese, Korean and now Chinese brands 2002, rising from 2,247,121 to 3,262,146 have allowed anyone to have a television or vehicles – a growth of 38 per cent in four coffee maker at home. Large retailers have years. The new CEO, J M Folz, had identified democratised this progress, making low- lack of innovation as the key factor behind margin products compatible with the the group’s stagnation (Folz, 2003). Between economic equation of high throughput. But 2000 and 2004, PSA launched 25 new models where do you go from there? and body shapes spread across its two brands, The average coffee-maker price is s30. driven by restated brand values and a renewed Would they become more desirable if sold at understanding of today’s markets and s28? What about 25, or 20? In many cate- customers. gories, the motor of growth is no longer price, Only innovation can slacken pressure on but desire – and desire is created through the costs: it generates desire and a temporary innovation of value. monopoly. However, modern competition is The crisis in the Japanese economy would all about non-durable but constantly repeated be much worse if it were not for the advantages, and sometimes allows new remarkable rate at which Japanese companies segments to be opened in which the inno- innovate, and the civic responsibility of vating firm becomes the market standard. Japanese consumers, who consume and renew This fact is important for mass retailers. their products as a matter of duty – thus providing collective support for the economy. What mass retailers want A source of competitive advantage Mass retailers are on the lookout for innova- tions that create value rather than just move In Europe and the United States, what inno- market share from one brand to another. They vation has revived the coffee-maker market? expect the creation of new categories or Nespresso – an original concept offering segments that will dynamise sales and access to the best-quality coffee at home at a margins. price of around s400, thanks to a partnership THE CHALLENGE OF GROWTH IN MATURE MARKETS 229

Innovation is brand oxygen lighter? Yet this model has had to be modified: the world has changed. Competition has Where would Apple be without the iPod or come in the form of even cheaper ballpoint iTunes? A brand will only survive in the long pens from China, but also from the Japanese term if it can demonstrate its relevance with Mitsubishi group, with ballpoint pens that are regard to the latent or expressed changing priced at above the s1-mark but are attractive, needs of a market which is in a state of innovative and practical: they create value. Bic constant evolution. It is through these new has now found itself forced to become creative products and their associated advertising that too, and even to make modifications to its this relevance is repeatedly demonstrated. business model to outsource a portion of its Even brands whose success and business new products – an approach which hitherto model are built on a single, durable product had been unthinkable. have been forced to change in order to survive and grow. Even Nivea, with its traditional little The virtuous cycle of innovation blue box, has had to take the path of inno- vation in a market where dreams are fed by the What managerial conclusions can be drawn hope offered by each new development. Even from the above points? As Figure 9.3 shows, Lacoste, despite its association with the the brand can be managed in two ways. legendary 12 × 12 René Lacoste shirt – a sign of Brand management is thus a balance sporting elegance and distinction since 1933 – between preservation, renewal, extension now holds two shows a year to present its new and growth of the prototype on the one collections in its three segments of sports, hand, and on the other the creation of new sportswear and ‘dress-down’ Friday wear. The products and services to capture new circum- same is true of Bic, whose worldwide success stances of use and new customers, and to had until recently been based on a business open new segments. The first part maintains, model founded on two principles (one single feeds and consolidates the brand base, while brand, and single-product factories). Surely the second opens bridgeheads into the future, everyone is familiar with the Bic crystal ball- carrying what will tomorrow become the point pen, disposable razor and cigarette brand’s new prototype.

Master brand image

Flagship Innovations: renovation – new uses and – new customers reinvention – new image

source of short-term profits

Figure 9.3 Brands’ dual management process 230 CREATING AND SUSTAINING BRAND EQUITY

The effect of innovation on sales the case in the automobile sector, where the Peugeot 206 was named Europe’s best-selling Innovation does not merely work for itself: it car of 2002. It has brought consumers to the benefits the brand in terms of both image and brand who until then would never have sales. It is what is known as the spillover thought of buying a Peugeot, but are now effect, that is, the effect that advertising for even considering buying higher-end models one product has on the sales of another such as the Peugeot 307, 407 or 607. product in the brand. This effect, which is well Innovation is the force that removes barriers known to companies, has been confirmed by to a brand’s image – and the feedback effect marketing research (Balachander and Ghose, modifies this image in a lasting way. 2003). Examining the sales of Dannon in the United States, the authors observed that advertising for a new Dannon product also Disrupting markets through had an effect on the sales of the prototype value innovation flagship product – the existing product most commonly identified with Dannon (which It is well known that markets grow by the they wrongly name the ‘parent brand’ – reduction of unit prices: this is how the strictly speaking, this term should refer only computer became a household necessity, to Dannon itself, and not its products). Most mobile phone sales skyrocketed, and so on. In importantly, this effect is three times greater mature markets, the goal is no longer to than the effect that the prototype’s own increase the market in volume, but to increase advertising has on its own sales (a 14.4 per it in value. There are obvious limits to usage cent rise in the probability of choosing the for most products: nobody wants to shampoo flagship product following advertising for the their hair four times a day. The main question new product, compared with a mere 5.7 per is really how to make the consumer willing to cent following its own advertising). pay more. This added value will then be There are several possible explanations for shared between the distributor and the this phenomenon. The first – advanced by the producer. authors themselves – is derived by reasoning. The goal of all brands is to look for value Since the prototype/flagship is strongly asso- innovations, an unprecedented bundle of ciated with the brand in consumers’ attributes that shifts the preference function memories, the stimulation of the brand name of consumers (Chan and Mauborne, 2000). through the promotion of a new product ‘Value innovation’ consists in sacrificing some produces a feedback effect which activates a attributes (by suppressing them) in order to path leading to the cornerstone product, the raise valued attributes to an unprecedented prototype. We believe there is another expla- level. The best example is the Accor Formule 1 nation. Every new product draws in new hotel chain created in 1985. This became the consumers distinct from those already fastest-growing hotel chain in Europe. How consuming the established products. In so did Accor, Europe’s leading hotel group, doing, they re-evaluate their overall achieve this? perception of the brand, and are thus more The first point was in the identification of tempted to explore its other hitherto ignored an ‘oilfield’, a source of growth nobody had or undervalued products, and the brand’s thought of before, or that previously could flagship best-seller in particular. Innovation not have been served profitably. Many people reframes the brand’s image and feeds it with never go to a hotel, because they cannot the new tangible and intangible attributes afford it. This is true of students, young brought by this innovation. This is typically couples, families, workers – a huge potential THE CHALLENGE OF GROWTH IN MATURE MARKETS 231 market. When they travel they tend to stay into loyal behaviour (which was only possible with friends or family. This matches their if they found a Formule 1 hotel wherever they price expectations (it is free for them) but went), and it was also possible for the brand to creates a number of disutilities (lack of access television advertising, hence reaching privacy, obligation to eat and spend time with the status of top-of-mind brand leader for the their hosts, lack of freedom and so on). An whole hotel category. analysis of the value curve of this very compe- This brand did not meet the same success in tition (staying at friends or parents) reveals all countries. In the UK for instance, land what bundle of attributes will move consumer costs and the difficulty of finding good hotel preferences. The solution is still to be very locations prevented the fast development of accessible pricewise but to offer all the guar- the chain, and hence access to the critical size, antees of a clean, safe, quiet, practical hotel. essential in the brand and business-building How to do that profitably? How to base the model. brand on a valid economic equation? Only by The breakthrough brought about by Virgin sacrificing an attribute. The disruptive nature Atlantic did not reside in its price or in the of the Formule 1 innovation was in suppressing logo, but in the ability to create a different in- some of the features that all previous players in flight experience through a number of inno- the hotel market had held to be essential, such vations that have now been widely copied. In as ensuite bathrooms. In Formule 1 there were addition Virgin offered business-class trav- no baths or toilets in the individual rooms, but ellers a full service before and after the flight collective ones at the end of each hall, auto- itself, adding new benefits to the Virgin expe- washed and disinfected after each usage. rience. They could be picked up at their offices Formule 1 succeeded in tapping a hidden by chauffeurs in Volvo cars and driven to the need, and also adopted a successful devel- airport. In addition they were offered access to opment strategy. This strategy consisted in a shower room after landing, to get ready for quickly reaching the critical size (250 units) to their business day. This not only attracted be able to cover the country (that is, initially, new clients but stimulated a higher frequency France). Customer approval was transformed rate among all clients.

Value

High IBIS hotels

Medium

At friends/in family F1

Low

Restaurant Bathroom Reception Quality Hygiene SilencePrice Human (F1:No) (F1:Not in (F1:24H/24H) of bed (F1:Lowest) contact the room) (F1:Self service)

Figure 9.4 A disruptive value curve: Formule 1 hotels 232 CREATING AND SUSTAINING BRAND EQUITY

Another case illustrates the concept of value why, for instance, they love to patronise innovation: ballpoint pens. What made the thematic restaurants and amusement parks, success of Bic, which launched the ballpoint and want to discover New World wines. pen on a commercial scale in 1950? Mastering Through these consumptions, their minds quality at a low price. The prototype is the and senses are stimulated. They live differ- Cristal model, the all-time best-seller. It encap- ently through the product. sulated the values of the brand: reliability, an Swatch has based its success on the delivery excellent quality/price ratio and durability. of repeated experiential benefits to each of its Competition certainly came from lower-priced clients, through collections, design and a pens, with a lower quality, sold by discount general sense of fun. Garnier, one of the mass- chains or as distributors’ brands. However the market global brands of the l’Oréal Group, has real challenge for Bic came from Pilot and defined itself as a full experiential brand: this Sanford, which introduced a lot of value inno- is apparent in everything from the touch and vations (ink gel, ink points, ink balls, more colour of the packagings to the internet site colours, better grip, new more sensual mate- and the importance of street marketing in its rials) at around five times the price of a Bic. brand building (with the creation of Garnier- When they encountered these products, which owned buses, travelling around the country in delivered experiential added values, closing the Germany as well as in Shanghai). This also gap with classical ink pens, and provided a means that everything needs to change faster, permanent thrill by frequently introducing new to maintain the thrill: product lines, adver- collections – as did Swatch, Gap and Zara in tising, promotions, the contents of internet different fields – consumers were seduced. To sites and so on. survive, Bic had to change part of its business In this respect, service acquires more and model, introducing variety to match what now more importance, even for product brands. emerged as very fragmented needs, thanks to an This can take the form of making the brand outsourcing policy, which had until then been ‘mediactive’, a mode which favours commu- forbidden within the Bic Group. Innovations nications among members of a virtual now represent 25 per cent of each year’s sales. community through consumer magazines, forums and chatlines, FAQs and other Increasing experiential benefits communication devices. It can also be achieved simply through levels of service, Anyone who has visited a Nike Town cannot such as the call centres created by Pampers forget this experience. The same holds true for and by Nestlé Infant Food to answer specific the House of Ralph Lauren, for Ikea and for questions about babies. Virgin Megastores. These places embody all the brand values in 3D, and in addition they deliver a memorable sensual experience. In Managing fragmented markets developed countries, people have met their needs, and are now looking for exciting expe- Customisation is also a response to the slack- riences. This creates a new source of growth: ening of desire among those who have increasing experiential benefits. become blasé. In the Maslow chain, individu- The concept of experiential marketing has alisation comes high in the ladder. Everything not emerged by chance over the past few years that creates an ability to tie the brand and its (Schmitt, 1999; Hirschmann and Holbrook, products to the singularity of each client is to 1982; Firat and Dholakia, 1998). Consumers be looked for, within an economically in developed countries and mature markets favourable equation, of course. One quarter of try to build thrills into their existence. This is the revenues of Harley-Davidson comes from THE CHALLENGE OF GROWTH IN MATURE MARKETS 233 accessories. They enhance the experience of personalised car. The number of alternatives both bike riders and non-riders, and meet available would make the choice a chore. these needs for individualisation. However, they do expect to be able to choose Customisation has its limits in terms of cost between prepackaged variations on the same and profitability. Segmentation can circumvent model. This is why modern car-makers them. It is very interesting to analyse the Ralph increase the level of involvement of Lauren range, which takes seriously the issue of consumers with their cars by planning in market fragmentation (Table 9.1). Actually advance the line extensions that target there are no fewer than 10 ranges within the specific highly conspicuous targets, or valued Ralph Lauren empire, from the very expensive life-styles. The sales of a new model are in fact Purple Collection (with jackets price ranging made by the addition of segmented offers. from US $2,000) to the more inexpensive Polo Mercedes decided to address the fragmen- Jeans and RLX. Each label provides a full range tation of needs. It sold 700,000 cars in 1995, of products and line extensions. This policy has and has now reaches 1,250,000 a year. a number of advantages: Meanwhile the number of models has made a leap, reaching 23 in 2005. l It creates a built-in coherence that distrib- Nike’s success can be explained the same utors might not match without guidance. way (Bedbury, 2002). It offers an increasingly broad array of niche products (a sign of mass l It allows the distributor to allocate specific customisation), thereby creating relationships labels to specific stores and locations. with subsets of the market, with fragments. l It matches the inclination of consumers to Being more involved with a product tailored feel different in the morning, afternoon to them, customers are ready to pay more. and evening, while continuing to wear Nike now produces a number of collections Ralph Lauren clothes. even for a single sport. Also to maintain the thrill, product life cycles have been shortened l It increases the perception of rarity, of from one year to three months. exclusivity, a feat for a brand that in fact is As a whole, all these examples demonstrate more and more diffused. the need for greater innovation in all aspects The car industry has also discovered the of the marketing mix, from product, channel virtues of range fragmentation. It is not and store to communication to match the certain that consumers would want a fully fragmentation of demand.

Table 9.1 Addressing market fragmentation Ralph Lauren’s situation brands, ‘portraying core life-style themes’ Ralph Lauren Collection (Purple Label, etc)

Polo Ralph Lauren Polo Sport Rlx Polo Golf Polo Jeans Ralph Lauren Polo Sport Ralph Lauren Ralph Lauren Ralph Lauren Ralph Lauren Ralph Lauren Collection Sport Ralph, Ralph Lauren Lauren, Ralph Lauren Chaps, Ralph Lauren Ralph Lauren, Children’s Wear Ralph Lauren, Home 234 CREATING AND SUSTAINING BRAND EQUITY

Growth through cross-selling However, in the short term there was an between brands opportunity to be exploited: for example, to tell Skip’s MVCs about the group’s other Is the brand perspective sometimes detri- products. Hence the creation of group CRM, mental to growth? This provocative question not only for this reason, but also as a way of has been raised by Accor Hotels, the number shouldering fixed costs collectively. one European hotelier. Even though it had The key questions with regard to CRM are built a portfolio of strong brands, it wondered those concerning the single-brand or multi- if, for growth purposes, it was not time to brand approach. Consumer magazines such as adopt a consumer orientation. With its Danoe and Living Magazine (Unilever), and their complete portfolio of zero to four-star brands Procter & Gamble equivalents, illustrate the (Formule 1, Motel 6, Etap, Ibis, Novotel, multi-brand approach and customise each Mercure, Sofitel and Suit’hotel), it realised mailshot to a great extent, deciding what that single-chain loyalty cards were causing its coupons and new products will be offered to clients to defect to the competition. which customers. These magazines place a This is because a businessperson travelling strong emphasis on cross-selling. This does not during the week does so at the company’s stop each brand from conducting its own rela- expense, and his or her family cannot afford tionship-based programme, for example, by to stay in the same hotel at weekends. organising conferences on issues relevant to Although they were all Accor hotels, a loyalty customers, either face-to-face or through card for Novotel (the three-star brand) forums on the brand’s website. Other channels conferred no benefits at Etap (one-star) or also exist to enable such contact: for example, Formule 1 hotels. Seeing things from the call centres providing real consumer services. client’s point of view led to the planning not of product brands, but of a horizontal brand – Accor Hotels itself – as a loyalty vehicle. This Growth through allowed the client to be kept within the whole internationalisation portfolio of the group’s brands. Seeing that Nivea enjoyed high levels of If domestic markets are mature, brands should loyalty because of its umbrella branding archi- look for better markets. This is why all brands tecture( all is Nivea), l’Oréal Paris decided to look eastward, towards the Eastern European become a truly horizontal brand with a countries and Russia, and towards India and greater importance than that of its daughter China. The two-digit growth markets of brands (such as Elsève, Plénitude and Elnett). tomorrow are there. We address these issues in The aim of this mother brand was to increase our chapter on globalisation. Brazil and cross-loyalty between the daughter brands. Argentina should also qualify as growth Analysing its client database, Unilever calcu- markets once the Argentinian financial crisis lated that 78 per cent of the most valuable is over. Finally, brands meeting sophisticated consumers (MVCs) of Skip were also MVCs for needs can find in North America the wanted Unilever products in general. This was also source of growth. true of 76 per cent of MVCs for Sun, 69 per For instance, Evian water has since 1991 cent for Dove, 66 per cent for Lipton Ice Tea, faced an unprecedented challenge in its home and 63 per cent for Signal. Ultimately, this country: the emergence of low-cost bottled posed the question of a horizontal Unilever water, sold at a third of Evian’s price. These brand – a tricky issue in an organisation waters are not ‘mineral water’, with a guar- founded on a variety of unrelated product anteed proportion of mineral ingredients in brands, in a ‘house of brands’ architecture. them, but ‘spring water’. (Another category is THE CHALLENGE OF GROWTH IN MATURE MARKETS 235

‘purified water’, such as Coke’s now famous another brand of facial spray, was launched Dasani, Dannon water and Nestle Aquarel. in alliance with Johnson and Johnson. Two These brands are mostly sold in North years after its launch it had become the America and in emerging countries, and number five brand by sales in the sector of hardly at all in Europe.) While Evian is still the mass market facial cosmetics. It now plans leader in value share, the volume-share leader to launch in other countries such as Japan is a low-cost brand, Cristaline. and Korea. This extension is consistent It is easy to see how difficult it is to have to with the repositioning of Evian less as a suddenly justify a major price gap. In 1972, water than as a source of health and beauty. four brands represented 80 per cent of the 2 billion litre bottled water market, and Evian To make the business of Evian far more prof- was the leader with 653 million litres. Since itable, a simple calculus shows that a litre of then 17 major competitors have entered the water can be sold at a double price in market, and in 2003 the four main brands developed countries such as the UK, Germany, represented only 40 per cent of what had the United States, Canada and Japan: there is a grown to be a 7 billion litre market. Evian’s growing demand for healthy bottled drinks annual sales volume is now 793 million litres. that is in reaction to the overconsumption of The brand succeeded in growing its sales in soft drinks, and the obesity syndrome value through three strategic actions: attached to it. The real un-cola is not Sprite or Seven Up: it is Evian. Despite transportation l Permanent innovations in the format, pack- costs, selling Evian in the United States aging and handling of the packs. All these delivers a high margin. The main problem is apparently tiny improvements gain signifi- to access consumers and to justify the price cance when one has to shop for water. premium in a market where Nestlé and Coca- Cola Corporation have established cheaper l Systematic repositionings of the brand, brands of purified water. This is why an from generic health and nature to equi- alliance was needed with Coca-Cola to librium and now to the concept of eternal distribute Evian in North America in every youth, while remaining within the brand’s outlet and vending machine. identity. Today, export represents 50 per cent of Evian l Extending the brand. As early as 1962, sales. In each country the brand’s role is to Evian was a pioneer in brand extension. In create the market for mineral water (not simply response to hospital requests it introduced purified water), in order to build the business a spray to vaporise water on the faces of and become its referent, the brand with a fash- patients and babies. In 2001 Evian Affinity, ionable, premium positioning. 236

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Sustaining a brand long term

Many apparently modern and up-to-date destabilise the balance of added value of brands have actually been with us for a long established brands, forcing them into a never- time: Coca-Cola was born on 29 May 1887, ending cycle of constant improvement. For American Express in 1850, the Michelin instance, the sudden growth of Daewoo in the bibendum appeared in 1898, Whirlpool in car market is due to the fact that this 1911, Camel in 1913, Danone in 1919, Alka- conglomerate had access to GM assembly Seltzer in 1931, Marlboro in 1937 and Calvin lines which were already ‘obsolete’ although Klein in 1968, to name a few. These are the they were just a few years old and were sold by brands that have survived – others have disap- GM at a low price. With the passing of time, peared from the market even if their names do consumers either become more sophisticated ring a bell. and expect customised offers, or become blasé The perennial appeal of some brands and prefer a simplified and cheaper offer. reminds us that, although products are mortal Time also marks the cultural evolution of and governed by a more or less long life cycle values, mores and consumer habits. As time which can be delayed but not avoided, brands goes by, current clients grow older and a new can escape the effects of time. generation emerges which has to be won over Many great and well-known brands have from scratch all over again. Finally, time also disappeared, others are struggling. Why do wears down the signs, the words, the symbols some brands last throughout time and seem and the advertising campaigns of brands. forever young, whereas others do not? Changes in the retail sector have far- Time is but a proxy variable, a convenient reaching consequences. Take, for example, the indicator of the changes that affect society as rise of hard-discount in Europe, originating in well as markets, subjecting the brand to the Germany – where it has already become the risk of obsolescence on a double front – tech- leading form of retail, and is now getting close nological and cultural. With time, techno- to a 20 per cent market share in Europe. In logical advances become more widely response to this, to pre-empt the risk that available and new cheaper entrants arrive that clients will desert them, hypermarkets have 238 CREATING AND SUSTAINING BRAND EQUITY created low-price product ranges and – in ening to brand equity. After all, sales may order to avoid harming their store brand – increase, but what will happen to the brand’s have widened the price gap with the big reputation? brands. Stronger and stronger brands are Is there a common feature of the seemingly needed to support this price differential, everlasting nature of some brands? For conven- which has grown suddenly. In Japan, too, the ience, one could say that an understanding of retail sector is changing: in the wines and the brand logic, addressed in a previous spirits market, bars have seen their market chapter, offers the best bulwark against a brand share fall from 32 per cent to 30 per cent, slipping into decline and disappearing. A small independent stores have slipped from general definition also sums it up: ‘to defend an 14 per cent to 10 per cent and liquor stores are added value that is constantly undermined by down from 34 per cent to 28 per cent. They competition’. The following sentence epito- have all lost share to the supermarkets, which mising the problem is attributed to Antoine have grown from 20 per cent to 32 per cent. Riboud (former CEO of Danone worldwide): ‘I Unlike the three first-named outlets, which do not believe in the overpowering might of offered little choice but could provide recom- brands, but I believe in work.’ A brand is not a mendations, supermarkets present a wide once-and-for-all construction, but the aim of a range – but in self-service style, with no constant effort to reconstruct the added value. recommendations. This change has come as a The current product has to be continuously blow to all wines that formerly relied on a adapted to meet changing demand while at the push strategy via in-store recommendation: it same time the new concepts of the future have gives an advantage to Australian and US to be invented that will sustain the growth of wines, which rely entirely on the brand’s high the brand. profile. An analysis of the numerous brands that Brands associated with a particular distri- have survived the crises and lasted down the bution channel are thus subject to the years may point to the key success factors of vagaries of the channel with which they are so this virtuous spiral and is the purpose of the closely linked. In terms of hygiene and beauty, present chapter. the chemist’s store channel is constantly losing ground to the hypermarkets and super- markets. Indeed, the supermarket and hyper- Is there a brand life cycle? market brands are improving their performance: Pond’s, Olay, Bioré, l’Oréal Curiously, the concept of brand life cycle is Paris, Nivea, and so on. This makes the absent from most books on branding, as a channel more and more attractive, and review of their indexes shows. Does that mean increases the pressure on other distribution that, unlike products, brands do not have a channels. There are two possible responses to life cycle? In practice however the question this, the first of which is to strengthen brands whether brands have a life cycle is pervasive in the threatened channel and thus increase in a number of legal disputes. For instance, in their attractiveness. This is the approach 2002 LVMH, the world leading group for taken by the likes of Eucerin (Nivea), La Roche luxury brands and goods, sued the famous Posay and Vichy. The other approach is that of consulting group Morgan Stanley for having the twin channel, taking advantage of the expressed the opinion that the Louis Vuitton reputation acquired in the chemist’s store to brand (born in 1854) was now a ‘mature sell the product in the supermarket. This is the brand’, a judgement that carried implicit and Neutrogena option, tempting from the point explicit consequences for financial analysts of view of sales growth, but potentially threat- and their clients, stock investors. Maturity is a SUSTAINING A BRAND LONG TERM 239

typical phase of the product life cycle, the l through a reduction in the price differ- third after launch and growth, and just before ential from cheaper potential substitutes; decline. To describe a brand as in its maturity l through permanent ‘facelifts’ or innova- does indeed imply it is not far from decline, tions to deliver more value to customers and so could hurt its reputation and the and recreate perceived differentiation; LVMH stock valuation. The product life cycle does exist. Historical l through repositioning, and renewed adver- evidence proves it. All products (by which we tising or communication in order to adapt mean the bundle of physical attributes) have the value proposition to the present an end. The problem is that the concept of competitive conditions. product life cycle was mostly developed in hindsight. It is easy to reconstruct now the A brand is not a product. Certainly it is based product life cycle of nylon, of transistors, of on a product or service: Nike started as a pair mainframe computers, of minicomputers, of of sneakers, Lacoste as a shirt, l’Oréal as a hair word processing machines and so on. These dye. But as these examples imply, brands start products were replaced by more efficient solu- from one product then continue to grow from tions. Microsoft killed Wang: word processing multiple products. Louis Vuitton started as a software was a better solution than dedicated luggage maker for the aristocracy: since then, hardware. Looking at aggregate sales figures of it has become a full luxury brand covering the whole nylon industry, one finds the typical many product categories. Recently the pattern: a birth and launch phase, a growth creative designer Mark Jacobs was hired to phase, a maturity phase and a decline. Maturity create the first Louis Vuitton clothing line. is signalled by a plateau, a levelling of sales. There should be perfumes soon. The brand As an after-the-fact concept, the product life keeps on surfing new products and their cycle model is always correct. But as Popper intrinsic growth. As such, has this process an showed us in the philosophy of science, end? Do brands managed in this way reach a concepts and theories that cannot be falsified levelling-off stage much later if ever? are not thereby right. In practice, managers One thing is sure. Brands that are not are never at their ease as to where they stand managed in this way, but remain attached to a in the product life cycle. Should they interpret single product, or even a single version of a any stabilisation of sales as an evidence that product, are subject to the product life cycle. the maturity phase has been reached, and We all know of brands that in fact designate a make appropriate marketing decisions. very specific product: Marmite (that pecu- Instead, they might argue that the decline was liarly English savoury spread), Xerox (photo- only due to weakened marketing, and that copiers), Polaroid (instant cameras), more work to identify and correct the causes Wonderbra and so on. of this stabilisation would make sales grow Certainly, brands such as Ariel or Skip are again. The routes to product growth recovery not growing any more in the heavy-duty low- are multiple: suds detergent market. Their market share hovers around 11 to 12 per cent in Europe. l through line extensions to capture the They do try to create disruptions through short-term new tendencies of the market regular innovations, but these are soon and increase brand visibility; imitated, so this has become a yard-by-yard ‘trench war’. Their growth will come from two l through distribution extensions to make sources. The first is geographical: the Russian the brand more available wherever market and all the former communist coun- customers are; tries remain to be conquered, as does Asia 240 CREATING AND SUSTAINING BRAND EQUITY

(although this will be done by Tide, the equiv- capable on each occasion of moving with the alent of Ariel in the United States). The second times. This applies just as much to stylish is brand extensions. Why should Ariel be brands and to fashion designers as to luxury satisfied by just being the co-leader of the brands that have to renew constantly not detergent market? Shouldn’t it redefine its their art but their products. Luxury must scope, its mission, as fabric care as a whole? move with the times lest it become Of course, it can be said that once all coun- embalmed. tries of the world have been conquered and all The exceptional longevity and leadership of possible extensions made, then a levelling-off Nescafé on the market can only thus be in aggregated sales will unmistakably take explained. Created in 1945, the brand has place. This long-term prediction is as certain never stopped innovating, either by little as J M Keynes’s famous comment: in the long imperceptible touches which when put run we are all dead. But for practical purposes, together have produced an instant coffee in the short and middle term, sources of whose taste is ever improving, or by major growth can always be found: it only requires technological breakthroughs which helped more work. recapture some of the 900 aromas that build a In any case the emerging overriding rule of ‘coffee taste’. The product has never stopped accounting for brand value (see Chapter 18) developing either in taste or in convenience has given a clear answer to the question of the (glass packaging replaced iron in 1962), or in practical existence of a brand life cycle. Brand its ecological considerations (the introduction values should not be amortised for the single of refills), or by its look. To signal the tech- simple reason that no sure forecast can be nical breakthrough and the progress made by made about their span of life. To amortise over lyophilisation, Nescafé took on the aspect of 5, 10 or 40 years one needs such forecasts. The small grains under the name ‘Special Filter’. In accounting standards and norms that are 1981, more aromas were recaptured, which coming to be accepted worldwide dispel the was signalled by the creation of a real product notion of a brand life cycle as an operating range (Alta Rica, Cap Colombie), and new concept (rather than a historical explanation). advertising focusing on South America. Later, a new manufacturing process called ‘full aroma’ was able to capture even better the Nurturing a perceived difference aroma of freshly roasted coffee. Innovation and advertising are the two pillars of the long- Brands should always be ‘good news’. A brand lasting success of this brand. This incremental is the name that progress takes to gain access process never ends. to the market. The progress marked by the The leadership of Gillette follows the same inclusion of enzymes in detergents is called pattern. Thirty-seven per cent of the sales of Ariel or Skip or Tide. The progress in conven- this multinational are accounted for by ience coffee is called Nescafé. But progress products that have been launched in the five does not stop. The latest level of quality or previous years. In launching new products performance is quickly integrated by the when the previous ones are barely established, market and becomes a standard. Before long it Gillette keeps ahead of the pack, justifying a can be found in DOBs. Continuous, but from comfortable price premium and putting DOBs now on selective, innovation is the brand’s on short allowance (18 per cent volume on fate. This also applies to products with a the disposables segment alone). Figure 10.1 strong intangible added value: the cologne demonstrates this well: there is a strict linear brand Eau Jeune (literally Young Water) can relationship between the innovation rate in a only survive if it launches new versions product category and the penetration of SUSTAINING A BRAND LONG TERM 241

Penetration of distributors’ • Syrup brands • Cheese

• Oil • Rice • Pastas • Chocolate • Yoghurts • Coffee • Frozen food % of products launched in the Source: McKinsey, UK last five years in the category

Figure 10.1 Innovation: the key to competitiveness

DOBs. When brands get lazy, cheaper copies situates them against two facets of their rela- can take a share of the market. It is significant tionship: cognitive and emotional (bearing in that each year in the Lego catalogue out of mind the fact that during the growth of the 250 product references, 80 are new. In many brand, the first facet precedes the second). sectors, the minute the innovation rate of a The customer learns through communication company goes down, it starts losing ground. and distribution the existence of a brand With their massive presence in distribution before grasping its difference, which then and daily presence on the table or in commer- leads to its pertinence. In the meantime, the cials, brands have become familiar, friendly seeds of familiarity and esteem have been and close, a source of empathy, even of loyalty sown, reminding us that prompted brand and attachment. To maintain the strength of awareness precedes spontaneous awareness brands, it is vital to nourish the two pillars and that the latter is correlated with the which make the relationship with the brand: emotional evaluation. The brands that come one cognitive, the other emotional. to mind spontaneously, as they belong to this Innovation serves precisely this purpose. It group, also happen to be our favourite enables the brand to differentiate itself objec- brands. tively and to draw once again the market’s As shown by Figure 10.2, the decline of a attention. brand, however, begins with a slide in the With time, it is noticeable that perceived level of perceived difference between it and differences erode faster than the emotional the competition and, in particular, with the relationship. The liking persists even though opinion leaders of the product category. The we can see that the brand no longer has a esteem and the emotional ties are still alive monopoly over performance. A study and well, but the consumer realises that the conducted by the American agency, Young & quality gap has been bridged between the Rubicam, is a reminder of this psychological brand and its competition. He still likes it but fact. The survey, called Brand Asset Monitor may now become disloyal! and conducted on 2,000 brands worldwide, The benefit of this study is to underscore that 242 CREATING AND SUSTAINING BRAND EQUITY

FAMILIARITY ESTEEM

NICHE LEADERSHIP BRAND RELEVANCE

NEW

DIFFERENCE EROSION

Figure 10.2 Paths of brand growth and decline the drop in differentiation signals the begin- found they preferred the taste of Pepsi in a blind ning of the decline, however strong the liking test. Moreover, Pepsi has always sought to be a score may be. Unfortunately, many leaders are couple of cents cheaper than Coca-Cola. The no longer considered as the qualitative reference strategy proved effective: we know it forced of their branch. We like Lotus, Kleenex, brands Coca-Cola to change its formula in 1985 so as that we have known since childhood, but we no not to take the risk of being surpassed in taste. longer think that they are the sign of superior This was the famous episode concerning New product quality. They will have to refocus on the Coke. product to regain their leadership. The Coke vs How do you preserve the superior image of Pepsi duel in the United States is a good example a brand, this capital of perceived difference? of this. One often reduces the struggle between the two giants to a battle of advertising budget l One way is to renew the product regularly, to size. Actually, Coca-Cola’s philosophy lies in the upgrade it to the current level of expectation. so-called 3A principle: Availability, Affordability This is why Volkswagen introduced the Golf, and Awareness. Coca-Cola must be within reach then Golf 2, 3, 4, 5 and 6. Detergent manu- everywhere, cheap and on one’s mind. Another facturers make minor adjustments every two phrase sums up Coca-Cola’s ambitions: ‘To be years or so, and make major changes in their the best, cheapest soft drink in the world’ formula every five years. This is how Ariel (Pendergrast, 1993). What is exactly the strategy and Skip maintain their qualitative lead- deployed by Pepsi-Cola? As it could not compete ership, making them both the two most in the communication, sponsoring, animation expensive brands and the leaders on the and promotion race it focused on product and market. Moreover, for want of financial price. Pepsi-Cola has always tried to improve its means, DOBs cannot keep up in the R&D taste to fit as best it could the evolution in the race, a race which can become an obsession. taste of the American public. This is what founded the very aggressive advertising l A second way is to integrate new and campaigns from 1975 onwards, such as the ‘Take emerging needs while holding onto the the Pepsi challenge’, where surprised customers same positioning. In doing so, any car SUSTAINING A BRAND LONG TERM 243

brand, even if it is not specifically posi- acquired wine appreciation muscles and tioned on safety as is Volvo, must from now explore the category. Soon they wanted to on show that it is equally concerned with discard their former simplistic brands in security and even the environment. search of new experiences. This consumer maturity was soon perceived as a potential l A third way is to constantly confirm one’s threat by Jacob’s Creek, which it met by intro- superiority by extending the line. A brand ducing gradual line extensions. A perma- of shampoo treating hair loss should nently renewed top range of special limited rapidly propose line extensions covering series was designed to keep up with opinion the different needs of people suffering from leaders’ expectations (Parker’s wine guide, this problem – creams, lotions and so on. wine buffs, restaurants), and a number of sub- These extensions demonstrate the concern brands based on more complex grape vari- of the brand to address as best it can the etals were designed to keep customers and at different aspects of the problem on which the same time demonstrate the competence it focuses and to affirm its leadership by of the brand, as a true leader should. Jacob’s becoming the reference linked to the need. Creek extended its line upwards: prices in l The fourth way lies in adapting to one’s 2004 ranged from a basic £4.59 to £6.99 for own customers who themselves change and sparkling wine and even £8.99 for a rare become more experienced. Line extensions reserve Shiraz. should propose new products adapted to In the banking sector, credit cards are their more sophisticated needs, to prevent constantly launching extensions to satisfy a them from trying the competition. customer base which, over time, is becoming more affluent and expects increasingly high- Jacob’s Creek is a good example of this. Over performance service and insurance products. 20 years, from 1984 to 2004, the UK became a After Visa came Visa Premier, followed by Visa wine-drinking country. Consumption per Infinite. With their very low cost but high capita was raised from a low 7 litres per person perceived value, innovations generate per year to more than 21 litres. This was the revenue for the entire chain, starting with the result, as ever, of three converging forces: broker and continuing to the bank which promotes the product to certain segments of l Multiple grocers realised that this new its clientèle, thus increasing the profitability category was very attractive. They wished of each customer. In addition, it produces a to made it a ‘destination category’. feeling of exclusivity among carriers of the most expensive cards, a feeling which is l Consumers travelling in Europe or destroyed by the spread of so-called ‘standard’ Australia tried wine and wished to pursue cards. This is the typical American Express the experience back home. strategy. l New players understood the UK consumer better than existing competition did, and the New World wine makers understood Investing in communication them best of all. Jacob’s Creek introduced its first two varieties in 1986 (a dry red and In 2002, the Danone group undertook a a dry white): it is now the UK’s number one significant move. It decided to increase signif- bottled wine brand (see page 52). icantly (by over 20 per cent) the media budget of its strongest brands. Since then, their share New drinkers are fast learners. Thanks to the of voice and market leadership have magic of wine, they want to flex their newly increased. Similarly the whole l’Oréal success 244 CREATING AND SUSTAINING BRAND EQUITY story is based on two pillars: research and As Figure 10.3 demonstrates, there is a advertising. linear relationship between the penetration of Communication is the brand’s weapon. It DOBs and the extent of advertising expen- alone can unveil what is invisible, reveal the diture in a market, measured in percentage of basic differences hidden by the packaging sales spent on advertising. Advertising is a which often looks the same among barrier to entry. However, upon examining competitors, especially when this similarity is the product categories, it becomes clear that precisely the impression sought by DOBs to the categories with a high investment in create confusion. It alone can sustain the advertising are also those that invest in inno- attachment to the brand, by promoting vations and renovations, which are perfect intangible values, even if this loyalty is opportunities for re-establishing the saliency eroded by many in-store promotions. of the brand in the public consciousness. It is Advertising is a result of the rise of self-service the conjunction of these two factors (inno- distribution and reductions in the numbers vation and advertising) that produces added of salespeople. It is the necessary conse- value. quence of investments in R&D that have to The role of advertising in defending and pay off ever faster and therefore need an ever sustaining the brand capital is shown by Table bigger public. That this has to be repeated 10.1. With the exception of jam, where there over and over is the proof that there is a is much consumption by children and the confusion in people’s minds about the legit- idealised reference to home-made jam favours imacy of advertising, even within marketing small brands, advertising is quite efficient. teams, and is why we will use numbers to Once more, we may notice that the categories back our statements. that invest heavily in advertising are also

Share of DOBs 30% WC cleaners ■ Dishwashing Fabric liquid ■ ■ softener 20% Air freshener ■

Cleansers ■ 10%

■ Detergents

0% 5% 10% 15% 20%

% Advertising/sales Source: McKinsey, UK

Figure 10.3 Penetration of distributors’ brands and advertising intensity SUSTAINING A BRAND LONG TERM 245

Table 10.1 Advertising weight of trade brands’ penetration Advertising sales ratio Trade brand market share %%

Cereals 10 15 Detergents 8 11 Coffee 8 13 Jam 7 47 Butter 5 6 Soft drinks 5 20 Tea 5 26 Yoghurts 2 39 Cider 2 36 Fish 0.7 26 Wine 0.5 61 Source: McKinsey, UK those that regularly innovate and strongly sales, was the first to put into reverse this incli- differentiate their products. nation by unilaterally lowering its prices in the United States. Wall Street reacted badly, thinking the bell was tolling for brands: on No one is free from price that day the stocks of all consumer goods comparisons companies dropped significantly. More than a year later, in August 1994, Marlboro’s market Even if innovation and advertising do increase share reached unprecedented heights (29.1 added value, loyalty at all costs does not exist. per cent), seven points more than in March of Customers can be both sensitive to the brand 1993 just before the famous ‘Marlboro Friday’. but disloyal to it, estimating that the price of In France 10 years ago, Philip Morris decided the brand goes beyond the price span that they to bring down the price of Chesterfields from are willing to pay for the product category, and 11.60F to 10F at at time when competitors beyond the brand premium that seems were preparing to pass on to customers the reasonable to them given the added satis- 15 per cent tax increase imposed by the faction which is expected. Distributors also government. Within two months the sales of have the same attitude. Chesterfields jumped by 300 per cent. The During years of economic growth, the market share of the brand went from less than biggest brands were tempted to regularly 1 per cent to 12.2 per cent in two years. It increase their prices to maximise the overall became, in a year, the favourite cigarette for profit accruing from a strong price premium young people (71 per cent of buyers were and a large batch of loyal clients. For financial under 25). directors concerned about showing ever- One may recall that Procter & Gamble increasing profits, what does a price increase significantly reduced the price of its brands in of a few pence or cents per unit represent? For the United States in accordance with its brand- the market, however, it now has the utmost boosting programme, thanks to the allocation importance. In April 1993, one of the most of part of the savings accruing from an famous brands, Marlboro, noting a slump in impressive programme to increase industrial 246 CREATING AND SUSTAINING BRAND EQUITY productivity, marketing and sales. These price The preceding argument is a fortiori valid if reductions were part of the EDLP (Every Day the price premium is higher than the perceived Low Price) policy which put an end to the added value of the brand. The brand then gets myriad of micro-promotions. into a niche at a high-end segment of the These price reductions show that the brand market and watches its volume drop. As is has to stay within the core of the market if it shown in Figure 10.4, the latent savings unex- wants to continue. This was discovered by ploited by industrialists could represent up to European car manufacturers after first the 30 per cent of costs. It is true that part of the Japanese and now the Korean invasion: they benefits linked to the product are sometimes forced all car OEM (original equipment manu- not valued by customers or that the upgrade in facturers) suppliers to reduce their prices by 20 production costs is not worth it in the per cent. Portable computer manufacturers customers’ eyes. There is more to be gained by also know that they must both innovate and suppressing these costs and finding a new reduce their prices. Indeed, the price premium price competitiveness again. Besides, trade-off that pays for the superior added value is a analyses demonstrate that the logic of ‘bigger differential concept. It says nothing of the and better’ can be counterproductive if it standard, the reference level of the brand with entails an increase in price. Beyond a certain which it is to compare. But nowadays in many performance threshold, utility slumps. There markets this standard is falling in absolute are also acceptable price thresholds: the rule value. If hard-discounters spread through for home computers is to always give the client Europe as they have in Germany, they can more as long as the retail price does not go impose in certain sectors their own levels of beyond the US$2,000 barrier. price and quality as the standard that the The analysis carried out by OC&C has, branded products have to reckon with when however, two limits. First, it neglects, as do setting their price levels. If brands leave their most economic analyses, the perceived value price premiums unchanged, they will not be of the reputation and image of the brand: a able to hold their ground. brand does not only bring a product benefit.

Potential sources of gain:

100 10 Width of line Product conception 5–15 Packaging Promotion 10–15 Economies of scale Sales force overheads 10–15 Habits

65–45

National Distributor Valued Non- Structure Hard- brand margin product valued and decision discount plus product process product plus complexity

Figure 10.4 Sources of price difference between brands and hard-discount products SUSTAINING A BRAND LONG TERM 247

Second, it is not obvious that price leaders set sure a brand lasts. It does not increase added- the standard price that will be the reference value but reduces costs. Moreover, a decrease for customers when they compare prices. It all in price on the part of the leader has important depends on the level of involvement of the consequences in the long term: it will jeop- customer and of the perceived difference! For ardise the profitability of the whole sector for years, low-priced colas existed but attracted 20 years to come. The leader should instead no consumers. Only recently have the aim either to retrieve the standard of quality Sainsbury’s and Virgin colas been able to chal- that the customer knows he is leaving behind lenge Coca-Cola. Creating a large shelf space if he chooses a cheaper product, or to enlarge for price-leader detergents will not in itself the market. But to do this the company must create a significant sales volume: the quality invest: lowering prices too much will make reference is set by Skip and Ariel. Customers financing this effort impossible. know they are not getting the same quality when, for want of buying power, they fall back onto secondary brands and a fortiori on Branding is an art at retail unknown brands. At the other end, the Viva milk created by Candia, far from being Where marketing is concerned, he who is in perceived as a premium product, has become contact with the end-user often has a decisive the milk that all milks should be like, the edge. This is a major handicap for manufac- standard for milk, both modern and turers who are not in control of their distri- advanced. There are indeed other price-leader bution network. It may be an illusion to milks, but they are considered ordinary and consider that you can bypass supermarkets to lacking in character. sell significant food brands, but this is not the Any price decrease, if it does occur, should case for many other outlets. Selective distri- not therefore be conducted in comparison bution is such an example. The evolution of with the cheapest product of the category but European Union law on selective distribution with the products in the same segment aiming networks has substituted qualitative criteria at the same need. The so-called ‘trammel- for the old quantitative criteria linked to hook analysis’ (Degon, 1994) demonstrates minimum volume quotas. empirically that the brands which are In the case of Levi’s, the brand is quite successful are most of the time those that have selective in its distribution. While not the lowest price within their own segment. To permitting the sale of its products to super- return to the Chesterfield case in France, the markets, Levi’s expects its retailers to respect brand was withdrawn as early as 1988 from five criteria: the declining segment of upmarket Virginia cigarettes (Marlboro, Stuyvesant, Rothmans) l the first one has to do with the offer range: to be positioned in the segment just under it, the latter must comprise quality clothing that of ‘popular Virginia cigarettes’ (Lucky and only brands that are recognised by the Strike, Gauloises Blondes). By pricing its pack customer where jeans are concerned at s1.5, it became the cheapest alternative (therefore no price-leader or anonymous within this segment and quickly became the jeans); leader. Since then, the brand has had to l the environment must be as high quality as increase its price due to budgetary constraints the offer; from the government, but has kept this price positioning. l product ranges that could alter the image of As a conclusion, a decrease in price has Levi’s must not be found close by; never in itself solved the problem of making l the service must be in tune with the brand 248 CREATING AND SUSTAINING BRAND EQUITY

and the staff must be adequate and one of the key questions in the analysis of the competent in the field of clothing; financial value of a brand, of the present value of its future profits. The impenetrability of the l last of all, the shop must be part of a fixed market is the best warranty for the latter, and construction (not a market stall) with the example of Black & Decker is quite adequate space reserved for jeans and revealing. capable of attracting youths aged 15 to 25. Why are there hardly any DOBs in the drilling machine market? Because Black & Through this mastery of the channel, Levi’s is, in Decker makes it economically impossible for fact, controlling its image and preserving its them to enter the market. DOBs sprout up brand capital. A brand cannot be narrowed when one or more of the following conditions down to its advertising and to its products, it are fulfilled: involves the customer in the purchasing act and even thereafter. This is also the strength of l there is a high volume in the market; Benetton, Ikea, Häagen Dazs and Louis Vuitton. Coca-Cola itself does indeed have to contend l there is little product innovation; with competitors in supermarkets and even with l brands are expensive; copies from distributors. But the reputation of a soft drink is enhanced by its distribution in l customers perceive little risk; cafés, hotels, restaurants and nightclubs. Moreover, the Coca-Cola company offers a wide l customers make their choice essentially range of non-colas that make it an exclusive according to the visible characteristics of distributor at the sales outlet. Hence, where the product; there is Coca-Cola there usually is neither Pepsi l technology is accessible at low cost. Cola nor any product from Cadbury Schweppes. Much to the contrary, the market for drills is small, and moreover is cut up into many Creating entry barriers segments. Black & Decker drives the market and makes it develop at a fast technological This last example draws attention to the pace. In addition, Black & Decker has glob- importance of entry barriers in sound brand alised its production: each plant produces one management: offering a full portfolio of single product for the worldwide market. The brands helps the Coca-Cola Company extend production cost level thus becomes its dominance, outlet by outlet. The bar unbeatable, and as Black & Decker is not owners and restaurant operating companies overkeen to increase its retail price, it does not are satisfied: they can offer their clients a full leave much room for copycats to manoeuvre. range of famous soft drink brands, and in Lastly, the customer feels safe when buying addition they often receive bonuses from such a well-known and ubiquitous brand. Coca-Cola for providing full exclusivity to the What are the main sources of entry barriers? whole Coca-Cola portfolio. (This was the source of lawsuits in Europe by the other soft l The cost of the factors of production is the drink companies.) most important, which leads to a long- By focusing exclusively on the consumer’s lasting competitive advantage. This is the psychology, brand analysis has overlooked strategy of Dell, and also of Decathlon, the the crucial role of the management of the world’s fifth largest sports goods retailer offer itself, which can make it impossible for and eleventh largest producer. Decathlon competitors to enter on the market. This is may become for some sports the European SUSTAINING A BRAND LONG TERM 249

number one manufacturer far ahead of any and satisfying distributors’ and customers’ others because of the economies of scale expectations. In the agricultural market, it accruing from its products developed at a is possible to count the different kinds of European level. Decis (the leader in insecticides) according to the type of plant, thus reinforcing the l Mastering technology and quality is a key worldwide leader status of this brand. success factor for Procter & Gamble, Gillette, l’Oréal and 3M. Turning down any l Putting a name on a product in itself yields offer to yield an iota of their know-how to a uniqueness of offer and an added value DOBs, these companies keep for them- that competitors will lack. All the giants of selves their main added-value leverage. the chemical industry produce elastane, a This is what enables them to constantly fibre that makes stockings and foundation innovate and to remain the reference of the garments soft and shiny. On the other market in terms of quality. Kellogg’s even hand, only Du Pont de Nemours had Lycra, goes to the extent of indicating on its boxes a fibre whose name in itself is used as a sales that it does not supply DOBs. ploy by Du Pont and by all lingerie brands. l Domination through image and communi- Actually, Lycra was the trademark used by cation is Coca-Cola’s mainstay, although it Du Pont to sell elastane. It is not the name does not hinder a K-Mart or a Sainsbury in itself which added value to the fibre: it is brand cola from borrowing as much as 10 years of worldwide communication possible the distinctive signs of Coke and about the glamour linked to the Lycra selling at a lower price. In hard times, sensi- name which gave the brand its exclusive tivity to price is exacerbated. But as a attractiveness. The same strategy applies to worldwide brand, Coca-Cola had access to Gore-Tex and Coolmax. the sponsoring of the Olympic Games in l Controlling the relationship with opinion Atlanta and was able to pass on the benefits leaders is one of the key success factors for a to bottlers worldwide. This is also the brand looking to the future. Canson, a weapon of Nike, Reebok and Adidas. school-supplies brand which is part of the Domination as a result of their fame and Arjomari-Wiggins group, provides an illus- image is not solely a result of the titanic size tration. What is more natural than a sheet of these companies’ budgets. Focusing all of tracing paper or drawing paper for a their communications on the name itself schoolchild? However, despite the share of and applying a brand extension logic supermarket shelf space given to DOBs’ beyond the initial segment, many brands drawing and tracing paper, only that of are thus able to dominate in brand Canson sells. For more than 20 years the awareness. brand has developed a close relationship l Quickly using up all the aspects of a prom- with teachers, for instance organising ising concept through range extension is a drawing competitions between classes on a method that hinders the entry of national level. The long-lasting presence of competitors. In the United States, and in Canson on a child’s shopping list for school Europe, the Snapple brand is surfing on the supplies is due to the excellence of what is wave of so-called ‘New Age’ drinks and now called relationship marketing. The offers a wide variety of tea-based soft main asset of Canson is its loyal teachers drinks. Dim, as we have seen, was quick to within the public education system. offer under one hosiery brand name a wide l Controlling distribution is also a major range of products covering different needs handicap for new entrants. McDonald’s 250 CREATING AND SUSTAINING BRAND EQUITY

will soon have 1,000 restaurants in France, Defending against brand and Quick, the second largest burger chain, counterfeiting will have 350. This sheer number closes the hamburger market off to competition. As soon as a brand starts to enjoy success, it is Mass-distribution brands also freely use imitated: copies appear and multiply. The this barrier to entry: by imposing their own competitive advantages offered by innovation brand on the shelf, they thus exclude are short-term only, and this is why today’s manufacturer’s brands. The ice-cream brand is built on the continual flow of inno- maker Häagen Dazs does indeed control vation. Ideas, concepts and products can all be the market of upmarket ice creams through the subject of imitation. For example, shortly the provision of a high-quality ice cream after the launch of a peach-flavoured low- and through a well-managed word-of- alcohol drink named Carlton, targeting the mouth campaign from opinion leaders, but top end of the range, lower-cost competitors most of all through its own exclusive refrig- such as Claridge began to appear. erator present in all supermarkets and Competition is even more intense where it hypermarkets. applies to intellectual property: this includes l The last barrier to entry is based on legality. patents and designs, but also trade dress, and The brand must defend its exclusive image even trademarks (the name or pictorial image against counterfeit products, models or of the brand). This imitation stems from signs. It should not hesitate to defend the producers and retailers whose imitation of the exclusive character of its distinctive signs leader is the first step towards building a store against imitations and distributors’ copycat brand (see page 79). brands. The latter, under the pretence that It also comes from counterfeiting. Top-of- these are signs of the category, actually try the-range brands such as Nike and Adidas, as to make their brands benefit from the value well as various luxury brands, are directly of signs developed by the leading brand. targeted in this way. The markets and bazaars The imitations of Coca-Cola try to get as of foreign countries are filled with fake Cartier close as possible to the red that Coca-Cola watches and Ralph Lauren polo shirts. No has with time associated with its quality. sooner has a Dior or Chanel fashion show Beyond the deliberate sought-after finished than Asian factories begin to confusion, which leads the customer, if he reproduce their designs, introducing them or she is not careful, to mistake the copy for into parallel distribution channels even before the original, the similarity between the the brand itself has sent out stock. More signs induces a perception of equivalence dangerous still is the practice of counterfeiting (Kapferer, 1995). Just as Dior, Chanel and medicines or automobile spare parts, which Cartier invest heavily in lawsuits against can often deceive customers and potentially counterfeiter networks, the brands must put lives at risk. Lastly, we have already sue imitators or, at least, state to them that discussed protection against brand imitations they will tolerate no imitations or copying. conducted by the brand’s own retailers (see From this point of view, the brands which page 87). from the start chose non-descriptive signs Intellectual property must be defended and withstand the test of time and imitation extended (for example, Harley-Davidson has better. The Orangina label is blue: it is not a patented the characteristic sound of its generic colour and protects this orange- engines, as has Porsche). It is not our flavoured soft drink brand well. intention here to cover in a few lines a subject as important and strategic as trademark laws, SUSTAINING A BRAND LONG TERM 251

particularly since, with the advent of globali- l Joint action aimed at the Ministries of sation, it is becoming obvious that not all Foreign Affairs and Justice. This works at the countries have the same sensibilities when it level of inter-state relationships. comes to counterfeiting. In China, South-East l Collective information programmes to Asia, Morocco and Italy, a considerable improve local laws directed at, for example, number of micro-companies make a living in world trade organisation. this way. It is always more or less directly linked to money laundering, and sometimes l Advertising for the original brand in the receives covert government protection. Such country in question. The extent of the divergent attitudes allow brands that could phenomenon of counterfeiting in China, not legally exist in the West (or any country where there are no laws over brands, is well that upholds intellectual property laws) to known. Chinese culture traditionally become established. Everyone in Singapore, praises those who share, and condemns Hong Kong and Shanghai is familiar with the those who do not. Faithful reproduction of Crocodile store chain, an obvious imitation of the master’s work is a virtue in traditional the world-famous Lacoste brand, whose Chinese education and teaching. Lastly, symbol since 1933 has been its famous croc- in the communist economy that domi- odile. The Asian store chain has exploited lax nated the Chinese way of thinking for 50 local brand laws to position itself in Lacoste’s years, the notion of property itself did not slipstream: it even goes so far as to boast in its exist, and it was common for all Chinese slogan, ‘Enter the legend’. factories to go under the same name. We The basic precautions to be taken in order should add that counterfeits are the only to avoid losing protection rights for one’s financially accessible option for local brand are well known. For example, never use consumers. Lastly, in these countries, after the trademark as a noun, but as an adjective: years of deprivation in terms of in other words, we should say a Budweiser consumption, people are keen to show beer, not just a Budweiser. Let us also add that their neighbours they have finally ‘made if a brand colour is to be protected, it too it’. Western brands are familiar to all, but requires protection within the company. very few actually have first-hand expe- Brand product lines are frequently segmented, rience of them: they are unaware that what which leads to the use of different colours to they are buying is a fake. Research has identify each segment. As a result, it becomes confirmed this point (Lai and Zaichkowsky, harder to maintain that a brand is charac- 1999): local consumers who choose a coun- terised by any one single colour. terfeit or an imitation do so because they How should the brand respond to counter- lack knowledge of the original. feiting and imitation? First, we should identify the difference between the two types l Counterfeit-related advertising in tourists’ of attack. Counterfeiting is the identical, trait- countries of origin. Western consumers are for-trait imitation of the brand and its identi- well aware which products are the originals: fying components: it is unlawful in the most imitations and counterfeits are a game for direct sense, and there is no need to provide them. Our own qualitative research of the evidence of customer confusion. It simply phenomenon reveals five underlying needs to be identified, and legal action taken. motives for them to buy a counterfeit: However, longer-term work is necessary in a – The sense of having obtained a bargain. number of countries where it is more than After all, everyone knows that luxury simply tolerated, and indeed often accepted: goods and Nike products are made in third-world factories. Such consumers 252 CREATING AND SUSTAINING BRAND EQUITY

deny there is any difference in quality – Lastly, some buyers of counterfeits are between the original and the copy: they motivated by ‘moral’ considerations. are therefore getting a bargain. This They believe that the price of the makes them very discriminating buyers: original is scandalously high because, they will only buy copies of Vuitton bags considering that it was made in a South- that are ‘identical’ to the original, and East Asian factory, the cost price of the they admire the quality of the copy. It product is actually infinitesimally small. is this quality, combined with the price, They consider their actions as just retri- that makes it ‘a real saving’ and enables bution: given that the brand itself has them to wear or carry the copy on a daily committed theft by selling at a price way basis, even while with friends, who will above its cost price, it is legitimate to not spot the difference. A buyer of a fake steal it in return. Bulgari watch – which is of very good quality compared with the genuine Preventive action with Western consumers in article he himself wears – will not their country of origin takes the form of hesitate to give it to one of his sons as a education. It needs to be pointed out that fifteenth-birthday present. counterfeiting is linked to Mafia-style networks Revealingly enough, the buyers them- and the laundering of drug money. There is selves often own the original product. also a legal side: a consumer bringing back a This is what qualifies them as experts and counterfeit product is an accomplice, and is lends status to the copy chosen for the thus committing a crime punishable by law. quality of its resemblance. They know what they are talking about. – The desire to put a little sparkle into Brand equity versus customer everyday life. Fake Ralph Lauren polo equity: one needs the other shirts may be only approximate copies, but they are good enough for tasks such as There is a debate about what is most housework, gardening or cleaning the car. important: customer equity or brand equity. – An original present. Instead of going to This is a rather vain dispute. Loyalty bought Thailand and bringing back cheap through loyalty cards, rebates and gifts is a knick-knacks as gifts which will immedi- cost. Certainly it creates returns, but brands ately be hidden away in a drawer, a also need to nurture true love. On the other tourist buys friends what is these days a hand, CRM does help brands to demonstrate typical item from that country: a good that they love customers and want to help imitation, a counterfeit scarcely distin- them, and assist them quickly and efficiently. guishable from the original. It will Both aspects interact. always surprise the recipient and lead to Even luxury brands have created customer conversations about how well made (or databases so that the travelling shopper is not) the counterfeit is; furthermore, it is recognised in any shop of any city. CRM also bound to be used. lets companies make sales propositions by – Some consumers willingly buy counter- e-mail, in a way that is very customised and feits because they cannot or will not pay matches the customer’s personal profile. the price differential for an original. The financial value of a brand is a function of They consider it ridiculous and pointless the amount of its future expected return and of to pay s60 for a Ralph Lauren polo shirt, the degree of risk on these returns. A brand can because they are not sufficiently only be strong if it has a strong supply of loyal involved. customers. This established fact led to a revo- SUSTAINING A BRAND LONG TERM 253 lution in the practice of marketing, under way brand or the company; the other is offensive, to since the beginning of the 1980s: the major create a personalised relationship with the concern is loyalty and its related factor, client client, the basis of a more intimate and satisfaction. Leaving behind an approach therefore more involving bond, what which implicitly concentrated on conquering Americans call ‘Customer bonding’ (Cross and clients away from the competition, firms now Smith, 1994). do all they can to keep their own clients. This is The essential part of the defensive side is to be expected at a time when, as a result of the the identification of the causes of disloyalty abundance of offers, buyers tend to jump from and dissatisfied clients. Thus, dissatisfaction one brand to the next, from one manufacturer linked to the food provided induces, because to the next. Rather than zero defaults, the aim of disloyalty, a loss in revenue amounting to is zero defections. £5 million pounds at British Airways. The A lifetime client at British Airways brings on dissatisfaction linked to bad seating costs average £48,000 to the company in revenues. close to £20 million! Paradoxically enough, Thus under no circumstance should one the company seeks to get as many voiced customer be lost. It is the same for Carrefour dissatisfactions as possible. Indeed, the worst where a loyal client brings £3,550 in annual thing is a silent dissatisfied client who, saying sales. Besides, loyal clients are more profitable. nothing to the company representatives, According to a study from the Bain company, spreads negative rumours among his relatives, a household spends s330 per month in the colleagues and friends. And there are statistics supermarket to which it goes most often, 85 in to prove that a dissatisfied client who is well the second most frequent and 22 for the one treated becomes a real proselyte, and even where it only goes occasionally. And not only more loyal into the bargain. When asked if do loyal clients spend more, but their expen- they will fly with British Airways again, the diture grows with time, they become less rate is 64 per cent ‘yes’ among those that have sensitive to price and they are the source of never contacted the complaints office. It is, positive word-of-mouth reports concerning however, 84 per cent among those who have. their favoured supermarket or brand. The treatment of complaints with diligence, Moreover, they are five times less costly to care and respect becomes a key lever in contact than non-clients. That is why, also customer loyalty. according to Bain, by lowering the defection Seeking client satisfaction implies adding a rate of clients by 5 per cent, benefits go up 25 touch of management spirit where spirit of to 85 per cent. The example of Canal Plus is conquest reigns exclusively. This is why significant: this pay-TV channel benefits from l’Oréal Coiffure is nowadays a company with an unprecedented loyalty rate: 97 per cent of a conquering as well as an innovative and its 6 million clients are loyal to it. Bearing in entrepreneurial spirit. It launches new mind that a yearly subscription costs s310, if products one after the other. Hairdressers like the loyalty drops by as little as 1 per cent, it the l’Oréal products and l’Oréal knows their would mean s11 million less in annual product needs well. Unfortunately, this led revenues! the firm to somewhat overlook the All strong brands are currently establishing management spirit: some deliveries were loyalty programmes. Nevertheless, a cautionary wrong, stockouts occurred, discounts were remark is necessary: no programme of this kind unevenly granted, etc. The firm responded will make up for a service that is not adapted or well to sophisticated needs but somewhat sufficient. The actions required to keep loyal forgot some of the more down-to-earth needs. customers have two aims: the first is defensive, The hairdresser who put in an order on to give the customer no reason for leaving the Tuesday for a tube of light golden brown 254 CREATING AND SUSTAINING BRAND EQUITY colouring for a client coming on Friday could to care about their customer equity or market not be sure it would be there on time. He share. In other words, these companies should could not always count on the company. That focus not only on augmenting brand pref- is why even when its product launchings were erence as a mental attitude, but also on successful, and even if customers were increasing brand usage, especially among the attracted, the sales of l’Oréal Coiffure stag- best customer prospects: the heavy buyers. nated for a while. When focusing on client Recent findings, for example, recognise that satisfaction, the product alone is not suffi- mass market brand profits come not from the cient if the basic service is deficient. mass market, but from the top third of When going over to the offensive, a brand category buyers. Furthermore, a brand’s must become a landmark of personal attention. greatest potential for additional profit rests on More emphatically, Rapp and Collins (1994) its ability to increase share in this high-profit, talk of becoming a ‘loving company’, inter- heavy-buyer category (Hallberg, 1995). ested not in the client but in the person. This Unfortunately, advertising misses the mark marks the end of anonymous marketing: with these prime prospects. Instead, it reaches attention has to be customised if it is to be effi- mostly non-buyers or small-quantity buyers. cient. But it has to be acknowledged that even On the other hand, promotions do touch the if the terminology of market studies distin- high-profit segment. That is, frequent buyers guishes between big, medium and small are more likely to encounter price promo- customers, up until recently few companies tions, coupons, rebates, etc. However, promo- had developed programmes designed specifi- tions over-sensitise consumers to price and cally for big customers, who as a rule are also tend to decrease brand loyalty in the high- the most loyal. But the loyal client wants to be potential, high-profit segment. recognised. He or she therefore has to be iden- As a consequence, most mega-brands are tified, a direct bond has to be established and now experimenting with database marketing he or she should be the focus of special on a grand scale. The database marketing attention. This is why what is commonly called concept is two-fold: relationship marketing (McKenna, 1991; Marconi, 1994) uses databases, customers’ l All marketing actions should target the clubs and collective events, which unite the prime segment more effectively. The goal is best customers of the brand. Moreover, real- to increase this segment’s rate of brand use. ising that a brand that does not have direct contact with customers becomes further and l Effective targeting requires companies to further out of reach – literally as well as figura- identify each of these customers or house- tively – many brands have stepped out of mere holds, almost nominally. As a conse- television advertising and off the shelves to quence, a by-product of all promotional establish a direct relationship with customers. activities should be a database, ultimately Nestlé offers to its customers a dietician, comprising 100 per cent of the high-profit reachable by phone. Six days a week, Nintendo customers. helps out 10,000 children who are stuck in a video game. As long ago as 1992, IBM France At this time Procter & Gamble’s database in created an assistance hotline working around the USA holds more than 48 million names. the clock seven days a week all-year-round. Danone’s database in France holds 2 million Treating clients as friends instead of accounts is names. Nestlé is building its own in each the basis to a long-lasting relationship. major country, as is Unilever. And this ignores In their efforts to increase brand loyalty, all the broker-created databases for rental to brand companies have realised that they have smaller companies. SUSTAINING A BRAND LONG TERM 255

The function of these selective databases is choice and an increased perception of the to deliver customised offers to specific targets, brand’s superiority. Finally, active and to bring the store shelf to the home (thus committed loyals should be induced to try decreasing impulse buying and distributors’ more and more new products, whether line or power), and to promote a ‘private image’ brand extensions. Figure 10.5 illustrates Sony’s among loyal and heavy-user customers. situation, where committed loyals comprise 19 Generally, these customers are more involved per cent of Sony’s entire customer franchise. in the brand, so they deserve recognition and The potential loyals represent 4 per cent, and special treatment. They also merit specific the pseudo-loyals 35 per cent. Each group information to nourish brand image and deserves a specific marketing proposition. equity. These activities constitute the nurturing of a ‘private image’, as opposed to a The customer demand for dialogue broader, general public image. Many consumers hold very favourable atti- Although most brands claim to put customers’ tudes vis-à-vis particular brands. Nevertheless, needs first, this does not extend to creating a their loyalty is insufficient to inhibit switching dialogue with them. Advertising does not within a repertoire of brands. These customers count as dialogue. Neither does a relationship are potential loyals only if a tailor-made with a seller with clear marketing intentions, programme is devised to increase the rate of and neither do satisfaction questionnaires: purchase of a particular brand. On the other they may be very useful in obtaining feedback hand, some repeat buyers are actually pseudo- on perceived quality, but a series of questions loyals: they do not hold strong attitudes does not constitute a dialogue. Do consumer regarding the brand. Perhaps, for instance, magazines provide a dialogue? Once again, no. they buy the brand because of its price or avail- And the same is true of direct marketing mail- ability. To increase their brand preference, shots from sellers inviting consumers to see or these buyers require a reinforcement of their try out a new product, and the like.

Brand capital Love the brand? Yes No

Passionate Habituated 19% 35% High Nurture the myth Delight Customise Reward Customer capital Sony Platonics Indifferents 4% 35% Low Stimulate Segment and purchases raise both brand (CRM, e-commerce) equity and sales

Source: Sofres, Megabrand system

Figure 10.5 Brand capital and customer capital: matching preferences and purchase behaviour 256 CREATING AND SUSTAINING BRAND EQUITY

Why do we say ‘customer demand’? all, the customer has bought a brand, not a Because customers want to be valued, listened retailer. Furthermore, what is the point in to and heard, and not merely as an averaged- conducting customer intimacy operations out statistic in a market segment, but for and public relations exercises if, the minute a themselves as individuals. Furthermore, the real need presents itself, the brand suddenly new internet firms, with their ability to amass becomes distant and fails to return the ‘intelligent’ information (which learns from customer’s calls? The ‘boomerang’ effect is the the most recent call, person by person) and only possible outcome here. use this information in future contacts, have This demand for dialogue explains why made them accustomed to a responsive brands seem as real media themselves. They reaction and a listening ear. create blogs, sites, forums not to sell but to let A relationship with a brand automatically their customers and advocates or detractors creates a need of this kind. Take banks and speak freely together. They also outsource the insurance companies, for example. Once the many call centres to provide a really quick and customer has initially been won over, the relevant answer to all incoming demands. brand–client rapport will last for years. There are bound to be problems along the way, but if Is relational marketing profitable? these are managed well, the result may be lasting loyalty. The problem is that they are Customer relations are certainly a good idea, often not managed well, and negative word of but are they profitable? Here again, we must mouth can be the only means of retribution reconcile the brand (the creation of value) available to customers who feel ignored, or with the economic equation. Convincing treated with contempt. Indeed, the retailer is statistics abound with regard to the prof- not only the brand’s best ally when things are itability of loyal customers. However, studies going well; it can also become its worst enemy also show that most customers who become when problems arise. It is the enemy of the disloyal to a brand were previously very brand because it is perceived as the enemy of satisfied with the brand: their requirements the customer. We believe that at such a time, have simply changed. Another way of looking the customer should have direct access to the at these figures is to conclude that the brand itself, its ultimate recourse. customers’ attachment – their desire to stay Saturn – the recent automobile brand with the brand – cannot have been especially created in the United States by GM as a high to start with. This is where relational response to Japanese brands – was a pioneer in marketing comes in. customer relations. Following the example it Attachment to a brand is evidence of a set, every new buyer – whether large or small – customer’s desire to stay in a lasting rela- should be given the name and telephone tionship with the brand. This attachment is number of a brand employee who can if characterised by loyalty, which is a behav- necessary be contacted by the customer in the ioural measure of repeat purchasing. Loyalty event of unresolved problems. This is the real may be a consequence of attachment, but it one-to-one relationship, and is what can also be generated by means of bonuses and customers expect above all else when so-called ‘loyalty cards’. Attachment to a problems occur. The brand cannot delegate brand is a one-dimensional concept of varying to third parties. strength. Its opposite state is detachment, Without becoming the enemy of its own indifference and non-involvement. selective network, the brand must assume a Attachment is a different thing altogether benevolent ‘the buck stops here’ attitude, from satisfaction. This is why attachments eager to find a solution for the customer. After can be mainly rational (a desire to continue SUSTAINING A BRAND LONG TERM 257

the relationship with the brand because it l a desire for rituals and participation meets the buyer’s implicit requirements, therein, like a community; albeit without generating any real emotional involvement). Conversely, some customers l a desire for information; remain very attached despite considerable l a desire for participation in the life of the dissatisfaction with the product or service (the brand and company; Harley-Davidson/Jaguar syndrome). Research has identified six sources of l a desire for shared creation and involvement attachment. As we shall see, each of these in the process of creating new products; points to specific levers for managerial action: l a desire to be heard; l Attachment based on the hedonistic satis- l a desire for community; faction conferred by the use of the products l and by the quality of the interaction with a desire for intimacy; the brand’s representatives (network, call l a desire for customer involvement with the centre and so on). brand: evangelising, prescribing and acting l Attachment based on the quality of the as an ambassador for the brand; relationship established by the brand: l automatic repeat purchasing (loyalty in the appreciation of the individual and his or strictest sense of the word). her uniqueness, personal recognition, ethical behaviour. Customer relations increases the effectiveness of brand promotion. An offer is never l Attachment based on shared values which perceived as ‘touting for business’ when it affect the consumer; a shared vision. arrives at the right moment! Only a rela- l Attachment based on the increased self- tionship with – and deep understanding of – image generated by the brand through its customers, informed by an awareness of their image, advertising, rallies, behaviour and recent requests, can transform what is usually so on. perceived as commercial harassment into an impression of genuine service. There is thus l Attachment based on the pleasure of a no real contradiction between increasing lasting relationship. The brand has often client profitability and nurturing a rela- played a part in the development of indi- tionship. A fan will be delighted to be able to viduals, their family and their children. In download historic advertising for the brand. A a sense, it has become a part of the life of young mother will be pleased to receive child- individuals and their ‘clan’. related ideas, services or products from the l Attachment based on the brand’s associ- many brands aimed at parents and children. It ation with people to whom the customer is all boils down to the timeliness of the offer. emotively linked. Managers have little How can this synergy be achieved if there is power to influence this particular factor, no information; no ongoing relationship with but it is real nonetheless (‘Proust’s the customer; no means of listening to that madeleine syndrome’) (Heilbrunn, 2003). customer’s needs and being able to store and update the information thus received through Many different types of behaviour result from a variety of media (e-mail, text messaging, attachment. A relational brand must respond telephone, fax, post)? As we can see, well- to them in order to feed attachment: targeted, relevant business offers that come at just the right time create satisfaction because 258 CREATING AND SUSTAINING BRAND EQUITY of the service they provide and the under- effect: they raise the brand’s share of require- standing they demonstrate of the client’s ments and create an exit barrier – as has been needs. They are thus one of the key ways of shown by airlines and store-card promotional creating attachment. offer coupons. In the sphere of commodity Having said this, we should not deny the sales, given the competition from low-cost power of the service in creating loyalty and sources, loyalty cards are – along with service – repeat purchases. For example, Courtepaille – an essential component of the economic the European high-quality fast-food equation. In petrol stations, for example, restaurant chain – has no loyalty programme. nearly 40 per cent of petrol by volume is sold Certainly, the customer will find very few to customers with loyalty cards. other restaurants with such friendly service However, the real aim is to shift clients from and hearty fare at prices of under s10. But behaviour towards attitudes. In traditional margins are so tight that the benefit of a marketing – symbolised by the AIDA loyalty card is still uncertain: happy (attention, interest, desire, action) model – customers will come back anyway. purchase follows desire, and thus attitudes. Such examples are rare: in mature coun- Given the number of competitors, and the tries, bad brands scarcely exist any more. The degree to which products resemble one other, competition is divided between very good the priority is now to stand out from the herd. brands and merely good brands. An in-house Creating a well-known, high-profile brand engineer will say that his or her product is the with emotive impact is one way of doing this. best: the customer and retailer will not see Another way is to introduce a surprising, things in this way. However, the brand will tempting innovation. A third way is to have played a successful part in influencing provide direct purchasing and repeat preferences if it has been able to draw purchasing incentives. However, this last alongside the customer and promote a rela- approach has meaning only if it creates long- tionship based on service, communication term value: that is, if behaviour initially moti- and community – a source of affective vated by the lure of an incentive is involvement. subsequently transferred to the brand and its products or services. Repeat purchasing is the Segmenting loyalty programmes customer’s way of giving the brand a unique chance to prove itself. Does this mean that the concept of loyalty is In terms of loyalty management, Accor, the outdated? The conceptual explanation above European hotel sector leader, offers an inter- clearly shows that loyalty behaviour (auto- esting and rare example. A hotel chain’s prof- matic repeat purchasing) continues to be itability is based on the occupancy rate in its relevant because it concerns information of hotels, and particularly in cases where prices critical importance to the company: it is based are tight, such as the budget hotel sector. on observation. Even so, there may be many Accor has a strong presence here, with a brand reasons behind a lack of loyalty (as we have portfolio which covers all segments: zero-star seen above), which should be linked to the (Motel 6, Formule 1), one-star (Etap hotels), level of satisfaction. two-star (Ibis), three-star (Novotel and The modern nature of competition is such Mercure) and four-star (Sofitel), not forgetting that the issue is no longer ‘or’, but rather the new luxury Suit’Hotels segment. However, ‘and’. It is therefore essential to avoid despite its customers’ sensitivity to price, neglecting strategies for increasing loyalty Accor charges for its loyalty cards. It has (repeat purchases) that operate at the strictly created an entire range of cards, each behavioural level. They have an immediate addressing a different client segment and SUSTAINING A BRAND LONG TERM 259 governed by its own precise terms of use, It is for this reason that, with its so-called acting as a replacement for single-brand cards. ‘small-user’ clients in mind, Accor joined An additional service is being offered to forces with a number of partners, each of customers by allowing them to move freely which shared the same client philosophy between the various brands of the group as and operated in the same line of business dictated by their own wishes, budget and situ- (journeys and travelling) to create the ation. This is the competitive advantage of Accor Compliments Mouvango card. This having a portfolio of brands. improved the services offered to customers The premier card is Accor Hotels Favourite and allows points to be accumulated more Guest, an individual card sold at the high quickly than would have been possible if price of s270/year. It offers significant advan- they had visited hotels even five or six nights tages to customers, and is therefore aimed at a year. This partnership has its own brand – ‘heavy stayers’ who spend more than 20 Mouvango, the sign displayed by partners to nights a year in a hotel. It offers guaranteed show that the card is accepted. It includes reservation up to three days prior to the stay restaurants, Total service stations, Carlson- date, as well as immediate reductions and Wagons Lits, travel agencies and so on. loyalty points – and can be used at Ibis, Total’s version is called the Club Total Mercure, Novotel and Sofitel hotels. Mouvango card, and so on. As we can see, The second card is targeted at lighter users the brand remains pre-eminent among all who spend an average of 13 nights a year in partners in this scenario, for it is here that hotels, and costs s45 a year. To make it more the customer contact and relationship exists: attractive in terms of points earned, it is a Mouvango is an exclusive additional service combined payment and loyalty card thanks to to sweeten this relationship. a partnership with Amex. This left the loyalty of ‘small users’ to be From the product to attentions: from secured. An ordinary free card would be of no the client to the VIP benefit here, since a quick calculation shows that it would take a customer who spends Segmentation leads rapidly to the realisation three nights a year in a hotel 15 years to earn that not all customers carry the same sales enough points for a free night. One option potential. It is also true that not all customers might have been to take part in a Smiles-type have the same interest in an involvement frequent buyer programme – that is, a card with the brand and becoming its ambas- allowing the user to accumulate points at a sadors. A brand cannot survive without loyal large number of sales outlets of all kinds followers and ambassadors, especially if it has (department stores, hypermarkets, super- premium positioning in its segment: there are markets, specialist stores such as Delheze and women who will spurn all washing powders Kaufhof and so on). But how much benefit other than the top-dollar Tide or Ariel brands. does such a programme actually bring to the This is even more true in high-involvement individual brand? None. Naturally, the aim of markets such as automobiles and cosmetics. loyalty is to increase the brand’s share of Such markets have traditionally been requirements, but also to feed its own values. driven by a product-oriented approach: this is The Total petrol company positions itself on why l’Oréal, the world leader, relies totally on its service, and so the main thrust of its loyalty research. The goal of its 1,000 PhD-holding programme is to provide access to additional researchers is to invent new products which quality service (such as Total Assistance will inspire dreams of beauty and youth breakdown cover); points are a secondary among women of all ages and all countries. consideration. The l’Oréal Group’s flagship brand, l’Oréal 260 CREATING AND SUSTAINING BRAND EQUITY

Paris, only discovered relational marketing were also made of new products, and specific fairly recently, in 2002 – the date when it samples were provided, along with access to a launched its first advertising campaign aimed dedicated, interactive MyLancôme.Vip web- at building a relational database as a way of site. The VIP card was accepted in selected offering services to women. The same is true restaurants and shops. Lastly, selective invita- of the luxury brand Lancôme, which took its tions to public relations events and fashion first steps in this direction in South America at shows, offering meetings with leading figures, a time when a brutal economic recession had were issued regularly. had a colossal impact on purchasing power. It The database also becomes a tool for was essential to retain existing customers and building a relationship between the brand thus enable the business to survive. Clearly, it and the sales outlets, for coordinating the was not enough merely to expound the promotion of new products, or performing a virtues of the products themselves: this was ‘diary’ function (reminding store clients of necessary, but insufficient under such circum- key dates – such as birthdays – appearing in stances. This is why Lancôme’s local teams the database, and prompting post-purchase reacted by innovating – not with new calls). The aim of this is not only to make products, but with the attention it paid its customers visit sales outlets, but also to enable customers. This example is even more them to be recognised as special and unique – pertinent in that it involved retailers, and receiving personalised attention to increase thus also created a trade relationship tool the pleasure of their visit. A VIP wants to be which generated business. recognised as such. Lancôme instructed its authorised retailers to distribute a small smart card – the Lancôme beauty card – and to use equipment that Sustaining proximity with would store the client’s last few transactions influencers when the card was presented. This was a revo- lutionary approach, since the retailers Today, mass targets have disappeared. believed that a client record was their own Statistics should not create an illusion. What property. In order to ‘earn’ the card, the client might appear to be mass targets are in fact had to make an initial purchase of US $100. made up of an aggregation of smaller ones, of All subsequent purchases – regardless of the micro targets. Even if mass advertising store, as long as it was a participant in the campaigns are still used, what is needed for a scheme and had an electronic recorder – brand is a shared image, a collective bonding would earn points. These points could be tool within societies. To develop the brand exchanged for Lancôme products, lingerie, over time entails improving the brand’s rela- jewellery and famous-name bags. Cards were tionship with each of the strategic micro also given to journalists and top fashion targets. These strategic targets are made of models. Once a database had been created, it more involved customers, or those who are became possible to create campaigns targeting currently non-customers but have the VIPs, who are generally also big spenders, potential to become involved. Once involved making repeated visits to their local sales they can act as influencers. They can re- point. energise a brand image that is weakened by The company’s first act was to produce and the deleterious effects of time. mail to these clients a woman’s beauty This is critical for sustaining the equity of magazine, paid for by advertising (from mature brands, facing new entrants. Such airline, jewellery, lingerie and similar brands run the risk of losing contact with the companies). ‘Sneak preview’ announcements trend-setting groups in a society. The risk is SUSTAINING A BRAND LONG TERM 261 that they will be perceived as yesterday’s addressed through Espace Ricard, an art brand. Recreating contact with trend-setting gallery, open to the latest forms of painting, ‘tribes’ or micro-groups is of paramount thus creating a proximity with the most importance even for brands that are not advanced artists and art lovers. In addition, involved with fashion in any direct sense. advanced designers are regularly asked to Otherwise they run the risk of becoming just redesign the basic ‘tools’ that accompany a another supermarket brand. drink of Ricard, a carafe and an ashtray. The Ricard provides a good example of best world-famous designers Garouste and Bonetti practice in its long-term engagement in recre- did the latest versions. ating lost ties with critical groups. It is a To gain proximity to young people inter- historical leader in the aniseed-based alco- ested in music and sport, Ricard has holic drinks sector, which comprises the fifth developed three long-term actions supported largest spirits sector in the world. It has intro- by a specific budget allowance. One is creation duced relational programmes aimed at three of the Paul Ricard car racing circuit, groups: women, those of high socio-economic compatible with F1 international racing stan- status (SES), and young people. Ricard faces dards, and now the most modern and safe competition both from spirits such as whisky, circuit in France. It hosted most of the major vodka, gin, rum and tequila, and thus from international car races, until a law was intro- world-famous brands such as Johnnie Walker, duced preventing sports sponsorship by alco- J&B, Absolut, Bacardi and Cacique, and from holic drink brands. It was then sold but the fashionable modern brands of beer. Finally, it name has been retained. is 40 per cent more expensive than the distrib- The second innovation is the Ricard Live utors’ brands and other low-cost brands of Music Tour, providing the largest free music aniseed drinks. Part of its resistance to these events in Europe, featuring famous rock stars. massive attacks has been to remain close to its It has attracted more than 1 million people core clients and to invest in reconquering each year, and its name has become proximity with the trend-setting groups, synonymous with quality music and concerts. those most attracted and seduced by interna- The company has gained unique know-how tional competition. in organising open concerts in the middle of Women may like the taste of Ricard but major cities and synchronising sales events they did not like its image. They perceived it around them to maximise synergy. Each as a male, popular brand, not a sign of good concert attracts a great deal of free publicity. manners. As a response, Ricard runs very The third youth-oriented initiative is the specific adverts in trendy women’s magazines, organisation of 1,000 integration parties (for and sponsors events involving women. The students just going up to university) and gradu- brand sponsors literary events where new ation parties each year. The targets for these are female writers are promoted. It is a major the top business and engineering schools, since organiser of St Catherine’s Day, a promotional their students will be the elite of tomorrow. event for national design schools. It continues Of course, it is not possible to remain a to try out specific relational operations such popular brand without also maintaining a as a cooperation with Mod’s Hair, a youth- proximity to core consumers, existing heavy oriented hairdressing franchise. Typically, this buyers and the engaged segment (see the involves the hairdresser’s customers being segmentation scheme Figure 9.1). Locally, at offered a Ricard to drink while waiting in the the micro level, pétanque contests are still salon in the summer. The new format RTD – sponsored by the brand in Provence (the ready to drink – is very useful for this purpose. birthplace of the brand) and elsewhere. In High-SES people of all sexes and ages are summer, a squadron of Ricard ‘fire girls’ runs 262 CREATING AND SUSTAINING BRAND EQUITY onto major beaches and offers sunbathers free present customers’ satisfaction or should it drinks. For image management purposes, each think of the new generation? brand needs to decide which of its many PR For sure, the global mantra of management activities should receive publicity. today is to focus on existing customers. They Nine lessons can be learnt from this are the most profitable source of cashflow. example: This is why all companies and brands invest in building up large customer databases, CRM l Because change is permanent, and new software, and undertake in-depth surveys on competition is always coming in and can be customer satisfaction with the product or very seductive, the brand’s profile is always service. This leads to necessary improvements, threatened over time. It must be nurtured and in theory it increases customer loyalty. and proximity eventually reconquered. We write ‘in theory’, for all automobile surveys show that 60 per cent of the l No brand can stay apart from trend-setting consumers who did not buy the same brand tribes in its sector. on their next purchase were very satisfied l Proximity and strong ties can only be built with their former brand. Why then did they at points of direct contact. change? Because consumption is situational. New situations create new expectations: this is l Strong ties need to be continuous: this is called ‘’. New generations too not a ‘coup’ policy, but a continuous develop a new set of values and expectations. decision. Existing customers are essential for short l This activity must be supported by a strong and medium-term growth and profitability, investment. but listening too much to existing customers is the main reason companies do not innovate l It must be done by courageous people. enough. Professor Christensen has shown Trend-setting groups are not waiting to be that the main reason companies disappear is approached by a currently unfashionable that disruptive innovations transform the brand, and sometimes they will look down market and rapidly make their products or on its promoters. services obsolete. What prevents these l Again, targeting is key. companies, which are often adjudged to be excellent, from innovating? Arguably they are l Again, creativity and disruption are of para- too well managed (Christensen, 1997). Well- mount importance, to surprise and create a managed companies select the innovations buzz. that please their clients and that provide good profitability forecasts with a high degree of l Finally, this is the occasion for creating certainty. Disruptive innovations are just the selective publicity, deciding which of contrary: they are not well perceived by these ties should be most squarely in the current customers, and nothing can be said spotlight. with certainty about their profitability. But disrupting the market is how the minicom- puter made mainframe companies obsolete, Should all brands follow their then the PC did the same for the minicom- customers? puter and so on. Collins and Porras (1994) have reminded us Regularly, the same question arises: should of the power of the ‘and’. Most of us keep on the brand aim at its existing customers or at its asking questions about alternatives: should future buyers? Should it try to maximise its the brand do this or do that? It is a mistake. SUSTAINING A BRAND LONG TERM 263

We must do both. Brands must think of their professional winter sports world exhibition. present clients as the immediate source of However, the stand remained bereft of visitors growth, but they must also look to the future throughout the exhibition: visitors (who were generation. all retailers) walked past without even At present Smirnoff has 60 per cent of the stopping. For a company ruled by technical UK vodka market. For most managers, this innovation, (for example, Salomon’s safety would be a good reason to be satisfied. bindings are world leaders), it was a major Instead, the management of Smirnoff inno- shock. Meanwhile, Salomon’s overall sales vated to react to new entrants such as Absolut shrank from s442 million in 1993/94 to s437 and Finlandia. Most importantly, it invented a million in 1994/95, s396 million in 1995/96, vodka for the new generation, who were not and then s365 million in 1996/97 – a lower interested in drinking vodka as their parents figure than in 1992/93. It should be said that did, but could be persuaded to drink it outside between 1994/95 and 1995/96, world snow- pubs, not from a glass but straight from the board sales doubled while ski sales fell by 16 bottle, like a beer. This is called dual per cent. management: already thinking of the The diagnosis was a shock, too. Salomon emerging trends, new behaviours and was perceived as an anti-model by new genera- customers, those who will be dominant tions of anti-conformist, rebellious ‘snow tomorrow. Brands have targets: when their surfers’ worldwide, who were opposed to the customers do not fit the target any more, they values prevalent in alpine skiing and in the should be transferred to another brand. If not sporting system in general. After all, a brand is the brand will be expanded but also diluted. always more than just a name. It is a point of view about a category, a vision, a set of values. As a pillar of the Olympic ideal and the Winter Reinventing the brand: Salomon Games, and the first choice of the world’s top ski teams, Salomon was becoming the symbol The problem with brand management over of a world from which the snowboarding time is how to deal with change. Customers community wanted to distance itself, standing change; society values change; and as it did in total opposition to its values. competitors change too. Few examples illus- Indeed, what are the typical values of tradi- trate the challenges of change as well as the tional winter sports in which all participants case of Salomon, the world winter sports ski along wide avenues of well-packed snow? leader with 30 per cent of its sales in Japan, 30 What are the Olympic values if not individu- per cent in Europe and 30 per cent in North ality, competition, beating competitors, America. shaving off hundredths of a second, order and In 1995, in an executive committee long- hierarchy? By contrast, snowboarding – which term planning meeting, a hypothesis emerged is after all a direct descendant of surfing – is that established a scenario for the future, in about getting together in groups, going off- which it was probable that the young piste and enjoying unique snow sensations teenagers who were giving up skiing to take centred on the values of fun, groups, friend- up snowboarding would never go back to ships, anarchy, freedom, pleasure and a skiing and the other traditional winter sports disdain of competition. that had established the reputation of not Breaking with traditional values, snow- only Salomon but also Rossignol, Kneissl, boarders form tribes with very well-defined Dynamic and others. On the basis of this dress codes, in sharp contrast to the tradi- prediction, it was decided to present a full tional clothing of the piste skier. Surfboarders range of snowboards at the forthcoming generally shun the reds, whites and blues of 264 CREATING AND SUSTAINING BRAND EQUITY traditional ski suits in favour of fluorescent case of the category leader changing along colours straight out of the Timothy Leary with the category as the key to its survival. psychedelic movement. Furthermore, snow- But the hardest work was yet to be done. boarding is a combination of sport and music: How was the firm to make up its lost ground in participants always wear their personal stereos the opinion-leading teenage target market to on the slopes. This makes it more than just a which it remained the anti-model and very sport: it is a sect. epitome of tradition? Of course, it could Salomon’s very future was at stake. The already count on the democratisation of the diagnosis was that there was no question of snowboard and snowblade. Assuming that this creating a new, dedicated snowboarding process continued, reaching increasing brand: to do so would ultimately be to sign a numbers of less radical people, the assets of the death warrant for Salomon and entomb it Salomon brand could offer them reassurance. within the practices of yesterday. Surgery was However, the world of sport is dominated by required on the brand itself in order to bring fashions and by opinion leaders, who saw about a profound change in its identity. brands such as Quiksilver as the real stars. Winter sports are not a segment or an activity, Three radical decisions were taken to bring but instead represent a fundamental shift in the brand closer to its reticent (or even western society. Therefore, no winter sports hostile) targets: listening to customers, the brand can afford not to play a part. A brand creation of Salomon Stations, and a strategic identity overhaul was thus set in motion. extension into rollerskating. The second part of the diagnosis was that Listening to customers became Salomon’s Salomon should continue to maintain a main method of conducting market research. presence in the ski and snowboard markets. Young people were sent out to spend time The former market was the source of its alongside – and learn to understand – surfers current revenue; the latter would generate the and young teenagers on the US West Coast, revenue of the future. This left the brand with since they are opinion leaders. Using this no choice: a dual marketing approach was ethnographic method of participatory obser- needed. However, there is no room for schizo- vation, they could feed back continuous infor- phrenia within a brand. There is room for mation on forthcoming trends, expectations, only one value system to be attached to any key words and so on. given name. When it comes to values, a brand Another step was the creation of Salomon cannot serve two masters. The answer was Stations, friendly places right at the heart of thus to reduce the values gap between skiing winter sports towns, offering a listening envi- and snowboarding, bringing the former ronment at the bottom of the pistes. The increasingly closer to the values of surfing: exercise was not about selling products, so as fun, sensations and pleasure. to avoid competing with local retailers, but This is where concept and product inno- rather about stimulating dialogue in a relaxed vation came in. Salomon invented parabolic setting, thus furthering the values and skis, freeride skis, X-screams skis and practice of the sport. However, considering improved mini-ski technology. All of these the significant set-up costs and times, another new products offered new sensations and approach was needed: this took the form of delivered the snowboarding feel without the brand stretching into the rollerskate and snowboard. By means of these innovations, inline skate market. Salomon achieved an effective reduction of This strategic extension was triggered by a the distance between skiing and snow- simple observation: young people only spend boarding or snowblading. Salomon thus one month a year playing winter sports. If dragged skiing out of its traditional mould – a Salomon is to become their brand, they must SUSTAINING A BRAND LONG TERM 265 be approached during the preceding 11 from a product-based definition (mountain months – and snowboarders are one and the shoes and safety bindings for skis) to an same group as the die-hard rollerskaters found identity based on the activity itself (winter in town and city streets the world over. sports) and on values (sensations and Furthermore, with regard to the actual roller- pleasure). It has developed from a cyclical skates, Salomon’s technical expertise could business threatened by the vagaries of the offer a significant advance over the climate (‘Will it snow this year?’) to a performance of existing roller skates in two permanent business with its grass roots in the key areas: comfort and safety. As a world tarmac roads of New York and Oslo. leader in mountain shoes and safety bindings, Tomorrow, they will also be in the waves of Salomon alone had the means to take a signif- Australia, California and the South of France. icant forward step through innovation. This This product extension also satisfies the goal led to the 1999 launch of a new range of roller of profitability: it will enable the follow-up skates whose performance characteristics were launch of a complementary textile range. widely acknowledged. After all, a textile range in this sector needs The third strategic decision was based on an legitimacy, of the sort that is conferred by the observation: in snowboarding, ‘software’ is just equipment. The extension into surfing has no as important as hardware. It was not enough other aim than to provide this legitimacy. merely to be a manufacturer of products, Lastly, on the communication front, however technically excellent. What was Salomon developed a relational marketing needed was the introduction of design, colour system and created communities. It initiated and hyper-modern codes capable of attracting the Salomon X-Adventure ski trek in Europe, young people brought up in the culture of tag the United States and Japan, created ‘free-ride’ graffiti and comic books. Most importantly, a stages and offered a host of ‘challenges’ for plan was needed for marketing the ‘software’, inline skaters and snowbladers. It also put an extremely modern clothing ranges which end to superficial sponsoring. Now the cham- would reflect the changes within the brand. pions, and opinion leaders for young Hence the purchase of the Bonfire textile teenagers, are more than just a brand vehicle – brand, which enjoyed a high profile among they are co-creators with Salomon. surfers – and, more importantly, enlisting the What can we learn from this? A brand can help of Adidas in 1997 to assist in these only survive change if it is constantly re- changes. After all, who better than Adidas to earning its relevance among target groups of master the balance between aspirational hi- which it may have had little understanding. tech and textiles and sportswear, worn by the Paradoxically – as has been shown by young and not-so-young alike, immersing Christensen (1997) – in their quest for ‘good’ them in the crucible of worship of sport (and management, companies often become slav- thus of the body)? Furthermore, there is great ishly devoted to understanding their existing profitability in textiles, which are sports deriva- client base. In the process of satisfying their tives. Until then a family company which had own customers better and better, brands been founded by Georges Salomon, Salomon become these customers’ hostages and neglect discovered in Adidas the financial resources the weak signals of social or technological and expertise to assist in the transformation of change. Considering that this change its identity and business model. generally takes the form of a break with The same strategy continues today: in a existing habits and products, it is rejected by nautical twist, Salomon is now entering the the brand’s existing customer base. The brand surfing market. This is the result of a redefin- then works harder and harder to please a ition of its identity and business: it has moved clientèle that does not represent the future, 266 CREATING AND SUSTAINING BRAND EQUITY thus becoming an anti-model for innovators unique know-how in working with profes- and tomorrow’s customers. sionals to design pure, simple, unique, inno- The necessary process of winning customers vative products. over again takes time and requires a It has had to acquire new skills in order to systematic, coordinated, focused approach communicate with – and indeed, enter into a which involves all areas of the company. It genuine relationship with – a new generation implies an internal revolution – at the of young sports enthusiasts worldwide. management, organisation and identity levels. Salomon has thus widened its target to It starts with a redefinition of identity. young people and teenagers, tomorrow’s What parts of the old identity do you keep? trend leaders. Activating this identity implies What do you change to help in coping with a long-term commitment and substantial changes in society and the rise of all the new human and financial resources dedicated to: sports that were still unknown 10 years ago? Salomon’s slogan – which defines its 1. Product innovation (brand extensions business and field of competence – is now play a strategic role here). For this ‘freedom action sports’, which applies equally purpose, Salomon sets aside 7 per cent of to the mountains, the town – and in future, its turnover for research and registers 80 the sea too. This shows the path followed by patents per year. The company has also the brand over time: reduced its product-to-market timescales to one year for composite products and l In 1950, its identity was based on a product two years for mechanical products – the ‘binding’ safety fastening, an essential (bindings). In addition, opinion leaders component. are involved at an early upstream stage in the creative process, and surfers can l In 1980, the brand’s entire identity, skills contact the brand via the internet to and value system could be summed up as influence research into new products. skiing. Furthermore, Salomon’s product range l In 1990, its identity became focused on marketing is no longer segmented simply mountains, with the introduction of hiking into the old three categories of age, sex boots and the like. and skiing ability: a fourth category has now been added (the type of sensation l In 2000, the brand expanded its target and sought after). field of competence to a particular area, a conceptualised sport: freedom action 2. The brand’s role as an engine for moving sports. It became a specialist multi-sport ‘old-fashioned’ but still majority activities brand, serving this concept and its under- (such as skiing) towards something more pinning values. What are these values? modern via new sensation-based Freedom means unrestricted sensations products, and in so doing narrowing the and ‘my style’; action means energy, gap that exists within both the brand and gravity and the environment as a play- winter sports as a whole. In addition, ground; and sports suggests gliding, snowboarding has become an Olympic adventure, riding and so on. event, and Salomon has been able to forge a link with Edgar Grospiron, an To equip itself against competitors and emblematic figure in winter sports. changes among consumers, distribution 3. Offering a complete range of experiences channels and competition, the brand via challenges, competitions, ski treks and continues to capitalise on its historic skills: its so on, and also via sportswear ranges. SUSTAINING A BRAND LONG TERM 267

4. Communication that has at last become s500 million in 1999. The company reversed more interactive, guerilla-styled and its 1997 deficit to move back into profit in street-focused. 1998. Bought out for 1.2 billion dollars by Adidas – 40 times its profit in a sector where 5. Proximity to the customer; perhaps even a the average multiple was just 20 – the Salomon direct relationship in locations devoted to group was keeping its promises. However, the brand, during events and the like. because global warming makes future snow levels uncertain, Adidas decided to sell The commercial and financial results reflected Salomon to the Finnish sports group Amer, the radical effort which had gone into which already owned Atomic skis and Wilson adapting to this change: sales rose from s390 tennis rackets. million in 1997 to s435 million in 1998, and 268

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Adapting to the market: identity and change

The only way a brand can grow is through brand’s contract with its customers. It repre- movement. You cannot expect growth and sented a disruption, but not an incoherence or lack of change. The brand is continually a contradiction. Mercedes could not afford to looking to create new markets, new segments confine itself to a conception of a car that was in which it can become the reference and becoming a minority taste. Its mission of above all the market leader. It was said, for offering the most reliable cars in the world example, of the Twingo that Renault had needed to adapt itself to the requirements of invented ‘the car that hadn’t existed’ (Midler, the world. 1995). According to this plan the brand’s Only radical change is visible. Otherwise, image is, like its environment, in perpetual according to the psychological principle of evolution. To fail to evolve is to appear to be ‘perceptual assimilation’, what we see is based shackled by the present, to have a dated and on our preconceptions. Accordingly, brands immobile image. should not hesitate to push their boundaries Mercedes could have repeated its famous far from their original prototype. The fron- sedans indefinitely, while always improving tiers of the brand’s territory are made always them, since they were the global image of to be pushed back, in the directions of what a luxury car should look like, to the products, geography and meaning. If, in point at which the Japanese Lexus copied order to manage the brand in the medium their contours exactly. Meanwhile customers term (three to five years) there is a need for had changed. Those at the edge of leading tools that fix its limits (such as the prism of opinion, who influence the opinion of 90 per identity), it is necessary to review them regu- cent of the rest, had changed their lifestyle larly, to adapt to changing circumstances, and their points of reference. They were no and indeed to prompt change. Equilibrium longer wedded to sedans, but were looking for for a brand in a world in perpetual movement niche designs of car to suit them. The brand’s does not consist of staying static, but of intro- hopes went into the Class A, the ‘little ducing movement, of fighting a continual Mercedes’: a break with what had been the battle. 270 CREATING AND SUSTAINING BRAND EQUITY

The luxury US brands surprise us, because ments (identity and change) leads us to view they have an air of incoherence. Calvin Klein the brand from two angles: the timeless angle went from the provocation of Obsession to of its basic meaning and identity, and the the idealism of Eternity. Ralph Lauren jumped offensive, disruptive angle of its new develop- from the Boston WASP image of Polo to the ments. This is the theme of this chapter. Safari ambience of ‘Out of Africa’. In reality one product does not follow on neatly from the previous one, in the sense of a repetitive Bigger or better brands? coherence that continues the same concepts to infinity, leading the brand inevitably down What are the main characteristics of Western a path of decline. These products are signs of a markets? For us the most important thing is brand in movement. Calvin Klein is not either that needs are satisfied. This has considerable Obsession or Eternity. It is both, a brand both consequences. more complex and more open than others First, growth will be found in Asia, Russia had imagined. Renault comprises both the and Brazil. Second economic growth will rest Megane and the Espace. The future belongs to on sustained consumption only if brands that are able to handle this type of consumption itself can be stimulated. This ‘and’, and to abandon the dichotomous means that brands will have to stimulate choice of the ‘or’. desire. This has great implications for brand This is also the message that Collins and management. Brands should now deliver Porras conveyed in their Built to Last (1994). experiences, and one of the first is to surprise Chanel surprised us in launching Coco and their consumers. associating it with Vanessa Paradis. There was Another key factor of mature markets is the an incoherence, a break with the image it had wish to consume better. Globalisation is now conveyed through its previous figurehead, a reality for consumers. They are aware that Carole Bouquet. But this kind of radical move first-world companies have their products does more to ensure the long-term survival of made in China or Brazil, that underdeveloped the brand in an era when it is faced with countries will only be able to develop if trade competition from American and Italian is more equitable, that some companies are designers who know how to seduce the more ecology-conscious than others. These young. considerations have no impact on consumers The paradox is that at the same time, the when their main problem is to fulfil their brand only develops on the basis of a certain basic needs. Maslow reminded us that higher- permanence, or perhaps a duration. The key level needs become important when lower- concept of the brand’s identity carries within level ones are satisfied. This means that itself the necessary continuity of ‘identifi- modern consumers do not want bigger cation’: the meanings and expressions of the brands, but better brands. Sustainable devel- brand. We should not forget that the brand is opment is here to stay. It is no fad. Perhaps a point of reference: it indicates a proposition, many companies now mention sustainable certain values. That is its first function. To development in their corporate annual create and build up a point of reference, the reports purely because their competitors do brand needs to have a clear sense of itself, a so, or because they feel forced to do it. direction. A certain amount of continuity is Meanwhile their competitors have realised also essential to the construction and devel- that sustainable development and fair trade opment over time of the brand. are sources of competitive edge. Today intelli- The parallel pursuit of these two require- gence is moral intelligence. ADAPTING TO THE MARKET 271

From reassurance to stimulation new insights. Brand management needs a set of bound- Certainly the key concept of brand aries. This is called brand identity, which management is identity: we have been covers how the brand defines itself, its values, stressing it since 1990, when the first edition its mission, its know-how, its personality and of this book was published. ‘Identity’ means so on. A clear sense of identity is necessary, for that the brand should respect its key values the brand meaning to be reinforced by repe- and defining attributes. However, there is a tition. On the other hand market fragmen- point where too much repetition of the same tation, competitive dynamism and the need creates boredom. Too much predictability is a for surprises call not for reinforcement but for drawback in modern markets. (Table 11.1.) diversification. As ever, brand management This is why the role of modern brands is to will act as a pendulum, going from an excess stimulate the consumer to have new experi- of sameness to an excess of diversity. There is ences. The role of the brand in providing reas- nothing wrong with this. The same holds true surance and generating trust is not dead, far of the local/global dilemma, or the ethics from it: but it needs to be used to encourage versus business dilemma. the consumer to take more risks, explore new Another consequence is the need to know behaviours, try new unexpected products. In the identity of the brand. More precisely, what order to do so, disruptive innovations become is its kernel, the attributes that are necessary very important. To grow through time while for the brand to remain itself, and what are the keeping its identity, the brand should traits that can show some flexibility? If all the continue differently. attributes of the brand belong to its kernel, To this end there is a need for new research that is to say, they are all necessary to its tools. Why are all companies now listening to identity, its ability to change will be hampered. forecasting consultants, trend spotters? How can a brand surprise customers, evolve, Because they need to think now about what adapt to new uses, situations and markets, if it consumers are not thinking about today, but is too rigidly defined? Peripheral attributes can will think about tomorrow. Classical change, or be present in some products but not marketing research analyses sources of satis- in others. Eventually, innovations introduce faction and dissatisfaction with the product or new peripheral attributes, which may become service or brand. The outcomes can be used to prompt immediate and continuous improve- ments. But can disruption come from this type of marketing research? Satisfaction is always linked to customers’ existing values and goals. Research is needed also to spot how Power Relevance these values and goals will change, leading to without without relevance power

Table 11.1 From risk to desire: the dilemma More More of modern branding diversity identity

Brand = capital Brand = impulse Identity Diversity Capitalise Surprise Repeat Diversify Sameness Variety Figure 11.1 The identity versus diversity Identity Change dilemma 272 CREATING AND SUSTAINING BRAND EQUITY incorporated into the kernel at some point in Consistency is not mere repetition time. This is how brands evolve through time, how innovations have an impact on their Brand messages and slogans are bound to identity. Peripheral traits act as the key long- evolve. Evian was, initially, the water of term change agents within brands (Abric, babies, then of the Alps, then the water of 1994; Michel, 2000). The tools to identify the balance, later the water of balanced strength, traits held by consumers as kernel traits of a and now a source of youth. These changes in brand are presented below but their use is not positioning occurred over a long time period: sufficiently widespread. they demonstrate the evolution of the The brands that ultimately last are those consumer’s attitude towards water, the matu- that are able to surprise their customers, and ration of the market and the evolution of the customers of tomorrow in particular. This competitive position. The functions and sums up the challenge facing modern brand representations of water are not fixed: they management in a nutshell. Far from seeking depend on external factors linked to urbani- to capitalise on its past – and thus to repeat sation, industrialisation, rediscovering nature, itself – the brand should surprise, and discovering pollution, new representations of promote change. This is what should be the body, health and food hygiene. termed the ‘exploratory function’, which Positioning is the act of relating one brand plays an epistemic role for the brand facet to a set of consumer expectations, needs (Heilbrunn, 2003). But how can you know and desires. As these needs change through what will surprise the customers of tomorrow? time, the brand is obliged to follow suit. Market studies provide a good under- However, Evian’s identity remained standing of today’s customers; or at least, of consistent throughout these repositionings. the expectations they express. So much needs But within a brand’s lifetime these changes to be done to improve customer satisfaction. in positioning should not happen too often, How long ago did readers receive a satisfaction about every four or five years. However, the questionnaire from their bank? Their car brand’s means of expression can move faster dealers? Their telephone company? to integrate with the evolution of fashion: To surprise customers, you need to take a new speech modes, new signs of modernity long-term view – hence the growing use of and new looks. It is essential that the brand is trends in brand management. Trends are perceived as up to date although such hypotheses relating to change that occurs necessary adjustments and changes make the within small groups in our societies, but could brand run the risk of a loss of identity. potentially create a tidal wave among the To retain their identity while changing, general public. These trends are established on brands often stick to their communication the basis of combined information regarding codes, that is their fixed visual and audio the demographic, technological, social and symbols. This is undeniably a factor that cultural future of our societies. contributes to a brand and what it represents We thus need to define three levels of being recognised. Even when not named, vision: long, medium and short term. Car Coke commercials can be picked out: their concepts in the automobile sector, for music and their style are unique. But the style example, are governed by long-term consider- itself is subject to obsolescence. Continuing ations. Decisions regarding models that are with it could prove fatal to the brand. already part of the seven-year production plan Unfortunately, it has to be acknowledged are considered as medium term. that brands have a hard time parting with ADAPTING TO THE MARKET 273 their communication codes, even when they be many central brand values. In the fact- feel it is necessary. This is to be expected: they finding mission for Peugeot and Citroen, the are afraid of losing their identity. But this recommendation was for three per brand: reluctance is largely due to the fact that brand dynamism, aesthetics and value for Peugeot, management concepts are essentially static. self-expression, comfort and inventiveness for Time is not taken into account when it is a key Citroen. France, as is well known, is in crisis parameter in markets. In that sense, the because she can no longer be run while concept of ‘communication territory’ is a respecting the three central values she set for vision that clings to the ground: it has to do herself: liberty, equality and fraternity. Too with all the visible signals that the brand uses many tacitly accepted decisions or social to communicate its definition and what it factors contradict one of these values. represents. However, an identity that defines The brand is also a tool of differentiation: its itself only through signs is subject to an alter- name sets all its products apart, through their ation of their meaning. The brand is indeed common tangible and intangible values. recognised, but no longer in control of its Because it carries the logo of Danone, whose meaning. central value is active good health, Danette, although it is sugary and rich, appears much healthier than a Mars or Lion bar, typically Brand and products: integration associated with obesity, or a creamy Mont and differentiation Blanc dessert. Like any well-managed brand, Virgin has How, specifically, does a brand function? How explicitly stated its brand values: this is what are the relationships expressed between the is known as a brand platform. Virgin has six brand and the products or services it sells? central values, those that belong to its identity What are the consequences? What is brand kernel. They are ‘fun, good quality/price ratio, coherence? quality, innovation, challenge, and brilliant To borrow an expression from G. Mischel client service’. This is its brand contract: as (2000), the brand is fundamentally a system such it is non-negotiable. In fact, in every- that integrates and differentiates. The brand is thing that Virgin does, we can find these six first of all a tool of integration: it is a tool of ingredients. Hence the brand inspires respect, coherence, by bringing together under its even if many of its attempts fail. These values name a range of products and services, each of are necessary because they help internally to which must carry the central brand values. A decide whether a decision, action, product or product or service that is not representative of service is ‘Virgin enough’ to be put on the the brand must not carry the brand name. The market to face the competition. Naturally, brand is an explicit normative system: the depending on the products within a range, brand’s central values must be known inter- not everything will represent the brand values nally and by everyone who has to set the with the same relative intensity. A Virgin soft brand in process. They are incumbent on drink will have a lot of ‘fun’, but even Virgin them: we should therefore expect to find Atlantic Business Class needs to have a little them in the products, services and communi- ‘fun’ about it, because otherwise it would not cations. Admittedly, a Toyota at the bottom of be Virgin, and because this is what differen- the range does not have all the qualities of a tiates it from the business classes of top of the range model, but it should embody competing airlines. all the central values of Toyota (for example, These brand values are not invented: they exemplary reliability and an excellent are present from the first product that the quality–price ratio). This is why there cannot brand produces. This is the founding product 274 CREATING AND SUSTAINING BRAND EQUITY or service that carries the meaning of a word these in number to avoid creating paralysis. previously unknown on the market (the The brand is built through the coherence it brand name). Its commercial success confirms imposes on everything it does, and which will the relevance of these values, and this is be therefore lived experientially by the client. strengthened by the extension of the range, If there are too many central brand values which then constitutes the ‘core business’. to maintain, the brand cannot evolve. Later, the brand will extend into other busi- It is therefore necessary to differentiate nesses, segments and markets, but always between so-called ‘central’ values, that is, under the name of the same values, inte- those values that are non-negotiable, and grating the whole and differentiating it from those known as ‘peripheral’ values, which the competitors in each market or segment. may be present here but not there, in one Andros, an SME from the Lot region of France, market segment but not in another. In fact, based in Biars, began by developing a mass- the brand’s products, since they are each in distribution jam business. That became its competition in their particular segment with core business. Then its competence in fruit different competitors, should have specific and the trust attached to its name led it to ‘pluses’ that do not emanate from the brand’s penetrate other segments: compotes (against central values. Thus Nivea sun cream must be the Materne brand) and now fruit juices hypo-allergenic, which is highly coherent (against Tropicana, Joker and other brands). with Nivea’s central value (taking care of oneself), but also add scientific reassurance Brand values and segment (not a central value for Nivea), since it is in expectations competition with sun creams from the giants in active cosmetics (the l’Oréal and Estée The brand’s products must therefore all Lauder groups), which have established embody in their way all the central values of science as the dominant code of this market of the brand, hence the necessity of restricting protecting the skin from sun damage.

Name as key Name as key difference difference Brand extension Brand extension vs competitors vs competitors in segment in segment

Brand

Name as key Name as key difference difference Line extension Core business vs competitors vs competitors in segment in segment

The brand acts as integrator “Same name is sameness’

Figure 11.2 The double role of brands integration and differentiation Source: Michel, 2000 ADAPTING TO THE MARKET 275

At the operational level, in order to manage service delivered is variable, since the a brand, the first thing to do is to specify company’s young stewards and stewardesses clearly what is part of the brand’s kernel (its show a degree of heterogeneity. central values and traits) and what could be Figure 11.3 provides a reminder that there variable, since it is peripheral, specific to each must also be a physical brand signature, expe- segment. This sorting must be explicit riential and perceptible. It cannot be reduced (written in a brand platform and diffused via to an intangible. Concretely, what must be the an intranet), and should deal not only with physical signature of all Martell cognacs, in the fundamental values, but also the person- comparison with all Hennessy cognacs? What ality traits of the brand and its tangible is the physical signature of Lancôme aspects. It is notable that Virgin included its compared with that of Estée Lauder products? ‘fun’ side (a personality trait) in the central It is up to the R&D researchers at Lancôme or facets of the brand identity. the cellar masters in the case of Martell to The exercise of sorting out what is nego- answer: customers do not have this acuity of tiable or even variable, adaptable, must judgement. equally involve the physical aspects of the client experience. For the Novotel brand, for example, it is necessary to specify whether its Specialist brands and generalist blue colour is negotiable or not, and also the brands appearance of the reception area in each hotel, the arrangement of the rooms, their Is the Renault brand managed the same way as furnishings and the level of service. Within a the BMW brand? Is the Galeries Lafayette single country, even a region, the client expe- brand managed in the same way as IKEA? Is rience cannot fluctuate: this is the effort that the Samsung brand managed in the same way must be undertaken in order for the brand to as Sony? The generalist brand offers a broad become a benchmark of the quality it wishes range under its one name, aimed at covering to symbolise in an exemplary manner, and on the needs of all segments of its market sector. which its reputation will be built. The answer It is ecumenical and open. Its business model is much less obvious from one continent to is that of capitalising on customers’ durable another. In fact, the Novotel on Broadway is values: by attracting young people via Clio or in competition with other hotels with Twingo, Renault hopes to win their loyalty American standards, in the same way that the and therefore later on to sell them a larger one in Bangkok on the banks of the Chao model corresponding to the evolution of their Praya is in competition with the mythical life cycle and the needs that follow from it. Hotel Oriental: it must be brought up to Asian The specialist brand is excluding. It sets standards, the highest in the world. itself a particular target market segment, of Nevertheless, within the portfolio of Accor which people either are or are not part, and Group hotels, the hierarchy is always builds its range according to that single target. respected: the Bangkok Novotel does not offer For example, BMW targets people looking to the same level of services as the Bangkok buy a car for more than s20,000. Sofitel. But a brand is a brand: to manage the brand For service brands, rendering the client is to undertake a 360° approach to coherence, experience invariable is a challenge: Air to create the perception of a differentiated France, with its 15,000 employees, has more offer, carrying added values, tangible and difficulty homogenising its in-flight services intangible. The brand is built, in fact, than, for example, Lufthansa or Singapore through the coherence of everything it Airlines. From one flight to the next, the undertakes. The foundation of this coherence 276 CREATING AND SUSTAINING BRAND EQUITY

Brand

Kernel facets Peripheral facets

Physical Intangibles Physical Intangibles

Form Benefits Form Benefits Design Personality Design Personality Taste Vaules Taste Vaules Colour Colour Experience Experience Performance Performance

Figure 11.3 Differentiate what is variable from what is non-negotiable in the brand identity

is the ‘brand kernel identity’, that is, the I Given the Renault values, but also its still necessary facets of the brand, those that poor recognition and reputation define its singularity over the long term. worldwide, should Renault continue to Building a brand is first of all a matter of invest in Formula 1? We know that defining very clearly, explicitly and publicly Michelin answered no to this question what about the brand is non-negotiable, and from 2007: in fact, the governing body of what must therefore be transparent in every- Formula 1 wished to have only one tyre thing it does. This preliminary work, called manufacturer for all the cars, so that the the brand platform, is necessary to help attention would be placed more on the weigh up the daily decisions within the competition between the different motors company and know how to say no. Among than between the different tyres. Nothing these questions we find, for example: is further from Michelin’s deepest values than a competition without competitors. I When is a car no longer a Renault? At this point, a difficulty arises: the generalist I When are client relationships no longer business model is based on the widest range, managed sufficiently in the Renault way? aimed at all market and customer segments. The specialist model is the reverse: it chooses I What should the welcome at a Renault its segments and therefore its customers. The dealership be like? generalist brand is open and adaptive; the I When does a loyalty programme not carry specialist brand is exclusive. The generalist enough of the values and personality of the brand must therefore adapt to the rules of Renault brand? each of its market segments in order to ADAPTING TO THE MARKET 277 succeed there. But how can you introduce the PPR group, preferred to sell it on to an brand coherence if you must also adapt to the Italian group. segments? Samaritaine’s mistake was not to have The temptation, for the generalist brand, is understood that faced with the many forms of to define such general and bland brand values competition in the city centre, but also in the that they thereby cease to define a singular suburbs, it was necessary to focus, to refocus, offer in each segment. The generalist brand and to make a choice. It needed to give then becomes simply a recognised name, a consumers a greater and more aspirational label of quality and no more, but with no aspi- reason to visit Samaritaine first. Faced with rational power. In the stores, the salespeople Zara, H&M, C&A and its other competition on take note: clients are in a hurry to discuss the Paris’s Boulevard Haussmann, Galeries size of the discount. They do not nurture any Lafayette centred itself on a meta value that strong intrinsic desire to finally possess ‘a became the guiding principle of all its daily Renault’ or ‘an Opel’. In short, the generalist decisions. Galeries Lafayette saw itself as a brand becomes, to use an analogy, a belt from ‘temple of fashion’. To achieve this, from 2000 which the models are hung, rather than a pole onwards it pursued a systematic policy of not of attraction expressed by the models. This is renewing contracts with all those brands that why the generalist promotes models (‘the in its view were not sufficiently in line with its Golf’, ‘the Quashquai’), whereas the specialist positioning. This was a brave decision in promotes itself (‘a BMW’). The generalist commercial terms: it is easy to imagine the turns its models into brands themselves, each nervousness of the salespeople and share- with its own personality: not so the specialist. holders, facing a loss of turnover with no Every BMW is a BMW. guarantee that this would ever be compen- Confronting the risk of the markets sated. becoming humdrum, and therefore of the Whereas the now-defunct Samaritaine price-only reasoning that threatens them on claimed, ‘You can find everything at the front line, the generalist brand must be Samaritaine’ – that is, refused to do the work boosted with an intrinsic value that is more of selecting its range under the auspices of a than the sum of its models. Contrary to the positioning, and continued to think only in natural catch-all tendency of the generalist, terms of breadth and depth of range – Galeries there is a need to give it an exclusive meta- Lafayette made known both internally and value, a positioning: that is, the power to say externally that you would no longer find no. Being selective means losing short-term everything at Galeries Lafayette: only fashion turnover, but increasing long-term desir- would exist there, whatever the department. ability. Exit the toy and book department, and others, The most instructive comparison is for the same reason. The new store Galeries between Samaritaine and Galeries Lafayette. Lafayette Décoration et Maison (Decoration As department stores in Paris, and therefore and Home) is not a store like any other, either: subject to very high overheads, these two it says ‘fashion’ on every floor, in every entities had the same enormous requirements department. in terms of daily visits, since only a fraction of As a just reward for this effort of thinking visitors will buy anything. The neutral point is and acting like a brand, Louis Vuitton decided very high. Samaritaine reacted like a store, that it could no longer not be seen at Galeries and closed down. Galeries Lafayette, under Lafayette. The fashion brands now jostle one the impulsion of P Houzé, reacted like a another to get a mention there. brand: it took a lead over its competitor What can we draw from this example? The Printemps. In 2006, the owner of Printemps, generalist brand must of course occupy all 278 CREATING AND SUSTAINING BRAND EQUITY segments, always assuming that it can exercise tional automobile project. Then in each its own personal brand imprint there. Will it segment the models must each embody each be able to imprint its strong, aspirational of the three values of the brand’s identity central values there? If not, then it should not kernel. This is non-negotiable. The brand must go there. Figure 11.4 shows clearly that, even also respect, in each segment, the price deciles if the base of the pyramid representing the that correspond to its positioning. generalist brand is larger by definition, all of The relationship between brand and the models must be ruled by a strong common products also differs between the two cases. vision and conception. Of course the models The specialist is by its nature highly typified, must have personality, in order to be intrinsi- identifiable and exclusive. The reverse is true cally boosted by added values, but there must of the generalist. In this way we recognise a be a leitmotif between them that cannot only BMW immediately from its design, but also be purely formal. from a unique driving experience. BMW Peugeot is a model of a generalist brand that expresses the virtues of German engineering. has understood how much thinking like a Conversely, a Volkswagen is harder to brand means imprinting its difference, and recognise at first glance. This is not to say that therefore its values, on all its models, all its acts its models do not have common traits: they and client relationships. From the little 106 to must do, or they could not all carry the same the splendid 607, all have the feline design brand. However, there are many more differ- that has become so characteristic of the brand: ences between the models in the Volkswagen but let no one be deceived, the Peugeot brand range than the BMW range. is not Swatch, where the differentiation essen- Volkswagen, like any generalist brand, sees tially comes down to design. The feline design itself as ecumenical: the car that will attract merely expresses with personality the values people looking for a small city car (the Lupo) found in the brand: audacity, dynamism, is not the car that must steal market share aesthetics and reliability. Citroen has also from the Mercedes C-Class (the Passat). At understood how the generalist brand is BMW, between the 1 series and the 7 series, managed: not like a rake that catches every- there are differences of degree only. They are thing, but as a precise, differentiating, aspira- almost all 100 per cent BMW. Each model

Generalist brand Specialist brand - Multiple targets - Monotarget Products are sub-brands Products are variants

Figure 11.4 Generalist and specialist brands ADAPTING TO THE MARKET 279 reproduces and embodies the essential facets agents, importers or even subsidiaries, may of what we mean by BMW, therefore what we lead to a loss of control, and therefore to a expect from a BMW! local reinterpretation of the brand, not to As a specialist brand, BMW is consequently mention the many demands for new products intransigent regarding the conditions that that will inevitably arise under the cover of decide whether a model may be called a BMW better meeting the demands of consumers in or not: there are a series of sine qua non charac- the country in question. teristics. The generalist brand is more flexible: Growth therefore introduces diversity. the Renault range went from Twingo and even Hence the challenge: how to manage this Dacia Logan to Vel Satis. It is not, however, enlivening diversity without losing identity? open to all models. The Renault brand also How to introduce variety without losing the has its criteria for inclusion and exclusion, but brand’s specificity, without diluting it? This is they are designed to enable greater openness the problem of the necessary coherence of the towards different types of car buyer: there are brand. What is, for example, the coherence sporty Renaults and softer Renaults, estates between Chanel No 5, and all the brand’s and minivans, and so on. Volvo is also a recent perfumes such as Chance or Egoïste? specialist brand. Of course it wishes to grow What coherence is there between Calvin but remain the model, the referent of cars Klein’s ‘wicked’ perfumes Obsession and CK where security, comfort and reliability come One, aimed at adolescents, and Eternity, a first. This also applies to trucks, cranes, public hymn to the family, and Truth? works equipment and so on. By doing this, Since the brand only exists via its products Volvo cuts itself off from all those customers or services, only overall coherence makes it who do not have safety as a priority. To brand possible to communicate what they have in is to choose. common: that is, the brand identity. Curiously, the brand coherence criterion is rarely taken into account when evaluating Building the brand through new product projects. These are selected on coherence the basis of their potential sales and prof- itability, their chances of success in the All brands grow through multiplication. The channel or country in question. The resources brand begins by introducing variants of the available for launching them are also taken initial new product or service that founded its into account. The link with the parent brand success. This policy of is a secondary criterion, not perceived to be makes it possible to increase the brand’s rele- strategic. The short term is therefore favoured vance, enlarge its presence and therefore its over the long term. visibility, whether online, among distributors, or on the shelf, if applicable. This also Why brand coherence? increases sales. Growth also comes from enlarging the Why worry about coherence? After all, if initial target market, and the regular products are selling well, the company will concomitant adaptation of the brand’s grow, as will its profits and the brand recog- products. The adoption of new distribution nition. However, this is to forget that the channels often introduces a variation in the company is pursuing another task: increasing offer in order to avoid conflicts between its own financial and share valuation, which channels, despite the thorny problem of price is affected by the strength of its brands. It is disparities. Finally, the conquest of the inter- also necessary nowadays to build defences national market, for example via commercial against the cheaper copies that will inevitably 280 CREATING AND SUSTAINING BRAND EQUITY emerge on the market. So how does one build a brand platform: that is, a very short a strong brand? Through the total coherence document specifying what makes the brand of everything it does, which enables it to unique (see Chapter 7). This base is integrative emerge from the group of competitors. and normative: it must be upheld in order to For managers, the brand is constructed in introduce a necessary coherence if the market stages, from top to bottom: first of all the is to have a clear, readable perception of the brand platform is written (the identity of the brand. brand to be created), then the products, Of course, repetition should not mean services and in-store experiences that best uniformity. Repeating oneself too much is embody them are created. For consumers or boring: there is not enough innovation, and customers, it is the other way around: the there are no surprises. Variety, diversity and experience precedes the essence. Their surprise are ingredients of the modern brand perception of the brand is built through the that should permanently stir up interest in it. coherence of their repeated experiences over Too much diversity, however, leads to ineffi- time. This is why the first contacts with the ciency, dispersal and a fuzzy perception of the brands are determining factors in the brand (see Figure 11.1). formation of a long-term image: in which The challenge of coherence essentially products/services will the brand be embodied? relates to generalist brands, since their In what channels? By which retailers, business model is precisely that of encom- department stores or distributors? In which passing and integrating the ranges of various price quartile? Through which marketing specialists. They increase in size by doing so, communications? Managers must know in but may lose the perception of uniqueness, advance what perception they wish to create, both internally (the managers no longer and must hold fast to it over time, eliminate know) and externally (among clients). Thus in any action or product/service that does not 2006 when Orange replaced the specialist conform. There is no brand without strong mass internet brand wanadoo, and the Equant internal policing and without a strong brand, a specialist in telecommunications for external coherence as well. large companies, the internal managers did Building the brand involves constructing not perceive the coherence: they saw a the perception of the specificity of that brand, dilution of what used to be the strong its exclusive and motivating added value. In coherence of each of these two brands, their perception, as in teaching, repetition and uniqueness. An intensive internal programme coherence over time are indispensable. was necessary for them to grasp the new Consumers must be exposed to messages and strategy, and the single Orange brand. products that, through their diversity, tell perceptibly the same story, each in its own No brand without family way. After all, if the products have the same resemblance brand name, it is necessarily because they have something in common. Admittedly To understand the notion of brand coherence, Renault Trucks operates on the worldwide it is useful to proceed with an anthropo- truck market and belongs to the Volvo Group, morphic analogy: that of a family. Two things but it carries the Renault brand and therefore characterise strong, large families: a strong cannot have a clashing discourse. common ethos (shared values or personality It is clear therefore that to build a brand, the traits) and a certain physical resemblance. We brand must have coherence, and paradoxi- recognise a member of the Kennedy clan at a cally, it is the source of its own coherence. glance. Admittedly, each member is also This is why good brand management requires different from all the others in terms of ADAPTING TO THE MARKET 281 personality, but they have a common ethos, life-style and contributes to it. This is not a and physical elements that identify them. hospital or a diet brand (like Weight The same must be true of brands. Growth is Watchers). The extremely broad Danone normal, as long as the identity is maintained: range from Activia and Actimel, through to the basis, and the identifying elements. The the double-cream gourmet dessert Danette. It family membership must be seen and not could be considered that this constitutes merely read (the name common to all): in the brand incoherence. The gourmet product end, it must be possible to recognise that a Danette does not spontaneously evoke ‘active member belongs to the family without good health’. On the contrary. it is rather the reading the name. halo attached to the Danone name that differ- A brand name is a point of reference: a sign entiates Danette (derived from milk) from its of added value. The fact of putting a product competitors (Cadbury’s, Mont Blanc cream under this name, to categorise it as such, itself desserts, Mars bars and so on). This halo of confirms that it is a full member of this family, active good health, carried by the parent of this brand. It is therefore necessary to visu- brand, is the lever of difference. alise it: hence the importance of packaging, Coherence is not uniformity. In mature labels, design, and everything that is seen on markets, an excess of uniformity kills desire. office fronts, factories and distributors. This The growth of the brand via an extension of makes it possible to install the common visual its product range nevertheless occurs by elements that will point to a family rela- upholding the brand’s central values, or it will tionship. This would seem to be self-evident, run the risk of diluting its specificity. At the but often the first efforts of many managers same time, too great a resemblance between when extending a range are to introduce a the models and versions of the brand damages high degree of differentiation between its the impression of renewal, and makes it members, reducing their common elements as impossible to indicate a clear differentiation much as possible. within the range. This double requirement is Family resemblance cannot be reduced to almost contradictory: this is the challenge of appearances. As the proverb has it, it is not the brands today. cowl that makes the monk, but his religion. It is therefore necessary to ensure that all the What cognitive psychology tells us: brand’s products do indeed have the same there are degrees of coherence religion, share the same values, even live them, and express them in their own way. How, then, can we manage both resemblance The objective of family resemblance is not and diversity? How can we include coherence only to create internal coherence and order; it without creating uniformity? In order to is also a key factor in differentiating a brand move forward on the operational level, a from the competition. Of course each product detour through theory will be useful. The has its own characteristics, but in carrying a questions above are precisely the subject of name it inherits the promises of this name, what is known as cognitive psychology, the which thereby constitute its genuine differen- study of how people think and form cate- tiation amongst its competitors. The main gories. The notion of coherence is not binary: difference between Renault Trucks and DAF or there are degrees of coherence. To return to Iveco or MAN is Renault. The same is true for the brand, this means that not all the Mercedes trucks. products represent the brand in the same way Take Danone as an example: the central and to the same degree, in the same way that value of the Danone chilled products brand is the members of a family do not all have the ‘active good health’. Danone likes the active family resemblance to the same degree. 282 CREATING AND SUSTAINING BRAND EQUITY

One of the central subjects of cognitive together that may be very different in psychology is understanding the way in appearance. which we categorise real objects. In fact, the In order to classify and bring together or human mind is constantly sorting, classing exclude objects, the concept must have a objects together in order to reduce diversity content and a rule for admissibility/exclusion: and render reality simpler and more compre- hensible. This task is known as categorisation. I Certain concepts class things according to We invent categories. the presence or absence of characteristics: The modern, polymorphous brand, spread for example, a bird is an animal that lays over several markets in different guises, eggs and has feathers, and which can cannot be considered simply as an example of usually (but not always) fly. We see a single category. Danone is not a kind of therefore that certain characteristics are yoghurt. It is yoghurts, of course, but it is also essential (egg-laying, feathers), but others bottled water, and dried biscuits in Asia. are not necessary for inclusion (flight). Nestlé gives its name to coffee, and to orange Either it is, or it is not, a bird. The frontier juice in Brazil, to chocolate, baby products, ice of the ‘bird’ concept is relatively clear-cut. creams, iced tea and so on. The modern brand A butterfly has no feathers and is therefore is itself in reality an abstract category, and not a bird. thus a concept, which is manifested through I Certain concepts bring things together on products. The question of the inclusion/ the basis of a group of factors, linked less exclusion of these products under the to the object than to the effect of the umbrella of the ‘brand’ supposes an under- object. Take ‘game’ as an example. What standing of the laws of categorisation. This is a game? Thinking about it, the defi- analysis will be based on the major works of nition is a tricky one: what relationship is psychologists such as Lakoff (1987) and Boush there between poker and hopscotch? (1993) in order to fuel the practice of brand Between chess (called a game of chess) management with their key contributions. and a game of hide and seek? Probably the Mention is often made of the ‘brand answer lies in the motivations and gratifi- concept’. It is necessary to take this decla- cations that cause us to spend time on ration literally: the brand is, and indeed works these activities, rather than the innate in the same way as, a concept. It is a concept characteristics of the different occupa- in the same way that ‘bird’ is a concept, tions called ‘games’. or ‘game’. A concept is an abstraction that determines what goes together, and what I Finally, certain concepts bring things could possibly be brought together under the together in a symbolic manner: what is same denomination. A concept is therefore a ‘good’? Under the umbrella of ‘good’, we fantastic tool for inclusion and differenti- must be able to include some very disparate ation. We can begin to see the link with the examples, provided that they symbolise brand here. ‘goodness’. Let us take the concept of ‘bird’, which This detour via cognitive psychology does not makes it possible to consider that things as deviate from the question of brands. different as a hummingbird and a parrot or a hen belong in fact to the same category (bird), I The first type of concept is typically that of whereas a butterfly (which also flies) cannot. specialised brands, with a highly typified However, an ostrich – which does not fly – is product. A Saab, for example, is recognised also a bird. The concept is therefore a classifi- through its design, its sounds and the cation mechanism, for bringing things ADAPTING TO THE MARKET 283

driving experience. Porsche is too, but not examples. For example, each person sponta- Toyota. neously thinks of a particular game on hearing the word ‘game’. For children it may I The second type of concept would involve be hopscotch; for adults, card games. All a brand such as Volvo. Volvo is summed up games can be classed in this way according to in a word: safety, an advantage for users. their perceived degree of representativeness of Volvo is synonymous with security, even in the concept ‘game’. The most typical game, very different markets: public works, the best example, is called the ‘prototype’ cranes, trucks, cars and so on. (McGarty, 1999). The concept may not have I The third type of concept is called clear frontiers, but its core, on the other hand, ‘metaphorical’. Take Nivea: when asked, is precise, typified by the best example (the the managers of this brand repeat ad prototype). infinitum that the Nivea concept is summed To return to brands, the psychology of up by ‘Love and care’. Its expression in prototypes proves enlightening. What are the cosmetic products is of a metaphorical kind frontiers of the Nestlé brand? The brand regu- as regards ‘love’. The notion of care can be larly pushes them back by putting its name to taken at both a physical level (skin care) more and more different products. and a psychological level (self-care). Consumers, however, have no difficulty in classing the products marked Nestlé in order Comparing these three types of concept, R of representativeness, from the most typical to van der Vorst (2004) has rightly emphasised the least typical. Everything works as though that their capacity for integrating variety they compared each product to the prototype differs widely. Concepts of the first type of good Nestlé baby milk. The prototype is not (known as taxonomic) are highly specific necessarily a product: it can be a person. about their inclusion criteria. As such, they Richard Branson is the prototype of the Virgin allow very little product variety. The frontiers brand: daring, fun and very friendly. This was of the brand are precise. also the case for Steve Jobs. He embodied At the other extreme, certain concepts are ‘Apple know-how’, and the dwindling brand relatively vague on the nature of their found a second wind when he returned to members. Saying, as France Telecom does, take charge. He is also symbolic of Apple that it is ‘the brand of relationships’ was fairly values: simplicity, conviviality and creativity. non-specific, but consequently rendered the brand open to variety. Its frontiers, however, were not clear. Relationships between concepts and At this point, a return to cognitive examples, brand and products psychology is necessary. It teaches that a As it is with concepts, so it is with brands. Two category may be defined either by its frontiers, levels must be distinguished. The abstract or by its members. In fact, if we take the level specifies the meaning of the concept (the concept of ‘game’, it has no frontiers. At its brand meaning, the essence of its identity). furthest limit, anything could be a game as The second level is that of the brand’s embod- long as one took pleasure from it. You might iments, its products or services. think this is overly confusing, and taking it At the conceptual (brand) level, it is also too far. necessary to distinguish between those facets Cognitive psychology teaches that these of its identity that are essential, and those that categories are however ordered: not all are not necessary, which can be called members have the same status, the same ‘peripheral’. This distinction is based on the representativeness. Some are very good contributions of social and representational examples of the category, others are less good 284 CREATING AND SUSTAINING BRAND EQUITY

psychology. Working on social stereotypes, I The ‘contradiction’ relationship. In this researchers such as Asch (1946) and more case, not only is one of the identifying recently in France Abric (1994), and in values not embodied in the product, but it marketing Mischel (2000), have emphasised is contradicted by a specific facet of the the need to sort those facets of identity product in question. The Mac Quadra, a without which the brand is no longer itself computer created by Apple and intended from the other, more peripheral facets. The for company executives, might be thought first group are ‘core facets’. For Apple, these to be such a case. were summarised as creativity, simplicity and Throughout the development of a brand, it is conviviality. Design for Apple would be a expressed through examples. The primary more peripheral trait, specific to the iPod or best-seller becomes the brand’s ‘prototype’, iMac. that which shapes the identity of which it is The product level is that of the embodiment the living and recognised symbol. The small of the brand identity. Placing the same name blue tub of Nivea is the ‘prototype’ of Nivea. on several products is to tell or promise In fact, Nivea breaks into all countries consumers that there is a certain equivalence through this universal product, which sums between these products. Nevertheless, not all up the essence of the brand (love and care) products represent the brand to the same and its associated values (accessibility, univer- degree. R van der Vorst (2004) recalls that sality, simplicity, closeness). This is the first products are constantly in competition. From contact for most families throughout the this point of view, it is important to distin- world: everyone uses Nivea moisturising guish those facets of a product that are cream with its pleasant smell. Then the brand distinctive and differentiate from their develops other self-care product lines, or other competitors in that segment, and those that examples of the brand that are very similar to are not. Thus colour was highly differenti- the prototype, aimed at a specific target or a ating for the iMac, not its memory capacity. particular use: for hands, against sun damage, It is therefore possible to identify four types for children and so on. Of course each one of of relationship between brand and products, these must have a specific element, in order to between the distinctive facets of the products take into account competition in the and the essence of the brand (the facets of its segment. Their fatal weapon of differenti- core identity). (See Figure 11.5.) ation, however, derives essentially from the respect for the brand’s values and the status I The ‘typical example’ relationship. In this that the fact of carrying this brand name case, the facets of the core identity of the confers. brand are also the distinctive facets of the Then Nivea enlarges the circle of its product product, and vice versa. lines by introducing lines that are transforma- I The ‘similarity’ relationship. In this case, tions of the brand (a key facet may be absent the distinctive facets of the product are the from the product’s differentiating elements): same as those of the core identity, with one deodorant lines, alcohol-based products for or two additional facets specific to the men, not to mention Nivea Beauty, where care product (colour, for the iMac). is absent since it is a wide range of beauty products, of pure seduction (mascara, lipstick, I The ‘transformation’ relationship. In this eye shadow and so on). It might be asked case, one of the facets of the core is not whether Nivea Beauty was not in fact a contra- found in the product’s distinctive facets. diction from this point of view: not only was This is the case with iTunes for Apple. the care value missing from the distinctive ADAPTING TO THE MARKET 285

Brand Brand

Core Peripheral Core Peripheral facets facets facets facets

Same as Distinctive facets Distinctive facets core facets Same plus some specific facets

PRODUCT Generic facets PRODUCT Generic facets

Instance link Similarity link Product’s distinctive facets are all core Example: iMac adds design and vice versa (example: Macintosh) as distinctive facet

Brand Brand

Core Peripheral Core Peripheral facets facets facets facets

At least one core At least one core Distinctive facets facet is absent Distinctive facets facet is absent plus some and contradicts specific facets a specific facet

PRODUCT Generic facets PRODUCT Generic facets

Transformation link Contradiction link Example: iTunes Example: Mac Quadra/Newton

Figure 11.5 The different relationships between brands and products Source: adapted from R van der Vorst (2004) facets of these products, arguably their sales communication. The multiplication of arguments (seduction, artificiality) were products without coherence leads to contradictory to the brand’s essence. enormous waste of energy and money. Instead of building a strong, distinctive, unique Growth, diversity and managing brand, products are scattered widely under a coherence single name. The first step is therefore to begin again from the name. Brand coherence is rarely instilled from the beginning. The need for it is only felt when Defining the core identity of the brand sales stabilise, when margins are reducing and price competition intensifies. Then it At Mars, a fundamental debate divides the becomes necessary to close ranks and hunt company. What are the key facets of the Mars down any inefficiencies in order to rededicate brand? For some, the answer is purely the financial resources to innovation and taste and the sensory experience. For others, 286 CREATING AND SUSTAINING BRAND EQUITY the uniqueness of the brand relates to the benefits and clients. Here a choice has been taste and the energy provided (physical and made: to address those clients and situations emotional). This discussion is not a matter of where energy is a key expectation. This brand splitting hairs. Depending on Masterfoods’ essence categorises the clients, but less so the choice of one or other of the two visions of products. the essence of its Mars brand, certain product How is the brand’s core identity identified? lines may or may not be in contradiction with Recall the central precept: the truth of a the brand, and therefore incoherent. brand lies in the brand itself. By studying Thus, from the first perspective (taste and the heritage, roots and history of the brand sensory experience), Mars with almonds is a (its DNA), potential facets of its core can be mistake. Yes, it sells. But nothing is more identified. contradictory to the famous Mars sensory However, the evaluation of the clients experience than the dry, crunchy aspect of an themselves must be sought on this, in order to almond. In fact, many consumers like Mars avoid a gap between an exhumed past less once they have tasted a Mars with identity, and the present reality (the market almonds. The same is true for Mars drinks and opinion): identity is not a point of view. For the Mars chocolate egg. example, ‘radical progress’ is certainly in From the second perspective, based on taste Citroen’s DNA, but is it still attributed to the and energy, Mars with almonds is not contra- brand today? It is therefore also necessary to dictory, nor is a Mars drink, but the Mars egg integrate the perception of consumers or remains so (it was created to counter the industrial clients themselves. In addition to Kinder egg, so strong on the notion of the the image study that identifies the traits asso- parental gift). Note that the two visions of ciated with the brand, another study must be Mars do not offer the same prospects in terms carried out, to identify which of these traits of variety, and therefore of the inclusion of are critical to the brand, the others being new products and new consumers (van der peripheral. G Michel (2000) has contributed Vorst, 2004). to this by transposing the methodology of Defining Mars as a ‘taste and sensory expe- social psychology to marketing. rience’ is to define inclusion according to the To find the answer, it is enough to ask inter- product’s character. This is a concept with viewees whether a new product that does not clear borders, linked to the characteristics of have one or other of the brand’s image traits the product. On the other hand, it leaves open could nevertheless carry the name of said the consumer benefit and the targets. Nothing brand. If the majority say no, it is a non-nego- in this schema prohibits the creation of new tiable trait: it belongs to the core identity. The products, coherent with Mars of course, but peripheral traits may be present or not, also with the added benefits of energy here, of according to the segments and the products of indulgence there, of a gift there, of sharing the range that correspond to them. there. Moreover, this brand perspective makes However, if the core identity is subjected it possible to aim at very different targets: men too much to the judgement of consumers who with a chocolate bar, women with Mars are constantly evolving, a deviation is created. Delight, children with Mars Mini and so on. For the directors of BMW, a BMW will always This brand essence categorises the products, have rear-wheel drive, since this is the but less so the clients (van der Vorst, 2004). necessary physical signature of the unique Defining Mars as ‘taste and energy’ opens driving experience of the cars of this brand. up a multitude of organoleptic formats (bar, This would be true even if certain potential drink, biscuits, ice creams and so on) but is customers expressed the opinion that, for much more restrictive in terms of consumer them, a front-wheel drive would not change ADAPTING TO THE MARKET 287

Question: what traits are necessary to the brand?

Out of the brand territory

Below 60%

60% to 70% Peripheral traits

Traits judged by more than 70% to be Kernel necessary to the brand definition (invariants)

60% to 70%

Below 60%

Out of the brand territory

Figure 11.6 How to identify kernel and peripheral traits

their love of the brand. Managing is not about luxury, more fashion). If this were not the following, but about having a vision. case, the product would have to be brought into line with the brand, or dropped. Confirming the presence of brand core facets in each product Identifying the role of each product line in the construction of the brand There is no brand: there are only expressions thereof. These expressions shape the represen- At this stage it is necessary to understand the tation. For the brand to be strong and link that each product line and daughter distinctive, every expression must carry the brand has with the parent brand. Is it a brand’s identity facets, and these must be prototype? Should it become tomorrow’s clearly visible. Therefore each of the products prototype? Is it a typical example? Is it or each of the daughter brands will be similar? Is it a transformation? Is it contra- analysed – their packaging, their physical dictory? product, their communication, their price, According to the link that each line must their merchandising and so on – in order to have, a greater or lesser degree of distance in identify whether the key facets, those of the the expression of the line itself will be core identity, are all well represented and accepted. First of all, signs of strong cohesion active in these products and daughter brands. are expected: the distances can only be a Figure 11.7 illustrates how the different function of the link identified above. This also Lacoste lines activate the three facets of the has an impact on the decision to give the core identity (elegance, comfort and natu- product line its own name (giving it the status ralness) and provide specific touches here or of a daughter brand) or not. Finally, this will there (more technique, more fun, more determine the parent brand’s posture towards 288 CREATING AND SUSTAINING BRAND EQUITY

Club line for men Accessories, bags Comfort/ practical

+Fashion +Fashion

Lacoste Club line Sport Pro line Masterbrand for women 3 core facets Elegance Natural

+Technical +Fashion and young Comfort and luxury

Sportswear Sport Active line

Lacoste shirt 12x12

+Fashion +Relaxed

+Soft/airy

Figure 11.7 Product lines must embody the core facets and each adds its own specific facet its products: this will be examined further on I strengthening certain identity pillars of the through what are known as the umbrella, brand: for example, the tennis lines source, endorsement and maker’s mark archi- strengthen the identity of Lacoste, the tectures (see Chapter 13). eponymous brand of the famous Musketeer The marketing function of each product René Lacoste, at the moment when its line or daughter brand will also be specified: global competitor Ralph Lauren invented a of course it must absolutely observe and tennis legitimacy for itself by sponsoring activate the central values, but also bring a the 2006 Wimbledon tournament and new contribution. This might be, for example: launching a line of Wimbledon clothing.

I modernising the brand by becoming its new prototype (Activia is the new Danone Graphically representing the overall prototype, and has replaced its old system of the brand prototype of natural yoghurt); The brand must therefore be thought of as a I rejuvenating the brand by opening it up to concept, whose meaning unifies the products younger clienteles; and distinguishes them from the competition. It is only expressed through its products, I bringing a new facet to the brand, such as communications and activities in stores and technical expertise or a pleasure dimension; ADAPTING TO THE MARKET 289

Females Mars Mars Delight Adults Miniatures Men

Variants Mars Teenagers Mars drink less standard King size dense bar

Children Mars egg

Lighter/pleasure Identity kernel: +Substance/more pleasure and energy-giving re-energization

Figure 11.8 Organisation of Mars masterbrand and products Source: R van der Vorst, 2004 other aspects. It is important to understand facets must be well and truly present. Thus the the overall system set-up, by mapping all the premium line ‘Club de Lacoste’ does indeed products seen as expressions of the brand, emphasise elegance, but also activates the two placed according to their distance from the other central brand values, comfort and natu- central values of the brand. In Figure 11.8, we ralness. have mapped out the current Mars system. This exercise is necessary to avoid a common Checking the coherence worldwide pitfall: a system that is empty at its centre. It is possible, in fact, for everyone to be The exercise described above should be carried conscious of the values of the parent brand (also out by geographic region. Here it may then known as the masterbrand) but for no product appear that the same product does not have of the range to assume these values 100 per cent the same link to the parent brand on different and become the prototype. What is often found continents, or the same role, or the same posi- is a situation where the brand has three tioning. These situations lead to inefficiencies distinctive facets A, B and C; certain products and should be corrected if necessary. It is carry value A, others B, and the third group facet nevertheless possible for local specificities to C. This situation, however, does nothing to require adaptation. For example, in Germany, build the brand up with values A, B and C. a country whose car-making pride is well The brand is not an average, the sum of known, the ‘prototypes’ of the Peugeot brand disparate discourses. It is built up in image are the CC models of the 206 and 307. In fact, and sales through successive products. These these represent a type of car that German car must be bearers of all the core values. makers were not offering at the time: a Admittedly it is possible to place a stronger convertible coupe. They represent more than emphasis on this or that facet, but all the 35 per cent of Peugeot sales in Germany, and 290 CREATING AND SUSTAINING BRAND EQUITY

Peugeot

Masterbrand Dynamism kernel facts of identity Aesthetics (explicit and normative) Sure value

Range differentiation between models and D V segments but each model has to A V A D S embody brand core facets S D A VS with its own emphasis 207 307 607

Figure 11.9 How the brand is carried by its products, each with its own emphasis

carry the central image of the brand future, we must know what drives it, what is (dynamism, aesthetics and value), with its prime reason for existing. emphasis on the first two facets. All these concepts (source of inspiration, Brand globalisation therefore requires a statement, codes and communication double coherence: as discussed above, of the themes) work together in a three-tier pyramid products in relation to the central facets of the that is useful in managing the balance of masterbrand (masterbrand central or core change and identity. facets), but also of each region of the world in relation to the identity of each product itself. l At the top of the pyramid is the kernel of (This point is developed further in the chapter the brand, the source of its identity. It must on globalisation.) Figure 11.9 summarises our be known because it imparts coherence and statement. The BMW 1 series expresses the consistency. core identity of its masterbrand BMW in its l The base of the pyramid are the themes: it own way, and each region of the world must is the tier of communication concepts and respect the identity of the BMW 1 series if the product’s positioning, of the promises there is a desire to construct a truly global linked to the latter. perception of the masterbrand. l The middle level relates to the stylistic code, how the brand talks and which The three layers of a brand: images it uses. It is through his or her style kernel, codes and promises that an author (the brand) writes the theme and describes him- or herself as a brand. It The evolution of a brand needs a direction. is the style that leaves a mark. Considering the brand as a vision about its product category, it is important to know in Of course, there is a close relationship which direction it is looking. The brand being between the facets of the identity prism of a a genetic memory to help us manage the brand and the three tiers of its pyramid. An ADAPTING TO THE MARKET 291

Brand kernel

Culture Brand style Self- Personality projection

Physique Reflection Brand themes, acts and products Relationship

Figure 11.10 Identity and pyramid models examination of advertising themes reveals sponds to a concern or a desire of a particular that they refer to the physical nature of market segment. Alongside these criteria, one products or to customer attitudes or finally to must respect the brand’s identity. the relationship between the two (particularly Brand communication can thus vary in its in service brands). They are the outward facets facets. Over time it seems first to start with the of identity, those that are visible and that lead physique, goes through the reflected image to something tangible. The style, as with one’s and ends with the cultural facet. Benetton first handwriting, reveals the brand’s interior launched its colourful sweaters, then facets, its personality, its culture, the self modernised to appear more dyamic, before concept it offers. Finally, the genetic code, the identifying with a set of universal values roots of a brand, inspires its whole structure (friendship, racial tolerance, the world and nurtures its culture. It is the driving village). This evolution is normal: the brand mechanism. There is, therefore, a strong rela- goes from tangibles to intangibles. It starts as tionship between stylistic codes and identity. the name of a new product, an innovation In Volkswagen’s case, its sense of humour is and later acquires other meanings and the consequence of solidarity because it autonomy. Benetton is now a cultural brand demonstrates the rejection of car idolisation, and addresses a range of moral issues. Nike the cult which leads to a hierarchical ranking moved from product communications to of drivers and therefore to their animosity behavioural values (just do it!). towards each other. The pyramid model leads to a differentiated This idea of levels or tiers within the brand management of change. The brand’s themes provides a tool which allows freedom for the (its positionings) must evolve if they no brand in the sense that the brand no longer longer motivate: it is obvious that Evian had has to define itself by repeating the same to move from balance to youth. All themes themes. The choice of the theme has to inte- tend to wear off and competitors do not stand grate the needs of the times. It is founded on still. The stylistic code, the expression of the the reality of products and services. It corre- personality and culture of the brand, has to be 292 CREATING AND SUSTAINING BRAND EQUITY more stable: it enables the brand to gently Ricci house alongside its worldwide best- pass without disruption from one theme to selling perfume L’Air du Temps. The death of a another. Finally, the genetic code is fixed. creator signals the birth of a brand: respect for Changing it means building another brand, a it demands understanding. An analysis of homonym of the first, but different. This is identity lies more in the history of the brand how, even if the positioning of Evian has than in opinion surveys. The most typical changed with time, from being the water of products of the brand are closely examined babies, to that of the Alps and that of the throughout time: from what unconscious strength of balance, there is a strong sense programme do they seem to emanate? Why that the basic identity has been preserved. does Nina Ricci haute couture sparkle with its Evian never was a water against something, dazzling evening dresses? Why did Mr Robert but a water for something, natural and loving, Ricci find in the photographer David a source of life. It is not for nothing that its Hamilton’s ‘fuzzy’ style a sort of revelation, to label has always been pink: this colour is the point of signing a long-term and exclusive linked to the brand’s kernel, its essential contract with him? What is the link between identity, those traits that are necessary to the the dresses, L’Air du Temps and Hamilton? brand. Without them, it would be another Once the highest point of the Ricci pyramid is brand. known, the problem of the necessary Finally, the idea of different tiers within the replacement of David Hamilton’s style brand gives particular flexibility to those becomes less acute. We know what he was brands which embrace many products. In expressing. Other means of expression will managing these products one must respect achieve this without using fake Hamiltons. their individual position in their own markets. Long-established brands seeking such an They may carry different promises for each overhaul should undergo an inner search product, provided they appear to emanate before projecting themselves into the future. from a common source of inspiration. In this respect, brands work as a superstructure. Taking into account the importance of this Respecting the brand DNA genetic code, how do we recognise it? All brands do not always have this identity basis. Each brand should be seen as a contract. It Some of them have only communication binds, promises and engages each side: the codes, or a style. When one says that Cacharel company and its clients. The brand expects is romantic, one talks about a common style loyalty from consumers but it must in turn be and source of coherence between Anaïs- loyal to them. With time, it is normal that the Anaïs, Eden and Gloria. Its products carry brand should seek to widen its client base by within them a very precise and hidden offering other products and services. In doing driving principle. so, it communicates more and more on its Consumers, clients and even managers are margins and less and less on its core, on the rarely aware of the brand’s pivotal guiding basic contract. force. They readily talk of its visible facets and The source of the current problems of Club of its codes, but without penetrating the Med, which feels it has lost its identity, may brand’s programme. Nor is the brand’s creator also find their source in the forsaking of the aware of it, but carries it subconsciously. He founding principles of the brand. However, it transmits it through his actions and his was not without reason that the product choices. Thus when Mr Robert Ricci died in range was differentiated to fit a particular the summer of 1988, his successor commis- market segmentation which, as customers sioned an analysis of the identity of the Nina were growing older, expected more comfort in ADAPTING TO THE MARKET 293 the rooms and sometimes wanted to or in Oceania, Australia and Scandinavian withdraw from the group and not sit down at countries. Hence the question that arose at mealtimes at the famous eight-people tables. the launching of the third perfume: should What aged in Club Med’s offer is the value one respect the brand contract – what it has system portrayed in its advertising, and which stood for up until now, the basis of its success a part of the population no longer identifies – or put on the market a softer version? with, in particular its opinion leaders. The Revitalising brands also implies the redis- concept of ‘happiness’ in groups is a cliché covery of one’s roots. With time, we tend to and no longer corresponds to the intense need forget the founding principles accumulating for meaning expressed by our society. What compromise after compromise. The Novotel made the inspired strength of Club management called the programme which Méditerranée was forgotten when the brand redefined the orientation of the brand ‘return was restructured to make it international and to the future’. The aim was not to reconstruct renamed Club Med. Indeed, the Mediterranean the Novotels from the good old days but to Sea is not, as one would think, just a reference take up again the historic mission of the to the original location of the vacation brand, updated to meet the needs of its clients villages or to some water sports. It is, on a in the year 2000. symbolic level, a source of life. The intense need for Club Méditerranée lies in its brand kernel: to replenish, to find one’s self again. Managing two levels of branding This drive, remarkably transposed in its time by the famous advertising campaign coined Managing both change and identity is helped by the FCA agency (love, live, play, talk…), by a double level of brand architecture. This is has disappeared and does not seem to inspire how Calvin Klein, Chanel and Volkswagen are the current brand any more, as Club Med has organised. How does one consistently manage become a vacation club like all others, only such brands? They are called source brands in more expensive than most, and no longer the sense that they include products that have promotes a particular vision. their own individual identity and brand name. The pressures that lead a brand astray from In this sense we talk of mother brands and the initial contract by little nudges are daughter brands, or first-name brands. Thus, numerous and create the risk of identity loss. there is Renault but there are also the personal- The management of the Paloma Picasso ities of Clio, Twingo, Megane and Val Satis, perfume brand is a good example of this. each with its own identity. The Renault brand Through the roots of the brand and the is not content just with endorsing, it adds its creator whose name it bears, this brand own values and creates a coherent envi- symbolises a violent Latin character, the ronment. It is no longer an umbrella brand South, a haughty, self-asserting pride. Its because there are two levels to the brand (the codes of red and black are Latin codes, signs of family name and the first name), whereas an a strong character, but such an identity creates umbrella brand includes products without first territorial boundaries for the brand. It is names (such as a Philips TV, a Philips razor, a strong in South America, in the Sunbelt in the Philips coffee machine …). The problem that United States (Florida, Texas, California), and surfaces is that of the balance which has to be in Europe in all the countries where Spain struck between coherence and freedom, family exerts an attraction (Germany, Great Britain, resemblance and individuality. This concerns, France). On the other hand, it has not been beyond the examples just cited, all industrial able to penetrate the Asian market (where the groups that maintain the strong identities of preference is for pastels, tenderness, softness), corporate brands, and that do not want to be 294 CREATING AND SUSTAINING BRAND EQUITY considered as merely a . The One should always start with under- key lies in a systematic approach to the source standing the whole (the masterbrand or house brand, analysing what each daughter brand brand) and how this impacts on its products. brings to or borrows from the whole. 295 12

Growth through brand extensions

Brand extension is on the increase. When Brand extension has become common they wish to enter markets from which they practice. What was reserved for luxury goods have been absent, more and more companies is becoming a general managerial procedure: do so using the name of one of their existing Mars is no longer only the famous bar but an brands, rather than using a new brand name ice cream, a chocolate drink and a slab of created for that purpose. Yet brand extension chocolate; Virgin covers everything from is not a recent phenomenon (Gamble, 1967). airlines to soft drinks; McCain covers French It is inherent in the luxury goods sector: the fries, pizzas, buns and iced tea; Evian now luxury brands originating in haute couture endorses cosmetics. For all those executives have extended to accessories, fancy leather brought up on sacrosanct Procterian dogma goods, jewellery, watch-making, even according to which a brand must correspond tableware and cosmetics. to one, and only one, product, the present In the same way, the first distributors’ situation leads to thorough rethinking; even brands (Migros in Switzerland, St Michael in Mars, for so long the typical example of a Great Britain) covered several differentiated product brand, has become an umbrella brand categories of products. Industrial brands covering very different segments and themselves were extended beyond their initial products. Such development is the direct product type to cover a range of diversified consequence of the recognition that brands activities under the same name: Siemens, are the real capital of a company and a source Philips and Mitsubishi have been using brand of competitive advantage. extension for a long time. Indeed, brand Brand extensions are one of the hottest extension is even used systematically by topics in brand management. They have Japanese conglomerates: Mitsubishi includes spawned a rich and intense body of research. shipyards, nuclear plants, cars, high-fidelity Some experts keep claiming that brand systems, banks and even food under the three- extension should be avoided (Trout and Ries, diamond brand (the visual symbol of 1981, 2000). However, today, most companies, Mitsubishi). even those that were culturally the least prone 296 CREATING AND SUSTAINING BRAND EQUITY to engage in brand extensions, have extended possible to grow the business indefinitely their brands. In fact, as we shall demonstrate, without changing some facets of the brand. brand extension is a necessary strategic move Hence the question, is the essence of the at some point in the life of a brand. It is an brand intact? Does the extension preserve the essential way to sustain the brand’s growth, kernel? Also, what does the extension bring to once other approaches have been explored. the brand equity, to the brand image, beyond Let us remember that growth should be built: growing the business? These are indeed strategic questions. l First, by increasing the volume of purchase Beyond branding itself, extensions are often per capita of present customers of the diversifications, entries into unknown present product (see Chapter 9). markets, with a different product from previ- l Then by and ously (see Table 12.1). As such they are a line extension to increase the brand’s rele- strategic move. vance and address the needs of more specific targets or situations. Line exten- sions are, in fact, proliferating in modern What is new about brand supermarkets. extensions? l By the globalisation of business in coun- Why has brand extension become such an tries offering high growth opportunities important topic? In fact, most companies (see Chapter 17). have discovered the virtues of brand exten- l By innovating to modify the competitive sions only recently. Certainly most luxury situation, create new competitive advan- brands have thrived through extensions, and tages or open new markets, thus benefiting so have Japanese brands, and indeed Nestlé, from the pioneer advantage. At this time but in North America and Europe most the question of naming the innovation marketers have been trained in a ‘Procterian’ becomes acute. Should one extend the vision of marketing. At Procter & Gamble, brand portfolio by adding a new brand (as since its foundation, a brand has been a single when the Coca-Cola Company added Tab product with a benefit. As a consequence, the to its portfolio) or call it instead by the rule has been that new products should form a name of an already existing brand (Diet new brand. P&G’s Ariel (known as Tide in the Coke, for instance)? United States) is a specific low-suds detergent. Other detergents have other brand names When an innovation is not in the core market such as Dash and Vizir. This practice is thor- of the brand, it means that the brand will oughly product-based. extend out of this core, a process also called The brand extension perspective introduces brand stretching. This is why brand extension two radical modifications. First, it maintains is such an important topic: it is about the that a brand is a single and long-lasting redefinition of the brand meaning. It is not promise, but this promise can or should be

Table 12.1 Relating extensions to strategy Products Markets Present New Present Intensive growth Market development New Market extensions Diversification GROWTH THROUGH BRAND EXTENSIONS 297 expressed and embodied in different competences required to meet competition in products, and eventually in different cate- the new market? At what price? With what gories. ‘Palmolive’ represents softness, and delays? At what cost? Is it worth it? Is it from this perspective it makes sense to have sustainable? The brand and business Palmolive hand soap, dishwashing liquid, perspective promoted by this book calls for a shaving cream, shampoo and so on. reinsertion of brand extension issues into the Second, it asks us eventually to redefine the context of corporate strategy. historical brand benefit by nesting it in a Finally, it is an involving topic because it is higher order value. Brand extension exem- generally tied to a new product launch, which plifies the move from tangible to intangible as for all new products commands time, values, from a single product-based promise to energy, allocation of resources, and creates a a larger brand benefit, thus making the brand situation of risk. This risk is increased by the able to cover a wider range of products. Is fact that unlike line extensions, brand exten- Gillette simply the best shaving product, or sions lead the brand into new and unknown ‘The best a man can get’? as it says in its adver- markets, which may be dominated by tising baseline? This latter brand definition entrenched competitors. There is not only a easily backs up the Gillette Sensor, or Mach 3, straightforward financial risk should the aimed at continually increasing the quality of extension fail, there is also potential damage a man’s shave. It allows also the brand to grow to the image of the brand, in the distribution by leveraging its reputation and trust to channels, among the trade, and among end introduce a line of male toiletries, a profitable, users. A good example is the problems growing market. encountered by Mercedes when it launched Brand extensions are an emotional topic its new Class A, a radical downward because they are the first occasion on which extension, after it decided to go where the the identity of a brand is redefined, when all market was and compete against Volkswagen. the unwritten assumptions that may have The car could not pass the ‘elan test’, thus been held for decades about the brand within destroying the sacrosanct image of Mercedes the company are questioned. In addition, as one of the most secure cars in the world. unlike mere line extensions, brand extensions The whole conception of a Mercedes car had are associated with diversification, so there is to be redefined. One does not move easily a sizeable impact on the company as a whole. from a high historical competence in manu- Research on brand extension has been so facturing large sedan cars with rear wheel obsessed by the brand itself that this has drive to making small compact cars with front tended to foster a tunnel vision in marketing wheel drive. Also for the first time, one could circles. The only focus of that research was to buy a new Mercedes for around s20,000. determine consumers’ attitudes to various This example illustrates the fact that brand possible extensions for a specific brand (Aaker extension decisions should not be looked at and Keller, 1990). This is why so many only through consumer research. As a rule, companies have gone through a phase where when expensive brands stretch downward, they extended their brands in all directions, their existing clients are frustrated. They feel just because the consumers said they could do less exclusive, therefore their attitude to the it. This phase has ended; this early research extension is negative (Kirmani, Sood and neglected the company. It is a form of tunnel Bridges, 1999). However consumers are in that vision to focus on the brand only and exclu- respect quite conservative. They do not have a sively. Diversification is a strategic concept, full picture of the Mercedes situation, and which has implications for the whole finally they do not have a long-term view. company. Will it be able to learn all the new Very few people knew, for instance, that the 298 CREATING AND SUSTAINING BRAND EQUITY average age of purchasers of the Class C, at brand extension. Some of the models and that time the entry-level Mercedes, was 51. rules presented in these pioneer studies Also, very few people knew that unless the should be questioned if not forgotten. company was able to produce more than a million cars rapidly, its production costs would be too high to sustain modern compe- Brand or line extensions? tition even in the premium segments. Higher production costs provide no value to When should one speak of line or of brand consumers. extension? We developed the case for line Managing brand extensions is about identi- extensions in Chapter 9. This is a necessary fying the growth opportunities. It aims also at step in growing the brand through: maximising the chances of success of the new product launch, while increasing the value of l An extension of the line to enrich the basic the parent brand. This entails managing the promise through diversity (like providing whole product range: to maintain its equity. new tastes, new flavours for a jam brand or Mercedes reinvested to innovate in the high- a crush brand such as Minute Maid). end segment of its market through the new l A finer segmentation of a need (like the Class S and now a spectacular top-end model. many variants of each shampoo brand On this occasion a naming problem arose: it according to the type of hair, age of was not called ‘Class Y’ but received a name, a customer, or kind of scalp problem). brand: Maytag. Since the first edition of this book in 1991, l Providing complementary products. As the brand extension field has changed. mentioned in the discussion on line brand Companies have all gained experience in architecture (Chapter 13), a brand might extending their brand. Some have made timid provide all the products involved in solving but successful extensions (Mars ice cream), a specific consumer problem. A brand others have experimented with at least 10 fighting hair loss would not limit itself to extensions, which may have all failed, as did its first product, a shampoo for instance, Becel extensions, Unilever’s anti-cholesterol but also provide a gel, a hair dye and so on. margarine (Kapferer, 2001: p 222). All acknowledge the necessity to reintroduce What is noticeable is that through these line more focus, and more corporate parameters extensions, the brand aims at intensive into the process. The decision to extend the growth. It deepens its problem-solving ability brand is a strategic one, and relying on more or less to the same customers, for the consumer’s attitudes to possible extensions is same need and consumption situation. This is now held to be seriously insufficient. Decision not viewed as a diversification (which grids have to encompass other dimensions. In involves different clients and different brief, because a brand could create an products). extension, it does not follow that it should do At the other extreme no one would quarrel it. To a far greater extent than it has been said with describing as brand extensions, rather or written, it is necessary to assess the compet- than line extensions, Virgin Airlines, Hewlett- itive status of the extension and of the Packard’s entry into the digital photo company behind it. The question of what the business, the Mercedes Class A, the Porsche extension really brings to the business and to Cayenne (its entry into the 4 × 4 market), the brand itself has also become more acute. Yamaha bikes (from a company originally On an academic level, recent research is known for its musical instruments), the now revealing the limits of early studies on Caterpillar fashion line, Salomon new surf- GROWTH THROUGH BRAND EXTENSIONS 299 boards (for the Hawaiian and Australian water market. The famous Perrier bubbles, beaches), Ralph Lauren domestic paint, Evian which are the essence of the brand, prevent cosmetics, Merlin Gerin moving from the brand from appealing to those who like switchgears to electrical distribution products, to drink less bubbly water with meals. This or GE extending from electricity to capital extension had finer bubbles (like San investment. Typically in such brand exten- Pellegrino) and a finer and more elegant sions, the brand moves to another remote bottle. category, in which it is open to question whether it has the ability to deliver the same How should these extensions have been benefit, and therefore to stay the same. The described? At Nestlé Water, the owner of buyers may be different, or the same: the first Perrier, they are called line extensions for the to buy the Porsche Cayenne were existing sake of simplicity. However, despite the fact Porsche owners who now have two Porsche that all these new products are basically water, cars. In fact most of the early research on the soft drink entry qualifies as brand brand extension has focused on remote exten- extension more than the others. It aims at a sions, far from the prototypical product. Some market dominated by other competitors, of these brand extensions are more than which is subject to other success factors, and is simply brand extensions: they are real diversi- aimed at different consumers. fications. The company wants to develop The ability of any product given the Perrier itself in new categories that may become name to meet the demands of the soft drink dominant in its future sales. Certainly this is market is surely a long-odds bet. Here not the case for Caterpillar, but it could be the promotion and place are essentials. Also, the case for HP, stuck between Dell and IBM in its brand evokes less fun than any other soft core activity. Few people recall that Findus, drink brand. This is why the decision was the name for frozen food, comes from ‘Fruit taken to have Perrier only endorse the Industry’, the core original business of that product, the big name on the bottle being Scandinavian company. ‘Fluo’. This refers both to the very odd colours Where does line extension end, and where of the bottle and to the fact that it is fluo- does brand extension start? Perrier is a case in rescent in the darkness, a typical situation in point. To grow its sales the brand has discotheques and late-night bars. However the launched three new products in three years: main question will be the ability of Nestlé Water to cater to these new circuits of distri- l In 2001 it launched its first ‘Pet’ bottle, bution and consumption. nicknamed ‘rocket’ because of its specific For Aaker and Keller (1990), brand shape. It was the first time since the brand extension refers to the use of the name of a creation (in 1847) that a non-glass bottle brand on a different product category. This had been created. It was aimed at mobile was the case when Bic went worldwide from consumers and out-of-home consumption ballpoint pens to disposable lighters, situations (such as stadiums and offices). disposable razors, and even stockings and hosiery in central Europe. One should then l In 2002 Perrier Fluo was created: it is an speak of line extensions when the brand aromatised water in a plastic fluorescent- launches new products in the same category. coloured small bottle. It is aimed at the Therefore Diet Coke should be called a line young and competes in the soft drink extension. Interestingly, at the Coca-Cola market. Company, Diet Coke is called the second l In 2003, Eau de Perrier was launched to try ‘brand’ of the company, which says it has two to achieve better penetration in the table worldwide leading brands: Coke and Diet 300 CREATING AND SUSTAINING BRAND EQUITY

Coke (called Coke Light in Europe). These licensing as a way of circumventing the differences in perception are not an academic problem: for example Evian Affinity (a problem. They hint at the fact that, although cosmetic line) is managed by Johnson & the product may be the same, the market, the Johnson. The other possibility is to outsource. ‘category’ may be different. Since the emer- It is a classic way of moving more quickly and gence of ‘category management’ we know benefiting from low import prices. However that category does not mean product (Nielsen, this often means reducing the perceived 1992). Therefore, Perrier Fluo would be difference between brands, if most of them considered as a line extension by those who outsource to common OEM suppliers. focus on the physical resemblance with the Another implication concerns the branding core product of the parent brand: basically it is strategy itself. Should one give a brand name the same water. For us, it qualifies as a real of its own to the extension, thus moving to a brand extension, for it aims at a different double-level branding architecture (that is, an category of need, and of usage situation, and endorsing or source brand architecture)? It is of users, and of competition. The same would noticeable that Perrier is very discreet about hold true a fortiori for Evian spray, which Fluo, as all endorsing brands tend to be. vaporises water onto the face. The product, Experimental literature shows that giving the created in 1968, holds the same water as any product a different name prevents dilution of Evian bottle, but the need and usage are very the parent brand image, especially in the case different as the channel of distribution. of downward extensions (where the product As for all concepts, the best tactic is also to goes from a premium price to a mainstream realise that they are relative, and that they price) (Kirmani, Sood and Bridges, 1999). One cannot obey simple yes/no cut-off points. One should therefore distinguish ‘direct exten- should acknowledge that there are both sions’ (without a specific name) and ‘indirect highly continuous extensions, which appar- extensions’ (with a specific brand name in ently capitalise on the real or perceived know- addition to the parent brand) (Farquhar et al, how of the brand (as with HP’s entry in the 1992). digital market), and highly discontinuous extensions, which do not capitalise on this know-how but on a mission, a set of values The limits of the classical driving all the behaviours of the brand conception of a brand whatever the market it decides to compete in. We analyse the Virgin case below. Most brand limitations are self-imposed. This This scale of discontinuity has a lot of is why brand extension took so long to implications. It is a measure of the risk taken emerge as a normal practice of brand by the corporation itself. The current brand management. This is also why some authors literature focuses heavily on the intangible still hold it in disrepute. These prejudices are facets of brands, probably because they are based on a classic conception of brands, treated as intangible assets in accounting which reigned over marketers and all business terms. But this is a semantic confusion: a schools for almost a century. However, it performance-based brand is also an intangible cannot resist the conditions of modern asset. Overlooking the performance source of markets. brands leads us to underestimate the weight of The classic conception of branding rests on corporate abilities. Some companies just do the following equation: not have the know-how or resources necessi- tated by the extension of the brand into 1 brand = 1 product = 1 promise specific categories. Certainly they can use GROWTH THROUGH BRAND EXTENSIONS 301

For instance, in the Procter & Gamble becomes rich with features, images and repre- tradition, every new product receives a sentations which give it its style. The brand specific name, which is totally independent thus has personality along with know-how. from the other brands. Ariel corresponds to a After designating an origin (the manufac- certain promise, Dash to another, Vizir to a turer’s brand), or a place of sale (the third. Mr Proper is a household detergent, and commercial name), the brand conveys after nothing else. Let us compare this policy with some time the signs of non-material elements, that of Colgate-Palmolive: Palmolive is a which take root in physical production (the toothpaste, a soap, a shaving cream and a products) and iconic production (advertising dishwashing liquid; Ajax is a scrubbing images, logos, symbols of visual identity). The powder, a household detergent and a window relationship between the brand and the cleaning liquid. product is therefore reversed: the brand is no The classic conception of branding leads to longer the name of a product, but the product an increasing number of brands. If a brand itself carries the brand in a sense that it reveals corresponds to a single physical product, to a the exterior signs of an interior imprint. The single promise, it cannot be used for other brand has transformed the product, endowing products. Under this conception it is a rigid it with both objective and subjective features. designator, the name of a product, a proper In this reversed perspective, there is no noun, just as Aristotle is the name of the other limit to brand extension than that of famous Greek philosopher (Cabat, 1989). It the ability of the brand to leave its mark on a names a specific reality, as a commercial name new category of product, ie to segment it is linked to a specific company. according to its own attributes. Bic, ignoring Under this conception of the brand, few the dissimilarity of products, left its mark by extensions are possible. The brand is in fact creating sub-segments of simple, cheap and the name of a recipe. All that can be done is efficient goods wherever these attributes are range extension, that is a variation around the valued. Bic failed where these were not valued central recipe either by: – in the perfume segment. The classic conception of branding is l ameliorating the quality of its perform- nominal: the brand is the name of an object. If ances. The brand then gets a series one looks beyond this object, and wonders number: for example Dash 1, then Dash 2 what project it conveys and what vocation it and Dash 3; embodies, one can grasp the full meaning of the brand, its etymological meaning (the l increasing the number of sizes in order to brandon), the exterior sign of an internal adapt to the changing practices of the transformation, on behalf of a key value (the consumer (packet, tub, mini-tub); brand essence). l increasing the number of varieties (Woolite Thus, the classic conception of the brand for wool and Woolite for synthetics). takes the history of the brand for its long-term reality. But, although the brand originates The classic conception of branding is actually from a product, it is not the product. The limiting. It does not differentiate the history of brand is the meaning of the product. the brand from the reality of the brand. Of Products cannot speak for themselves. The course, a brand originally begins with a new consumer is perplexed in front of a tin of single product which is better than the compe- brandless frozen lasagna. How can he or she tition, thanks to the know-how of a firm. foresee the satisfaction that will be derived With time, and through communication, from this tin? The brand reveals the intention packaging, advertising, etc, the brand of the maker: what values did they try to put 302 CREATING AND SUSTAINING BRAND EQUITY into this tin? What did they want to introduce Lacoste, one is casual when smartly dressed, in this product: the love of tradition, an and smart even when dressed casually. Lacoste example of work well done, a respect for is beyond fashion: it is a classic. From this modern tastes, the will to find a compromise perspective, Lacoste can brand shoes or between fat and light food? leather goods as long as they preserve the Extensions cannot be made in all direc- brand’s originality; it must not brand products tions. The direction is defined by the brand that have already been seen. The other itself. A brand works as a genetic programme. condition is to brand only products which It carries the code of the future products embody the values of the brand: flexibility, which will bear its name. casualness, extreme finish, durability, What does this new conception of branding distance from fashion, unisex use, etc. What change for brand extension? According to the enables Lacoste to brand a product is not the classic conception, brand extension barely physical fit, but whether the product belongs goes beyond very similar products. The key to the Lacoste culture and high standards. concept is product or usage similarity. This This new perspective opens new sources of does not explain how perfumes by jewellers – growth for brands. Instead of looking at them- Van Cleef, Bulgari, Boucheron, etc – are selves as product brands, they become successes. It reduces brand identity to one concept brands, defined by a set of values and single facet, the physical. This logic would not by a single instance (Rijkenberg, 2001). exclude the idea of a Swatch car. Indeed, brand logic is additive. The brand is The larger conception of branding leads to the sum of its attributes: it is revealed by the extensions out of the initial category. The products that it covers. The case of McCain is brand is different from the original product. It typical. The brand generally penetrates new is a way of dealing with products, of trans- countries through its frozen fries (it is actually forming them, of giving them a common set the main supplier to McDonald’s). They later of added values, both tangible and intangible: introduce a frozen pizza (‘deep pan’, typical of this way, a Swatch car is possible. An alliance the American way of life and of eating). They with a company which has the technical then launch buns to aim at the snack market. know-how (Mercedes for example) suffices. McCain also launched an iced tea to penetrate This alliance, eventually made explicit this high-growth market. Brand identity is through co-distribution, will give reassurance actually uncovered by the sum of all these as to the car’s quality and free consumers’ products. McCain’s identity in Europe is that desires. of ‘American fun and generous food’. The case of Lacoste helps to compare the Generosity is both a relationship trait and a operational consequences of each of the two physical trait: all portions should be bigger conceptions of branding. Lacoste gained its when signed by McCain. Hence the surname reputation in 1933 through its tennis shirt ‘deep pan pizza’ or the higher cap of its iced made out of knitwear (called the 12 × 12), so a tea (surnamed Colorado to refer to a mythical logical extension of Lacoste could be made view of America). Future products may come not only toward other knitwear products, but from anywhere as long as they embody this also to other polo-shirts, sportswear and enlarged identity of the brand, and fall within textiles in general. Under this conception, the territory of legitimacy the brand has shoes and leather items are excluded (apart created step by step, through each of its from tennis shoes), since they do not use the product launches. same know-how as textiles and knitwear. History should not determine the future. In Under Lacoste’s broader brand conception, order to remain up to date, the brand must the crocodile signals a typical attitude: with also be able to evolve; this is achieved through GROWTH THROUGH BRAND EXTENSIONS 303 extension towards products which lead it in ability to access a critical size and visibility. new directions and modify its meaning. Although not always successful, launching a Nestlé, known for dry foods (its prototypical perfume under one’s name is a classic, if not products are instant milk and chocolate), did the only, way to build the brand and business. not enter the ultra-fresh market of yoghurts Interestingly, this is the argument used by an just to increase its turnover. The move was as yet little-known designer brand that sued also intended to nurture its image thanks to P&G for damages when the latter decided to this more modern segment, capable of stop its plans of launching a perfume under its updating its traditional and classic image brand name. Without this expected boost, traits. would the brand meet its growth and prof- itability objectives? As long as growth and profitability can be Why are brand extensions achieved through the present customers and necessary? products, or through minor variations in these products and their benefits (also called Brand extensions are necessary. They are a line extensions) there is no need to extend. direct consequence of competition in mature Globalisation in search for the new areas of markets and of the fragmentation of media. consumption in the world is also a natural The only justification for brand extension is route, but this does not solve the problem of growth and profitability. growth in domestic markets, which are often Brand extension is not new: it is the core of saturated. Brand extensions allow brands to the business model of luxury brands (see page compete in less saturated markets, with a 95). It can increase the power of the brand and perspective of growth and profitability, as its profitability. Typical margins in the ready- long as the brand’s assets are assets in these to-wear premium market are 53 per cent, but markets. That is to say, the brand image must the average is 71 per cent for bags and 80 per be able to act as a driver of purchase in the cent for watches. This is why fashion brands other market. extend so quickly to these categories. As to Brand extension relies on the ability to perfumes, sold under licence by l’Oréal, create a competitive advantage by leveraging Procter & Gamble or Unilever, they provide the reputation attached to the brand name in royalties, and a considerable boost in interna- a growth category, different from the brand’s tional visibility to the extended brand. This is present categories. This bold move, which why extensions are strategic in the fashion often surprises the competition in the and luxury sector. No name can survive category of extension, makes five crucial without them. The first thing a capital assumptions: investment fund does after having bought a name is to extend the brand. What would l The brand has strong equities (strong assets): Armani, Ralph Lauren or Calvin Klein be it is strongly associated with a number of without their licences and extensions? customer benefits (tangible or intangible) Often, perfumes become the most visible and it inspires a high level of trust. part of the fashion brand, because of the high advertising budgets involved. In addition the l These assets are ‘transferable’ to the new perfume increases the brand awareness and and attractive destination category, that of dream value, a prerequisite before other the extension. Its buyers will still believe extensions. In fact, without a perfume, can a and acknowledge that the new products designer brand succeed and be profitable? (that is, the extension) are endowed with Success in modern competition means the the benefits associated with the brand. 304 CREATING AND SUSTAINING BRAND EQUITY

l These benefits and brand values are very as a quasi-branded house. This is why relevant to that new category (extension). brand transfers have become so frequent. In fact, they should segment it in a previ- The goal is to capitalise on a single name ously unforeseen way, and leave the and to nurture it by a constant flow of competition unable to react rapidly. innovations. l The products and services (extension) l The fight against distributors’ brands that named by the parent brand will deliver a themselves are mega-brands and are prac- real perceived advantage over the compe- tising extension (as is, for example, tition, both consumers and the trade. President’s Choice) has called for the reor- ganisation of products and innovations l The brand and company behind it will be under a small number of banner brands. able to sustain competition in this new category over the long run. This refers to l In 1995 Nestlé decided to extend its name the question of resources needed to acquire into the yogurt market. Until then the leadership in the market in order to remain group had been present in this market in it profitably. through a regional brand, which was Chambourcy in Europe. However, the As a consequence the most important part in competition with Danone was leading to the brand extension process is the selection of rising marketing and advertising the destination category. This requires the investment. As a result it was decided to company to assess various strategic param- leverage the Nestlé name, thus enabling eters: the intrinsic attractiveness of the new the products to benefit from all the trust category, the company’s ability to acquire and equity attached to this name, and from leadership in this category, and its ability to the advertising investment in other segment it profitably. These factors are to be product categories where the group was found in the brand image, but also in the already competing under its house brand. company’s more general abilities and All products were transferred from resources. Chambourcy to Nestlé. In the meantime A second set of reasons that has pushed this extension provided the opportunity to corporations to extend their brands is more nurture the brand image, by adding defensive, or tied to efficiency and produc- important facets that had been lacking up tivity factors: to then. Born in the larder, in the realm of dry goods, Nestlé as a brand was not asso- l Facing higher media costs, companies have ciated with modern chilled and fresh felt the limits of their former brand archi- products. These represent the future of tecture and wish to create more encom- modern food. It was necessary to reasso- passing brands, so called mega-brands, in ciate the brand with these values, in order which a larger product portfolio can be to avoid losing some relevance and equity. nested. Most companies that started with a product brand architecture have realised l Some brands are in declining product cate- the impossibility of sustaining growing gories. To avoid disappearing with their advertising allowances behind each product they must move to another product or brand. They have transferred category. Why did Porsche enter the 4 × 4 some of these formerly independent market in 2003? As we shall see later, there products or lines to a single mega-brand, is a danger in resting always on the same which acts either as an endorser (Kraft or product, even if it is continually face-lifted, Nestlé) or like a source brand (l’Oréal Paris), revamped and renewed. All over the world, GROWTH THROUGH BRAND EXTENSIONS 305

data show that the share of the coupé in home services including insurance and the overall car market is decreasing. If financial services to the customer base. This Porsche stayed in that niche without naturally entailed a change in name to reacting to this trend, it would be facilitate consumer acceptance. competing in a shrinking market. In addition, the 911, Porsche’s keynote l Labeyrie is a brand that originated in the product, was coming to look at odds with ‘foie gras’ sector. This is a very cyclical the trend in values among elite and niche market, where most sales are made in three car buyers worldwide. Some of their newer months of the year. To be able to advertise values are captured by the 4 × 4 category. It and gain a competitive advantage, Labeyrie remained to Porsche to build a 4 × 4 which decided to enlarge its scope and extend to would be a ‘real’ Porsche at an acceptable other luxury foods such as smoked salmon price. The only way of producing one at a and caviar. The resulting increase in its realistic cost was to capitalise on the sales volume made television advertising a platform of the Volkswagen 4 × 4. realistic investment. Another example is that consumption of l Many companies make a brand extension brown tobacco is strongly declining, a sure because they do not have the resources to threat for Gauloises, the prototype of dark sustain two brands nationally and interna- cigarettes. After decades of uncompro- tionally. This is why in Spain Don Simon mising battle against blond tobacco, the sells wine, gazpacho and orange juice company had to make a hard choice. under the same name. This small company Should it let its banner brand die? It invests all its resources in productivity and decided to extend it into the blond quality. It fights head on against Tropicana category, creating Gauloises Blondes, in the juice sector, and has now extended which now represent the largest part of its its market throughout Europe. We shall see sales. later that although they are governed by l In the business-to-business market, the necessity, such decisions may prove later to logic of continually increasing customer be a real blessing. value leads in itself to brand extension. l Some sectors are under growing advertising Take a service provider, say a company constraints: cigarettes, spirits, beers and wine providing cleaning services for hospitals. are all limited by law in their types of adver- How can it increase its sales to its core tisement and sponsorship. They have to clients? Rooms cannot be cleaned two create brand extensions to circumvent these times or three times a day. There is no other limitations. Such extensions actually act as avenue than to propose extended services, surrogate brands. The most known and for instance supplying flowers for hospital successful is Marlboro Classics, an offshoot of rooms, lobbies and offices. This is another the cigarette brand, which has become a real competence, an extension. outerwear fashion brand worldwide. It has a British Gas faced the same problem after very specific design, and exclusive stores and the deregulation. How could it defend its concessions. This is a typical case of a business against all the new gas providers? successful licensing approach. It realised that its strength was its customer The Camel Trophy did not survive the proximity: its engineers actually visited introduction of laws forbidding any associ- millions of households. It was time to ation of cigarette brands with sports spon- leverage that competence and competitive sorship. Pharmaceutical laboratories are advantage, and provide an extended set of another typical case where extension makes 306 CREATING AND SUSTAINING BRAND EQUITY

it possible to increase competitiveness even Caterpillar clothes and shoes were able to though the core product is tightly express the exact values for which the constrained. In all countries, pharmaceutical Caterpillar was known: tough work, relia- laboratories have to make a choice: whether bility, security and so on. to produce freely available over-the-counter Similarly, why did Michelin extend its (OTC) products, or products that are only brand from tyres to guidebooks, over a available on a doctor’s prescription. OTC century ago? The first Red Guide was products are allowed to be advertised, but produced to tell readers where to find a garage they are generally not prescribed and they in the event of a breakdown. Soon it came to tend to be expensive. Part of the cost of be aimed at inducing car owners to travel prescription drugs is usually reimbursed more, with tips about hotels and good restau- through the national security system or by rants. It was a great example of relational health insurers, so they can cost less to the marketing before the word was ever invented. end-users. However, manufacturers are Recently, Michelin, working with a partner, generally not allowed to advertise The Licensing Company, has created a dedi- prescription drugs to consumers (although cated company, Michelin Life Style Limited, there are some exceptions: specific types of based in London. It is marketing snow chains direct-to-consumer advertising are often for cars, a product with obvious marketing permitted for asthma products, for instance). synergy with tyres. There are plans to extend In France, the market leader for paracetamol the brand into sport equipments such as ski is called Doliprane. This is a prescription shoes and running shoes, areas in which the drug, so consumers can be reimbursed for its use of rubber can increase comfort and cost, but in addition it can be bought freely security. These are the two key benefits of without a prescription. As a prescription Michelin tyres. drug, however, Doliprane is not allowed to In a slightly different way, My First Sony advertise. To circumvent the regulations it and My First Bosch are tactical extensions, launched two extensions, Doli’rhume and designed to create early familiarity with the Doli’tabs (‘rhume’ means catching a cold in brand among soon-to-be clients. French). These two variants could be adver- tised, because they are only sold in the OTC market. The heavy advertising campaigns Building the brand through not only boosted the sales of the two new systematic extensions: Nivea products, but had a positive spillover effect on the core product. In 2003, the three giants Procter & Gamble, Henkel and l’Oréal bid against each other to What should one think about the Caterpillar acquire Nivea, putting in very high offers – a line of shoes and clothes aimed at the youth sign of their extraordinary confidence in the market? Was it necessary for the tractor brand growth potential of the company and its to extend itself in this way? Of course not. brand. What an astonishing outcome for a What then was the rationale? When asked German company founded in 1912 in that question, the CEO answered that it was Hamburg on a single product: a little round, intended to increase the share value by giving blue metallic box containing skin moistur- more visibility to the brand name, beyond the ising cream, which was treated almost like a trade circles in which it had previously been medicine. known. Many small investors now buy shares, However, the company and its brand were and familiar corporate names act as symbols split up after the war, and like other German of value to the lay investor. In addition, brands (such as Persil), its assets were given to GROWTH THROUGH BRAND EXTENSIONS 307 other companies across the world as war available at all sales points, explaining its damages. This is why the brand had to be penetration into all social environments. Next rebuilt with great patience, with the assets come the extensions, in a pre-established being bought back whenever and wherever order, to build the brand: first care products, possible, such as in the United States in 1974. followed by hygiene, then hair products, and In 2003 Nivea was the world’s leading skincare lastly make-up. The daughter brands expand brand, with a turnover of s2.5 billion and an these categories, with their specialisation average growth of 15 per cent per year. The based on age (Nivea Baby), purpose (Nivea brand’s growth has been achieved entirely Sun), gender (Nivea for Men), and so on. through progressive, carefully planned exten- However, if it is to maintain itself, the brand sions repeated in country after country. As we must work tirelessly to recapture its relevance, shall see, each extension constructs a specific and this is why it must innovate. Each adver- facet of the brand while penetrating new tisement for a Nivea daughter-brand now markets or new needs, all the while remaining places the emphasis on innovation. But even faithful to the brand’s heritage and key values. the prototype has needed an update: this has Nivea provides a good example of well- been the role of Nivea Soft, with its white box, managed systematic extensions. The lifespan as modern generations look for a cream which and growth of this world-leading skincare is less greasy and penetrates the skin more brand can be explained through two key quickly. Nivea Soft is bringing the brand’s factors: the modernisation of the prototype foundation up to date. product, Nivea cream, in its round blue box, Extensions very soon came to form a part of and systematic brand extension via daughter Nivea’s business model. An analysis of its brands (which Nivea calls ‘sub-brands’). brand launches in all countries – from the The little round box is the prototype of United States to Russia and China – reveals a Nivea, and carries the brand’s values. In every fixed, well-planned pattern of development. country it is introduced first, and made The brand is launched in each country using

NO GO

Beauty

Face DEO Hand Vital

N

O O

Nivea Nivea G

Body For men G

Cream Soft O O

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Sun Baby Hair care Lip care

Bath care

NO GO

Figure 12.1 The Nivea extensions galaxy 308 CREATING AND SUSTAINING BRAND EQUITY its cornerstone (founding, prototype) daughter brand. In this respect, the Nivea brand product, portraying itself as a healthcare is also a sort of branded house (source brand) brand. Next follows Nivea Visage, a sub-brand with two clear brand levels, even though the which is key to its long-term business devel- mother level is dominant in this case. opment. Nivea Visage is the perfect symbol of Indeed, each daughter brand has its own care: we entrust our faces to it. personality, and this is a deliberate decision. After that follow the daughter brands Furthermore, the aim of each extension is to judged to be most relevant for each different provide not only a deepening of the core country, deepening this role and mission: competence (loving care for the skin) and Nivea Hand, Nivea Body, Nivea Sun, Nivea Lip greater penetration of the category, but also Care, and three brands that are segmented by specific components of the overall image. For customer type: Nivea for Men, Nivea Vital (for example, Nivea Sun is where the family and the older market) and Nivea Baby (formerly protection aspect is communicated, and so known as Babyvea). The next to arrive are advertising for Nivea Sun shows mothers and hygiene products, via the Nivea Deo and children, and fathers and children, together. Nivea Bath Care daughter brands. Finally, Likewise, the final extension – the one these are followed by Nivea Hair Care and farthest from the core of the brand – is Nivea Nivea Beauty. Beauty. By now we have come a long way Thus, the order of entry in each new from long-lasting products, simplicity and country is always carefully planned: care harmony. In this category, the key words are products first, followed by hygiene, then hair accelerated range renewal (four per year), the products and lastly make-up. Similarly, game, fun, seduction and so on. However, in women’s care products come before men’s: highly developed, sophisticated countries this Nivea Visage is always launched before Nivea extension is necessary. It brings young girls to for Men. Nivea’s philosophy is that each Nivea who would not otherwise have come, country organisation is free to choose to and who will subsequently try out other launch a daughter brand, depending on the products from the range. It also adds a available potential in that market. However, necessary touch to the brand image: more Nivea Visage is of key importance. For modernity and ‘fashion’. example, although the care products market We can therefore see that under this system, in Brazil is small in comparison to hygiene daughter brands are not extensions in the iter- products, the brand construction order is still ative sense, as they would be for a hypo- maintained. After all, Nivea is not Dove. The thetical brand X asking itself what else it latter (Unilever) brand is based on hygiene could do. In reality, they are the means (with as its core product a soap containing 25 through which the brand’s ‘big plan’ takes per cent moisturising cream), but is now shape. Extension presupposes the existence of successfully expanding into the entire a long-term vision. Before sinking the pillars hygiene and beauty market worldwide. for a bridge across a river, one must first have The brand architecture is an umbrella, in the picked a clear destination point on the other sense that each daughter brand is named side. These extensions are not extensions in descriptively, and thus represents a statement of the traditional sense, but rather components the brand’s values as they pertain to that of a pre-planned whole which accumulates its category. However, note that the logos of each meaning, coherency and scale through them. daughter brand are not uniform. This tiny As with any new product launch, the key difference makes the brand open, living and question is that of perceived distinctiveness non-monolithic. Furthermore, each logo from the existing competition. Of course, the reflects a personality and values specific to the brand brings its own intangibles and image GROWTH THROUGH BRAND EXTENSIONS 309 equities, but they are not enough on their major source of threat: pharmaceutical labora- own: a physical basis for differentiation is tories. These have the potential to innovate in needed. This is, therefore, where innovation cosmetics, thus endangering l’Oréal’s market comes in: share. This threat was exemplified by Johnson & Johnson launching a new active ingredient l Nivea Visage launched Patch in Europe (the Retinol in a number of its brands (such as fruit of an alliance with the Japanese firm Neutrogena and Roc). Kiaoré). L’Oréal bought a niche brand called La Roche Posay (LRP), named after a town l Nivea for Men provides more care during known for its dermatological water and spa. shaving. The town hosts more than 10,000 patients per l Nivea Vital is developing the concept of year, including about 3,000 children as young mature skin. as five months. LRP’s business model was based on medical expert prescription. When Lastly, as with any system, there are certain working with dermatologists, it takes two or no-go areas – such as, for example, anti- three years before any new product can safely cellulite products. This is not because no be introduced to the shelves of pharmacies. market exists: it does exist, and it is a thriving But the brand faced growth problems: one. Rather, it is because none of the existing products work well. To enter this area with l It was imprisoned in its therapeutic niche, another product that did not really deliver its and limited to patients rather than the promise would therefore be to break the link general public. of consumer confidence in Nivea –and more l It was remote from the public. A user might than any other brand in its sector, Nivea be satisfied by the performance of, say, wants to be the brand of confidence. Antelios XL (an LRP product prescribed by There are many examples of companies that dermatologists), but without another have built their meaning around successive prescription, he or she would not buy a extensions. For example, the Canadian different LRP product. company McCain has three divisions, frozen fries, pizzas and soft drinks. In high-potential l As a consequence the brand was below the countries, it enters by means of frozen fries, minimum critical size. LRP sold 560,000 then after three years launches its pizzas, and units in 1998, while it needed to sell at least lastly soft drinks (for example, Colorado iced 1 million units. tea). McCain is thus no longer a fries, pizza or soft drinks brand, but instead symbolises North L’Oréal’s strategy is to build its growth on truly American cooking (rich, plentiful, playful, global brands, and this requires a minimum modern, relaxed) in the eyes of non-American sales level of s150 millions per brand. LRP was consumers. This process of scope enlargement intended to be the eleventh global brand of takes time, and presupposes that the brand is the l’Oréal Group, but as it was, it was not able to carry it off, as we shall see below. easily exportable. To thrive against modern competition it is necessary to move quickly in global markets with promising growth Extending the brand to potential. L’Oréal’s target markets were internationalise it Europe, Brazil and Argentina in 2000, Scandinavia and Asia in 2001, and India in As world leader in cosmetics and beauty, 2002. It needed the brand to have a presence l’Oréal has to create barriers to entry against a in four market segments: hygiene, facial care 310 CREATING AND SUSTAINING BRAND EQUITY products, solar protection and make-up. These of sport (skiing), could it not also extend into last two categories were intended to release the tennis rackets and golf clubs? first two sources of limitation in the brand’s Luxury product brands often find the growth, and make it truly attractive to phar- reason and the inspiration for their extensions macists all around the world. from within their own history. Thus René In some markets pharmacists’ shops were Lalique, founder of Lalique, made jewels, not appropriate outlets. The strategy here was scarves and shawls. The extension of Baccarat to create another form of outlet, such as a into small items of furniture, jewellery, concession in a department store (the perfumes and lamps is also symbolic of the solution in Canada), with a qualified phar- reconquest of unexploited areas. macist in attendance. Whatever the source, a long list emerges Because LRP did not have existing products from this process of introspection and investi- in the solar protection and make-up cate- gation into brand identity and extrapolations gories, strategic extensions were planned for based on it. It is then subject to internal feasi- these. This was done by means of a brand bility filters. Brand extension is a strategic transfer. LRP took over the products sold choice that is also accompanied by other under another l’Oréal brand, Phas, which had changes: in production, know-how, distri- been positioned on non-allergenic products bution channels, communication, corporate (see Chapter 15 for the brand switch culture. These have to be financed either inter- description). nally or by forming alliances. Thus, Boucheron sold 22 per cent of its shares, not those of its core business (high-fashion jewellery), but Identifying potential extensions those of the company that managed the so- called ‘first circle’ extensions (jewellery, It goes without saying that before making any watches, spectacle frames, pens and perfumes) brand extension it is imperative to know the in order to increase its resources. brand well. What are its attributes? What is its This shortlist is then tested with the target personality? What identity does it convey to public. Opinion surveys are often used to its buyers and users? What are its latent associ- achieve this. For every extension proposition ations or traits? The answers to these ques- consumers evaluate the product on a scale of tions are based on both quantitative studies interest to them such as ‘very interesting, so- (to discover the popularity and the image of so, not interesting’. This leads to a popularity the brand) and qualitative interviews of the rating of the possible extensions. target public. A simple listing of the image This method is advantageous in that it is characteristics does not give a full picture of simple and that the grading is done by the brand. Defining the prism of identity numbers. Its one drawback is that it is requires qualitative investigation. conservative. When a series of questions Armed with this information, the second about a multitude of products are thrown at step of the investigation procedure involves them, interviewees tend to comment only the extrapolation of the brand’s distinctive on the basis of the most striking features of features in order to assess their consequences. the brand. Therefore, this technique is If Dove is personified by gentleness, then biased and conservative. Thus, when Bic what other products need to be gentle? If was only making ballpoint pens, this Christofle is a brand for knives, forks and strategy would have ended up by spoons, could it, by metonymy, be extended exhausting all the possibilities in stationery to glasses, plates or other tableware in and completely rejecting the idea that Bic general? Since Rossignol is active in one area should sell razors. GROWTH THROUGH BRAND EXTENSIONS 311

Davidson (1987) distinguishes a number of some added value to the product category, concentric zones around an inner core: the one would also like to know under what outer core, the extension zones, and finally conditions the envisaged product would be the no-go areas (see Figure 12.2). Close-ended legitimate for the brand. What attributes – questions in surveys provide information on objective and subjective – would be necessary the immediate vicinity of the brand (the outer for it to be able to bear the brand name? How core). In-depth qualitative phrases explore the is the product superior to the present market remote extension zones. offer? Once again, it is necessary to proceed with a Thus, it is not enough to say that Lacoste qualitative investigation to bring out the could make jackets. One also has to describe latent potential of a brand and to see how it what the characteristics of a Lacoste jacket can or cannot adopt each of these extensions. would be and those of a ‘non-Lacoste’ jacket. Through this same investigation we can also The Lacoste identity prism encompasses the tell whether the resulting refusals were due to following characteristics: knit, finish, dura- a conservative attitude linked to the actual bility, discretion, harmony, social aptness, situation, a lack of imagination on the part of conformity and adaptability. The reputation of the interviewee, or due to incompatibility the original Lacoste product is that of a second with the brand. skin: it induces a distancing effect which The qualitative phase is a constructive one. constitutes the central value of the brand. It Bearing in mind that a brand has to bring nurtures an image of supple transition

No-go area Threats of brand’s capital asset

Extension zone

Latent potential Outer core

Spontaneous associations Inner core

Kernel line extension

Figure 12.2 Perimeters of brand extension 312 CREATING AND SUSTAINING BRAND EQUITY between the personal and social – personal question of the boomerang effects on the ease and social ease. The aerated knit is anal- brand capital to be dealt with. ogous to the skin and its pores. This identity prism defines the territories which are not Lacoste and which should be avoided for fear The economics of brand extension of losing the very meaning of the brand: By capitalising on the brand awareness, the l since it conforms to a sporting ideal, esteem and the qualities attached to an Lacoste is transversal and cuts across all existing brand, the practice of brand barriers of age and sex, thus it should not extension can help to increase the chances of put its name to products which are exclu- success of a new product and lower its launch sively feminine (in fact, the Lacoste aerobic costs. These two alleged consequences have line was a big failure), or hyper-masculine been verified. (eg hunting); As shown in Figure 12.3, only 30 per cent of new brands survive longer than four years, l Lacoste does not sell either garish colours whereas the rate is over 50 per cent for brand or short-lived ‘in’ products; extensions. l being a ‘second skin’, Lacoste does not How does extension increase chances of make either heavy knitwear or shiny survival? First, distributors themselves will leather clothes. allocate more space to an already well-known brand than to a newcomer. But brand One understands why there are no Lacoste extension also has an impact on the consumer leather jackets. They are very masculine, virile (see Figure 12.4): and fashionable, and they do not last. Only the suede jacket is capable of possessing l in the trial rate, inducing a higher rate (123 Lacoste characteristics. vs 100); The qualitative stage also permits an under- l in the conversion rate (17 per cent vs 13 per standing of the functions of the brand for its cent); users. Is the brand a sign for itself or for others? Where would consumers like to see l in the loyalty rate (index of 161 vs 100 for the brand signed? This information is new brands). essential for branding. On the pocket of a Lacoste blazer should the signature be Thus, for an equal facing and an equal Lacoste, the crocodile or Lacoste Club? unweighted distribution/weighted distri- Fundamentally, the testing phase should bution ratio, consumers have a higher proba- not only find out whether the success factors bility of trial, conversion and loyalty when of the extension category are coherent with the product bears an existing brand name, as the brand, but also whether the product is this second OC&C analysis shows. superior to its competitors when deprived of As far back as 1969, Claycamp and Liddy its brand. In spite of the many explications had measured the impact of a ‘family name’ about image failure, many extensions fail (extension) on the trial rate of the new simply because they are inferior to existing product. Their forecasting model, known as products and are more expensive. Above all, Ayer’s model, rested on a database of 60 an extension is an innovation and its added- launches in 32 categories, half of these being value should be considered. Finally, these in the food sector. The basic structure of the projection techniques allow the tricky model is presented in Figure 12.5. GROWTH THROUGH BRAND EXTENSIONS 313

100

90

80

70 Brand extension

60

50

40

30

20

10 Years since 0 launch Launch 1 2 3 4

Figure 12.3 Rate of success of new brands vs brand extensions (OC&C)

The estimate of the parameters of the model usefulness of multi-brand portfolios in the (through double regression) resulted in a very maximisation of market coverage. Moreover, positive weight for the ‘brand extension’ as will be discussed later, some brand exten- variable. A previously known name directly sions can hinder the success of a new product, and strongly induces the consumer to try the or be detrimental to the brand capital itself. product. Moreover, Liddy and Claycamp Thus Hermès refused to lease its name, in noted that this variable was not correlated to exchange for royalties, to the Wagons-Lits advertising recall or even to weighted distri- Group, which wanted to launch a top-of-range bution. This last point is surprising: perhaps service of individual or package holidays. The American distributors do not act as barriers to service risks of hotels in exotic and far away entry as much as their European colleagues. countries were too high for Hermès to be What conclusions can be drawn from these willing to associate its name with that venture. studies? It would be wrong to think now that These figures also reveal that the all new products must be launched under a consumers’ view of the product is generally known brand. This would mean forgetting the far less conservative than that of management

New brand

100 13% 100

Brand 123 17% 161 extension Rate of trial Conversion Repeat-purchase (index) rate rate (index)

Figure 12.4 The impact of brand extension on the consumer adoption process (OC&C) 314 CREATING AND SUSTAINING BRAND EQUITY

. Product positioning . Repetition . Copy quality Awareness of the . Consumer promotions new product . Degree of involvement (advertising recall)

. Level of distribution . Packaging . Family name vs new name % trying within . Promotions, bargains 13 weeks after . Satisfaction after trying launch a sample . Category penetration

. Relative price . Satisfaction after product Repurchase rate use . Frequency of category purchases

Figure 12.5 Ayer model: how a family name impacts the sales of a new product itself. Quite often the latter is too blinkered by strategy of brand extension proves the origin of the brand and considers the economical as far as cost per trial is concerned manufacturing history of the brand as its defi- (see Table 12.2). nition. For management, Mars could not However, another study from Nielsen based mean anything else but the chocolate bar. on 115 launches gives apparently contra- And yet the Mars ice-cream bar has been a dictory results: the new products launched success and the Mars biscuit launched in 2003 under new names get market shares twice as was also a hit. This proves that consumers high as those of the products launched under distinguish rather well the brand from the known brands (except for health and beauty product, or at least that they do not associate products, for which the results are identical: them irreversibly. 2.7 per cent vs 2.6 per cent) (see Figure 12.6). The second economic argument put The reason for this difference can be seen in forward to justify brand extension has to do the second column. The extension strategy with cost: launching a new brand would cost would not in fact be less efficient: the lower more than launching a new product under a market shares are due to the fact that well-known brand. Indeed, for consumer management uses smaller communication goods one estimate is that, as a result of lower budgets in cases of brand extension, which expenses in ‘push’ and in ‘pull’, in promotion lowers the share of advertising presence. (to consumers and above all to distributors) as For an equal percentage of advertising well as in media advertising, the savings due presence, brand extension results in equiv- to the choice of brand extension amount to alent or even greater market shares in the field 21 per cent. Since the trial ratio is higher, the of health and beauty where, the risk perceived GROWTH THROUGH BRAND EXTENSIONS 315

Table 12.2 Brand extension impact on launching costs New brand Brand extension %

Launching budget: – pull 100 78 –22 – push 30 24 –20 Total 130 102 –21 Trial rate 100 123 +23 Cost/trial 1.3 0.83 –36

Source: OC&C by the consumers being higher, there is a pref- trial rate (very tightly linked to the familiarity erence for known brands. of the brand name) whereas Nielsen’s is based What can be deduced from these two on market share over 24 months, which studies? Are they contradictory? The first one reflects the marketing mix and product concludes that extension is more efficient quality as a whole, may have some bearing. even with a lower budget. The contradiction Finally, this low launch budget of the could be solved by considering the fact that extension may be linked to a desire to keep many managers, confident in the productivity the bulk of advertising on the core product of of brand extension, reduce the advertising the brand to preserve its sales (a mistake since budget dedicated to the extension launch it underestimates the reciprocal spillover (thus the results of the first column of Figure effects of advertising a new product on the 12.6). For equal budgets, the extension sales of the core product (Balachander and strategy has a slight advantage which is not Ghose, 2003). significant in the cleaning products and food A hidden factor in each of these two studies sectors but significant in the health and is the moment of entry on the market. A risky, beauty sector (0.46 vs 0.39). In addition, the new market cannot be approached in the same fact that OC&C analyses efficiency in terms of way as the same market at a more mature

Share of market Share of market secured secured during during first two years per first two years point share of advertising

Household products (28)

New name (14) 6.7% 0.52 points Established name (14) 3.3% 0.56 points

Food products (36)

New name (10) 6.5% 0.48 points Established name (26) 1.9% 0 0.50 points

Health and toiletries (51)

New name (22) 2.7% 0.39 points Established name (29) 2.6% 0.46 points

Figure 12.6 Comparative sales performance during first two years (Nielsen) 316 CREATING AND SUSTAINING BRAND EQUITY stage. Sullivan’s (1991) analysis of 96 launches become the reference on that market, by in eleven categories of products gives inter- benefiting from what is called the pioneer esting descriptive results (see Table 12.3). advantage (Carpenter and Nakamoto, 1990). First, this analysis noted that companies Finally, many new markets are created in preferred to penetrate new markets with new reaction to old ones. For example, the snow brands. Of the 48 launches studied that had surfing market is a counterculture against taken place on emerging markets, only 13 alpine skiing and its competition-oriented were brand extensions. However, in mature values; its proponents have their own brands markets, 40 out of the 48 launches analysed and have refused the surfboards of Rossignol, were brand extensions. Sullivan also noted the established brand. that the brands which used their own names Apart from the case of weak brands trying to in order to penetrate a young market were dominate a new market, it can be attractive to rather weak brands. For example, in the be the only known and reassuring reference United States, Royal Crown Cola was the first on a market where neither the offer nor distri- brand to penetrate the diet cola segment bution is structured, and where the consumer under its own name. It was followed by perceives a high risk. The consumer will Pepsi-Cola with Diet Pepsi. Coca-Cola had appreciate the presence of a famous brand, preferred to launch Tab and not to put its even if it is far from its original market. Only brand capital at risk. It introduced Diet Coke its fame and serious reputation count. That is last. The survey shows that the brands which why Tefal penetrated the fledgling market of have become leaders in these markets were domestic appliances under its own name. almost always new brands (Diet Coke is an Finally, the analysis of success rates of the exception). two launch strategies, depending on the Why do strong brands hesitate to penetrate degree of maturity of the markets, reveals a young markets? Of course, they would benefit slight advantage for the new brand strategy in from the fact that there is no competition yet. the market creation phase. But with time, the But creating a market entails more risks for the brand extension strategy seems more creator (Schnaars, 1995) and a negative effect successful (see Table 12.3). on the brand and its capital. In a young, badly defined market, a brand must be flexible in order to find the best positioning. Brand What research tells us about extension does not permit such flexibility. brand extensions The attributes of the brand must be respected. Furthermore, launching a brand which is Since 1990, extension has attracted the specific to a new market enables the brand to attention of all marketing researchers and

Table 12.3 Success rate of two alternative branding policies Market development Growth Maturity Launches of new brands 57% 43% Launches of brand extensions 46% 68%

Source: Sullivan (1991) GROWTH THROUGH BRAND EXTENSIONS 317 academics. This barren ground was seducing, the extension to existing competition. and in addition the stakes were high. This 7. Assessment of the ability of the company research, mostly experimental and quanti- to sustain competition in the extension tative, has focused on identifying the determi- category and to acquire leadership nants of consumers’ attitudes to an extension. through time. Would they find the concept attractive or not? It has also looked for the conditions where the 8. Assessment of the feedback effects on the brand equity could be diluted by an parent brand and on the sales of the core extension, which is generally true when an product. What does the extension bring extension fails to bear the ‘brand contract’. to the brand (new clients, new image What is the impact on the parent brand image traits, new sales?) or on the sales of its core product? This research has thus focused on only a Academic research mostly addresses issues 1, small part of the brand extension process, 3 and 8. It aims at answering such questions which involves eight key steps: as: When is brand equity transferable? What causes positive consumer reactions to 1. Assessment of the brand equities (its image, extension proposals? When can brand equity or emotional assets, its key competencies be damaged by an unsatisfying extension? Its among various segments of the population). dominant paradigm is experimental research, using consumer evaluations (I like 2. Assessment of the intrinsic attractiveness it, I do not like it) as the variable to be of likely extension categories. explained. Only recently have researchers 3. Assessment of the transferability of the analysed back data, and the historical brand assets in the chosen extension sequence of market entries, to focus on sales category. and segment leadership and try to under- 4. Assessment of the relevance of these stand the determinants of success and assets: are these assets real benefits in this failure. (See Figure 12.7.) category? Early experimental studies on brand 5. Assessment of the ability of the company to deliver the expected benefits subsumed extension by the brand name. The first study was presented in 1987 during a 6. Assessment of the perceived superiority of symposium on brand extension at the

Parent category Extension perception Extension evaluation Leverage Brand assets transfer Extension Relevance of – Awareness – attributes these – Quality – concept – attributes – Affect • tangible – concepts – Image • intangible – Fit • distance X • complement • substitution Difference from – Difficulty of manufacture the competition

Figure 12.7 The brand extension decision 318 CREATING AND SUSTAINING BRAND EQUITY

University of Minnesota. The attitude towards found the superficial extension very similar, a fictitious brand of calculators (Tarco) was but the experts not as much. On the other manipulated through the presentation of the hand, an explanation of the process and results of tests evaluating six Tarco calculators. material used convinced the experts more These tests concluded, according to the experi- easily of the fact that tennis rackets and golf mental group, that none of the six calculators clubs are close products, while for non-experts were of poor quality, or one out of six, two out they remain quite dissimilar. Thus, identical of six ... up to six out of six. Naturally, the composition is not a factor of perceived simi- general attitude towards Tarco was much influ- larity for non-experts: they base their enced by this manipulation. Then a list of new opinions on more superficial signs. They are products to be launched by Tarco was sensitive to extensions based on relationships presented: these ranged from a new calculator of complementarity or substitutability and ‘close’ extensions (microcomputers, between products, which this creates a sense digital watches, cash registers, etc) to ‘distant’ of ‘fit’: extensions (bicycles, pens, office chairs). The interviewees in each group were asked to state l Uncle Ben’s sauce is complementary to their feelings about each of these new Tarco Uncle Ben’s rice; products before having even seen them. The l Nesquik cereals are substitutes for Nesquik correlation between the attitude towards Tarco milk chocolate. and the attitude towards these extension products of Tarco was measured. The corre- Experts are not satisfied with these peripheral lation was stronger when the extension was cues. They need a stronger rationale, such as close. In short, the transfer of attitude is facili- that of Look’s extension. This brand, famous tated by the perceived similarity between the for its ski bindings, was extended to the category of brand origin and the category of upper-range mountain-bike market, for it the product extension. could apply here its mastery of the automatic Naturally, the bases of ‘perceived similarity’ grip pedals and of new composite materials. vary with the individuals. As another study In the first study, the fact that Tarco was a has shown, experts and non-experts use fictitious brand was intentional. This way, the different indexes to evaluate the degree of brand had no capital – no particular trust and similarity between two products. For example, emotion were associated to the brand. This the two following types of extension were explains the importance of the criterion of simi- shown to two groups of individuals, non- larity of products to facilitate the transfer of atti- experts and experts: tudes. In a normal situation, if the brand is a strong one, the relevance of its key values in the l one was a superficial extension, using product class it wishes to enter is what deter- superficial similarity and relatedness (from mines the attractiveness of the extension even if tennis shoes to tennis rackets); the categories of products are very different l the other was a ‘deeper’ extension, using (Broniarczyk and Alba, 1994). The success of Bic the same know-how (that of carbon fibre, in pens, razors and lighters illustrates this fact. enabling a brand of golf clubs to introduce The first sign of awareness of a mechanism tennis rackets). independent from the product and stemming from the brand itself appeared in 1991, among When asked about their perception of simi- Park and his colleagues. Two lists of products larity between the starting category and the were given to the persons interviewed: func- final category (tennis rackets), non-experts tional products and expressive products: GROWTH THROUGH BRAND EXTENSIONS 319

Functional Expressive by which consumers build an opinion on an products products extension: TV perfume compact disc shoe l If the brand is mainly functional, the cassette-player wallet extension is evaluated from the bottom up, radio shirt according to inherent links between the videotape bag category of the original product and that of VCR pen the extended product. The consumers’ walkman ring evaluations rest on the degree of perceived car radio watch similarity between product categories. video camera belt record-player crystal l If the brand is symbolic, the concept of the headphones tie brand creates a link between products which otherwise would not have one. In this case, the judgements on extension are Two questions were asked: independent of the physical characteristics 1. the traditional question about the degree of the products. Each extension is eval- of similarity between the products within uated according to its belonging to the each column; brand concept and to its coherence with the value system of this brand. This is a top- 2. a question about whether the products of down process. each column ‘fit’ together. The researchers asked these two questions in Some extensions bear the risk of dilution of two ways: the brand. Like an elastic band that has been pulled too much, the brand can become weak. l blindly, as above; Many factors explain the weakening of a brand by excessive extension. Evaluating this l using a brand, here Sony for the first list risk is no mean task: what would be the and Gucci for the second. impact on Tuborg if a sparkling mineral water were introduced under this brand (such an What were the results? extension does exist in Greece)? A study demonstrated the existence of this l For the expressive products, the fact that risk. It focused on a well-known health and the brand was mentioned or not did not beauty brand, Neutrogena. Two extensions modify the judgements of low perceived were presented to the consumers, one very similarity between the products. However, unusual for Neutrogena, the other very the presence of the Gucci brand name typical of Neutrogena. The experiment created a considerable fit between products consisted of informing the consumers that which did not seem to fit much without both extensions did very poorly in the two the brand (3.68), but suddenly fitted dimensions that make Neutrogena famous, together (4.74) under the brand. softness and quality. What would be the l For functional products, the presence or impact of such a statement on the image of not of the brand did not modify the judge- Neutrogena itself (Loken and Roedder, 1993)? ments of perceived similarity and of ‘fit’. Would the image of softness and quality of typical Neutrogena products be affected, too? In short, the authors hinted at two processes The study considered product A1, the brand 320 CREATING AND SUSTAINING BRAND EQUITY prototype associated with Neutrogena by 83 results of these summary analyses and per cent of consumers; product A2, associated critiques. by 61 per cent; product A3, by 55 per cent; For example, Bottomley and Holden (2001) product A4, by 39 per cent; and product A5, reanalysed data from all research that faith- by 5 per cent. Here are the conclusions: fully adhered to the basic Aaker–Keller paradigm (1990) to explain attitudes with l Although of poor quality, the remote regard to an extension. In this pioneering extension did not stain the image of the study, consumers were asked to evaluate ideas brand, nor the image of its other products. for extensions (a good idea/not a good idea; This phenomenon is well known to good/bad). The aim was to gain an under- researchers on stereotypes: the exception standing of the determining factors behind does not harm the rule. The extension is these evaluations from among a series of atypical, therefore without influence on suggested values, such as the parent brand’s the heart of the brand. reputation for quality, the perceived fit l The situation is different for the more between the extension and the category of typical extension of Neutrogena. Its poor origin, and the perceived difficulty of quality had a negative influence on both constructing the extension, along with a the image of the brand in its key number of other variables, without consid- attributes, and that of products typically ering the interactions between variables. The and spontaneously associated to the perceived fit is the main variable to emerge brand. (A1, A2 and A3 had a statistically from this pioneering research. It measures the significant poorer softness image after psychological – and thus subjective – gap exposure to the extension.) There has, between the extension and the brand’s typical indeed, been a negative impact on the product (its prototype). Traditionally, the fit is brand and on its most significant measured in three dimensions: the degree of products, but only in the case where the perceived synergy between the extension and extension is typical of the brand. The the prototype, the degree of perceived substi- danger concerns line extensions much tutability, and the perceived transferability of more than brand extensions. know-how. Bottomley and Holden’s reanalyses of the How attitudes about extensions are initial study and seven repeat studies produced conclusions somewhat different formed from those that were circulated following the Much research has been carried out into brand initial research: extension. As with any field of research, the pioneer articles are followed up by endless l Consumers’ evaluations of an extension are variations on the theme, exploring contextual in the first place influenced by the aspects such as other products, countries, and perceived quality of the parent brand and interviewee types along with in-depth the perceived degree of fit. Clearly, exten- analyses (Leif Heim Egil, 2002), summaries, sions are not a way of saving weak brands: and then – much later – reanalyses and meta- they must have a reputation for quality analyses. Meanwhile, the results of the initial before it is possible to attempt brand research have done the rounds, and have stretching. With regard to the dimensions assumed the status of intangible truth. Only of fit, ‘synergy’ and ‘transferability of later do their limitations become apparent. know-how’ are more important than This is why, it is possible to sort through the ‘substitutability’. GROWTH THROUGH BRAND EXTENSIONS 321

l These evaluations are also influenced by the means of evaluating the brand extension. This interactions between the brand’s perceived applies well to so-called ‘functional’ brands. quality, the degree of synergy and the trans- But how much proximity is there between ferability of know-how, as well as by the fries and pizza? Or between fries and buns, or interaction of the brand’s perceived quality fries and iced tea? There is little in a physical with the perceived difficulty of manufac- sense, and yet these products constitute the turing the extension. (In short, the impor- McCain range. In fact, the common factor tance of the brand’s perceived quality grows behind the unity of this brand and the fit along with the perceived difficulty in between its products is not the products them- carrying out this extension.) selves, but the brand concept, American food. In the future, McCain could start to sell brownies or l Last, there is a small direct influence ice cream. We may thus suppose that there is produced by the perceived difficulty of another way of evaluating fit other than just the manufacturing the extension: when this three dimensions examined above: the evalu- rises, the evaluation rises. Consumers do ation of the fit with the intangible concept of not like brands that are happy to put their the brand itself. In this case, consumers would names to excessively trivial products. use a top-down approach. Starting with the However, this result is not confirmed in all concept, they would ask themselves whether the cases. It is true that the success of brand product extension conforms to the concept. licences among children casts doubt on the Furthermore, extension serves to move a extent to which they are influenced by this brand from being product-based (‘McCain variable: the Harry Potter name has makes excellent frozen fries’) to being appeared on some of the most banal concept-based (‘McCain makes delicious products (exercise books, erasers, pencils, American food products’). Becoming a pens, clothing and so on). However, concept brand enables preparation for future perhaps the effect does apply to parents, expansion via other new product introduc- helplessly watching the tidal wave of tions, thus increasing the brand’s market demand for licensed products bear down power, turnover, profile and visibility: it on them. It may also apply to technical becomes a mega-brand. brands, which would explain their reluc- In acquiring an intangible dimension on tance to move down-range by manufac- which its identity is founded, the brand thus turing oversimplified products. gains access to expansion. For as long as it stays a product brand, it remains confined to a The Aaker–Keller paradigm has provided an product segment: if what you sell is Bic biros, initial step in brand understanding. However, how much further can you go than, say, as can easily be seen, it has its roots in a tradi- erasers, marker pens and pencils? But when tional, cognitive view of the brand defined by perceived as ‘the brand of cool, simple, prac- its competence, objective attributes and tical and plastic products’, Bic can put its know-how. To evaluate an extension, name to ballpoint pens and disposable razors consumers are thus supposed to analyse the and become a world leader in both these proximity of the extension product to the markets, as well as in the disposable lighter product that in their eyes most accurately market. represents the brand (its prototype). This is a The research can thus be summarised as in bottom-up approach: the consumer’s starting Figure 12.8: extension is based on physical fit point is the similarities between products as a and concept fit. 322 CREATING AND SUSTAINING BRAND EQUITY

Brand prototypical Brand dilution product –

Physical fit + Brand Extension product reinforcement + Concept fit –

Brand concept + Brand expansion

Figure 12.8 The consequences of product and concept fit and misfit Source: Michel, 2000

The limits of early research on The prime factor for consumer acceptance extension of an extension, stemming out from this research, is ‘the fit’, the feeling of perceived Who knows Genichi Kawakami? He was the similarity between the core product and the CEO of Yamaha for 52 years, and died in extension. This result has been amply 2002. When he succeeded his father as CEO confirmed by subsequent research (Leif Heim in 1950, Yamaha was a harmonium and Egil, 2002; Bottomley and Holden, 2001). piano company. In 1954 the company made What fit or resemblance is there between a a radical diversification into motorbikes. In piano and a motorbike? None. However, parallel, it also created synthethisers and Yamaha is the world’s leading brand for acoustic and electric guitars. Then it musical instruments and the world number extended its activity to skis, tennis rackets two manufacturer of motorbikes. What fit is and carbon-based golf clubs. Later it was to there between a ballpoint pen and a lighter, or enter the hi-fi market, positioned as a a lighter and a disposable razor? None. premium product, followed by extensions in However, Bic is the world leading brand in the video market and now multimedia. At these three markets. It successfully managed the heart of all these strategic moves lay the its very dissimilar extensions under the same belief that product innovations are the only name. According to its CEO, having the same way to enter markets and to remain prof- name was precisely one of the factors of their itably in these markets. They were also success. Certainly, consultants told him not to underwritten by a genuine vision of this launch the lighter in 1973 under the same CEO, that of the leisure society. Of course, it name as the ballpoint pen (launched in 1950) never came to the mind of Genichi or the disposable razor, launched in 1975. But Kawakami to call any of these innovations by the management had another vision. These any name other than Yamaha. three products now make 53 per cent of their The problem is that, according to early sales in North and Central America. brand extension research (Aaker and Keller, Why are the findings of this early research 1990), these extensions should have all so far from this reality? In fact, this failed. This casts doubts on the theory. pioneering work (Aaker and Keller, 1990) GROWTH THROUGH BRAND EXTENSIONS 323 rested entirely on laboratory research. In question at the heart of research on cognitive this special context, consumers were psychology: according to what criteria is an presented with ideas about extensions and object considered part of a category? had to make an immediate evaluation. In Indeed, the psychological study of classifi- the real world, the extensions are launched cation by categories aims at identifying the as all-new products, with information about processes by which we form categories, and the intrinsic value of the extension and trust assigns certain objects to one category rather relayed by publicity and word of mouth. In than to another. The brand is, in that sense, a the laboratory research setting, the inter- category. viewees had none of these, and this is why For decades, the dominating, or ‘classical’, they relied on perceived fit, a measure of theory answered this question in the following ‘global sameness’, or similarity between way: a product or an object belongs to a the extension and the brand. In brief, the category if it has the necessary and sufficient conclusions of that research present the features of this category. This leads one to consumer as very conservative. Recently, question ‘the’ definition of the concept (or the Klink and Smith (2001) confirmed that the category), ie about the nature of these features results were determined by the method. The determining the belonging or non-belonging. interviewees have too limited information, This model works well for certain categories (for are exposed only once to the concept (in example the category of ‘even numbers’), but it contrast to the multiple exposures of a real seems less reliable for others. Specialist or niche advertising launch campaign), and typically car makers such as BMW or Saab have definite are not the risk-taking innovators who try image and physical traits, which can qualify a new products first. Klink and Smith demon- new car as belonging or not to the brand. This is strated that the effect of fit diminishes when not the case for the generalist brands such as consumer innovativeness increases, and Ford, Opel, Vauxhall and Nissan. The same that multiple exposures increase the holds true for Braun vs Philips. perceived fit between an extension and the Indeed, in this classic model, all examples brand. of the category are equivalent since they all After 20 years of academic research it was have these necessary and sufficient traits: two time to make a meta-analysis of all the articles is an even number as much as 18 or 40! All or studies focusing on the overt discrepancies BMWs are BMW. between generally held beliefs stemming from Experience proves that the situation is research and the reality of brand and business. different for many categories: for example, It now appears that laboratory research some birds are more ‘birdlike’ than others, produced conservative statements about and even a butterfly is more ‘birdlike’ than an brand extension. In the real world consumers ostrich. Belonging to a category does not seem are more informed and can better evaluate the to be a clear-cut binary function (yes/no) but a extensions. probabilistic one. The frontier between the ‘bird’ and ‘insect’ categories is unclear. This The new perspective of typicality does not nullify these two categories: indeed, we all have in mind the prototype of a bird Above, we have spoken of typical and atypical and that of an insect, and these two proto- extensions. This raises the question of how to types cannot be mistaken one for the other! judge whether the product resulting from an However, the frontiers of each category are extension is at the heart, at the limit or not that separate. (see also Chapter 11.) outside the territory of a brand. This question Thus the new tendency of research on cate- is one more application of a more general gorisation, led by Rosch (1978) and Lakoff 324 CREATING AND SUSTAINING BRAND EQUITY

(1987), admits that categories can also be reason, in a different context, luxury groups with unclear boundaries which are not brands have little difficulty in practising defined by a series of necessary and sufficient extension even into dissimilar categories. features but by a prototype, the best exemplar. Their primarily symbolic qualities ignore Basically, an extension is considered the distance between concrete objects. acceptable if it ‘fits’ the idea that consumers They can be transferred more easily. have of the parent brand. This feeling is based either on a high perceived similarity to the most typical product of the brand (also called the How extensions impact the prototype), or on the coherence between the extension and the brand contract (also called its brand: a typology concept or identity). Brand extension is a leap out of the category When the extension is distant from the of origin to grow the business. Here again it is mother brand, which attributes of the latter necessary to see the difference between close are transferred to the extension product, and extensions, also called continuous extensions, which are not? As the notion of distance is and discontinuous or remote extensions. A linked to a comparison with the prototypical brand of spark plugs for automobiles can product – or products – of the brand, the undertake a close extension into other auto- objective characteristics of the brand are the mobile accessories (batteries, windscreen ones which will be transferred the least to wipers, etc), as is the case for Bosch and Valeo. remote extensions. On the contrary, the A brand that masters optics can extend into intangible, more symbolic characteristics photocopying: this is the case for Canon, ignore distance and have an influence on all Minolta, Ricoh, Kodak and Agfa. A sports extensions. The doctoral thesis of Gali (1993) brand can cover other sports goods (Adidas, under supervision of the author, demonstrates Salomon). Discontinuous extensions elim- this. Consumers were asked to evaluate the inate technological synergies and physical Miele brand according to various image links between products: they are real diversifi- dimensions, then to evaluate according to the cations. For example Yamaha sells both same dimensions the most typical product of motorbikes and classical pianos. The Miele (the washing-machine) and two exten- Carrefour distributor’s brand covers the entire sions, one slightly atypical (a television) and field of mass consumption goods and even one very atypical (a microcomputer). quality goods. Thus, there are extensions which are far What did the research reveal? from the original territory of the brand, and extensions which are close. This leads to brands with a narrow spectrum of products – l First, the very atypical extension receives specialised brands – and brands with a wide very little of the Miele functional values. spectrum (such as Philips or General Electric). l Generally speaking, objective qualities are Is it better to be a specialist or a generalist? not transferred as well as symbolic qual- Both strategies are valid. A brand is arbitrary, ities. Thus, typical physical features of in theory it can go wherever it wants to. Miele – quality, innovation, reliability – are Nothing can stop Bic from deciding to brand weakly transferred to the image of the two windsurfing equipment. If the corporate extensions. On the contrary, the extensions strategy puts forward synergies of brand receive the following features: for the awareness and savings on advertising, it will young, to show off, for innovators. For that adopt a wide spectrum strategy. As a general GROWTH THROUGH BRAND EXTENSIONS 325 rule, it can be stated that beyond the growth expected from the brand. Significantly, in of sales and profits, brand extensions the field of home appliances, some brands influence the brand and its capital in six are thought to offer many more types of different ways: products than are actually produced, but if they decided to actually penetrate these 1. Some extensions exploit the brand markets, their image would not suffer. capital: the new product sells thanks to its This shows that consumers have a name. This is what happens when the perception of the brand which is different product receiving the brand is no from that of those who manufacture it. different from the existing competitors on They attribute to the brand areas of the market: the brand has not entirely competence which are larger than and played its transformation role, but it not limited to just the existing products. enables the product to benefit from its image. By using this practice too 4. Some extensions influence the meaning frequently – through a loose licensing of the brand: when Rossignol added policy for example – the brand capital branded tennis rackets, the status of the wears out as the brand becomes associated brand changed. It is now less specialised with these now commonplace products, and is characterised by a wider range of and with their unjustified price premium. interests. Yet the two sports covered by Industrial brands often fill up the gaps in Rossignol were not chosen randomly: the their lines by buying the missing items brand is still offering the equipment from their competitors. This is typical of which extends the individual’s body to the copiers’ market. help gain access to pleasure and performance. Nestlé increased its 2. Other extensions destroy the brand modernity by competing upfront under capital, for instance when the extension is its own name with Danone on the ultra- downwards. Porsche has cancelled its 924 fresh market (ie yoghurt). range, cars which only justified their considerable price difference against their 5. Some extensions are regenerating. They competitors (the Golf GTi) by the presti- revive the brand and its core, and re- gious name. None of the objective or express its base values in a new, stronger subjective values of Porsche could be manner. Thus, the classic green blazer is a found in the 924 model: neither regenerating product for Lacoste. It repre- masculinity, nor technology. This model sents a rare symbiosis between the seemed to announce the end of the features building the Lacoste brand: Porsche myth. Since at that time the conformity, discretion, sociability but also brand no longer took part in Formula 1 a certain distance on fashion. As for the racing and was losing in the Le Mans 24- green colour, it is more casual than the hour endurance race, the only communi- blue blazer (too uniform for Lacoste) and cation element of the brand was refers to the green grass of the original advertising, of which a large part was tennis courts at Wimbledon. The green dedicated to the 924. To return to its blazer brings Lacoste up to date and at the source, the brand ceased to manufacture same time expresses its roots. The the 924 and reinvested in the 911. ‘Marlboro Classics’ line allows the brand to recommunicate its history, its roots and 3. Some extensions have a neutral effect on founding values. the brand capital. The product is not out of place but is in tune with what is 6. Finally, some extensions, although not desired by the brand, are necessary to 326 CREATING AND SUSTAINING BRAND EQUITY

defend the brand capital: their purpose is, contract and its three essential attributes: relia- above all, to prevent the use of the brand bility, safety and standing. name by another company in another Extensions also entail taking risks other category of products. Thus, Cartier may than just image-related ones. A brand not want to develop along those lines, but extension generally brings about changes in they have to in order to prevent another target markets, distributors (and perhaps even company from registering the brand buyers, from a mass retail perspective), prices, name Cartier on an international scale in manufacturing and logistics. These changes the textiles category. may be a source of annoyance to the brand’s historical distribution channel, opinion Avoiding the risk of dilution leaders or existing customers. There is thus a genuine business risk – and this may affect In our many brand extension consulting sales of the current flagship product which missions, the recurring question concerns the constitutes the main sales platform. risk of diluting the image capital. Could the business extension harm the brand’s assets: its An example of brand dilution: Vichy reputation, and the traits that comprise its value in the eyes of the market? For example, Vichy is an example of a brand whose changes what will be the long-term effect on Danone’s over its history have led to a loss of identity image if it starts selling Danone water too? and value. It started out as a cosmetics brand What will be the long-term effect on that promoted itself as the dermatologists’ Mercedes’ image when it produces its A-Class brand. However, in an attempt to increase range? What will be the long-term effect of sales, it dropped this label and began devel- Chanel’s decision to start selling glasses at oping products with a strong cosmetics base. Afflelou, a discount franchise chain of opti- Freed of its dermatology tag, the brand was cians? What will be the long-term effect on able to advertise on television and develop the image of a brand that has sold only to products which, in accordance with women’s professionals, but now starts selling to the wishes, had a much more cosmetics-based general public too? What will be the long- slant – as well as bigger margins. The brand term effect of an extension towards lower was able to launch more new products every prices? What will be the long-term effect of year, as the whole clinical tests process was no selling not only pens but also cigarette lighters longer necessary. In just a few years, it became and razors under the Bic brand? just another run-of-the-mill pharmacy As these typical questions show, the problem product. lies in estimating the long-term effects. No Vichy’s sales increased very rapidly, as did study can predict the future. Second, the its margins. However, at the same time its answer will depend to a large extent on the image was being eroded. This policy, although ability to perform the extension successfully a winner in the short term, had caused a loss and well. After all, an extension is more than of identity in the eyes of consumers who just a brand extension: more importantly, it is a could no longer perceive the brand’s distinc- departure from the brand’s tried and tested tiveness or added value. It was no longer what sphere of competence. Some learning will be chemists wanted either, at a time when the necessary, and this may take time. For example, pharmacies channel as a whole was the little A-Class car revealed that Mercedes had attempting to re-establish its legitimacy not sufficiently mastered the engines and against new distribution channels also stability issues for this chassis type, thus seeking the right to sell so-called ‘para- reneging on the brand’s traditional basic pharmacy’ products. GROWTH THROUGH BRAND EXTENSIONS 327

It was back to the drawing board for Vichy’s brand’s image is safe. However, extensions that business model and brand mission. Vichy, the are fairly typical of the brand are the ones that dedicated chemist’s brand, needed to bolster its dilute its image the most if they disappoint distribution channel. The brand was reposi- with regard to the brand contract. The tioned around the theme of health, and thus problem is that there is no guarantee the brand slogan became La santé passe aussi consumers will ask themselves whether the par la peau (‘Health is vital. Start with your extension is typical or not. In the aforemen- skin’). Most importantly, all items and products tioned study, researchers put the question to that did not fit this philosophy were axed. half the sampled group. The question did not Such losses of identity are common: large spontaneously occur to the other half. It groups often seek to make a profit out of their would therefore seem that consumers adopt a acquisitions and force small brands with a ‘bookkeeping’ approach in which the brand is strong identity to move quickly into other responsible for everything it does, whether distribution channels and categories. good or bad. Neutrogena, for example, is facing this threat: A second, more recent piece of research it is expanding its presence in the worldwide considered the question of the effect of food channel, but at the risk of losing the key breaking the brand contract during an values that make the brand truly distinctive. extension on sales of the current flagship product (Roedder John, Loken, Joiner, 1998). Is the consumer bookkeeping or Disappointment with the performance of a subtyping? Johnson & Johnson brand extension did indeed impair the brand image with regard to Academic research furnishes important infor- the attribute that constituted its differenti- mation on the risk of image dilution. ating value: gentleness. However the sales of Unfortunately, however, it focuses exclusively the prototype, or flagship product, was not on the misfit with the brand image: it does affected. This suggests an ‘experience effect’. not consider risks arising from the fact that an Consumers who have already used the extension is usually also accompanied by product are confident about qualities. They strategic changes in distribution and targets. might view a brand extension negatively but The foremost paradigm in research on this will not alter this confidence about the dilution is a failure to honour the basic flagship product. However, J&J’s flagship contract. What happens when the expecta- product (baby shampoo) was affected when tions created by the brand’s name are dashed the disappointment stemmed from a line by the brand extension? Apart from this failure extension (a simple modification to the basic in itself, is there not a risk to the brand’s image, product). Such very closely linked extensions or even to the sales of existing products? Basic are the ones that cause the most collateral research (Loken and Roedder John, 1993) has damage to sales of the flagship product. shown that any failure to honour the basic contract has a negative impact on the brand The risk of downward stretch and its image for each image aspect that is ignored. A brand is constructed out of the sum It is a well-known fact that price is an indi- of all of the impressions accumulated in cation of quality, and can on its own create consumers’ memories. The only exception to the image of a product with a high standing. this is if customers find themselves asking the In their extensions, some top-of-the-range question, is the unsatisfactory extension prestige brands have been prompted to sell typical or atypical of the brand? If the cheaper products in the search for a client extension is perceived as being atypical, the base that is more numerous but less willing to 328 CREATING AND SUSTAINING BRAND EQUITY pay a high price. This is the approach taken by distance from the competition and price gap brands such as Mercedes with its A-Class and tally with the consumer’s impression of the Cartier with its Must de Cartier range. What brand’s standing, the risk is reduced. If they do effects do such acts have on the brand’s not, the consumer mentally lowers the brand’s existing clients? standing. For example, it is crucially important Given that an expensive brand derives its for a brand of standing to have a clearly value in part from the fact that it indicates the separated display which is distinct from buyer has the financial means to afford competitors’. If it does not, and the display is expensive products (consumers’ reflected mixed, the consumer interprets this as a signal image), it is hardly surprising that there is a from the (supposedly expert) retailer that the negative reaction: their status has to be spread brand of lower standing placed alongside the more thinly, and thus reduced. This has been brand of high standing is just as good. confirmed by a study on ‘The ownership What can we draw from this research on the effect in consumer response to brand stretches risk of dilution? First, we can conclude that (Kirmani, Sood and Bridges, 1999). People customers of prestige brands are happy where who do not buy the prestige brand (BMW in they are: they form a conservative lobby. In so this study) are pleased by its more accessible doing, they demonstrate a lack of awareness price extension; existing buyers are much less of the economic conundrum faced by the impressed. Current buyers, however, appre- brand or company. As Jürgen Schremp, the ciate price-increasing ‘upward-stretch’ exten- CEO of Daimler-Benz, observed in 1998, sions far more than non-buyers do. With Mercedes could either stay where it was and – brands that are not of high standing (for like Rolls-Royce – go bankrupt; or it could example, Accura cars), there is no effect of this change, and sell over a million cars. kind. This study also confirms that the act of Conscious of the risk of losing the attachment using a sub-brand protects the top-of-the- of its existing customers, the brand has to take range brand from image dilution in the event precautions: of a price-lowering ‘downward-stretch’ extension. This is what Cartier did with Must l Even in its lower cost extensions, the brand de Cartier, selling pens, cigarette lighters and contract must be honoured – and the first leather goods in large retail stores to reach a consideration is quality. wider clientele and increase its recognition, l The brand should manage its downward which until then had been restricted to a well- extension while at the same time off elite. continuing to nourish the legend that Another interesting piece of research ensures its high standing. After the A-Class, (Buchanan, Simmons and Bickart, 1999) Mercedes relaunched the S-Class – voted by analysed the risk of devaluation if a prestige experts as the best car in the world – and brand adopts a less selective channel when announced Maytag, an even more luxu- entering a non-prestige market. For example, rious model. the luxury hairdresser J Dessange granted a licence to l’Oréal to use its name on a shampoo l The brand can use a sub-brand for its to be sold in supermarkets. The findings of this downward stretch. study were that it all depends on merchan- l It can also split its distribution into dising, and – in this case – on three factors. segments. Chanel boutiques concentrate What is the brand’s relative visibility, price gap on products with a minimum price of and distance from one or more lesser known or s1,000, while Chanel sunglasses and lower prestige brands? If its relative visibility, cosmetics are intended for wider channels. GROWTH THROUGH BRAND EXTENSIONS 329

l Current buyers benefit from a greater level and Bacardi products. We should add that the of attention and distinctive signs of recog- real risk would have been to do nothing and nition, following the model established by watch as young people deserted the brand as a credit cards. There is a basic card for result of its failure to adapt its products, everyone, but also far more exclusive Gold consumption methods, sales and consumption and Platinum cards which provide a way of locations and prices to new consumers. re-establishing the differentiation from Extension is a necessity. other cardholders. The traditional problem faced by profes- sional brands is their desire also to address a The brand is extended to grow through less professional audience. Modern changing its scope of influence. It is not management techniques advocate talking to possible to grow while at the same time the customer’s customer. By communicating keeping everything intact and unchanged. with the general public to publicise the merits With regard to non-prestige brands, the risk of aluminium verandahs, Technal – at that of dilution can often be exaggerated internally. time a subsidiary of Alcan – increased For example, all spirit brands have asked them- demand from its actual clients (craftspeople selves what the impact would be if they were to and businesses that make aluminium enter the ready-to-drink (RTD) pre-mix/ verandahs for their customers). Somfy, the alcopop market. Would this not have an effect worldwide manufacturer of tubular motors on their image among the buyers of their basic for household automation products, did products – Smirnoff, Ricard, Johnnie Walker, something similar: it produced advertising Bacardi and so on? In fact, company studies for automated blinds, even though its actual reveal that this is far from the case. Buyers of customers were the blind manufacturers established but somewhat elderly brands are themselves. Will such a strategy tread on delighted to see that the brands are consumed professionals’ toes? Such questions overlook even by today’s young people, albeit in a very the main issue: these extensions are strategic different way, a fact that is flattering to their because they seek to maintain the domi- parents. This is not to suggest that such exten- nation of the channel, ensuring that the sions are entirely without risk, but the risks are company does not become a mere OEM, parts business-related. The first of these is that the manufacturer and subcontractor. Not to take new product launch will fail. The second is that such an extension risk is to take a much more older buyers with a high volume potential will serious medium-term risk instead. This is be replaced by younger buyers who – at least certainly one way for a leader to increase its initially – will consume less. The trick will be to recognition, and thus its brand’s status. More encourage them to migrate at a later date from importantly, it is the way to increase the size an RTD-type product to the far more profitable of the market, by directly influencing down- ‘real’ product. Even if Bacardi Breezer is a stream demand from its own clients – who genuine worldwide success – like Smirnoff have a natural inclination to go on selling Mule or Ice before it – and even if the products whatever sold well last year, and not to are high-margin on account of their low actual promote innovations. However, only innova- alcohol content (5 per cent), it is still a fact that tions can make the market grow: this is why Bacardi-Martini is a spirits group that expects they must be ‘pushed’ by the distribution the high profits commensurate with the spirits channel. If they are not, demand has to be sector, not the lower profits of the RTD sector. ‘pulled’ instead. The challenge is therefore to migrate current Business-to-business brands start out as RTD customers in future to the proper Smirnoff specialists, and grow via integration. The 330 CREATING AND SUSTAINING BRAND EQUITY delicate phase comes when they stop being Balancing identity and single-product specialists and expand their adaptation to the extension range to include another speciality. For market segments example, could a company that has made its reputation in high-voltage switching gear also Brand extension capitalises on the brand’s manufacture medium-voltage or low-voltage ‘assets’. It hopes that there will be a transfer of switching gear? More importantly, could it these ‘assets’ between the parent category and also distribute electricity distribution the extension category, given the perceived hardware (plugs, cables, conduits and so on) subjective proximity between the two cate- without losing its status? After all, switching gories. It is therefore a question of capitalising gear is a key component of any industrial on identity: the intended result is an identity- installation: safety comes first, especially in based brand. high-voltage equipment. The same cannot be However, the success of an extension said for electrical distribution hardware. But it depends on its ability to deliver value to the also seems obvious that while we continue to client. In what way are these assets relevant? look at the problem from the sole angle of What makes them superior to the compe- brand extension, we are viewing things the tition? This presents the problem of the wrong way around. The real question is one of extension’s ability to exploit a genuine oppor- leadership. Clients and distributors want tunity or real consumer insight in its market. more integration, because it makes their There is therefore always a balance to be business life simpler. Furthermore, in struck between these two (equally legitimate) emerging countries, the pursuit of critical size requirements. Since a name is a promise, the is vitally important. Can this be achieved with brand cannot make different promises with a single line of products? No. different products; but at the same time, However, it is important to maintain the unsuitability for the target market is the image capital, which can be achieved in two number one reason that new products fail: interlinked ways. The first is by entering the each market has its own ‘drivers’ and new market (electrical distribution) with a customer preference levers. differentiated range based on the attributes for An extension category may be chosen for its success in this market, with an additional ‘plus’ contribution towards building the future as insurance (even if this is not a determining brand. Nivea, for example, owns a raft of expectation for this new market), in the daughter brands, each positioned on exten- interests of brand identity and commercial sions that have a highly specific role in success. The second is the pursuit of innovation building the Nivea brand over time (see page and communication in the switchgear market 306). The hygiene and beauty market – as the to reinforce the brand’s leadership in this sector. name suggests – consists of hygiene and care By way of conclusion on the risk of on one side, and make-up on the other. Why dilution, let us remember that all extensions would a brand such as Nivea, positioned on are a form of change whose aim is to ensure skincare and having successfully offered all growth and profitability. It is impossible to possible skincare permutations worldwide, expect both growth and a lack of change at use Nivea Beauty to enter the world of the same time. Of course, the basic values and seduction, play and appearance against such attributes of the brand’s kernel of identity well-established giants as Maybelline, Max must be preserved. However, the extension is Factor and Bourjois? certain to add new attributes, which start out As always, the answer has to be growth, as being peripheral but may one day become image and profitability. After all, the make-up part of the kernel themselves. market is a rich seam of double-figure growth. GROWTH THROUGH BRAND EXTENSIONS 331

Furthermore, it attracts new young customers. decided to launch an ice tea, Colorado by This fashion aspect lends the brand image a McCain. The firm justified its choice of an very modern appearance. And lastly, it is a endorsing brand architecture by the over- profitable category. prominence of the ‘raw’ product’s image (in However, Nivea still had to acquire legit- light of the previous launch of McCain fries imacy in this unexpected area. The first adver- and pizzas in the relevant countries). tising campaign of Nivea Beauty was a failure; Consumers were therefore intended to ask for during extension, brands are often (naturally the Colorado tea drink, with its intangible enough, perhaps) more preoccupied with youthful Tex-Mex connotations, thus fitting it their brand identity than with the customers into the overall American brand identity. in the target market. Nivea relied on bad The marketing team was not limiting itself insights. The sub-brand’s positioning was ‘All to image. Mindful of the competitive nature the colours of care’ – but to a young target of the market, it also created a highly differen- audience in the mass retail channel, this is not tiated product embodying an essential a relevant promise. At a chemist’s it would McCain identity trait: generosity. As a result, have been a different story, hence the exis- the can of tea contained 33 cl instead of the tence of La Roche Posay and Roc cosmetics. competitors’ usual 25 cl. This decision was The brand repositioned its beauty line on the based on sound logic: it differentiated the market expectations and the long-term weak- extension in terms of the brand’s equities, nesses of the competition. The new promise both intangible and tangible. Sadly, this was was, ‘The most beautiful me’. also one of the causes of the extension’s As we can see, this promise is no longer a failure. In reality, this differentiation, straightforward translation of the essence of embodying the brand’s spirit of generosity the brand (loving care for the skin), but (and thus larger portions, as befits the stereo- neither is it inconsistent with the brand’s typical American), proved to be a problem. equities. Nivea Beauty’s promise is that it The can, being taller than other standard cans preserves a woman’s natural beauty. This capi- in the category: talises on Nivea’s fundamental intangible values: respect, humanity, love, naturalness, l was unsatisfactory to retailers, who like to simplicity. The promise derives from a keep storage issues as simple as possible; consumer insight as a reaction against the l was rarely drunk in full by customers, who totalitarian line taken by many make-up, thought it contained too much; cosmetics and beauty products brands, urging l appeared more expensive in terms of its women to look like top models and stars. This retail price, even though the per litre price time around, the relaunch was a success. In was the same. terms of extension, the challenge lies in the balance between market appropriateness and Paradoxically, then, this differentiation faithfulness to the brand’s identity: it is generated long-term dissatisfaction – a funda- created through successive adjustments. mental error in the cut-throat environment of The McCain example provides another this double-figure growth market. illustration of the difficulty inherent in brand The most serious problem faced by this extension. McCain is a Canadian company, extension was probably the fact that it was up operating worldwide, with three branches: against Lipton, the world’s number one in tea frozen fries (it supplies McDonald’s products, aggressively pushing its two mega- throughout the world), frozen pizzas, and soft brands (Lipton Ice Tea and Liptonic), with drinks. In 1998, noting the rising popularity their associated promotional expenditure, to of tea-based drinks in the soft drinks market, it capture this market. Not even Nestea could 332 CREATING AND SUSTAINING BRAND EQUITY compete, despite a strategic alliance with the values as well. Taillefine/Vitalinea is a leading Coca-Cola Company which ensured the yoghurt brand based on good taste with 0 per distribution of its drink in all Coca-Cola cent fat. It made a successful extension in the vending machines. In the hypermarket – and biscuit market, but with a promise of ‘less fat’. thus the home consumption market – Nestea Finally it was extended to purified water, a was powerless against Lipton. product with no taste but with slimness benefits. At this point we should take another look at At some point in time, it is then possible and why strategic analysis is a higher priority than even necessary to forget the tangible root. marketing analysis for the extension. Smirnoff is a vodka. However, Smirnoff Ice, the world’s number one ready-mixed drink, is based on not vodka but malt whisky. Skyy Blue also is Assessing what should not not vodka but whisky-based. Of course, this is change: the brand kernel not a guaranteed way to success. In the United States everyone knows that Captain Morgan is a All extensions are real products or services, brand of rum. To grow the business it too intro- and real decisions have to be made duced Captain Morgan Gold, a ready-mixed concerning their attributes and character- drink. Instead of rum, it too used whisky as a istics. Typically the first extensions are very basis. This ingredient switch created a number conservative. Then bolstered by success, of strategic advantages: extensions gain their degrees of freedom (from the prototype). This is the time when l lower taxes; the issue of what should be left intact, l access to greater distribution than is unchanged, and what can change is asked. possible for rum, for instance through beer distributors; Extension and respect for physical l access to television advertising (not identity permitted for spirits in the United States). One of the first questions raised in extensions is The new product however failed. Consumers how far the brand can go from its physical basis. did not like the taste enough, a classic in food This is especially true for brands whose identity and drink new product failure. rests heavily on their physical facets. Dove posi- In brand management, identity plays a key tioning for instance is based on its moisturising role – and this is doubly true in extensions power, and the claim of 25 per cent moistur- management. If consumers reject the very ising cream content. This claim is maintained idea of an extension, it is either because they across extensions. All Orangina’s extensions cannot see what benefits it offers that the respect the ratio of 10 per cent real juice and 2 competition does not (the number one reason per cent real pulp in the bottle or can. for the failure of extensions), or because they Typically, first extensions are very close to the cannot see the logic of the extension under original: Mars introduced a Mars ice-cream bar, this brand. In other words, the extension is in for Mars looks like a bar. Only later would it dare conflict with their concept of the brand’s to move to other formats and shapes. However, essence and kernel of identity – that is to say, growth can only be found by gaining more the handful of attributes without which the degrees of freedom: self-imitation cannot brand ceases to be the brand. So how can we suffice. In addition, extension is an extension of gain an understanding of identity as perceived the same benefit elsewhere: it accentuates the by consumers? move of the brand from pure product to To return to basic theory for a moment, the concept, from pure tangible values to intangible GROWTH THROUGH BRAND EXTENSIONS 333 brand – like any concept – is defined by essential various remote categories to look coherent, and less essential traits. The former are identi- one has to draw upon the deeper meaning of fying traits, and are thus crucial. The latter are the brand. This supposes that the brand either variable: they may be prominent in some brand has such meaning or has the potential to products and less prominent in others. In his acquire it. The Swiss brand, Caran d’Ache, work on the perception of stereotypes, Salomon built its reputation through upmarket pencils Asch showed that some traits had a consid- and writing tools. Its extension into scarves, erable impact on overall perception, while wallets and leather items failed. The brand others could be absent (or even contradictory) was missing the necessary deep meaning. without affecting overall perception. Abric Figure 12.9 demonstrates the demands (1994) extended this theory to include social arising out of brand extension. Every degree of perceptions, and Mischel extended it to brands product dissimilarity changes the meaning (2000). According to the theory, the brand and the status of the brand. Close extensions changes over time by incorporating traits into (B) are compatible with product or know-how its kernel which had until then been peripheral, brands: Heinz can market not only ketchup, featuring only in some of its products. These but also mustard sauce. Extension one degree traits form the heart of the brand’s vitality, the further (C) corresponds to brand benefits: source of its ability to adapt to its ambient envi- Palmolive softens all that it embraces and Bic ronment. simplifies everything from pens to razors to lighters, making them disposable and cheap. A further extension (D), in order to be Preparing the brand for remote coherent with the initial product (A), assumes extensions a brand defined by its personality. In the beginning, Sony was a brand exclusively for Not all brands lend themselves to extension. hi-fi systems. But in a few years it has acquired Some brands are defined only through their fame in the field of television sets and videos prototypical product or know-how. This is the and has therefore modified its image and its case with cosmetic brands such as Clarins, Roc significance, but its core values still remain and Vichy. Their field of extension has to be technology, precision and innovation with a limited within appropriate boundaries which specific elegant and refined personality. The combine both science and beauty. last extension (E) assumes a brand that is Other brands are almost like sects and have defined by deep values. Virgin is a good quasi-religious principles: St Michael, the example. brand owned by Marks & Spencer, covers Thus, the only way for a brand to give a everything from food to clothes, from toys to single meaning to a collection of extensions is para-pharmaceutical products and furnishing. to regard them from a higher viewpoint. To Through its signature it imparts legitimacy to make distant extensions fit, the brand has to all that is in conformity with the Marks & distance itself physically and serve more as a Spencer ideology. Like a patron saint (etymo- source of inspiration and a value system that logically, patron means pattern, ie model to be can embed itself in different products. This is followed), the brand transforms and elevates the case with Nestlé, a brand with a very large all the products that it sanctifies. spectrum of offers. The distance helps to If the brand is to remain intact in the eyes of maintain the angle between the brand and its the consumer and not be fragmented into capacity to lend itself to different products. disconnected units, the prerequisites of a The steeper the angle, the greater force it remote extension must be taken into consid- exerts on the products (from A to E). The eration. For the extension of one brand into flatter this angle, the less is the force available 334 CREATING AND SUSTAINING BRAND EQUITY

Type of brand

Values

Personality

Benefit

Know-how

Product Distance between extension and the (A) (B) (C) (D) (E) brand prototype

Figure 12.9 Type of brand and ability to extend further to the brand to unify the products. Like an considered the brand as a product and overstretched rubber band, the brand confined it to pineapple juice. But for becomes weak, loses its grip and finally consumers, Dole signified much more. breaks. Beyond its attributes (good taste, freshness More concretely, brands having only a and naturalness), lay a deeper core: physical facet (a product, a recipe) and no sunshine. Dole was actually the sunshine intangible identity do not lend themselves to brand and in this capacity could cover not remote extensions. They become diluted and only other fruit juices, but other products, are no more than numbers. This is the case eg ice creams. Very well known for a long with Mitsubishi. It no longer operates as a time as a shoe brand, Salvatore Ferragamo unifying brand but is only a corporate name has now successfully diversified into ladies’ and a factory trademark. It carries no signifi- handbags, cardigans and ties. cation other than the generic characteristics As shown in Figure 12.9, the further a brand of Japanese technology and the image of wants to move from its origins, the more it industrial power that is associated with the needs to have acquired a relevant intangible group. Mitsubishi cars do not seem to embody meaning. any particular ideal and neither do Mitsubishi Research does, indeed, demonstrate that televisions or tools. This was also the case with the order in which intermediate extensions Philips to a certain extent. are made affects consumer reaction to the At the other end of the spectrum are the final extension. Thus, in an experiment, underexploited brands. These cover a very consumers were presented with a sequence of narrow product field but have an inner five extensions for a number of brands. These meaning which makes them legitimate over extensions were chosen to represent five a large range of products. The brand Dole degrees of perceived distance or fit with the was a typical example of under-exploitation. brand. In one case, consumers viewed an This brand underestimated its growth ordered sequence of extensions (from the potential for a long time. Management closest to the farthest); in the second case they GROWTH THROUGH BRAND EXTENSIONS 335

Exploration matrix Coherence check with kernel

Peripheral traits Benefits Same Different Kernel traits

Same

Target SWOT of extension

Different Strengths Weakness

Opportunities Threats

Figure 12.10 The managerial process of extension evaluation saw an unordered sequence of extensions Again, a real-world illustration of this (Dawar and Anderson, 1992). Two results process is that of McCain. This brand entered emerged from this laboratory experiment. the market with its frozen fries. After two As expected, there is a decrease in perceived years, it moved to large American pizzas, then coherence due to the distance between the to buns and recently to the fast-growing iced extension and the brand’s present product. tea market. The meaning of McCain is now However, the decrease in perceived coherence clear: American food, simple products, due to the distance is less steep when generous portions, fun to eat and innovative consumers saw the remote extension after a in their category. This brand territory will series of prior extensions presented in order of determine McCain’s future extensions. increasing distance. Each one may have acted A second experiment demonstrated as a stepping stone and prompted a category another basic rule of brand extension: only (brand) extension mechanism known as the coherence between extensions can create ‘chaining’ (Lakoff, 1987). The same result held a brand territory. Two extensions may be true for the purchase likelihood for extensions. equally remote from the core of the brand but Interestingly, it took less time to evaluate not in the same direction. When a remote the farthest extension’s coherence with the extension is presented to consumers after an brand when that extension was seen at the intermediate extension in the same direction, end of the ordered sequence (4 seconds vs this sequence increases the perceived 4.34). Actually, the ordered sequence had coherence of that remote extension and its itself modified the meaning of the brand, purchase likelihood (compared to the case making it clear that it was not a product brand where the intermediate extension is not in the but a larger brand with a wider territory. same direction) (Dawar and Anderson, 1992). 336 CREATING AND SUSTAINING BRAND EQUITY

Brand Concept Resources

Fit

Extension

Relevance Sustainable advantage Consumers’ needs Competition Figure 12.11 Framework for evaluating extensions

Keys to successful brand stretch in all directions, but strategy should extensions guide it. There is for instance a big difference in stating that Tide (Ariel) wants to lead the What advice can one give to increase the low-suds detergent market, and that it wants probability of success of brand extensions? to be the brand for those who take trouble Based on both research and consulting, there over the care of their textiles. do exist key steps and questions in the extension process which require particular The limits of consumer research for attention. Extensions must be evaluated in managing extensions relation to the brand, consumers and the competition. (See Figure 12.10.) The role of consumer research is to assess the level of risk. It indicates what difficulty may Think of the big plan first arise when using the same name on an extension. But research is not management. Extensions used to be managed too much on Brand management needs to integrate all an ad hoc basis. Every new idea was screened dimensions of the decision. This is the funda- and evaluated, then eventually implemented. mental rationale of this new edition of this Now this era has ended. Brand management book. Decisions about extensions will take entails a long-term vision for the brand itself. into account production, financial, strategic There should be a clear statement of where the and competitive factors, beyond the imme- management wants to lead the brand. The diate reaction of consumers. Management is brand wants to be a leader of what? How risk taking, a source of competitive advantage. should we define its leadership – by product? Let us recall that consumers’ reactions to by category? by need? by target? One thing is brand extensions are reflections of the past. sure: the ambition must be to construct some They rest on prior learnt associations. They kind of leadership. are also short-term oriented. Management of This long-term vision can be compared to a brand extensions is based on a long-term stairway. It shows the direction of the stairway vision. Prior to any extension, one question and the steps to get to the desired position. must be asked: what do we want the brand to Each proposal is then evaluated in rela- look like in the future? Each extension is a tionship to this objective. A brand cannot just step up the stairway to this goal. Consumers have no idea of the stairway. GROWTH THROUGH BRAND EXTENSIONS 337

Are our values here really valued service, it entails a full new marketing mix. It there? requires in fact that the organisation think more about the consumer than the brand. Many extensions fail because someone has When Nike launched its Nike Women overestimated the value of the brand assets in extension, its management was so infatuated the extension category. Are they really assets with the brand itself that it forgot consumers. there? Do they really have a motivating value? This is why it was a failure: the products Do they deliver an unprecedented array of (shoes and clothes) had the same design as benefits? Too often someone overestimates their male counterparts, and only the sizes this point, making the assumption that the were adapted to women. Nike Women was brand assets are relevant. For instance, most not really a line for women at all. Soon it was perfume brands are tempted to launch discovered that to succeed in this extension, it cosmetic lines, but very few have succeeded. was first necessary to create relevant products. The drivers in the latter market are focused on Female designers were hired to rethink the confidence and hope in research, and this is product offerings. not what a perfume brand can provide. It has In Europe, Perrier has always been no credentials. hampered by its most differentiating A second key question concerns compe- attribute, its strong bubbles. This is why tition. Does the proposed extension really Nestlé (which owns the brand) has restored it beat its competition? Too much of extension to growth via two innovations/extensions. research is : it asserts the The first, called Perrier Fluo, targets young attractiveness of the concept. However, in people who perceive Perrier as being the stores customers compare offerings, and assess brand of their parents. It offers a sophisti- their relative attractiveness. Certainly an cated taste (for example, peppermint) and extension may be welcomed in research exer- finer bubbles, making it easier to drink than cises, but that does not mean it will win out in the original Perrier. Perrier Fluo also has lower the purchasing decision. Customers may be production costs, because the packaging is reluctant to change their existing purchasing plastic (rather than glass), and the water used patterns for the new brand and product. At is not taken from the Vergèze spring, the the moment of truth, is curiosity enough? brand’s historic source. The second There has to be a strong incentive (perceived extension, called Eau de Perrier, targets adult difference) or a pioneer effect (acting first). mealtime drinking. To this end, a finer, more It is noticeable that Nestea, Nestlé’s entry in elegant bubble was created, and the sparkle of the iced tea soft drink market, has not been the product was adjusted to make it lighter. successful in Europe, despite its strategic As we can see, extension often takes the alliance with Coca-Cola, which distributes the form of the adaptation – indeed, sometimes product and offers it in all the vending the radical modification – of the product or machines it controls. However, there is one entire marketing mix. The main and only real country where Nestea is leader: Spain. There reason for extension is growth. Often, the and only there, Nestea was launched before brand needs to go beyond a mere range Lipton’s Ice Tea, and so benefited from the extension to achieve a significant leap. Thus, pioneer advantage. in the United States, Smirnoff – currently the world’s number two spirits producer – decided Think of the full marketing mix of the to enter the store multiples channel in extension addition to its traditional channel (liquor stores). To do this, it launched a new ready-to- An extension is not simply a new product or drink (RTD) product, Smirnoff Ice, with a low 338 CREATING AND SUSTAINING BRAND EQUITY alcohol content, backed by an advertising they just have to hand the bottle over to investment of US $70 million. It has sold customers, without the need for a glass. more than 30 million cases and produced ‘a Meanwhile, the bottle with its highly visible positive spillover effect on Smirnoff’s image’. branding acts as a badge, an identifier for The extension also led to the acquisition of customers, unlike a glass of beer which competence in this new distribution channel. generally does not carry a brand name. This is When Ricard launched its own RTD in a very important motivation for 18–24-year- order to penetrate the nightclubs, disco- olds who are insecure about their image. In theques and night bars it had failed to enter addition, advertising reinforced the modern with its core (and till that point, only) status of the new drink. More than £4.5 product, did it think enough of the new million was spent on Smirnoff Ice to launch it consumption situation associated with these among young males (Mule having been places? After midnight, this simple RTD mostly chosen by females). competes with all kinds of cocktails. It should therefore have been aromatised to better The question of resources answer the needs of that situation. This extension is consumed in a specific place, at a The main source of failure of extensions is a specific time, and this had implications for lack of resources for the launch. Companies the product itself. The same holds true for should remember that if an extension is distribution. Extensions are often ways to get aimed at a different market, its launch should out of the classic distribution channels and be treated as a new product launch. become closer to the public’s need. Unfortunately many companies extend their brand, thinking that it is a way to save money Extension should meet trade compared with launching a new brand, and expectations too that a simple mention at the end of the regular 30-second television ad will suffice. It In its desire to maintain its dominant share of might do for a simple line extension, a market in the UK, Smirnoff has shown the variant, but not for a brand extension. way by following a dual strategy. One part is Companies also hesitate to divert aimed at adults, its present target market, with investment from core products to finance an the introduction of Smirnoff Blue, Smirnoff extension. They feel that by doing so they will Lemon and Smirnoff Black for instance, to put their core product at risk from compe- compete with Absolut and Finlandia. The tition. As a consequence, they decide at the other is aimed at the youth market through last moment not to support the extension Smirnoff Mule and later Smirnoff Ice, two with the required budget. This reasoning ready-mixed drinks which gained high underestimates the reciprocal spillover effect. success and were soon imitated. The success of Communicating the benefits of a new product Smirnoff Mule demonstrates that all good has an effect on the sales of the core product innovations must provide value to the (see Chapter 9). This is one of the virtues of distributor and to the consumer. mega-brands covering multiple products: they The strategic goal was to establish these get re-energised through communication new products among young people for on- about their new products. premise consumption. On Friday or Saturday nights, many pubs are literally full up and How will the competition react? people gather outside them. Smirnoff Mule brings bartenders a faster way to serve clients Some extensions attack the core market of a than a draught beer, with a better margin: competitor. It will react fiercely and at any GROWTH THROUGH BRAND EXTENSIONS 339 cost. This is rarely taken sufficiently into What name for brand extensions? account when planning extensions. To sustain long-term competition supposes a Why is Chanel’s entry in the cosmetics market long-term commitment, not only at head- called Precision, and why does Biotherm call quarters level, but at the local subsidiary level its entry in the male market Biotherm where budgets are tailored to innovations. Homme? Obviously the question of the name cannot be separated from that of the chosen Extending the brand extensions brand architecture (see Chapter 13). If it is decided to follow an umbrella brand archi- After a successful line or brand extension is tecture there should be no specific names. created, one major question that soon arises Architectures based on source brands and concerns its geographical extension. In what endorsing brands allow for another name. countries should it be developed? In answering The naming decision must satisfy two it is important to remember that extensions are demands. First, it should help the extension often created in response to a specific market succeed. By a name one can underline specific problem. For instance Orangina Red (with red traits or benefits of the extension, or counter- oranges and guarana energising ingredients) balance possible negative thoughts. Second, it was created to challenge Coke’s appeal among should not dilute the parent brand equity. the major soft drink gulpers, the teens. Coke’s Fashion and perfume brands are not that appeal is based on thrill and mystery: it is a legitimate in the highly scientific cosmetic black drink with a secret formula that can be market, where women are looking for inno- mixed with forbidden (to teens) alcohols. vative ingredients, not just dreams or fashion. Orangina Red was created to be the more Chanel’s choice of Precision helped bypass the thrilling and adventurous extension of negative prejudice against this type of Orangina. However, this logic only applies in extension for perfume and couturier brands. countries where Orangina is in fact competing Many years ago, when there was still a lot of across flavours. In the United States for male prejudice against cosmetics, Vichy instance, it held a niche position within the decided to name its male line Basic Homme de ‘new age’ segment of orange-flavoured drinks. Vichy. Men were just not ready to buy Vichy Orangina Red would make no sense there, for Men. In fact, at that time Vichy had not while Orangina Light would. repositioned itself on effectiveness and Nivea’s sub-brands are not present equally health, but was a mid-range cosmetics line. in all countries. The fashionable Nivea Beauty Now its message is that health is tied up with is not sold in the United States, for instance, skin condition. This message, this vision, has although in this case it is because the sub- no sex, and is extendable directly to men. In brand roll-out strategy has not reached this addition the market has changed, and men point. are more open to buying cosmetic products. Another reason for differences between Basic Homme de Vichy was renamed Vichy countries is based on the potential of the Homme. country and the status of the parent brand The name should also not dilute the within it. For instance, should Evian launch parent brand equity. Too often, just because Evian Affinity in Japan or Korea? This the parent brand is old, or seen as such in extension is in line with the latest Evian posi- public surveys, the extension receives a new tioning based on health, aesthetics and brand name, and the parent brand is hidden, eternal youth, and Evian water is certainly in a typical endorsing architecture. This known in Korea and Japan, but it commands a creates a self-fulfilling prophecy: hidden, the very low market share. parent brand gets older and older in the 340 CREATING AND SUSTAINING BRAND EQUITY public perception. The role of new products Is the market really attractive? and brand extension is always to take from the brand equity but also to give to brand The first thing to evaluate in a brand extension equity: imbalanced exchanges should be is not the extension, it is the market attrac- avoided. tiveness of the category. The key question in As a rule, and as will be discussed with evaluating a brand extension is the intrinsic reference to the multicircular model (see value of the category. Later, we examine this Chapter 13), the more remote an extension from the point of view of the business and the from the brand core values, the more it brand. This presupposes that we are consid- should have an endorsing architecture and as ering not only the present but also the future of a result a brand name of its own. The closer it the category. An extension is not an overnight is to the core, the more it should adopt an affair, it marks the beginning of a desire to umbrella architecture, and receive a generic invest in a new market. The extension itself is or descriptive name. For instance a prepaid no more than a bridgehead. A realistic analysis card for mobile phones could be called of existing strengths, threats and opportunities Mobicard or BT Nomad Card, but surely not is therefore required. Clearly, this corresponds Nomad … by BT. to the traditional SWOT model (Figure 12.10). Opportunities derive from the relationship Checking what the extension brings to between the factors for success in the category the brand, its feedback effect and the organisation’s key competences, both tangible and intangible. They also derive from An extension uses brand capital. This is not the brand’s ability to segment the category surprising, since it was created to do so: the according to its own values, or in other words brand is a business development tool. It is to create genuinely relevant differentiation. therefore logical that we should seek to Strategic analysis also analyses the future of exploit this capital by putting it to productive competition and the organisation’s relative use in new growth categories. However, we strengths. Will its entry into the market trigger must also ensure a win–win outcome. After a competitive reaction, and if so, how big? To all, what does a brand extension really answer this question, it is necessary to evaluate deliver? Sales alone are not enough. The the importance of the category to competitors. benefits to be derived by the brand from this To repeat, the fact that a brand can be extension must be clearly specified. extended does not mean it should be Each extension from Kinder confectionery extended. One must take into account future is aimed at a particular target, age segment or competition and the costs of remaining a situation of use. Each also gives the brand significant player in the category (the rate of widened relevance and less of a narrow image. innovation, rate of launches, marketing and This must be specified clearly in advance, and sales investment and so on). Extension is not then measured afterwards. an inside feat: it must deliver a sustainable Of course, we must be all the more careful advantage. For instance, many food to avoid any risk of dilution, as can happen companies have thought of launching a when the values associated with the extension frozen pizza, but what would they do next to category contradict those of the brand, or capture shelf space from Buitoni or McCain, when it is known that implementing the or to defend their own shelf share? In the extension will be risky. After all, the imple- middle term, who is in the best position to mentation is the part customers see. innovate most often? Table 12.4 presents a multi-criteria strategic evaluation grid. GROWTH THROUGH BRAND EXTENSIONS 341

Table 12.4 Extension strategic evaluation grid Extension 1 Extension 2 Extension 3 Is it a growing market? Are its success factors close to our strengths? Are the brand assets transferable? Are the brand assets still assets in this market? Will it impact positively the brand equity? How entrenched are competitors? How fast can they copy? Does the product have a clear differentiation? Is it a motivating difference? Can the company produce it? Can it produce at a normal cost? Will distribution accept it? Is it consistent with brand or company identity? Does it capitalise on the brand or company’s present customers? Is it consistent with the brand or company’s positioning? Does it capitalise on the company’s expertise in: – production? – advertising? – logistics? – sales forces? – retail location? – pricing/promotion? Does is meet the company’s profitability objectives? Can the company sustain competition (does it have the financial resources needed to compete)?

The question of resources l Weight Watchers’ expansion in the pre- cooked meals category was made possible As mentioned above, the main source of through a co-branding agreement with failure of extensions is the lack of resources for Fleury Michon, a leader in this field. the launch, and later to defend them. l Evian asked Coca-Cola to distribute it in the United States, where its core brand Should we implement it alone? urgently needed to be made more available. Partnerships and licences It also asked Johnson & Johnson to develop It is difficult for a company to master the and market Evian Affinity (its cosmetics many new competences needed for an line) worldwide. extension at the same time, which is why so many companies prefer alliances: One of the criteria in the strategic matrix for evaluating extensions concerns the l Nestlé won the battle in Europe against company’s ability to produce this extension. Kellogg’s once it decided to find a technical Of course, we are not suggesting that exten- partnership with the American General sions should be restricted to categories that the Mills. company is itself capable of producing. Mars had no expertise in ice cream, nor did it have 342 CREATING AND SUSTAINING BRAND EQUITY any knowledge of the buyers in this category, apparent in this founding act: Branson seeks and hence it subcontracted production of Mars out opportunities in markets choked by ‘false’ ice cream, its first major extension outside the competition. He asks himself how he can chocolate bar market. All Cacharel extensions operate differently from the leaders – who are based on licences: Playtex for hypermarket have usually frozen the market to their lingerie until 2004, l’Oréal for perfumes, advantage. The Virgin name was chosen household items by Arnolfo di Cambio and so because it was friendly and modern, and on. In total, of a turnover of s35 million last could be applied to sectors other than just year, royalties (extensions) accounted for music. This last consideration alone presaged s7.6 million. the business model that would follow. Licences can enable extensions to move Virgin’s originality lies in the fact that it is quickly into categories in which the brand has held together by one entirely intangible no experience of production, logistics or ‘glue’, its brand. This is why the brand archi- distribution. Some famous brands have never tecture is umbrella branding. Every year, produced or even distributed their own Virgin launches itself into new businesses and products, but have instead operated on the pulls out of others. In under 20 years, Richard basis of production and distribution licences Branson has extended the brand to the throughout their existence, along with following sectors (and subsequently pulled regional sub-licences, while retaining control out of some of them): over design, creation, strategic marketing and communication. l First business: mail order (1969). l Records: Virgin Records (label created in An extension-based business 1973 and sold to EMI in 1992). model: Virgin l Radio: Virgin Radio. l Video games: Virgin Games (1983). Most brands conjure up an image of a product or service: shoes for Nike, yoghurt for l Distribution: Virgin Vision (1983), Virgin Danone, ballpoint pens for Bic, a holiday Megastores (1988) and Virgin Bride (1996) village for Club Med, and so on. This is not for brides-to-be. surprising: before they became brands, they l Cosmetics: Virgin Vie. started out as a simple product or service, driven by marketing and sales. Virgin is an l Drinks: Virgin Cola, (1994). exception: who associates that brand with l Computers: PCs manufactured by ICL only one product or service? Indeed, Virgin Fujitsu (1996), Internet terminals manufac- now comprises 200 companies and 25,000 tured by Internet Appliance Network people working for the brand worldwide. It (2000). has a turnover in excess of s7 billion, and has become one of the world’s top 50 brands. l Air transport: Airways Even in countries in which it does not (1984), Virgin Cargo (1984), Virgin Express operate, it is still a famous brand. (1996). It all started in 1969, when Richard Branson l Rail transport: Virgin Railways (1997). decided to launch a direct record-selling oper- ation, enabling many groups without distri- l Tourism: Virgin Holidays (1895), tour bution by the ‘majors’ to gain access to the operator, Virgin Sun. general public. The brand’s DNA is already l Hotels and pensions: Virgin Hotels, Virgin GROWTH THROUGH BRAND EXTENSIONS 343

Pensions (for senior citizens). Megastores in the UK are 75 per cent owned by the W H Smith group. Similarly, Virgin l Financial services: Virgin Direct Financial Vodka was manufactured and distributed by Services (by telephone, 1995), Virgin Bank. William Grant in a 50/50 partnership with l Internet: Virgin Net (1996). Branson. Virgin allows start-ups to begin with a l Utilities: Virgin Power House (2000): water, world brand as their ‘birth gift’, significantly gas and electricity. reducing their necessary advertising expen- diture – particularly as Branson is well aware In a sense, Virgin is like the Japanese keiretsus, of the financial benefits of repeated public horizontally structured conglomerates relations exercises such as his balloon trip consisting of independent companies that around the world, or riding down Fifth share one name and one set of values. How Avenue in a Patton tank to celebrate the can a brand spread itself in so many directions launch of Virgin Cola. Branson also resells his without specific competencies and with businesses, but only after having added what minimal investment? Of course, the more makes them valuable in the eyes of the public widely the brand spreads itself into apparently – his brand. For example, the French dissimilar extensions, the greater the need for Megastores were sold to Lagardère, and Virgin an intangible link (see Figure 12.12) – and this Atlantic Airways went to Singapore Airlines. link consists of the Virgin brand’s values. Its Of course, the Virgin brand remains the extensions actually form a family of inde- property of Virgin Enterprises, a company of pendent companies that share the values of which he is the sole owner. the Virgin brand. Virgin’s extensions are remarkable in that To finance his expansion, Branson usually they are truly based on a strategic analysis of seeks support from appropriate partners in the sector. But in addition, like any healthy order to minimise his own investment, even if extension, they deliver far more than just a this means not being the majority share- name to customers: they represent true inno- holder. The partner thus provides the sector vation which remains consistent with the know-how, the money, and its own energy as brand’s values. As its name so prophetically an entrepreneur. For example, Virgin suggests, Virgin aims to take a brand new,

Instead of starting from the product’s usage or benefit, Virgin starts from the more intangible dimensions of the brand

Mission values: Intangible to break monopolies Personality: friendly Consumer benefit: real choice Attribute: service and price Product ingredient

Tangible

Remote extensions

Figure 12.12 The Virgin extension model 344 CREATING AND SUSTAINING BRAND EQUITY

‘virgin’ approach to markets and operate in a l When it adds nothing other than just different way from the ‘majors’. Virgin has a competition. This was what happened with rebellious, extraverted personality. Its Virgin Clothing, abandoned in 2000. ambition is to ‘unblock’ markets and liberate London already buzzes with creators, rebels consumers from meaningless choices between and anti-conformists. In a fragmented dominant market leaders. Its commercial market with extremely wide price varia- proposition is innovation, quality and fun. tions, what could Virgin add? The result is a product range totally different The same is true of Virgin Cola. In from those of its competitors, targeting a Europe, Pepsi already plays the role of the younger audience and better value for money, fly in Coca-Cola’s ointment. Furthermore, all under the aegis of an . the multiples’ purchasing centres chose not After all, in order to succeed, innovation is to stock the brand, thus starving it of access required at every stage, even if it means being to the public. A question mark also hangs copied: Virgin Atlantic Airways was the first over Virgin Express: despite the fact that company to offer a Volvo-chauffeured Virgin Atlantic Airways and its battle collection service for its business class clients against British Airways assumed from their offices, and a bathroom at the emblematic status, the act of starting yet arrival airport. On board, Virgin innovated another low-cost airline to compete with with the first personal video screens, followed Ryanair failed to connect with the brand’s by relaxing massages and the like. Another mission. There are no dominant leaders in example is Virgin Cola, which innovated by this sector, and customers do not feel offering an excellent taste, produced by the trapped. Canadian firm Cotts (bought out by Virgin in 1998), at a price nominally 10–15 per cent l When the scale of investment required lower than that of Coke, with widespread pushes the fulfilment of the promise back distribution. into the long-term future. This is what has However, the system has its limits: exten- happened to Virgin Rail. In the UK, the sions do not always work (a fact that applies to brand’s entry into commuter railways has Virgin just as it does to any other firm, of not made any real difference to commuters’ course). The further you get from the British daily life: it has not been able to deliver a zone of influence, the weaker and less emotive better experience. True, the dilapidated the Virgin brand becomes. This makes the state of the rolling stock and infrastructure, high visibility associated with the Megastores’ handed over to the firm ‘as is’ under music and entertainment brand a prime tool privatisation, ensured there could be no for generating recognition and empathy miracle: a network cannot be changed that among young people from all countries. quickly. Similarly, profitability issues Paradoxically, Virgin’s failures do not seem concerning the MGM cinemas taken over to have damaged its business model. In situa- by Virgin in 1995 prevented any real price tions where many brands would have packed reductions – one of the terms of the brand up and gone home, Virgin simply continues contract. to expand elsewhere. After all, should we crit- icise David if he loses to the Goliaths every Without Richard Branson himself, could the now and then? At least he tried. But can this succeed? Given its founder’s brand and business model last forever? Not if aura, and his ability to attract the attention of the extensions fail too frequently. An analysis the media and to concentrate energy and of the failures readily shows when an investors around him, it must be concluded extension has been inappropriate: that Virgin is Branson himself. This is the GROWTH THROUGH BRAND EXTENSIONS 345 brand’s strength, but also its weakness. As little available to eat or drink, and every- with luxury brands, we should remember that thing must be paid for. Consequently, a brand only truly begins with the loss of its customers consume very little on board, founder. and use of the toilets is reduced. This makes it possible to remove one toilet and replace it with seats, which in turn bring in money How execution kills a good idea: and increase passenger numbers. easyCar I The cost of cleaning the plane during stopovers: the crew do the cleaning. EasyJet’s success is well known; the failure of its brand extensions is less so. We examine I Parking costs during stopovers: every here how an ostensibly good extension idea minute that a plane is on the ground costs (easyRent car hire) led to major financial money. This time was therefore reduced to losses. a minimum by maximising flying time and EasyJet and RyanAir are the two best-known rotations per day. RyanAir was also able to ‘low-cost’ companies in Europe. They have exploit small, unknown, empty airports both picked up the clever idea of Herb (such as Amiens, which is 142 km from Kelleher, the founder of the world’s first low- Paris, as opposed to Roissy-Charles de cost airline: Southwest Airlines, in the United Gaulle, which is only 30 km away). These States. The strategic idea is to aim at the smaller airports charge airlines much less, market of all those people who have never and there are grants available from local flown before, rather than fight over those who chambers of commerce for these low-cost take planes on a regular basis. The first market airlines, which bring hundreds of tourists is enormous, and has never been seriously and create a regional economic boom. explored, whereas the second is a sea of blood I Plane maintenance costs, through a single- as a result of intense competition and high supplier policy. By buying only the same operational costs. It was therefore possible to plane, and only from Boeing, all processes speak metaphorically of a ‘blue ocean’. They and costs can be simplified. needed to find a way to liberate this potential demand. The only brake was the price of an I Staff costs: these companies pay their staff air ticket, and the opportunity existed much less than other airlines, and offer provided that it could fall below a psycho- very few company benefits. logical threshold, the cost of the taxi that I Advertising costs: the founding directors takes you to the airport. were able to create regular media events To achieve this price, they had to invent a through accusations against British new business model, a new economic Airways, for example, or fabulous offers equation, in order to offer a brand value (free flight for 10 people, etc). Anything proposition of a type never seen before, a type became the pretext for staging an event. that would revolutionise demand. This was achieved first by suppressing all costs, other I Costs linked to the lack of service: these than safety, that inflated the price. Therefore companies try to avoid paying any they removed or reduced: compensation for (frequent) delays, or for lost luggage and the like, arguing that I All selling costs, by making it obligatory to people cannot expect the lowest prices and buy exclusively over the internet. compensation. After-flight service is defective, often non-existent. I All on-board service costs: there is very 346 CREATING AND SUSTAINING BRAND EQUITY

Flushed with this success, Stelios Haji- ones who manage it. Furthermore, customers Ioannou, the founder of easyJet, decided to arriving late (as they often do, since air travel extend the business model to many other is rarely punctual) find a queue at the easyCar activities, thereby imitating the approach of counter, which is understaffed, thereby Richard Branson with his Virgin brand. He extending their wait: recriminations break out created the easy group, and launched on all sides. On their return, they are in a products such as easyMoney, easyValue, hurry to return the car, and therefore mess up easyInternet Café and easyCar. the formalities. This only multiplies the It is true that the car rental market is an problems when the bill is received, since oligopoly, controlled worldwide by two rental customers take less care of a hire car giants, Hertz and Avis, whose margins and than they do of their own. EasyCar quickly procedures showed that it should be easy to crumpled under the complaints of customers, drastically reduce costs, and therefore prices. furious at finding themselves charged for Furthermore, what could be more natural repair costs. than to take advantage of travellers disem- In order to grow, easyCar opened agencies barking the easyJet plane by offering them a in town centres, which attracted a clientele similar type of service to reduce the prices of particularly eager to get a bargain and try a car rental? Having paid just s30 for their plane Mercedes for s9. This led to an abnormally ticket with easyJet, these travellers would high number of damaged or dirty cars. It is choke at the notion of paying s100 for a day’s difficult to immediately hire out a dirty or car rental at Hertz or Avis. The idea was to damaged car. The company could ask its flight offer managers travelling by plane an crew to clean the cabin, but not its car rental attractive car (Mercedes A-class) at s9 a day. clients. This therefore affected car rotation However, there are many differences and created logistical complexities, leading to between a plane and a car. On easyJet, the unforeseen costs that dragged the figures into customer is required to have – non-negotiable the red, in addition to the ill will spread by – iron discipline from reservation to disem- aggravated customers. Finally, the Mercedes barkation. Moreover, the asset is not entrusted A-class was a brilliant choice of car, but an to the customer. The reverse is true for the car; expensive one to maintain – and the buy-back customers refuse all constraints, and they are price of the cars (in poor condition) was lower the ones entrusted with the asset (the car), the than anticipated. 347 13

Brand architecture

A brand has only one need: to grow, while When Lafarge invented a revolutionary, maintaining its reputation and profits. fluid and therefore extremely smooth Capitalising on the success of its founding concrete, should it have called it simply product or service, it does so by means of fluid cement, or Agilia? In the latter case, successive extensions, which deepen the rela- how should the link be made between this tionship with existing customers, or which so-called daughter brand, Agilia, and the make it possible to enter into new customer so-called parent brand, Lafarge? Should segments, or new distribution circuits. These one say Lafarge Agilia or Agilia by Lafarge? extensions may be narrow to begin with Does the same rule apply for all daughter (product line, range) or broader in scope (entry brands? How should it be expressed on the into new product categories, such as when the packaging of cement sacks, on the products jeweller Bulgari also became a hotel brand). themselves, on distributors’ shelves, or on When this extension of the perimeter of the the stands at trade shows? brand’s offer occurs, strategic questions arise: I How many brand levels to adopt? Should they concern the brand architecture. The there be only one brand name within the answers to these will have a considerable company? This is the choice for most Asian effect on the value creation and the groups. This means naming the products in construction of brand capital. This is not a a descriptive manner in order to have one problem of aesthetics, but of efficiency. single brand. Thus, we talk about Samsung televisions, Samsung mobile phones and The key questions of brand Samsung digital cameras. In the same way, architecture there are Braun coffee machines, Braun razors, Braun electric toothbrushes and Braun hairdryers. Conversely, for decades There are five types of question: Philips razors have been known by the I What to call new products? Should they be name Philishave, and we talk of the Apple given a descriptive name or a brand name? iMac and now the iPod. 348 CREATING AND SUSTAINING BRAND EQUITY

I How much visibility to give to the cor- These are necessary, even crucial questions, porate name, group name and the which need to be answered in order to make company name itself? Should everything the continually renewed product offer easy to be brought together under this one name, read, while at the same time building the as Siemens and Axa have done, or should brand’s reputation through this offer. the name be given a role as a guarantee of The term ‘branding strategy’ is used for daughter brands, as 3M and Danone have decisions on: done? On all 3M products (such as Scotch and Post-It) we find a visible 3M signature. I the number of brand levels to be imple- Conversely, you have to turn the Evian mented (one, two or even three?); water bottle round to find the Danone I the role of the corporate in the product Corp logo on the label at the back. As for value communication: should it be absent, Procter & Gamble’s products and brands strongly present, or hardly present? (Ariel, Tide, Dash, Always and so on), it takes a sharp eye to spot the name of the I the relative weight of these brands, and the local subsidiary in the small print. graphic arrangement of their coexistence Pharmaceutical laboratories answer these on all the documents, packaging, and questions in different ways, depending on products, but also industrial sites, offices, whether they operate in the prescribed and business cards of salespersons and products sector, or in over-the-counter managers; (OTC) medication, or even manufacture I the degree of globalisation of the archi- generic medicines (Moss, 2007). tecture. Within groups, should the brand be situated at the corporate level (Accor), or at There are a few typical responses to these the divisional or business unit level, as with questions: these models are called branding the Accor Casino or Accor Hotels brands, strategies. They are discussed in detail below. alongside the well-known product brands First of all it is necessary to return to the key (Formule 1, Motel 6, Red Roof, Etap, questions of brand architecture. Brand archi- Mercure, Novotel, Sofitel, Suite Hotels and tecture is therefore a strategy: it may be ideal, so on)? or may lead to losses of efficiency, even to paralysis. In any case, what is expected is a I More generally, should there be a different coherent and well-founded response, even if it name for the company and the commercial must change as competitive conditions brand? Thus, France Telecom is still the evolve, rendering the previous choice of archi- name of the institution, and Orange is now tecture null and void, or inefficient and too the only commercial brand, now that the expensive. In fact, groups never cease to Equant (which was dedicated to businesses) change their brand architecture, as the and wanadoo (previously the only interna- examples below illustrate. tional France Telecom brand dedicated to In 1990, l’Oréal Paris, which had previously the internet) brands have been suppressed. limited itself to endorsing its brand ranges worldwide (Elnett, Elsève, Studio Line, etc) by I Should the same architecture apply around discreetly signing them, overturned this state of the world? For example, in the country of affairs, henceforth giving l’Oréal Paris a key role, origin, in Europe, in the United States and under which all these so-called star brands had in Asia? to fall into line, thereby displaying a community of values and communications style. BRAND ARCHITECTURE 349

In the B2B sector, Henri Lachmann In 2006, Veolia, the world leader in envi- undertook the reverse change when he took ronmental services (water and waste over from Didier Pineau Valenciennes as treatment, energy, delegated public transport) managing director of the Schneider Electric decided to remove its three trade brands, Group. The latter was responsible for taking through which it had communicated since Schneider from a fragile status as ironmongers their creation: Connex for transport, Dalkia to that of a global high-tech company special- for energy and Onyx for waste treatment, ising in industrial electrical equipment, substituting them with the unifying name thanks to the acquisition of companies Veolia: so the brands became Veolia famous throughout the world (such as Merlin Transport, Veolia Energy and so on. Gerin, Telemecanique, Yorkshire Switchgear, Clearly brand architecture is not a technical the Italian company Modicon and the or tactical problem, but a strategic one. The American Square D). Pineau Valenciennes’ choice of one leads to a commitment that lasts goal was to achieve a unique corporate brand several years, and it may become a source of as quickly as possible, which would also play cost cutting or of expensive inefficiencies. the part of a commercial brand: as its What is under discussion is not a formal competitors Siemens, ABB, GE and Legrand problem of graphic organisation, but the and Hager do, Schneider Electric became the concomitant construction of turnover, keystone of the whole offer. This involved the growth and a real brand capital, a source of progressive disappearance of the specialised competitive advantage. Brand growth implies companies such as Telemécanique and Merlin increased complexity, and therefore the risk of Gerin, relegated to the rank of daughter loss of image coherence, and of dilution of the brands, then to names of ranges. Taking over brand capital. management of the company, Lachmann had a different vision. It was necessary to do the opposite, revitalising the daughter brands to Type and role of brands worldwide recognition, since they were the capital of the emerging company Schneider Let us look at a roll of adhesive tape. At the top Electric. This resulted in an architecture with and in large letters we find the name of the two brand levels (that of the corporate name general public commercial brand name and that of the daughter brands). Scotch. Down and to the left we find 3M, or In 2005, all products manufactured the company’s corporate brand. Finally, under anywhere in the world by Unilever, a leading Scotch, comes the name of the product itself: group in mass-market products, had to carry Removable Magic™ Tape. the U logo in a highly visible and identifiable As we can see, there are three brand levels way. Until then the company had been hidden, here, and a descriptor (or designator): or at least not identified on product packaging, except for the legally required mention of the I the company’s corporate brand 3M; legal name of the local subsidiary (such as I the commercial brand Scotch, which acts as ‘Lever Industan Ltd’ in India). This emergence an umbrella brand for all the mass or of the corporate brand is a fundamental general public products; tendency, but Unilever’s competitor, Procter & Gamble, still hides its identity on its packaging. I the brand of the product line Magic™ Tape; It is true that the company has had to cope I the designator specifying what kind of with a particularly persistent and unpleasant Magic Tape it is: ‘removable’. rumour (Kapferer, 1987). 350 CREATING AND SUSTAINING BRAND EQUITY

3M is familiar with this three-level strategy. brand name (Nokia, Samsung, Sony Ericsson, Many remember the advertising nickname of Sage and so on). It takes time to install a ‘Gratton’ (‘scratcher’ in French) on all the particular product brand. products of the Scotch-Brite line (scouring In big industry, work is done by project: the pads), under the commercial brand Scotch, name summarises the company’s compe- from 3M. The raton laveur (raccoon) had tence, stature and power, the professionalism appeared in Scotch-Brite advertisements, and of its men and women, the underlying suggested the nickname ‘Gratton laveur’, culture. This is why big industrial companies which then appeared on its packaging. like to capitalise all their shares on a single The strategy of Nokia appears much name. Nevertheless, taking public works for simpler: here there is only one brand level. example, as invitations to tender are done Everything is Nokia, followed by a serial through trade bodies, the groups have a two- number or code name that serves only to level brand policy. Vinci suggests the power of identify a reference, a code name that will be a leading group, Via is the reputed global null and void in six months, given the speed brand in road construction. at which the ranges in the field of telephony In the mass market, where products are are rotated. Moreover, it is common to say, largely similar, it is necessary to help create ‘I’m going to buy “a Nokia”’, without giving perceptible differentiations. Brand names any other name. Then people specify which contribute to this. Pepito by Lu was aimed at model they want to the salesperson by children from 6 to 10 years, then Prince by recalling the particular characteristics desired Lu took them on to the age of 15. The first (‘the one with this and that function and a name also makes it possible to confer an very flat design’ and so on). intangible personality on the product, an As for Apple, the company has opted for added value in comparison to the two brand levels, Apple itself and iPod or distributor’s copy. iMac, named after the famous Macintosh. Apple’s star products have all had their own Which role for which brands? name (sub-brand), except of course for the early ones that made the company’s repu- In the above example of the removable Scotch tation. They were called Apples (1, then 2 Magic™ Tape from the 3M company, it is easy then 3) and then a variant name. At l’Oréal to understand how each level plays a specific also, the policy is not to mention the group role. The manner in which the consumer talks name but to build the brands on star products about the product indicates which of these (also called franchises) with their own names. levels plays the leading role, that of seller (the For example, Garnier (the other global general motivator), the one in which the perceived public brand of the l’Oréal group) has built its value resides. The consumer rarely says ‘I want reputation on the Fructis range, or the Recital a 3M.’ On the other hand, the manager of a line. Renault has built its reputation on clinic or hospital, hospital attendants and brands that all have a name (Twingo, Clio, doctors will find it easier to emphasise 3M. In Megane, Espace, Vel Satis). their eyes, all the professionalism of a What explains the choice of architectures company that, through its innovations, has with one, two or even three brand levels? It is been able to create products so useful to principally the market, its level of segmen- surgeons at the most critical moments of tation and the option of whether or not to surgery resides at this level. lean on the corporate brand for support. When you buy a KitKat Chunky from Products with very rapid rotation make it Nestlé, you are buying first and foremost ‘a impossible to use anything other than a single KitKat’ in its larger version (here called BRAND ARCHITECTURE 351

Chunky to increase the perception of volume the presence or absence of the corporate and size), under the obvious auspices of the brand on mass-market products cannot be ‘better living brand’ Nestlé. If you turn over decided only by questioning consumers. Of the product, you will see the corporate brand course, if they were asked whether they see Nestlé itself (with its characteristic nest), any reason to keep the name 3M on the pack- which acts as a supreme guarantee, morally aging, the majority would say no: they don’t responsible for all the products made by its know 3M. Since the logo evokes nothing for factories around the world, a kind of manufac- them, they regard it as useless. However, the turer’s brand. Let us note that this manufac- strategy cannot be based on this point of view turing brand Nestlé is also present on the back alone. The legitimate ambition of enhancing of the regional European commercial the group’s value on the stock exchange processed meats brand Herta. implies an awareness that cannot be built up Through these examples may be distin- through colossal advertising budgets, the guished the roles of: money for which must necessarily be taken from the brands’ operating budgets. It is I Motivator, the anchor point for value. My therefore better to profit from the millions of American colleague David Aaker speaks of stealth contacts offered by the products and the ‘driver’. From a certain point of view, the communication they make. this is the true brand: the one that most For this same reason, the Accor symbol symbolises the differentiation and creates appeared in the lobbies of all the group’s the desire. hotels, regardless of brand. This made it clear that all of these hotels, previously presented I Source of value for products. The as independent or even competitors, were in commercial brand Nestlé applied as the fact members of the same family. There was a aegis above all products indicates that these loss in differentiation and probably in carry its values of taste, health and family. emotion, but Accor rapidly gained from it I The producer’s moral endorsement and recognition as the leader in hotels and responsibility, where the company supplies services in Europe. a telephone number that customers can call to report any deviation that they A major alternative: branded house or consider unacceptable, anywhere in the house of brands? world. This is a manifestation of the demands of corporate social responsibility The brand architecture is the coherent (CSR). Yesterday we said, ‘Big is beautiful’; response given to the three questions today we say, ‘Big is responsible.’ examined above: I The designator of the specificity of the I How many brand levels should be used? reference in question – when we say KitKat One single level, or two? In other words, Chunky, to specify which one we wish to should brands be created to designate the buy. activities or the professions or the products I An identifier of the origin: this is the role of themselves? the manufacturer’s brand. I What linkage exists between these brand The accumulation of levels damages clarity, levels? This goes back to the question of the and appropriation by the client. It should respective roles of the brands: where is the therefore be combated, and only the indis- value located, who endorses whom, and so pensable levels should be kept. The debate on on? 352 CREATING AND SUSTAINING BRAND EQUITY

I What visibility should the corporate brand I the source brand strategy. have? And what role? These strategies are responses to the market. The answers to these questions are not inde- They may be structured along two axes (see pendent. In reality they form six types of Figure 13.1), according to whether the value overall response, with precise impacts that go sought by the brand relates more to power far beyond the descriptive (what name or and stature on the one hand, or personali- symbol is in large font, or in small, at the top sation, differentiation and identity on the or the bottom) and concern the offer itself. other. They affect its content, its values: that is, the At one extreme, the strategy known as the degree of variety that a brand can offer under corporate masterbrand is characterised by a its name. These overall responses or branding single and unique brand level, often the architecture types number six in total. From corporate name, and that of the company this point on we shall distinguish the itself. The whole of the company that adopts following architectures: it must then fall into line with the brand’s values, and be the carrier of these values. I the product-brand strategy and its variants, Either something is IBM, or it is not. Brands in the line and range brands; the industrial and public worlds and the services sectors (banks, insurance, consul- I the flexible umbrella strategy; tancies and so on) typically follow this I the masterbrand strategy; strategy. Here, reputation is linked to reas- suring size and power. I the maker’s mark strategy; At the other extreme we find the product- I the endorsing brand strategy; brand strategy. In this strategy, the company is

BRAND FUNCTION: INDICATOR OF ORIGIN SOURCE EFFECT REASSURANCE

. Corporate masterbrand

. Corporate source brand

Corporate . endorsing brand

. Maker’s mark

. Umbrella brand . Source brand . Endorsing brand

. Range brand . Line brand

. Generic brand . Product brand

BRAND FUNCTION: PRODUCT DIFFERENTIATION PERSONALISATION Figure 13.1 Positioning alternative branding strategies BRAND ARCHITECTURE 353 not identified at all. This is the case with The first option (house of brands) relates to a brands of LVMH and Procter & Gamble, situation of extreme freedom of management which does not strongly identify itself on each for the brands, subsidiaries, activities and divi- of its brands (Ariel, Tide, Pampers, Always, sions. This is typical of Japanese groups. For Dash, Swiffer and the rest). This makes it example, there is no coordination between possible to function in the same market, for the Mitsubishi Motors division and the example washing powders, with a portfolio of Mitsubishi Electric division. It may be the apparently competing brands. The car manu- same name, and the same company in legal facturer PSA also functions via a product- terms, but each division, like a silo, acts as it brand strategy: you can buy either a Peugeot sees fit. It carries out its own advertising, with or a Citroën, but not a PSA. its own arguments, its brand values and so on. Architectures with two or more brand levels The important things are commercial success, represent a compromise between the power and the growth in recognition of the requirements that push for a single dominant Mitsubishi name. name (masterbrand) and the personalisation As we can see, ‘house of brands’ does not requirements that push for segmented relate solely to the product-brand archi- daughter brands, each having a clearly differ- tecture, as my American colleagues David entiated identity. In fact, generalised auto- Aaker (1995) and Kevin Lane Keller (2007) mobile brands attempt to capitalise on their write, but also applies to umbrella-type name (Volkswagen, Toyota) but boost the strategies (a single brand for the whole attractiveness of the models themselves by company) where in fact the decisions made means of a name that acts as a brand (Golf, downstream, in contact with the market, are Passat, Yaris, Prius). very free, and seek only to reach the objectives It is also possible to classify these architec- linked to that specific market, without tures according to the degree of constraint coherence as a whole at the image level. that they impose downstream, at the business, Michelin has acted in this way for decades. product and market levels. In this respect, the Michelin’s Truck Division did not coordinate Americans distinguish between two basic with Michelin Private Vehicles or with alternatives: ‘house of brands’ or ‘branded Michelin Aviation. There was no desire to house’ (that is, a basket of different brands or create variations on a common, specific and activities brought together under a single normative brand platform in each of these aegis) (see Table 13.1). These alternatives lead markets. back in fact to the degree of constraint and The ‘branded house’ expresses the desire to coherence imposed on the products and give coherence to the whole under the markets. We will see that behind these basic auspices of a brand with central values that alternatives can be found architectures that in find embodiment at the market and product practice are very different. level. This path brings together the master- brand and also dominant (source) brand Table 13.1 ‘House of brands’ or ‘branded strategies, giving a strongly normative house’ structure to the daughter brands on the second level. This strategy is pursued by Nivea House of brands Branded house Product-brand Source brand for example, l’Oréal Paris and Kinder. This Line brand second level must express the values of the Range brand parent brand. In this way the necessary Maker’s mark coherence can be instilled, as dealt with in Endorsing brand Chapter 11. The ‘branded house’ is a family Flexible umbrella brand Masterbrand with a high degree of internal unity. 354 CREATING AND SUSTAINING BRAND EQUITY

High degree of freedom High degree of coherence (house of brands) (branded house)

Product brands Umbrella brand Masterbrand

Brand A Brand B Brand C Brand or corporate Brand or corporate

One branding Product Product Product Product Product Product level (Hidden corporate)

P & G Mitsubishi, Samsung Nivea/Sony Maker’s mark Endorsing brand Source brand

corporate Brand A Brand B Brand or corporate

Two branding Brand A Sub-brand Sub-brand Sub-brand levels A B C

Corp Corp

Ferrero 3M l’Oréal Paris

Figure 13.2 The six main brand architectures

This is why we can structure the strategies The business angels and investment funds according to a matrix that classifies them. have got it right. For example, in the They are classified by the number of brand cosmetics sector, there is more to be gained levels (one or two) and according to the from the resale of a ‘branded house’ than a degree of freedom allowed downstream, at basket of mixed brands, however well known, market level, for decisions on product and grouped together within a ‘house of brands’. service positioning. These will be examined For example, Garnier has become a ‘branded here in turn. house’, a house with a house spirit and house values that in return influence the positioning Branding strategy and brand of the brands under Garnier. In fact, Garnier is valuation itself a brand with a specific identity. SCAD, on the other hand, is a ‘house of brands’ that Branding strategy should not be seen as a groups together brands as diverse as Dop, formal design problem but rather a matter of Vivelle, Dessange and J L David. SCAD is deciding on the value flows to be created merely a commercial and marketing organisa- between the different parts and products of a tional structure. company. The central issue is therefore the In the cosmetics sector, a ‘house of brands’ valuation of the offering, through the agency is valued at six times the profits, while a of the company itself. ‘branded house’ enjoys an overvaluation that BRAND ARCHITECTURE 355 brings the P/E (Price-Earnings) ratio to 7 or 8. Japanese companies have recently become Similarly, as soon as a company is quoted on a aware that their typical silo organisation, stock exchange, all internal separatist although it certainly had advantages, was tendencies – such as sub-brand logos damaging to the emotional quality of the protected jealously from the corporate brand – brand and its coherence. Each division pushes must cease. What had previously been of little a functional characteristic of its product, and consequence becomes unacceptable. All value nobody takes responsibility for the brand flows must converge on the stock brand, since values themselves. This is why, in 1999, the market valuation of the company presup- Toshiba decided to name a ‘Mr Brand’ in the poses that the company capitalises on all person of the previous worldwide director of sources of value created by its subsidiaries and research and development for the Toshiba sub-brands. Everyone and everything in the group. It should also be noted that Korean company contributes to this, including groups such as Samsung, and in particular LG, branding strategy. did not take so long: they were quick to name Industrial companies are only just brand guardians, with transverse and global beginning to appreciate the importance of authority. brands in terms of their profitability. If we examine the architectures in detail, the apparently banal fact of moving from Brand architecture and corporate two brand levels to one is in reality a message internal organisation on the company’s methods of organisation and the distribution of power. In its begin- The brand architecture also has a strong nings, Veolia followed a house of brands influence on the functioning of the company. strategy. Veolia was born from the splitting There is no masterbrand or source brand up of Vivendi Universal’s public utilities without a brand master, a guardian of the division, but the value was located at the temple, someone who will ensure the level of its business activities. In this way necessary coherence, not only at the level of Connex brought together all the private the logo or of the formal identity, across all trains, buses and subways throughout the countries and divisions. That would be to world, Onyx was the global brand for waste view this person as more than a guardian of management and Dalkia the brand for the policies – on character, on typographics, or on energy branch. This marked a group where respect for graphic charts – (what is often power coordinates, but the markets referred to as a logo cop). dominate. Veolia was more a group name In reality, the more a company moves than a brand carried by unique and differen- towards the ‘branded house’ type of archi- tiating values. This is somewhat like Suez tecture, the more it becomes necessary to nowadays. Moving to Veolia Transport, install coordination and power structures. Veolia Water and Veolia Waste Management Hence at Schneider Electric, and also at the was a revolution in the methods of gover- core of the Seb group, there exists a brand nance. This therefore gives us a single, committee, made up not of communicators central Veolia, which varies according to the but of the managers of the business units and market it is operating in. the divisions themselves. The profile of the Removing the division brands sends a participants in this brand committee is strong message of integration, externally to moreover symptomatic of how seriously or clients and prospective clients, but also inter- otherwise the company takes the notion of nally. The client may legitimately expect to branding. see the organisational and IT silos disappear, 356 CREATING AND SUSTAINING BRAND EQUITY and genuinely networked managers appear. object, because the brand distinguishes each When this is not the case, there is a gulf of the products from the other products or between the brand and the organisation. services; and finally, a concept in the sense that the brand, like any other symbol, imparts its own significance – in other words, its The main types of brand meaning. architecture The product–brand strategy involves the assignment of a particular name to one, and Let us now examine the individual characters only one, product (or product line) as well as of the principal brand architectures. We shall one exclusive positioning. The result of such a begin with those architectures that allow great strategy is that each new product receives its freedom in terms of products and communi- own brand name that belongs only to it. cation: the link between the company values Companies then have a brand portfolio that and those of the divisions, activities and corresponds to their product portfolio as illus- product is lax. They are brought together trated in Figure 13.3. under the term ‘house of brands’. Then we This brand strategy can be found in the examine strategies that are more restrictive hotel industry where the Accor Group has downstream, since the latter should reflect developed multiple brands for precise and central values, of which the brand is the exclusive positions: eg Sofitel, Novotel, Suit’ concrete expression. Hotel, Ibis, Formule 1 and Motel 6. The company Procter & Gamble has made this The product–brand strategy strategy the symbol of its brand management philosophy. The company is represented in It is widely known that a brand is at the same the European detergent market by the brands time a symbol, a word, an object and a Ariel, Vizir, Dash and in the soaps market by concept: a symbol, since it has numerous Camay, Zest, etc. Each of these products has a facets and it incorporates figurative symbols precise, well-defined positioning and occupies such as logos, emblems, colours, forms, pack- a particular segment of the market: Camay is a aging and design; a word, because it is the seductive soap, Zest a soap for energy. Ariel brand name which serves as support for oral positions itself as the best detergent in the or written information on the product; an market and Dash as the best value for money

Company X

Brand A Brand B Brand N

Product A Product B … etc … Product N

Positioning A Positioning B Postioning N

Figure 13.3 The product–brand strategy BRAND ARCHITECTURE 357 in the intermediate price range. Both have What, then, are the advantages of the developed a product line including powder, product brand strategy for companies? For liquid and tablets. firms focusing on one market, it is an Innovative companies in the food sector offensive strategy designed to occupy the create new speciality products which are then whole market. By indulging in the practice of distinguished through individual names and multiple brand entries in the same market therefore these companies have a large brand (Procter & Gamble has four detergent brands), product portfolio. The cheese company the company occupies many segments with Bongrain markets more than 10 brands, such different needs and expectations and as St Moret, Caprice des Dieux and Chaumes. therefore has a greater consolidated share of The mineral water market is composed of only the market: it becomes category leader. product brands: one asks for Vittel, Evian or However, this remains inconspicuous, for the Contrex, knowing very well that there will be corporate name is kept discreet if not hidden. no ambiguity and one will get the product Some companies do wish to remain at the asked for. Here, the brand, the name of a back and focus the lights exclusively on their product, becomes a strict indication of brands. The cases of Procter & Gamble, identity. Unilever, Masterfoods and Bestfoods are well In an extreme case, the product is so specific known, that of ITW is less so. ITW stands for that there is no equivalent, and the product is Illinois Toolwork. It is a billion-US-dollar not only a product, but an entire product corporation, very acquisitive: it owns more category of which it is the sole representative. than 500 companies throughout the world. Its This phenomenon has been described by brands aim at the construction professional: some through the neologism ‘branduct’ they are called Paslode, Duo-Fast for wood (Swiners, 1979), an abbreviation of brand products, Spit and Buidex for steel and product. These products are so unique, so concrete. The goal is to provide very specific that they have no other name than specialised tools to specialised workers: a their brand name. We see this in ‘Post-it’, policy of niche brands, addressing segmented Bailey’s Irish Cream, Malibu liqueur, Mars, needs, craftspeople and channels is a direct Bounty, Nuts, etc. consequence of this goal. People working with How is the strict relationship between one wood want to be reinforced and differentiated name, one product and one positioning main- from people working with other materials. tained over a period of time? First, the only ITW does not wish to hurt this desire, and AS way to achieve brand extension is by resisted all temptations to grow the ITW renewing the product. To keep the product at brand itself, for instance as an endorser. ITW’s its height and original positioning, the Ariel success rests precisely on the exact contrary. formula has often been improved since it was When the segments are closely related, launched in 1969. Ariel receives the best tech- choosing one name per product helps nological and chemical inputs from Procter & customers to perceive better the differences Gamble (like its competitor, Skip, from Lever) between the various brands. This may also be (Kapferer and Thoenig, 1989). Often, to necessary when the products resemble each emphasise an important improvement to the other externally. Thus, one sees that although product, the company adds a number after all detergents are composed of the same basic the brand name (Dash 1, Dash 2, Dash 3). To ingredients, the proportion of these may vary keep up with changing consumer habits, the according to the factor that is being opti- brand name is applied to various formats (for mised: stain removal properties, care for example, in packaging: packets, drums, in synthetic materials, colourfast control or suit- powder or liquid form). ability for hand washing. The association of a 358 CREATING AND SUSTAINING BRAND EQUITY specific name for a type of need underlines Product brand policy implies that the name the physical difference between the products. of the company behind it remains unknown The product brand strategy is one that is to the public and is therefore different from adapted to the needs of innovative the brand names. This practice allows the firm companies who want to pre-empt a posi- considerable freedom to move whenever and tioning. In fact, the first brand to appear in a wherever it wishes, especially into new new segment, if it proves to be effective, has markets. Procter & Gamble moved from the the advantage of the first player in the creation of the soap, Ivory, in 1882, to the market. It becomes the nominal reference for culinary aid, Crisco, in 1911, Chipso in 1926 the thus innovative product and maybe even and the machine detergent, Dreft, in 1933, the absolute reference. The brand name Tide in 1946, Joy, the dishwashing agent in patents the innovation. This is particularly 1950 and then Dash in 1955, the toothpaste, important in markets where the success is Crest, in 1955, the peanut-butter, Jif, in 1956, likely to induce copying. In the pharmaceu- Pampers in 1961, the coffee, Folgers, in 1963, tical world where copies are a certainty, every the antiseptic mouthwash, Scope, as well as new product is registered under two names: household paper rolls, Bounce, in 1965, one for the product, the formula, and another Pringle chips in 1968, sanitary napkins, Rely, for the brand. Even if they have the same in 1974, Always (Whisper) and Sunny Delight formula, future copies appear different later on. because the originality of the brand name Since each brand is independent of the (Zantac, Tagamet) provides an aura of exclu- others, the failure of one of them has no risk sivity and of legal protection. On the other of negative spillover on the others, or on the hand, where the law cannot provide company name (in cases where the company protection, forgeries and copies attempt to name remains relatively unknown to the exploit the potential of the brand name by public and different from that of any of the imitating it as closely as possible. That is why brands). large mass retailers often use product brands Finally, the distribution parameter also or, to be more precise, counter–product favours this strategy heavily: the shelf space brands. Thus, Fortini copies Martini, Whip accorded by a retailer to a company depends copies Skip, etc. Scared of having their other on the number of (strong) brands that it has. brands cast out of favour manufacturers have, When a brand covers many products, the until now, hesitated to legally challenge the retailer stocks certain products and not others. distributors for forgery or illegal imitation. In the case of product brands, there is only (See also page 79.) one product per brand, or one product line Product brand policies allow firms to take per brand. risks in new markets. At a time when the The drawbacks arising from product brands future of the liquid detergent was still are essentially economic. Thus multi-brand uncertain, Procter & Gamble preferred to strategy is not for the faint-hearted. launch a product brand: Vizir. Launching it In fact, a new product launch is often a new under the name Ariel liquid would have brand launch. Considering today’s media threatened Ariel’s brand image asset and costs, this involves considerable investments launching it under the name Dash would in advertising and promotions. Furthermore, have incurred the risk of associating a poten- retailers, unwilling to take risks with new tially powerful concept with a weak brand and products whose future is uncertain, stock them thereby overshadowing it. Coca-Cola did just only when reassured by heavy listing fees. the same when it first launched Tab to test the Multiplication of product brands in a diet market. market due to the increasingly narrow BRAND ARCHITECTURE 359 segmentation weighs heavily on the chances category shelf, branducts suffer from a lack of of a rapid return on investment. The volumes prominence and visibility on the shelves. This required to justify such investment (in makes their fame their only strong point. In R&D, equipment, and sales and marketing times of recession, they are the first to expenses) make the product brand strategy an undergo budget reductions. ideal one for growing markets where a small market share could nevertheless mean high The line brand strategy volumes. When the market is saturated, this possibility disappears. On the other hand, in a Deglaude Laboratories launched a product stable market it is sometimes more advanta- brand, Foltene: a single product associated geous to nurture an existing brand with the with a single benefit, the regrowth of hair. A innovation in question rather than attempt to strong TV advertising campaign made the give it product brand status by launching it market explode and Foltene became the under its own name. leader with a single product and a 55 per cent The role of fire curtains between product market share. They should have remained brands is certainly important in times of thus, but consumer logic prevailed. Bald crises, but in other times it prevents the brand people were not looking for a single product. from benefiting from the positive spillover They wanted an all-encompassing service, a effect created by other products under the total care routine. They wrote asking that same name. The success of brand A will not shampooing be combined with the Foltene help other products because their names, B, C, treatment. In 1982 Deglaude launched a mild D, etc are different and do not bear any shampoo (which was later subdivided relation to A. As we can see, in this strategy, according to hair type) followed by a daily-use the firm gives the brand a completely distinct lotion. All this was by way of response to and exclusive function and almost no hints customer demands. about its origin. New products do not benefit Christian Dior launched Capture, an anti- from the renown of one of the already ageing liposome complex for the skin. existing brands nor from the economies that Following its success, a first spin-off was soon one could derive from it. On the other hand, launched: ‘Capture, eye shaper’, followed by this advantage has no role among distributors lip shapers and then other products for the who are well aware of the company name body. The Capture line was born. behind the brand and its reputation for Thus, to take up Botton and Cegarra’s defi- success or failure. nition (1990), the line responds to the The case of ‘branducts’ is even more concern of offering one coherent response marked. Since they represent an entire under a single name by proposing many category of products on their own, they have complementary products. This goes from vari- to invest twice as much in advertising. While ations of the offer, as in the case of Capture or a brand of whisky only has to associate itself with the fragrances of an aftershave, to the with the whisky category for the customer to inclusion of various products within one recall the brand when he wants to buy a specific effect, as in the case of Foltene. This is whisky, other products such as Sheridan, also the case with Studio Line hair products Malibu or Bailey’s cannot fall back on the from l’Oréal, which offers structuring gel, cushion of a product category. They therefore lacquer, a spray, etc. Calgon (a Benckiser need a permanent spontaneous awareness: brand) markets a dishwasher powder together either one thinks of Bailey’s or one does not with a rinsing agent and limescale inhibitor. (in which case the probability of a sale is zero). That these products are completely different Furthermore, isolated due to the lack of a for the producer makes no difference to the 360 CREATING AND SUSTAINING BRAND EQUITY consumer, who perceives them as related. result of seven years’ research in collaboration It should be clear that the line involves the with the Pasteur Institute, received three exploitation of a successful concept by patents and brought with it a revolutionary extending it but by staying very close to the anti-ageing principle, Dior decided to attach it initial product (eg Capture liposomes or the to a currently existing anti-ageing line. This Foltene principle). In other cases, the line is did not prevent the success of Capture, but launched as a complete ensemble, with many unnecessarily delayed it initially. complementary products linked by a single central concept (for Studio it was allowing The range brand strategy youngsters to do their own hair and give themselves a ‘look’). The eventual extension Campbell’s Soup, Knorr, Bird’s Eye and Igloo of the line will involve only the marginal all propose more than 100 frozen food costs linked to retailers’ discounts and to the products. But not all range brands are this packaging. It does not need advertising. It extensive. The Tylenol range now covers a should be compared to the marginal number number of different products. Range brands of consumers that could be won. As one can bestow a single brand name and promote see, the line brand strategy offers multiple through a single promise a range of products advantages: belonging to the same area of competence. In range brand architecture, products guard their l it reinforces the selling power of the brand common name (fish à la provençale, and creates a strong brand image; mushroom pizza, pancakes with ham and cheese in the case of Bird’s Eye). In the Clarins l it facilitates distribution for each line cosmetic range, products are named ‘puri- extension; fying plant mask’, extracts of ‘fresh cells’, l it reduces launch costs. multi-tensor toning solution, day or night soothing cream, etc. The disadvantages of the line strategy lie in Range brand structure is found in the food the tendency to forget that a line has limits. sector (Green Giant, Campbell, Heinz, One should only include product innovations Whiskas and so on), equipment (Moulinex, that are very closely linked to the existing Seb, Rowenta, Samsonite) or in industry ones. On the other hand, the inclusion of a (Steelcase, Facom). These brands combine all powerful innovation could slow its devel- their products through a unique principle, a opment. Thus, even though Capture was the brand concept, as is shown in Figure 13.4. The

Brand

Brand concept

PRODUCTS A B C D ...... N

Figure 13.4 Range brand formation BRAND ARCHITECTURE 361 advantages and disadvantages of the structure name and each actual product name. This is are as follows: the role of specific lines such as: l It avoids the random spread of external l ‘Lean cuisine’ that regrouped 18 dishes all communications by focusing on a single recognisable by their white packaging; name – the brand name – and thereby l ‘Traditional’ covering nine dishes with creating brand capital for itself which can maroon outers; even be shared by other products. Furthermore, in such a structure the brand l ‘Seafoods’ comprising nine kinds of dishes communicates in a generic manner by and assorted products (previously simply developing its unique brand concept. Thus, called hake cutlets, whiting fillets, etc) in the range brand of pet food, Fido, covers blue packaging. many products but in its advertisement it only has a taster dog who marks his Such names for a line throw light on the approval on a product with a paw print. products and also help to structure the range This commercial transfers the brand focali- in the same way as retailers organise their sation and its pre-eminence to the animal. shelves. The criteria for segmentation and for Another approach consists of communi- the creation of families of products depend on cating the brand concept by concentrating the brand. Thus, should we make the distinc- only on certain of the most representative tions according to the content (poultry, beef, products through which the brand can best pork etc, as in a butcher’s shop) or according express its meaning and convey consumer to consumer benefits (light, traditional, benefit. This can then be shared by other exotic, family orientated ...)? products of the range which are not The line structures the offer, by putting directly mentioned. together products which are undoubtedly heterogeneous, but all of which have the same l The brand can easily distribute new function. Thus, in the Clarins cosmetic range products that are consistent with its brand, the offer is also made more clear and mission and fall within the same category. structured by way of lines. To assist the Furthermore, the cost of such new launches consumer in deciphering the scientific terms is very low. used on the products, the brand proposes lines as one would a prescription. For example: Among the problems that are most frequently encountered is one of brand opacity as it l the ‘soothing line’ for sensitive skins expands. The brand name Findus covers includes a mild day cream and a mild night scores of savoury frozen products. It is a good cream as well as a restructuring fluid in brand – high quality, modern, a specialist in capsules; frozen products and a generalist as well because it makes all kinds of dishes. For years, l the ‘slimming and firmness’ line regroups product names were the names of the recipes. an exfoliating scrub, a slimming bath, a But these names are banal. Any brand can ‘bio-superactivated’ reducing cream and an claim that it has the same recipe. To enrich the ‘anti-water’ oil. brand and to express its personality on one hand, and on the other hand to help the The Clarins offer ceases to be a long list of consumer choose from the mass of products creams, serums, lotions, balms and gels and that are on offer, an intermediate level of cate- now forms structured and coherent groups as gorisation must be created between the brand seen in Figure 13.5. 362 CREATING AND SUSTAINING BRAND EQUITY

CLARINS

Concept: the specialist in beauty care

PRODUCTS

Creams Solutions Fluids Gels Baths etc …

Soothing line

Slimming and firmness line

Line Y

Figure 13.5 Range brand structured in lines

The maker’s mark strategy architecture where the corporate brand is completely absent, this strategy is charac- For many years the Bel logo has been system- terised by a discreet corporate logo, giving pre- atically marked on the packaging of cheeses eminence to the commercial brand. In a produced by this company: Laughing Cow, certain way, the presence of 3M on all its Kiri, Port Salut, Mini Babybel, Sylphide and mass-market products must be a mystery in other brands. But what does Bel mean? the eyes of its consumers, if they notice it at Nothing else was done to explain the brand. It all. From this point of view, the architecture is was the maker’s mark, the maker’s seal, a close to that of the ‘maker’s mark’. In the proto-brand in the sense that it did not seek to United States, where 3M is better known, the build itself a territory of meaning, of emotion. application of the 3M logo plays more of an The Bel company added its seal to authen- endorsing role. ticate the product and guarantee its prove- nance. The function of this maker’s seal was to Endorsing brand strategy create a recognition sign identifying the industrial group that made it. Consumers are Everyone recognises famous car brands such not worried about this, but this sign is aimed as Pontiac, Buick and Chevrolet in the United essentially at distributors and department States or Opel in Europe. Next to their logos heads. It is also important internally, for all and to the signs of the dealers of these brands the international cheese-making companies we always see the two letters: GM. It is obvi- acquired, who see in the application of this ously General Motors, the endorsing brand. seal to their products, the sign of their full Again, what is the link between the cleaner integration into the Bel family. Pledge, Wizard Air Freshener and Toilet Duck? In formal terms, in relation to the previous They are all Johnson products. The endorsing BRAND ARCHITECTURE 363 brand gives its approval to a wide diversity of least expensive ways of giving substance to a products grouped under product brands, line company name and allowing it to achieve a brands or range brands. Johnson is the guar- minimal brand status. Thus, we can see the antor of their high quality and security. This initials ICI (Imperial Chemical Industries) on having been said, each product is then free to Valentine or Dulux paint pots, the name manifest its originality: that is what gives rise Bayer on packets of garden products and to the different names seen in the range. Monsanto on Round Up. The high quality of Figure 13.6 symbolises endorsing brand these brands is guaranteed by the names of strategy. As one can see, the endorsing brand these major organisations. On the other hand, is placed lower down because it acts as a base through their presence in everyday life these guarantor. Furthermore what the consumers companies become more familiar and close to buy is Pontiac or Opel: they drive choice. the people, as in the case of ICI in Europe. General Motors and Johnson are supports and Since the scientific and technical guarantees assume a secondary position. are assured by the endorsing brand, product The brand endorsement can be indicated in brands can devote more time to expressing a graphic manner by placing the emblem of other facets of their personality. the endorser next to the brand name or (when signed above, it acts as maker’s mark) by Therefore, as one can see, there is a division of simply signing the endorser’s name. roles at each stage of the branding hierarchy. The advantage of the endorsing brand is The endorsing brand becomes responsible for the greater freedom of movement that it the guarantee that is essential for all brands allows. Unlike the source brand, the and, today, these guarantees not only cover endorsing brand profits less from its areas such as quality and scientific expertise, products. Each particular product name but also civic responsibility, ethics and envi- evokes a forceful image and has a power of ronmental concerns. The other brand func- recall for the consumer. There is little image tions are assumed by the specifically named transfer to the endorser. brands: distinction, personalisation and even The endorsing brand strategy is one of the pleasure (Kapferer and Laurent, 1992).

Promise A Promise B Promise C Promise N

Product or Product or Product or Product or range A range B range C range N

Brand A Brand B Brand C Brand N

Endorsing brand

Figure 13.6 Endorsing brand strategy 364 CREATING AND SUSTAINING BRAND EQUITY

Umbrella brand strategies of Japanese, Korean and Chinese brands. Mitsubishi sells cars, electrical products, lifts Under the term ‘umbrella brand’, we find in and nuclear plants under its name, but also fact two modes of implementation in food products under the Three Diamonds companies, the first relatively liberal towards brand (the Mitsubishi symbol is made up of products and subsidiaries, the other exercising three diamonds). Toshiba is only known in real control. We shall examine both in turn: Europe for its laptop computers, but you only the first is in reality a house of brands, the have to visit the Tokyo department stores to other a branded house. see Toshiba sewing machines and frying pans. There, Toshiba is rather like Philips in Europe. The flexible umbrella brand In fact, the umbrella brand has been typical of Japanese organisations, where sales The umbrella brand strategy is characterised subsidiaries of these Japanese companies had by a single brand level: the products are not a high degree of freedom. What was required given a daughter brand. They may possibly be of them was to establish themselves in the given code names, but only with the aim of country, not to make waves, and to conquer identifying them in catalogues or price lists. the markets. Historically, the penetration of Philips televisions are known as ‘televisions’ the United States and Europe by Japanese (whereas Sony’s is known as a ‘Trinitron’), equipment products (radio, hi-fi, television, Philips razors are known as ‘razors’, and so on. photography, reprographics, telephones, IT, Unlike the product brand, where a brand games and so on) was carried out via the relates to a single product and vice versa, the exportation of products made in Japan. The case of Philips underlines that here the distribution subsidiaries were tasked only umbrella brand covers several product cate- with selling them; they were managed by gories, both figuratively and in reality. This is local people, since the Japanese did not like the principal advantage of this strategy, working abroad. Moreover, the emphasis moreover: offering a common umbrella, a placed locally on sales was convenient for common name, to a highly diversified range. subsidiaries essentially made up of in-country It is important in these analyses to distin- managers. Besides the sales objectives, and guish between two types of umbrella brand, respect for corporate ethics, there were few according to the degree of freedom accorded constraints on the managers. There was a to the products, divisions or branches. This point on the brand map, if not the graphic flexible umbrella strategy is currently typical map, but no value platforms. The Japanese

Brand

Products or services A B C ...... N

Specific communications by product or service A B C N

Figure 13.7 Umbrella brand strategy BRAND ARCHITECTURE 365 global success was achieved on the basis of the necessary to turn to other levers of attraction advantages and the low prices of the products and attachment. On the other hand, it does themselves, carried by quality commercial build the country brand. organisations, under the umbrella of a brand The disadvantages of this approach make whose dispersion also contributed to building themselves felt later in the brand’s life. It is its recognition. The umbrella brand was a devoid of emotional content: it is not a source name, not a vision finding embodiment in of aspiration, of tacit agreement, of affective services and products. This name was attachment. Admittedly, it is perceived as a generally the corporate name, that of the source of quality products, but it is also seen as industrial group. cold and distant. As the global director of the This is why the subsidiaries had a high Toshiba brand (a post newly created precisely degree of freedom: their marketing communi- to remedy this state of affairs) told us one cations were carried out by country. Within evening, the brand could be compared to a the same country, over several years, the highly technically skilled work colleague, advertising campaigns of Toshiba hi-fi, whom you might ask for help, but whom you Toshiba lo-fi, Toshiba televisions, not to would not invite home for dinner. mention microcomputing, were not at all In the West, the notion of a brand was coordinated. Each had its own brand slogan forged on the notion of speciality. Procter & and emphasised different values, and even Gamble founded a school of thought that was worked with a different advertising agency. taught for years in business schools the world It is known that brand strategies have over, where a brand does only one thing; a organisational implications. The supple, single product rigorously produced and flexible umbrella architecture gives the varying according to its formats or forms subsidiaries a great deal of autonomy, which (washing powder, washing liquid, tablets or can motivate them and make it easier to pearls). We now know that this vision is recruit bosses with entrepreneurial profiles, restrictive. Of course a brand can only have which is very useful during the phase of one value system and make one central conquering market shares. The international promise, but these may be applied to different unity is through products, imported from products. The global success of Bic testifies to Japan. this, as does that of Nivea, l’Oréal Paris, Virgin Another advantage: since the name is more and Amazon, not to mention distributor a corporate name than a brand, there is no brands such as the Carrefour brand, which by hesitation in placing it on products that are its construction covers multiple product cate- highly disparate from a Western point of view: gories. The problem with the flexible umbrella sewing machines, saucepans and microcom- brand is that the value system is not puters. This is rather like the now-dead perceived; and it is through these values that Thomson brand. In Asia, however, the more the tacit agreement and the affective rela- powerful a group, the more it is respected. tionship are developed, beyond the satis- From this point of view, manufacturing every- faction linked with the product or the thing helps to increase power. excellence of the service. There is therefore a On the communications level, the double rupture: no value link expressed emphasis is placed on the specific qualities between the corporate and the products, or and advantages of the products. Therefore between the products/categories themselves. there is little intangible added value, which By signing its products without explaining would be very useful once the conquest phase why, the brand is diluted. Like an elastic band, is over. When the markets mature and the it stretches and breaks. In the chapter on products become equivalent, it is then brand extension we saw that the brand may 366 CREATING AND SUSTAINING BRAND EQUITY indeed bring together intrinsically different two central values, ‘love and care’. This products, on condition that it gives them a embodiment begins with the composition of common meaning. This is the case with the products themselves, their harmlessness, luxury brands, but also Virgin, for example, or their softness, and extends to the manner in Apple. We know that the brand functions as a which they are communicated. Everything is concept, and therefore has power to integrate codified in a centralised manner. The master- objects that are different at first glance. brand is strong because it brings together a Signing products from the ballpoint pen to broad offering of products under highly differ- the razor, to cigarette lighters, and to kayak entiating common values. At Nivea, the cate- canoes, with the name Bic is to say that there gories are each sold under a variant of the is Bic in each of them. Therefore, the common name Nivea and a descriptor of the function or name presents a group of common values target. In this way, we have Nivea Body, Nivea embodied in these different categories. The Sun, Nivea Hands, Nivea Visage and so on. flexible umbrella structure offers none of this, Other examples of this strategy are found in other than generic propositions such as B2B, where there are strong brands such as ‘making quality products’. To achieve this, it Legrand and Hager for low-voltage electrical is necessary to move to the encompassing appliances. umbrella, or masterbrand, strategy. The encompassing umbrella architecture is also known as masterbrand. The name ‘masterbrand’ implies a guardian of the The aligning umbrella brand temple: a person, judge or authority capable (masterbrand) of policing, not dissident logos but projects, This is the second version of the umbrella innovations and even advertisements that do brand. At first glance, in formal terms, not fully embody the brand’s central values, nothing distinguishes it from the previous since these are what dilutes its promise. The version: the company still accepts only a brand is only as strong as its weakest link. single brand for the whole, and consequently The brand power conferred by this archi- imposes descriptive names for the products tecture, when properly implemented, is and services or divisions and branches. Here remarkable. It offers economies of scale linked we find sub-brands. to the variety of products and markets that the In practice, however, a gulf separates these brand can cover while creating a brand two outworkings of the umbrella brand. Here identity (that is, a group of values that are the parent brand is mistress: it provides not highly differentiating and relevant in each of just a name, but a frame of reference behind its markets). which everything should align, in order even- Korean companies, which 20 years ago were tually to become the embodiment of it, the content to imitate Japanese groups, even to living spokesperson. Here the brand is the their practice of the flexible umbrella brand, surrounding framework. This is the clearest have acquired a strong global image by example of what we call a ‘branded house’. changing their brand architecture. LG has a The masterbrand prototype is Nivea. A clear brand platform that is imposed on all Nivea product or communication can be divisions and countries. The same is true for recognised at a glance. Nivea is active in a large Samsung. number of categories: moisturising creams, In Europe, since 2004, Philips has been sunscreens, deodorants, shampoos, beauty attempting to become a masterbrand, a strong products and make-up. Everywhere, in each of surrounding framework. The new managing its categories, it faces specialist brands. It director has installed a new ‘One brand’ counters these with products embodying its motto for all the divisions of this global BRAND ARCHITECTURE 367 group. It is difficult to imagine the cultural However, one cannot build a mega-brand by revolution created in this company by such balkanising it. It needs a platform (central an apparently simple declaration. Let us values, core identity), and support at the consider how it will differ from the situation highest levels of management. The products, before 2004, as I learnt in the Netherlands on divisions and branches must reposition them- a consultancy trip: selves in order to present the central values of the brand at home and abroad. Hence a study I Philips is active in many countries under was carried out to define the platform of the another brand name. Thus, Philips razors Philips brand (see Chapter 7) and consider its are sold under Norelco in the United States. consequences both at the level of the new This is why Philips is unknown in the products and services to be created, and at the United States. It is therefore necessary to communications level. replace the best-known razor brand in the United States with an unknown name. Source brand strategy I Philips does admittedly act under its name alone in televisions and medical This is identical to the umbrella brand equipment and light bulbs, but everywhere strategy except for one key point – the in the world it goes by the name Philishave products have their own brand name. They for razors. Therefore, Philishave must be are no longer called by one generic name such abolished. as eau de toilette or eau de parfum, but each has own name, eg Jazz, Poison, Opium, Nina, I Moreover, the division of small household Loulou, etc. This two-tier brand structure, appliances functions with first-name known as double-branding, is shown in Figure brands in order to differentiate its products 13.8. from the competition and make them stars. Since this strategy is often confused with It would therefore be necessary to cease this the endorsing brand strategy, it is important practice: and this division is the most prof- to specify the differences at the beginning. itable in the group. When Nestlé puts its name on the chocolate

Source brand

Personal brand names Brand A Brand B Brand C

Specific Promise A Promise B Promise C communication

Products Products A Products B Products C or line A or line B or line C

Figure 13.8 Source brand or parent brand strategy 368 CREATING AND SUSTAINING BRAND EQUITY

Crunch and Galak, on the bars Yes, Nuts and related to the parent brand’s field of activity Kit Kat and on Nescafé, Nesquik, etc, the should be associated with it. All product aids corporate brand is endorsing the quality of should share the same spirit. If greater the merchandise and acts as a maker’s mark. freedom is sought, then the endorsing brand The Nestlé name dispels the incertitude that strategy is more suitable. certain products can create. Nestlé takes a Garnier for example wanted to become a back seat position. The product itself is the source brand and abandon its previous driver of the consumers’ choice; it is the hero endorsing brand strategy. This is a delicate to the extent that few customers of Crunch process for it means moving from patchwork attribute it to Nestlé. On the contrary, when to unity. we see the Yves Saint Laurent name on a perfume such as Jazz, this name is more than a Creating a source brand: from simple endorsement. Here, it is the brand patchwork to unity name which holds sway and which accords Jazz the seal of approval and the distinction Companies need to improve their efficiency which it would not otherwise enjoy. Yves on a regular basis. One way of doing this is to Saint Laurent is the driver of purchase, not put an end to the natural dispersion of brands Jazz. Jazz is another key to the door of the Yves and identities, and reorganise supply under Saint Laurent cultural universe. The problem proper parent brands that fulfil more than an with many brands is that they have converted endorsing function. These parent brands from source brands to endorsing brands. would be a source of strong, differentiated and Within the source brand concept, the family unique values shared by all products and sub- spirit dominates even if the offspring all have brands, which also have their own particular their own individual names. With the personality based on their target group, endorsing brand, however, the products are product territory and specific function. What autonomous and have only the endorsing the present work refers to as a ‘source brand’ brand in common. Today, where do Nestlé, partly corresponds to what some people have Kellogg’s or Kraft stand? What about Du Pont called a ‘branded house’ (as opposed to a or Bayer, Glaxo or Merck? ‘patchwork’ or ‘house of brands’). It should be The benefit from the source brand strategy remembered that, unlike the umbrella brand, lies in its ability to provide a two-tiered sense the source brand is a strategy with two layers of difference and depth. It is difficult to of branding. personalise an offer or a proposition to a client So how does a company convert a without any personalised vocabulary. The ‘patchwork’ into a real ‘house’? The first thing parent brand offers its significance and it has to do is define the identity of the brand identity, modified and enriched by the for the future. The real identity of a brand lies daughter brand in order to attract a specific within the brand itself, while its future lies in customer segment. Ranges having ‘Christian its ability to adapt to the markets. It is names’ allow a brand which needs to therefore by analysing the roots and origins of maintain its own brand image to win over the brand, its early products and performance newer consumer categories and new territory. that it is possible to isolate its core, its key The limits of the source brand lie in the values, the source of its influence and legit- necessity to respect the core, the spirit and the imacy. But this analysis must then be identity of the parent brand. This defines the considered carefully within the context of the strict boundaries not to be infringed as far as development of tomorrow’s markets and brand extension and also product communi- consumers. cation are concerned. Only the names that are Garnier provides a good illustration of this BRAND ARCHITECTURE 369 process. Until 2002, this internationally rational brand for modern young people renowned brand was known as Laboratoires worldwide. Fructis and especially Fructis Style Garnier. Its task was to become the other would be the new prototype for the brand, international brand of the mass-market while their casual and ironic tone would network, alongside l’Oréal Paris, which was provide the basis for its reinvention. positioned as a more glamorous, more What were the consequences for Garnier? expensive product within the same shelf In order to be attractive and accessible to ranges. It was a question of finding values that young people in countries throughout the were positive, aspirational, internally and world, the brand had to change its name from externally motivating, and had popular Laboratoires Garnier and simply become appeal since the brand had been allotted a known as Garnier. It was no longer a scientific more accessible market position. or a French brand, it was accessible and inter- Historically speaking, the origins of national. Furthermore its brand contract, its Laboratoires Garnier date from 1904, when M. values, were now written in English. Garnier first invented a herbal hair tonic. This How does Garnier define its aims? ‘Garnier original product already had some of the key believes in beauty through nature. attributes of the brand – naturalness and Scientifically developed and enriched with beauty care. Some time later, after the Second selected natural ingredients, our products World War, a hugely successful shampoo help you look healthy and feel good every called Moëlle Garnier not only revitalised the day.’ This contract is outlined in six core ‘genes’ of the brand but also boosted business. values: Relaunched in 1986, the brand was extended by its sub-brands – Synergie (cosmetics), l Natural high tech (which distinguishes it Ambre Solaire (sun care), Graphic (hair care), from Yves Rocher, which is not high tech, Ultra Doux (skin care) and Lumia (hair and l’Oréal Paris which does not focus on colour). the natural element). The brand achieved international renown l Healthy beauty: Garnier is a healthy brand, and established a strong position on several which does not use top models, but European markets. However, its sub-brands unknown models who look and feel good declined in popularity and remained regional. (like the girl next door). All except one, that is, which had already been extremely successful outside Europe and l Total experience: Garnier is not selling just appealed to the younger generation in coun- a product but a complete experience that tries throughout the world – Fructis, the first appeals to all five senses. strengthening shampoo with active fruit l Universal: it is multi-ethnic, multiracial, concentrates. Fructis was a direct descendant multigeneration. of the Garnier line but with a more modern image. The real reinvention came with Fructis l Accessible, as evidenced by price and Style, a range of revolutionary styling distribution. products containing fruit wax and charac- l Positive irreverence: this is a distinctive terised by a complete range of strong, tactile personality trait, found in all Garnier sensations – the colours, consistency and advertisements. aroma of fruit. With Fructis, a new generation of sensual products was born. How was this new identity projected across all But to conquer the world market the brand Garnier’s daughter brands? needed a new identity that, while respecting its origins, would nevertheless make it an aspi- l The first stage was one of identification. 370 CREATING AND SUSTAINING BRAND EQUITY

Apart from modifying the name, a new Garnier sub-brands. The ‘branded house’ has logo was created in green, orange and red, constructed a ‘virtual house’ in which all the the colours of fruit but also traffic lights. brands in the family are brought together with a view to offering an intense product l The next stage involved bringing the sub- experience. Garnier’s (male and female) brands portfolio into line with the source customers enter via the Garnier Hall from brand. Since Garnier is a source brand, the where they can go to the Beauty Lounge, Style sub-brands must reflect its core values. So Room, Tonic Area or Game Zone and try out the Neutralia sub-brand (shower gel) was their future looks, carry out personalised diag- abandoned because its clinical purity no nostic tests or simply experiment and develop longer corresponded to the Garnier ‘house’ their customer loyalty. image, while the Ultra Doux brand was From this it can be seen that the source brand extended to replace Neutralia. Similarly, is a structure that restructures all its parts. Many the Synergie sub-brand (cosmetics) became groups use this type of brand architecture to Skin Natural which was much more in line give greater impact to their diverse product with Garnier’s values. ranges by making them converge on a common l The third stage consisted of developing image. For example, all Danone products and business by organising an attack on growth brands now focus on health, the core value of markets, that is, deciding which sub-brands the source brand, in the knowledge that there would target which countries and which are seven types of health, and therefore seven segments. What would be the conse- different ways of presenting it. Danone has also quences in terms of range and adaptation changed its status from an ‘endorsing brand’ to to multiple niching (universality value)? a ‘source brand’. l The fourth stage involved defining how the Mixed approaches advertising was to be handled. What distin- guishes a Garnier advertisement? They all The six branding strategies presented here are begin with a light-hearted statement of the models, typical cases of branding. In reality, problem, followed by the presentation of companies adopt mixed configurations where the solution, and involve a wide range of the same brand can be, according to the different people, all looking and feeling product, range, umbrella, parent or endorsing good and reflecting the cultural and racial brand. For example, l’Oréal is a range brand of diversity of the country in question. The lipsticks. It is a source brand for Studio, Elsève slogan says ‘Take care of yourself’. or Plénitude. The hybrid character of the l In the fifth stage, the promotional prin- usage of the brand l’Oréal and the strategies ciples were established – an accessible adopted reflect its willingness to adapt to the brand that offers a full experience – and decision-making processes of consumers in Garnier developed massive sampling and different sub-markets (hair care products, street marketing initiatives involving direct perfumes or cosmetics) or according to the contact with consumers in all countries. distribution channels (ie self-service or specialist stores). In certain cases, l’Oréal guar- It is significant that the website is called antees reliability and technical capacity. In GarnierBeautyBar.com. Visually, it is others, it wants to achieve recognition (ie in presented like a real ‘house’ where you can cosmetics) and therefore needs to place itself visit each room and discover and/or to the forefront. And finally, in still other personally experiment with one of the cases, l’Oréal has to be invisible – either to BRAND ARCHITECTURE 371 avoid being associated with a low-price branded Scotch directly. But for the scouring segment or to avoid hurting one of its prestige pads, on the other hand, a line brand called products. Nevertheless, many hybrid situa- Scotch-Brite was created. To counter the chal- tions result out of the series of small decisions lenge of a rival product from Spontex (who that are taken as and when a new product is simply call them scouring pads) Scotch launched. Due to the lack of an overall plan replaced the generic name by a particular for a brand’s relationship with its products, a name, the ‘Raccoon’ (just like the Volkswagen number of non-coherent branding decisions Beetle). This differentiated its product and often exist side by side. explained its advantages in a unique manner 3M provides an interesting example of the and gave it a closer and more friendly image. accumulation of separate branding policies, The ‘Raccoon’ itself has been expanded into with as many as five denominational stages many versions – green, blue, red – depending (quintuple branding). This is shown in Figure on its shape and use. For its general consumer 13.9. 3M is a company focused on high-tech products, such as sponges and glues, 3M was research into industrial and domestic applica- used as an endorsing brand with a signature in tions of adhesives. This covers a vast area small print. Curiously enough, 3M is scarcely which includes glues, obviously, but also in evidence on Scotch cassettes. Is this to films, cassettes, medical plasters, trans- distinguish better from the video cassettes parencies and overhead projector products, marked clearly and exclusively 3M and etc. The 3M name is synonymous with seri- targeted at professional use? In fact, while 3M ousness, power and heavy R&D. But this also provides a guarantee of good performance and leaves an image of coldness. Thus, to an endorsing brand for general consumer humanise the contact with the general buyer, products, it serves as an umbrella brand for the umbrella brand Scotch was created. Video professional products: all the power and signif- cassettes, glue sticks and sellotape are all icance of the 3M name is reflected in products

Medical OverheadPost-it Video Extra,YZW adhesives projectors,cassettes Magic cameras

‘Raccoon’ (nickname)

Scotch-Brite

(3M medical division) Scotch

3M

Figure 13.9 A case of brand proliferation and dilution of identity 372 CREATING AND SUSTAINING BRAND EQUITY such as cameras, overhead projectors and product or service, consumer behaviour, and dental cement (coming from the 3M health the firm’s competitive position. Brand policy division). Post-it, the famous ‘adhesive notes is a reflection of the strategy chosen by a that serve as a memory tool or a message particular company in a specific context. carrier’, is also signed 3M. In order to patent What parameters should be taken into this invention in a better way and to define it account when choosing a branding strategy? in a better manner than the long description The first is corporate strategy, of which used above, that it be given a proper name was branding strategy is in fact the symbol. For to be expected. example, in 2003, Schneider Electric, one of Thus, depending on the level of profes- the leaders in the field of electrical distri- sional end-use that a product has, or the need bution and industrial control, decided to revi- for an up-to-date image of excellence and talise its Merlin Gerin and Telemecanique performance, it is either signed 3M in a brands, which were well known to research prominent manner or even perhaps exclu- departments and electrical integrators and sively. If not, 3M is present through the brand installers throughout the world. In so doing, Scotch. Perhaps this is why the sellotape, Schneider ended an initiative launched some Scotch Magic, used the name 3M only as a 10 years previously with a different aim in recall tool. On the other hand, aerosol glue for mind, namely to replace individual brands communication professionals bears the with a single, group brand. The company’s Scotch name in small print and 3M in large new director, who had come from Steelcase, letters. There are also differentiated product outlined the strategic positioning of advertisements for the ‘Raccoon’, general-use Schneider Electric against GE, ABB and sellotape, Scotch cassettes and Post-it. Beyond Siemens. Compared with these general elec- the endorsing brand, there are no common trical and electronic giants, Schneider Electric codes of expression which appear inde- is not a small general electrical company but pendent in form and intent. rather likes to see itself as a multi-specialist company. In fact, because it sells intermediate products, its customers are looking for a Choosing the appropriate specialist company. On the other hand, when branding strategy compared with its many single-specialist competitors, Schneider Electric is more of a general electrical company. So if it wants to Which is the best branding strategy? Procter & position itself as a multi-specialist company, Gamble are firm supporters of product brands; the specialities must be offered by specialist are they right and l’Oréal, their more flexible brands, united by a group brand, a single competitor, wrong? entity, which facilitates customer relations. Each type of brand strategy has its own This is why it was decided not to follow the advantages and disadvantages, as has been single-brand path, but to bring the range of 50 described. However, a simple list of the pros product brands together under three inte- and cons does not provide a procedure for grated international brands – Merlin Gerin, making a choice in a given company in a Telemecanique and the US company Square given market. The choice of brand policy is D, in 130 countries. There is therefore a not a stylistic exercise, but more a strategic Schneider Electric front office and a Schneider decision aimed at promoting individual Electric sales force organised by type of products and ranges as well as capitalising the customer, and these customers are able to brand in the long term. It should be purchase products under different product considered in the light of three factors: the brands. BRAND ARCHITECTURE 373

Another consequence is that distributors as the inventor of modernity, anti-tradition- will once again become the official distrib- alism, accessibility and everyday values. It utors of Merlin Gerin or Telemecanique does not deal in those speciality cheeses without there being any obligation, as in the bought as a weekend treat. As the inventor of past, to automatically reference both brands. modernity, it must therefore create brands, Similarly, Groupe SEB, world leader in small with their own particular shapes and charac- household appliances, decided to form itself teristics, that can subsequently be offered in a into a multi-brand group, with four interna- variety of forms to capitalise on the tional brands – Moulinex, Tefal, Krups and investment in promotion. Bongrain decided Rowenta. Why not follow the tempting to develop processed AOC (appellations single-brand path, like Philips? Precisely d’origine contrôlées) cheeses to make them because of Philips. The strategy lies in the art more accessible in terms of taste, price, of being different. The single brand is an preservability and usage. Vieux Pané is a advantage if you are already a single brand processed version of the AOC cheese category like Philips, one of the few international called ‘Pont l’Evêque’ but, as such, does not brands whose reputation is based on the fact have the right to use the name of the appel- that it is distributed throughout the world – lation. Bongrain therefore has to give each of even, via its light bulbs, in the depths of the the specialities it creates a new name – hence Amazon basin. It is basically too late to try to the product-brand policy. The disadvantage of emulate Philips. In today’s fragmented this is that it has to promote each new brand, markets, with their aggressive distribution meanwhile supporting through advertising networks and consumer segments, it is far many small volume brands. better to exploit the targeted reputation (in The business model of Lactalis is to segment terms of product and values) of the brands generic categories in order to bring them up to that people have bought precisely because date and into line with everyday life and the they were brands. modern life-style. This model gives rise to an The second parameter is the business model. umbrella-brand policy – under a single brand In this respect it is interesting to compare (Président), there are descriptive names for companies within the same sector, since their each of the varieties, each of the various brand policy is often a reflection of their forms, with low-fat butter remaining a quality business model, the driving force of their butter, Emmental a real Emmental, and Brie a competitive edge and their profitability. This real Brie. can be illustrated by comparing three giants of The third parameter for choosing a brand the European cheese industry – Bel, Bongrain architecture is cultural. The United States has and Lactalis. Bel develops range brands developed the culture of the product brand – a around a central innovative product, thereby brand that produces a single product. Ivory, giving rise to an entire range of products with the founder brand of Procter & Gamble, is and The Laughing Cow, Kiri or Mini Babybel continues to remain a soap, which explains signature. Bongrain develops product brands the company’s reluctance to extend the brand – Chaumes, Vieux Pané, Caprices des Dieux, and even the ideological opposition of such Haut Ségur – while Lactalis uses a single brand authors as Trout and Ries who have berated it (Président) as an umbrella for all its cheeses in their work for the past 20 years. But the US and butter, and even milk in Russia and Spain. domestic market favoured this product-brand So why the different brand policies? policy. On the other hand, it also explains In fact, the business models of these why Europe and Japan have been the main companies are not the same, hence the exponents of the umbrella-brand policy. different brand strategies. Bel likes to see itself Nivea and Nestlé are just two of the many 374 CREATING AND SUSTAINING BRAND EQUITY

European examples. In Japan, apart from the Finally the brand vision impacts the choice size of the domestic market, the concept of of architecture. In the cosmetic market there the company has also counted for a lot in the are thousands of products and many scientific sense that, the more products and sectors a terms, and innovations are essential. This is company covers, the greater its reputation. It what leads to an opacity in the market. Brands would simply not occur to the director of a serve as milestones and a question that is Japanese company not to use the corporate frequently asked is which naming strategy name to promote all kinds of brand exten- should be used? There is no single answer to sions. Yamaha is a typical example, putting its such a general question: it depends a lot on name to such widely diverse products as the brand’s conception of itself. motorcycles and pianos. Lancôme prefers a mono-product policy The fourth parameter is the pace of inno- with only a small range derived from the vation. How do you develop product brands in leading product (Progress for the face, eye- a sector that updates its offer on an annual liner, anti-wrinkle cream, etc). Thus, recently basis? In this instance, a single-brand policy the brand chose to launch mono-products for covering the entire range is preferable, as in body care, each with its own brand instead of the case of Nokia, Sony-Ericsson, Alcatel, a line under one name. There was Cadence for Samsung and even Whirlpool and GE. the body (moisturiser), Exfoliance (scrub) and A fifth parameter is the added-value lever on Sculptural (slimmer). Lancôme is not an which a product is based. This point is illus- endorsing brand. It wants to be a source brand trated in Figure 13.1, giving the relative posi- and therefore the creator of a precise vision, tioning of these different strategies. When the that of French elegance. The brand wants to added value in a particular market is linked to serve as a vehicle to express: reassurance, reputation and scale, a single- brand umbrella strategy is recommended (in l the product’s technological level and its the world of industry, this is often the performance; corporate brand), although a source-branding strategy with two levels – a real ‘branded l luxury as perceived in a French manner, house’ like Garnier or l’Oréal Paris – can work that is to say natural sophistication; equally well. However, the more segmented Lancôme makes laboratories appear the market, with top-quality, personalised charming. products, the more one has to favour either a portfolio of l’Oréal product brands or an Lancôme expresses itself through its products endorsing brand strategy that sanctions the and the services that surround them (the sub-brands (the logic of Danone or Nestlé in dialogue and the advice of salespeople). They dairy products). want a brand policy that is coherent and Next there is the problem of resources. In the easily understandable on two levels: the absence of sufficient funding, a company consumer and the seller. But, consumers should concentrate its efforts on a single actually respond badly to brand policy in this brand, especially if it is international. The sector: they do not usually memorise brand need to achieve a visibility threshold comes names and may simply ask for the ‘moistur- before all other considerations. However, in ising cream from Lancôme’ when they enter case of co-branding, it is impossible to do so: the shop. The sales assistant then explains this is why Philips and Douwe Egberts (a that there are two: Hydrix and Transhydrix. leading coffee company) created a separate The two names help the assistant explain the name (Senseo) to designate their joint inno- existence of multiple products. Through these vation in coffee machines. different product names, the customer under- BRAND ARCHITECTURE 375 stands the different products and the assistant In the past, the creation of any new product can subsequently promote each one by was usually also accompanied by the creation stressing their individual functions, use and of a new name. In christening the new specific characteristics. Thus, at Lancôme, product, the product manager gave it life. they try to give each product a different name Without a name, the product had no real exis- to reflect a function (Nutrix nurtures the skin, tence. Once branded, it had a life. In 1981, at Hydrix moisturises it and Forte-Vital makes it 3M, 244 new brands were created and regis- firmer) or the main ingredient if it is some- tered. In 1991, only four new brands were thing new or revolutionary (eg Niosome created. The same thing happened at Nestlé: contains niosomes, Oligo-Majors has oligo in 1991, the company created 101 new elements). This naming policy makes the sales products but only five new brands. The age of pitch clearer because it explains the differ- brand multiplication is over. What has led to ences between the products and other closely this change in practice? positioned products and therefore avoids the The realisation that brands are the true confusion that could have occurred had they capital of the company has led to this revo- been in the same line and under a single lution. By capitalising on fewer brands, common name. companies had to sustain their equity by This would appear to close the argument nurturing them through constant innova- clearly between product brands and line tions and line or range extensions. Therefore, brands in favour of the former as far as the question ‘what name do we choose?’ cosmetics are concerned. But, at Clarins, as a becomes ‘which new product should we put general rule, there are no mono-products and under which already existing brand?’ their 70 products are all grouped into lines. Companies with decentralised manage- Since Clarins is not Lancôme, it does not have ment are particularly susceptible to brand the same image, the same identity or the same proliferation. Thus, 3M, in spite of its high conception of itself. It projects itself as a rank in the Fortune 500 companies and its Beauty Institute and the profession of beau- 60,000 products, remained relatively tician is very important to them. This concept unknown. One part of the explanation for implies the use of many products belonging to this was the excessive number of trademarks the same line, just as in a prescription. A with which it was burdened: over 1,500. In mono-product cannot do everything and order to solve this problem, 3M decided to from this arises the preference for product take the cat by the tail and created a branding lines that act in synergy. Clarins wants to committee at the highest level (Corporate create stable lines that can last for years and Branding Policy Committee) whose mission are in conformity with its identity, personality was to establish a precise doctrine regarding and brand culture. Finally, it prefers objective brand policy. Its approval was necessary product promises rather than a plethora of before the creation of any new brand. To slogans for mono-products that all play on make 3M become a real corporate brand, it one factor, presently ‘victory over ageing’. was decided that from then on 3M would be From this arises the names for their products, used to sign or guarantee all products (except which are always in the beauty sector. The the cosmetic line). The second decision was names are always descriptive of the product’s the banning of the use of more than two actions and do not play upon dreams and names on one product (as was the case with fantasies as did Christian Dior when he Scotch Magic) in order to abolish brand pile- launched ‘Capture’. At Clarins, names are ups, as is shown in Figure 13.9. In order to constituted of two or three words, for facilitate the integration of the new brand example, ‘Multi-Repair Restructuring Lotion’. policy that capitalised on a few mega-brands 376 CREATING AND SUSTAINING BRAND EQUITY

(also called primary or power brands), 3M creation of a new parent brand. The last filter distribute to all its subsidiaries a guide question evaluates the capacity of the new explaining the policy to be followed in case of product to justify the creation of a new branding when faced with a new product. secondary brand (daughter brand). From the The creation of this guide led to a drastic fall decision tree emerge six exhaustive branding in the requests for new brand creation: be it possibilities that are based on measurable parent brands (like Scotch) or daughter brand market parameters. They go from the (like Magic). extremely simple (slides for overhead The decision tree shown in Figure 13.10 projectors from 3M) to multiple level puts each innovation through four questions branding (Scotch Magic, the sellotape from which serve as filters to limit the creation of 3M). As expected, the creation of a new a new brand to certain very specific circum- brand (primary or secondary) became the stances (like Post-it). The first filter question exception rather than the rule. A number of asks if the innovation satisfies one of the restrictive conditions had to be fulfilled first: following four criteria: Is it a top priority mainly, that the innovation creates new innovation? Does it create a new kind of primary demand and that none of the price/quality relationship? Does it create a existing primary brands are suited. new product category that did not exist until then? Is it the outcome of an acquisition? The second filter question asks whether the New trends in branding strategies brand could not be used to nurture an already existing parent brand in 3M’s Companies do evolve in their branding primary brands portfolio. The third filter strategies. An analysis of their international question seeks to discover whether the new behaviour reveals significant trends. product can provide the occasion for the

3M branding options review QUESTION 1 QUESTION 2 QUESTION 3 QUESTION 4 DECISION Does the product Is there Could the product Could it justify meet one of a usable justify a new a new four criteria?primary brand? primary brand? secondary brand? 3M brand NO + generic product name NO Existing primary brand Generic product name YES 3M logo NO 3M brand + generic product name

NO New primary brand YES YES Generic product name 3M logo NO YES Existing primary brand Generic product name YES 3M logo Existing primary brand New secondary brand Generic product name 3M logo

Figure 13.10 3M branding options review BRAND ARCHITECTURE 377

Why the rise of branded houses? issue is that of power and organisation. Take Toshiba for instance. This conglomerate is An interesting classification of branding organised in business units: computers, hi-fi, architectures is that of ‘branded house’ versus television, cookware (in Japan) and so on. Not ‘house of brands’. As it names indicates, the only are the business unit directors totally ‘house of brands’ refers to a company which independent, the country managers are also operates through well-known brands but itself very independent. Their role is to sell the remains discreet if not hidden: this is the case products coming from Japan. As a conse- of the ITW (Illinois Tool Works) operating quence, there is no desire at all to coordinate with such brands as Paslode or Spit, and well the communications between business units, known in professional circles. Procter & and for a given business unit between coun- Gamble and Georgia Pacific also operate that tries. The result is that although they wear the way. same name, Toshiba hi-fi products do not The branded house is the inverse case: the have the same image as Toshiba computers, company itself is the one and single brand, Toshiba television sets and so on. The Toshiba acting as a banner and a federating force. For corporation up until now never thought of Aaker and Joachimstahler (2000), the models itself as a brand that needed to be managed of such architecture are GE (GE Capital, GE globally as such. It is only recently that a VP Medical and so on) and Virgin. In fact, it is was named with that objective, with over-restrictive to assimilate the branded worldwide responsibilities and authority. His house to this type of case. The branded house or her first task will be to establish the Toshiba is a strategy by which the corporation is the brand platform and to enforce it throughout source of reputation and the federating force. all communications of any product in the This can be achieved by two branding archi- world. Philips is itself now acting under the tectures: the corporate umbrella brand (Sony, ‘one Philips’ internal motto. Philips, GE and Virgin are examples), and the Why do so many organisations move corporate source brand, where there exist sub- towards this branded house architecture to brands or branded subsidiaries, but the leader recreate identity where there is diversity, frag- is the parent company. This is typically the mentation, if not a patchwork? In modern policy followed by HSBC, which puts its developed markets, unlike the emerging name or logotype before that of all ones, it is no longer sufficient to be known. subsidiaries, as long as these subsidiaries keep One must also consistently evoke a set of their name. values and stimulate emotional resonance. Two brand architectures correspond to the This supposes some discipline and less so-called ‘house of brands’: naturally what is autonomy. Sales-oriented organisations, such called the product brand approach, and also as those of Korean and Japanese companies, the endorsing brand approach. When 3M puts assign high sales objectives to their country its name at the bottom of all its products, is it managers. In exchange they have a lot of really driving customers’ perception of freedom. This is why their communication is value? No. Although present, visibly it generally managed at the local level. Creating remains discreet: this is the sign of a ‘house a branded house will meet resistance because of brands’. The brands of the portfolio act one source of autonomy, and not least, adver- very independently. tising freedom, will be affected. However, a Paradoxically some corporate umbrellas are branded house does not automatically mean also very close to being quasi houses of a global campaign: the spirit of the brand brands. This may look as a contradiction with may emerge through different and even what has just been said. In fact, the whole localised communications. 378 CREATING AND SUSTAINING BRAND EQUITY

Loyalty and the rise of transverse the limitations of a flagship-brand strategy in brands which l’Oréal Paris merely endorsed a large number of independent sub-brands – Elsève, There is another reason for changing brand Elnet, Plénitude and so on. Apart from the fact strategy – when the emphasis shifts from that the publicity budget was fragmented, product logic to customer logic, from a desire there was no effective capitalisation. The to conquer new markets to developing group therefore switched from a ‘house of customer loyalty. Accor Hotels, the European brands’ logic (with l’Oréal Paris as the leader in the hotel industry, is a good example endorsing brand) to a ‘branded house’ logic, a of a company that was able to react and source brand with a basic unity and a very modify certain fundamental principles of its distinctive form. This is when the so-called brand policy. Accor owes its success to the ‘dream team’ appeared on the international creative brilliance of its two founders who scene – a collection of internationally invented the product brand in the hotel sector. renowned top models and stars, each Novotel, their first hotel chain, was based on promoting a sub-brand from the l’Oréal Paris the concept of total standardisation – house, using the same creative platform and whichever hotel they stayed in, businessmen publicity signature (‘because I am worth it’). and women felt at home, down to the very At the same time, the l’Oréal Paris brand name layout and decoration of the rooms. Then they became larger, more visible, and more covered the different market segments with prominent for such sub-brands as Elsève, on other product brands: Formule 1, Etap Hotels, the packaging and in-store merchandising. Ibis, Mercure, Novotel, Sofitel and Suit’Hotel Finally, the denominative logic was applied to in Europe, and Motel 6 in the United States. brand extension categories that were not yet According to the original logic, Accor – the sufficiently attributed to the brand (due to its name of the holding company – was limited historic associations with hair products). to that single function and was therefore Plénitude, the brand then in competition invisible. Then, in view of the requirements of with Nivea, was abandoned in favour of stock exchange valuation, it was decided to Dermo Expertise, Pure Zone and Solar make the corporate brand more visible. It Expertise, whose more descriptive names began to appear in small print on the hotel immediately suggest competence in the area brochures, before being incorporated as the concerned. trade name – Accor Hotels – in the actual logo By doing this, l’Oréal Paris was also aiming of each product brand. to develop real customer loyalty across the The growth of the group’s market share different sections of the brand and thereby recently led to another reassessment: the make up the time lost to Nivea in this respect. decision to move from individual loyalty In 2002, in an extension of this customer programmes for each brand to a corporate loyalty objective, l’Oréal Paris launched its loyalty programme (Accor Hotels Favourite first advertising campaign with a view to Guest). creating a relational database. It was this same need to develop loyalty that led l’Oréal Paris to break with its historic brand strategy in 1995. The decision was Industry discovers the importance of made in response to Nivea, whose simple branding strategy maximised brand loyalty within an increasingly broad portfolio of sub-brands When branding policy is considered, the that were in direct competition with the industrial sector does not immediately spring brands in the l’Oréal group. L’Oréal realised to mind. Paradoxically, since promotion in BRAND ARCHITECTURE 379 this sector is not done through costly In the United States, the challenge is the publicity but through catalogues, the sales media and distribution costs. The conse- force and trade exhibitions, companies do not quence is the obligation to nest products hesitate to register trademarks. Air Liquide, for under an umbrella brand which remains to be example, has registered a total of 880 trade- created. As a result we see what can be called a marks (effectively, brand names). ‘vertical crunch’ of brand architectures. There As well as representing a considerable cost, are in fact two types of ‘vertical crunch’. The these trademarks also create confusion and first is a bottom-up crunch, when a mere opacity further down the line, at sales team descriptor becomes a driver (the way and at catalogue level. The problem is that consumers name what they buy). For instance they are specialist names which it is hoped in Europe, the whole shampoo line of l’Oréal will be passed on by word of mouth and Paris is sold under the brand Elsève: its many recommendation: ‘I want some X.’ But this is products have names such as Color Vive and quite clearly impossible as there are far too Energance. In the United States, Elsève has many, which is why the industrial sector is not been launched. Instead of three levels, beginning to incorporate the concept of the there are only two levels (l’Oréal Paris and a endorsing or source brand, and even the wide range made of names like Vita Vive, mega-brand, which creates an umbrella for a Nutri Vive, Hydra Vive, Curl Vive, Color Vive series of specialist products. and Body Vive). The other is a top-down crunch, when a mere endorsing brand becomes the driver. For Internationalising the instance in Europe the famous biscuit architecture of the brand speciality Pim’s is called Pim’s by Lu. In the United States, it is Lu Pim’s. Should companies globalise their branding Companies also exploit local equities to architectures? Should they just duplicate carry international brands. For instance, all them when entering new countries and conti- Unilever’s global ice cream concepts (Magnum, nents? It is a fact that most branding architec- Solero and so on) are endorsed by a local house tures have been created slowly, through time brand, acting as reassurance by its long-estab- in the domestic market. They benefited from lished proximity and familiarity in the country. low media costs, and a lower competition. This is why we so often find ‘product brand’ architectures. They resulted from the acqui- Some classic dysfunctions sition of a company by its main competitor: to avoid losing market share, the acquirer Brand architecture, like any plan, is one thing. decided to keep the brands apart. Can the Implementation is another. In practice, we same portfolio architecture be applied when find four classic branding dysfunctions. entering Russia or the United States? In Russia, as in many former communist The case of the parent brand swallowed countries, there is a unique opportunity to up by a daughter brand rapidly take a dominant position by investing fast and heavily as long as western Sometimes, in fact, one of the daughter competitors are not there, and media costs brands can prove remarkably successful, remain low. This is what Frito Lay did. This attracting to itself all the advertising means capitalising on one brand, used as investment. The result is that the parent source brand or endorsement, and rapidly brand has been taken over by the image pushing new products into new segments. created by this exclusive communication. It 380 CREATING AND SUSTAINING BRAND EQUITY can no longer play its role as parent brand and In the B2B sector Sage is an illustration of create new daughter brands. This is the price of this problem. It is a giant in terms of market success: not only does the star product hide the sector (number three in the world in others, but it drags the parent brand with it. For management software) and a dwarf in terms years the Nina Ricci brand was associated with of image, whereas everyone recognises SAP, a single perfume, its global success L’air du Microsoft, Oracle and Cegid. It is true that the temps. This created a fundamental problem for company has a decentralised structure: licences: a luxury brand makes its profits communications are paid for by market, through these. However, Nina Ricci no longer therefore by the products sold in each. This had its own identity, and potential licensees has two consequences: tomorrow’s promising did not want to be licensees of L’air du temps, products are not communicated enough, and but of the parent brand. It was necessary to the communication places emphasis on the reconstitute the identity of the latter. products, and not enough on the Sage brand. Volkswagen was swallowed up in image This may place a brake on organic growth. (and sales) by the Golf, a car which has known The Sage brand is well known to accountants glory but which symbolises the 1980s! (who buy its best-selling accounts software) but not people from other corporate func- tions, where tomorrow’s growth segments are Company–product disconnection located. Essilor is the worldwide number one company in corrective optical lenses. When a consumer Brand shadowing results from an excess goes to an optician in the United Kingdom of endorsement or of emphasis on the with a prescription, this optician sends the umbrella prescription to Essilor UK, which manufac- tures the lenses during the night in its very Sales of the product suffer as a result of this. automatised and modern factory in Portugal When Ricard, the true pastis of Provence, and has them sent back by Fedex to the launched an alcohol-free pastis called Pacific, optician the next day. What a gigantic service it called it Pacific de Ricard, with packaging provided to the opticians : this is a B2B whose codes and label were resolutely winning-business model. Marseillais and similar to that of a traditional One exception is Varilux, the worldwide aniseed liqueur. Over the months, and name for Essilor’s brand of progressive multi- following consumer analysis, the visibility of focal lenses. It has been quite well advertised the Ricard brand was reduced. Nowadays it is at the end-user level, so that people ask for seen as having the status of a maker’s seal. Varilux lenses. What is changing is the distri- Pacific was given specific symbols that seemed bution: huge multiple chains of dispensing disconnected from pastis: those of the Pacific opticians are developing, such as Grand Ocean and its islands. Optical and Afflelou. Their innovation is to be able to produce directly in the store a large Balkanisation of the brand number of lens prescriptions, in one hour only. As a result Essilor is threatened. As a If segmented, differentiated brands are created company it is not known by the end users. It is under its aegis, the parent brand is impover- only known and respected by opticians: but ished and becomes simply an endorsing some of them are grouping together and brand. Diluted, it no longer imposes a starting to limit Essilor’s role to the difficult framework, an individual vision, its identity prescriptions that cannot immediately be or its values. It is a known name, with a story, made in the shop. but one that is now overtaken by the stories BRAND ARCHITECTURE 381 written in the media by its autonomous the same question arises from the parents of daughter brands. the project: what shall we call it? For example, the segmentation of Dim The question of naming new products is products with daughter brands ended at one important: it is not at all a euphonic problem point by turning them into stars. Dim became (does the name sound nice?), but a funda- a name on the packaging of tights and mental one. In reality, the first question stockings, minor in comparison to that of the should be: do we need to call it anything? daughter brands (Macadam, Dim’up, Diam’s Why, in fact, did 3M give the name ‘Post-It’ and so on). Moreover, the coherence of a great to something it could have called ‘removable brand was nowhere to be found. However, it is Scotch tape’? Scotch is 3M’s well-known brand the parent brand, Dim, whose job it is to and the name indicates ‘adhesive products’. survive. In order to do so, it must remain Isn’t Post-It an innovative variant of Scotch intrinsically attractive, a source of desire. It tape? Now a brand – in this case, Scotch – is does so, admittedly, through its daughter only supported when it is nourished through brands, who ensure its relevance today in innovation. Let us take another, B2B, example: growing market segments. Nevertheless, the an innovation by Lafarge. It is a revolutionary, daughter brands must be dissolved when they ultra-fast, fine cement that makes it possible to lose their relevance, and new ones must be obtain an extremely smooth surface. Should a created. It is therefore necessary to ensure the new name be found for it, with the potential pre-eminence of the parent brand. To do this, for turning it into a Lafarge product or range it is necessary to: brand later, or should it simply be called ‘the new Lafarge ultra-smooth cement’, opting for I redefine the identity of the parent brand; a descriptive name, as it would be in a master- brand or umbrella strategy? The name I redefine a true source brand strategy, therefore poses the underlying question of the ensuring the pre-eminence of the parent brand strategy (the number of levels and the brand; links between them, between the corporate I align the daughter brands within the and the products). framework defined by the parent brand. When should you create a sub-brand? The parent brand, after all, is the surrounding framework. It is worth looking at this process When a new product arrives, there is too great a in detail, since it should be implemented regu- tendency to opt for the creation of a specific larly in order to correct the effect of brand. This is understandable; the inventor centrifugal forces. reacts like any parents who, proud of their child, seek to give it a first name. However, a first name is an identity, and a lasting What name for new products? commitment of a marketing budget in order to forge this identity and achieve recognition for A company grows through its new products: the daughter brand. Moreover, in practice, by they make it possible to gain a differential in focusing on the so-called daughter brand, there products and services over the competition. is a tendency to let the parent brand take a step They also make it possible to focus advertising back, into the background, something that is on news that will interest the market. Finally, quickly translated into the periodic monitoring they provide the springboard for a revitali- studies of brand equity. The parent brand sation of strategic image features of the brand. declines in spontaneous recognition and in For every launch of a particular innovation, image. 382 CREATING AND SUSTAINING BRAND EQUITY

Focus on Focus on the brand innovation

One brand

Lafarge Lafarge Lafarge Agilia Agilia Agilia

Agilia Quick Quick Quick Quick Quick cement cement cement cement cement Lafarge Masterbrand Source Endorsing Maker’s House umbrella brand brand mark of brands

Figure 13.11 Which brand architecture is suitable for brand innovation?

The reaction then is to change the status of mass communication to strongly signal the the daughter brand, to turn it into a simple technological, sociological and cultural product. For example, the prepaid card from breakaway. Therefore, capitalising on the Bouygues Telecom was initially treated as a pioneer’s advantage, the category is struc- relatively autonomous daughter brand: tured around the pioneer, here iPod. The Nomad! It later became the Bouygues Telecom new entrants position themselves in Nomad card. relation to the iPod. When, then, should one create a sub- I A first name is necessary, albeit supported brand? by a long-term investment in communi- cation, when the protection of the inno- I Chapter 11 on brand coherence presented vation must be improved. When Candia, the four figures of the relationship the milk brand, invented milk with a guar- between product and brand: variant, anteed vitamin content, it could have been similarity, transformation and contra- called ‘milk with guaranteed vitamin diction. The closer one is to the variant, content’ or ‘vitamin milk’. After all, people the more natural it becomes to give the say semi-skimmed milk or flavoured milk. product a purely descriptive name, or However, it is necessary to account for the even to invent the descriptive name in competitors’ reaction. Carrefour, noting question. Is a walkman a brand, or did it the success of the major brand’s inno- quickly become the generic word to vation, would not be slow in launching its describe this new piece of equipment copy under its own distributor’s brand: created by Sony? People talk of the ‘new Carrefour milk with guaranteed vitamin Philips television’. Conversely, the content. By launching its milk with guar- further we move from the strict repro- anteed vitamin content under the name duction of the central values of the brand Viva, underpinned by long-term adver- through the new product, the more a tising campaigns, the Candia brand was daughter brand is justified. able to create a halo of exclusivity, of differ- I A first name is necessary in order to create a entiation. Viva not only created the category: iPod! It could have been called segment: it is its referent. The consumers the Apple MP3. But there was a need in the buy Viva with all its evocations of active BRAND ARCHITECTURE 383

good health. It is more than a product; it is launched landline/mobile convergence on a true (daughter) brand. 5 October 2006, it named it simply ‘Unix’, a descriptive name to get the concept across: I A first name is necessary in order to correct clients could receive calls made to the the negative induced effects of an inno- landline on their mobile. In Great Britain, vation. The sausage company Aoste (now British Gas created a daughter brand in acquired by Sara Lee) innovated by services: Goldfish. inventing the first industrial sausage: each of them had exactly the same weight and I When the parent brand does not (yet) have the same length. This was a complete break the image suitable for the targeted market, from the age-old practice of sausage- a relay or an intermediary is required. This making, all slightly different in appearance, is the goal of the first-name brand. Venus weight and length, but one that responded by Gillette made it possible for this very to the major expectation of large-scale macho brand to target women. Peugeot distribution: economy of cost. In fact, there motorcycles and scooters have used many was no longer a need to weigh each first names: young people seeking emanci- product, hence there were savings in time, pation need a badge. Buying ‘a Peugeot’ 15 personnel and money. However, it was years ago did not fulfil this function suffi- necessary to give it a name that would ciently, even if the product itself was correct, even remove, the immediate remarkable; hence first names such as evocations on seeing the product (it’s an Booster. industrialised product, standardised to the The maternal identity of Nestlé did not maximum). It was launched under the legitimate its presence in coffees. Nestlé is name ‘Shepherd’s Stick’ by Justin Bridou, in historically, and first of all in everyone’s order to create a rural, rustic imaginary lives, baby milk. It was not possible to background for this industrial product. The launch a ‘Nestlé coffee’. Nescafé made it ‘Shepherd’s Stick’ became the leader of the possible to say both ‘instant, powdered’, segment it had created. giving reassurance through the confidence linked with the name, while distancing the I With services, a first name is often maternal image, and to say ‘coffee’. The necessary in order to give flesh to an inno- word café brought Nestlé an element that it vation. In 2004, Gaz de France, a distri- had previously lacked. Conversely, the bution company, wanted to provide a identity of Philips was already techno- modular, global offer to its 10 million logical: it was enough to endorse the razor. subscribers. It was a personalised diagnosis, Choosing to call the razors ‘Philishave’ a proposal according to the desired comfort rather than Philips razors brought nothing level. Told in these terms, readers might ask new: the activity descriptor ‘shave’ did not themselves how this proposal was in any bring any added value and contributed to way revolutionary. After all, isn’t all that distancing the salience of Philips. In fact, part of the minimum client focus? The fact Braun simply calls its razors – Braun razors. is that ordinary words make innovative proposals sound banal. This is why Gaz de Taking into account the tendency to think up France named their proposal ‘Dolce Vita’ a first name too quickly, several warnings and based all its advertising communi- should be heeded before launching into the cation on this name, which became a choice of a daughter brand: daughter brand, with an emotional dimension. In contrast, when Orange, the I No first names without a major, long-term French leader in mobile telephones, advertising investment. Otherwise, the 384 CREATING AND SUSTAINING BRAND EQUITY

product will appear on shelves or in cata- Transport, Veolia Energy and Veolia Waste. logues, with a mysterious name, and the I Before creating a daughter brand, would it customer will be unable to grasp what the not be better to launch the innovation new product has to offer. All too often there under an existing daughter brand? For is a time lag between the decisions on the every daughter brand has to ward off its name, taken very early, and the fixing of own obsolescence through innovation. the budget, which may change at the last Systematically placing innovations under moment. new first-name brands handicaps the older I The second question concerns the future: ones. We will see below how 3M created a will this daughter brand be able to provide multi-criteria grid to manage this real risk. an umbrella for other products? Will it be possible to put other future products under Agilia by Lafarge, for example, that will be A case in point: names in the coherent with this name? This criterion is automobile industry essential and too rarely used: if it is not The car fascinates us. Innumerable reviews respected, the company plunges ahead into and magazines are dedicated to it. This sector an economic impasse. In fact, it is difficult only lives through innovation, giving us the to support a single product in advertising desire to change cars. Different constructors and communication. Only the arrival of a have different policies regarding their new genuine range, and other new products, models. Renault gives them all proper names will make it possible to acquire the critical (Vel Satis, Megane, Twingo, Logan and so on). mass that generates a sufficient size of Peugeot follows its three-digit logic with a budget. zero in the middle (which forced the first I Is the parent brand sufficiently well known Porsche known as 901 to become the 911 in to move on to the stage of having daughter order to avoid legal proceedings). Citroen brands? It is the parent brand that gives opted at one point for proper brands (Citroen meaning to the daughter brand. How were Xsara, Saxo, Xantia) before returning to the the first Apple products known, for over 10 initials C1, C2, C3, C4 and so on. With BMW years? Apple 1, 2 and 3. Only later, in the you buy a series number: series 1, 3, 5 or the place of the Apple 4, to clearly show the top-of-the-range 7. What is the logic to these discontinuity, was the name Macintosh choices? used. What did the low-cost telephone The first structuring factor of the decision operator Free call its convergence offer? concerns the maker’s status: a generalist or a Free Box! Orange called its unique specialist? Generalists target all segments of landline/mobile offer Orange Unix! The the market, all consumers. Since they first Danone products were all called promote the car for everyone, their image is Danone or a variant thereof (Danette, consequently not as strong as the specialists. Danessa, Danino, Dan’up and so on). As a result, their image is less in a position to In the industrial domain, Veolia dynamise new models, to bring them a strong Environment removed all its daughter emotional added value. These are reassuring brands, since the problem for Veolia is that brands, brands with guarantee and proximity it is an unknown group: it therefore has an through their network, not desire. The reverse urgent need to make itself known is true for the specialists, who have segmented worldwide. Therefore, its global daughter their market to a high degree and made their branch brands, Connex, Dalkia and Onyx, choice. The name alone of the specialist is the were de-christened and renamed Veolia stuff of dreams: BMW, Saab, Volvo, Morgan, BRAND ARCHITECTURE 385

Mini and so on. According to their means, Group and corporate brands buyers take away a little or a lot of the dream: the 1 or 3 series, or later on the 5 or 7 series. As Since 1990, there has been a basic tendency with Mercedes, one always buys ‘class’, A, B, for corporate brands to be as visible as possible C, M, E, S and so on. on the products themselves. For example, There is no dreaming with generalists: it is Pharmaceutical Laboratories now regard therefore necessary to boost the model itself themselves as a brand in their own right and with imaginary added value, with emotion. take much greater care to ensure that their Hence the need for a highly evocative indi- brand name is clearly visible on the packaging vidual name. Remember the Golf Gti! From of brands of medication. In the professional whom? Volkswagen. In order to compete with electrical equipment sector, the name Mercedes, Volkswagen concentrates on the Schneider Electric appears on the packaging of Passat, since Volkswagen means ‘people’s car’. products from the Merlin Gerin, Other parameters, however, come into play. Telemecanique and – in the United States – Why, in fact, does Peugeot opt for numbers Square D brands. The back of all Nestlé rather than model names, when it is a gener- products bears the Nestlé corporate brand alist? Before we answer this, let us recall that a name and the customer service phone number can play the part of a brand, like number. It is the same for Danone, which has Chanel No 5, or 007, or number 23, the taken great care to create a logo for its Danone number of the football star David Beckham at corporate brand, as distinct from the Danone Manchester United. Each of these numbers commercial brand used for chilled products, has an emotional potential. Likewise 205 or and water and biscuits in Asia. 911 in cars, through their association with a This tendency is part of a basic trend – the cult model, the first of which marked an era, demand for responsibility and transparency. the second of which marked several genera- The company presents itself as the ultimate tions of men. endorsement and no longer hides behind its Peugeot’s approach is explained by the brands. This also has the effect of increasing specific positioning of the brand: it wants to its visibility, and therefore its attractiveness to be ‘the most specialist of the generalists’, as A students, executives and the employment Saint Geours, its managing director, has said. market in general. In Asia, television ads for This is why the brand, although generalist, Procter & Gamble and Unilever brands bear in accentuates its differentiating traits and the the last seconds the signature of the radical design that makes it palpable. companies themselves. This is not the case in As for Citroen’s policy shift, it can be the United States or in Europe, although – explained as a result of the costs incurred by a influenced by this Asian experience – Unilever daughter brand policy. If a model lasts six is looking for some kind of higher public visi- years, it is therefore necessary to invest over bility to boost its corporate brand profile. In this time period to give it recognition and an Asia, however, these two companies do not image before turning these into profits and enjoy any reputation and this must therefore losses. Moreover, Citroen’s objective is to be established. strengthen its image. The emphasis placed on Finally, once a company is quoted on a first-name brands, in addition to being slow stock exchange, it must try to influence the and costly, does not rebound strongly onto the share price since, over and above the financial parent brand. Hence the decision to group the results published on a regular basis, market portfolio of models around Citroen, a single predictions are influenced by the company’s brand. We then buy a variation on the theme name and reputation. So anything that makes according to segment: C1, C2, C3 and so on. people dream a little adds to its goodwill. 386 CREATING AND SUSTAINING BRAND EQUITY

Companies regularly change their name the significance of the acronym, which refers and take the name of their flagship to internationally renowned luxury brands. commercial brand. For example, the company On the other, by retaining the acronym, the formerly known as BSN changed its name to group demonstrates its intention to remain Danone Corp (it nearly became Evian Corp), discreet by placing the emphasis at brand while the Volkswagen group and l’Oréal group level rather than corporate level, and leaving have both taken their name from their the brands to develop through their own flagship brands. Mars, on the other hand, creativity, publicity and the quality of their changed its name and became known as distribution. From this, it can be seen that the Masterfoods, as other companies are called position of the corporate brand in relation to Bestfoods (Unilever) or General Foods. So its subsidiaries is in fact a reflection of the what are the reasons for these two diametri- group’s internal organisation. cally opposed attitudes? This essential part of group strategy is Capitalising on a flagship brand by developed below. applying its name to the group makes it possible to take advantage of the halo effect, Group and subsidiary relationships even if this involves two clearly distinct sources, since the image of the one influences In the industrial sector where external growth the perception of the other. For example, the is the norm, the question of the status of press regularly refers to Volkswagen as corporate brands that have been acquired Europe’s number one brand when it was not crops up again. Should they be left inde- the brand but the multi-brand group that pendent? Should they disappear? Should they earned the title through the cumulative sales be endorsed with a simple visual symbol of the of each of its brands. In fact, at the beginning parent company? Or joined to the name of the of 2003, Europe’s number one group was PSA parent company? If they behave as mere Peugeot Citroën. holding companies such firms should not be The l’Oréal group does not advertise a great surprised by their low public recognition. For deal. However, its brands use heavy adver- instance, although it was founded in 1969 and tising, along with research and development, was one of the largest chemical companies in as one of their main weapons. By sharing the the world, Akzo remained largely unknown. name of its glamour (‘l’Oréal Paris’) brand, the No wonder: all the companies acquired l’Oréal group benefits from the impact of an had kept their own company names and international image that inspires confidence brand names (Warner Lambert, Stauffer, in shareholders and defines what they do. Montedison, Diamond Salt, etc). Akzo thus It was for entirely opposite reasons that acquired a poor image in terms of technology Mars took the less transparent name of because of its lack of visibility. It had become Masterfoods. Apparently, it was difficult to sell the biggest unknown company in the world. brands of pet food such as Pedigree and General Electric has defined four brand Whiskas under the Mars corporate or group policies and specifies the conditions for their name, particularly since Mars conjures up the application. These policies range from: image of a single product, a legendary chocolate bar, which has growth limits in an l The so-called monolithic approach where extremely segmented market. There was also a GE behaves like an umbrella brand and risk of a negative halo effect on financial replaces the corporate brand which has predictions. LVMH, the initials of Louis been bought (either immediately or after a Vuitton Moet Hennessy, uses both strategies. transitional period of double branding). On the one hand, the experts are familiar with The brands GE Silicons, GE Motors and GE BRAND ARCHITECTURE 387

Aircraft Engines have all emerged from this Above all, each branding architecture has process. organisational repercussions, with each playing a different role for the group in l The endorsement approach where GE signs relation to its subsidiaries and sub- its name beside the name of the product or subsidiaries: the company that has been acquired. l The financial approach where GE behaves l The strategy in which the group is a source like a holding company and is only brand can be likened to the role of an discreetly mentioned (X, member of the GE orchestra conductor or band leader. group). l The strategy in which the group is an l The autonomous approach where the umbrella brand makes it a unifier. acquired company or product makes no l The strategy in which the group is an reference to GE. endorsing brand makes it a coordinator. To decide upon a policy, GE uses six selection It is obviously not up to the branding deci- criteria: sions to determine the of a 1. Does GE control the company? particular group – that would be a reversal of roles – but it should explain management 2. Does GE have long-term commitments in choices and the criteria on which these this company? choices are based. 3. Does the product category have an image value? Dynamic or not? Internationalising the group/ 4. Is there a strong demand for GE quality in subsidiary architecture this industry? The world is complex. Groups must face the 5. Is the corporate brand which has been fact that their different branches have a very bought strong? different competitive status in different coun- tries. In addition, in some regions high equity 6. What could be the resultant impact on brands/companies were purchased as a means GE? to penetrate the channels of distribution. This creates a question as to the longevity of these Group style and branding strategy brands. Architecture has a connotation of something At regular intervals, the major industrial nice, square and fixed. In fluctuating and frag- groups ask themselves whether their branding mented modern markets, one should be careful strategy is as effective as it could be. There are not to harness operations under too many three formal types of strategy that can be constraints that would prove to be counter- implemented within industrial groups. productive. This is why it may not be ideal to Although the terms ‘subsidiaries’, ‘holding have the same branding architecture across all companies’ and ‘companies’ tend to be used products/services and regions of the world. in this context, structurally speaking they Let us analyse the Lafarge case. This represent the typical figures of branding worldwide company is known for its core strategy – source brand (A), endorsing brand business: concrete and cement. Less known is (B) and umbrella brand (C). But beyond these the fact that Lafarge has many other branches: terms, the impact on level-one subsidiaries roofing systems, plaster, granular products (sub-brands) is self-evidently not the same. and paints. If internally the goal of creating a 388 CREATING AND SUSTAINING BRAND EQUITY feeling of belongingness to the group is Corporate brands and product justified, the same does not necessarily hold brands true as far as branding is concerned. As for all brands, two criteria need to be For years, companies have hidden behind their taken into account. First, is the activity core brands. Through prudence and fear of being or not? If it is not, it could be sold in the affected in case of brand failure, company future. For instance, in the plaster business, if names have been separate from those of the BPB (British Plaster Board) takes over Knauf, brands. Thus Procter & Gamble remain then Lafarge would become stuck in the unknown to the public while their brands are number three position in this market. There the stars (Ariel, Pampers). In fact, it is this that is no reason to stay in a business where one is allowed the company to keep its turnover number three: resources might more prof- stable when the rumour of it being linked to a itably be invested in other businesses. sect raged through the United States. The Second, are there strong local brands in the brands, autonomous from the company itself, portfolio and are they key drivers to customer suffered no setback. Nevertheless, such loyalty? instances are rare and the tendency is more As a consequence Lafarge has not chosen a towards transparency due to communication uniform, monolithic umbrella brand archi- obligations. Also, the public wants to know, in tecture. It is definitely umbrella on the core larger numbers than before, who are the actors activity: after acquiring the Korean Ala behind the brands. Journalists want to disclose Cement company, this local leading who is the ‘brand behind the brand’. This also company soon became Lafarge Ala Cement, explains why so many companies have taken or in India Lafarge Tata Cement. For non- on the names of their most famous brands (eg core activities, Lafarge acts as an endorsing Alcatel-Alsthom, Danone). They get more visi- brand when there exist strong local names in bility and acknowledgement. This helps the key mature markets. This is the case for stock exchange investor also, in cases where he Redland in the UK, Braas in Germany and is not an expert or very well-informed, to Klaukol. understand better what he is buying. It may Should Redland have become Lafarge also create a beneficial confusion for the brand Roofing UK or Lafarge Redland? Here a itself. After it bought Audi, Seat and Skoda, distinction must be made between the legal Volkswagen Group is now co-leader in Europe name of the company and the commercial on a cumulative basis. However, many people brand. Marketing research has shown how mistakenly speak of Volkswagen as a brand much these names conjured emotional being the number one in Europe. attachment among local professionals: the The trend towards greater visibility of company became dual named, and the local corporate names also has other causes. brand became endorsed by the branch Distribution is one of them. Distributors, (Lafarge Roofing). However, in Malaysia multiple retailers and hypermarket chains are from the start it created Lafarge Roofing not very interested in brands. Their funda- Malaysia. mental relationship is with corporations, not This shows that the question of the name of with brands. It is a business to business rela- societies, branches and brands needs to be tionship. The name of the powerful corpo- well understood as implying different criteria. ration is therefore a potent reminder of that Not all societies are brands, or divisions that relationship. are organisational classifications subject to Only corporate names can endow brands change. Brands are made to convey values to with stature, an extra dimension calling for one or many targets. respect. Would Audi have succeeded in its BRAND ARCHITECTURE 389 remarkable recovery had it not been known products where the company guarantees a that Audi belonged to the Volkswagen Group? certain quality and the differentiation is The same holds true for Seat and Skoda. essentially commercial (ie special condi- Nissan’s status will change because it is now tions offered to the client on a case-by-case part of the Renault group. As long as car basis). An example would be ICI makes are only brands and not part of a larger polyurethanes. and more dynamic corporation, they arouse l The second policy is that of the endorsing perceived risk among consumers and do not brand. The company puts its name beside guarantee a long-term presence. the product brand and this confers a status Many companies sell in industrial and of high technology and reliability to the commercial markets at the same time. Here, product. Thus, Dulux paints are accom- there is the problem of having to choose panied by the ICI logo. between the use of product brands or the use of the corporate reputation to support the l The third policy makes exclusive use of the products. This depends on the quality of the product brand. Tactel is one of the most company’s endorsement and the degree of widely sold fibres but it never mentions ICI. visibility that it wants to acquire. In practice, The product is sold to the textile industry the respective weight to be attributed to the and to the fashion world, and it is feared product brand and the corporate brand that the mention of the ICI name may alter depends on a case-by-case analysis of the the positive images linked to Tactel. returns brought by each of them on the many Similarly the insecticide, Karate, which is targets concerned. Table 13.2 presents the sold throughout the world, also does not outline of such an analysis. make any mention of ICI. Does this have At ICI three kinds of brand policy were used anything to do with not wanting to step on (see Figure 13.12): ecological toes and avoid the possibility of blame regarding the harmful effects of pesti- l The first policy is the classic umbrella cides on ground water? This situation is not brand where the products keep their only changing through time, but it also generic names and are signed with the changes according to the company. Decis, corporate name. Most often this concerns the world leader in pesticides, makes a raw materials and undifferentiated reference to Roussel Uclaf (Agrevo division)

Table 13.2 Shared roles of the corporate and product brand Targets Product brand Corporate brand Customers +++++ + Trade associations ++++ + Employees +++ ++ Suppliers +++ +++ Press +++ +++ Issues groups ++ ++++ Local community ++ ++++ Academia ++ ++++ Regulatory authorities + ++++ Government commission + ++++ Financial markets + +++++ Stockholders + +++++ 390 CREATING AND SUSTAINING BRAND EQUITY

‘ICI Fibres’ brand ‘Tactel’brand

Company and Br

Br and Product

Texturiser Weaver and Garment Retail Consumer fabric maker maker Figure 13.12 Corporate and product branding at ICI

on its packaging. Similarly, to benefit from It is surely an occasion to demonstrate the its innovations, Du Pont de Nemours ability of the group to deliver more than mentioned clearly ‘Lycra by Du Pont’ on all cement, its core symbolic product and star its communications for Lycra, the fabric that (which in this sense means offering high has revolutionised women’s lingerie. growth and high profitability). However, roofing is a high involvement decision, with Product innovations generally provide an both a high perceived risk and dimensions of ideal occasion to ask fundamental questions emotion. It may be hard for the corporation about the branding policy. How to name ego to recognise it, but would a Lafarge name these innovations? Let us suppose that the be able to evoke the sufficient emotion Lafarge Roofing Division decides to launch a needed in all real brands within a realistic radical innovation in roof maintenance and timespan? Wouldn’t it be better to use it as a rebuilding, associated with a guarantee for 10 guarantee, and let a specific good commercial years or more: an ‘all in one approach’, name foster the benefits, tangible and intan- service oriented instead of technology gible, of this total solution, against the small oriented. How should it be called? Would a local companies with which it will be name like Lafarge Roofing Total Solution be competing? better than a new specific international name for that innovation? 391 14

Multi-brand portfolios

Although the main function of a brand company’s business model for the 1970s, extension is growth, there are limits to what a 1980s and 1990s is defunct. In the past, single brand can achieve. Each brand is Mattel treated children in the 4–10 age targeted. Even if psychographics are substi- group in exactly the same way, as a homog- tuted for demographics, a brand is not a catch- enous group. This had a major advantage in all. BMW values attract only 20 per cent of the terms of cost (economies of scale) – they premium car buyers worldwide. BMW refuses were all sold the same Barbie doll, which to dilute its brand and in order to grow it went represented 40 per cent of the company’s international. It also bought the Mini and sales. Rolls-Royce brands. Mattel’s first response to the tweens chal- The other way in which a company can lenge was to segment the target group and grow is by creating new brands to meet the create a special Barbie for 8–10-year-olds, the demand that existing brands cannot satisfy. Barbie Generation Girl with the single Barbie But it takes courage to launch and position signature. Then, to counter the success of new brands. MGA’s Bratz dolls for 8–12-year-olds, Mattel It takes courage because, at a time when relaunched My Scene Barbie, still with the extensions are the order of the day, it is Barbie signature but smaller. However, difficult to admit that even a mega-brand has the company had to make up its mind to take its limits. Companies prefer to attribute failure the plunge and create a genuine new brand to production problems so that they can try – rather than a brand extension, and in 2003, and fail – again. Thus Mattel is facing the chal- the multinational launched Flavas to succeed lenge of the ‘tweens’ (see Lindstrom, 2003) Barbie. After all, there comes a time in every who are no longer really children but not little girl’s life when she no longer wishes to quite teenagers or adolescents. There is a play with Barbie. saying in the business that today’s kids are Levi’s had already taken the plunge by getting older younger. launching Dockers after initially trying a In concrete terms, this means that the simple brand extension – Levi’s Tailored 392 CREATING AND SUSTAINING BRAND EQUITY

Classic. But the same brand cannot be simul- Times have changed though, and now the taneously rebellious and classic. In the car trend is to reduce the size of portfolios as sector, brands seem to represent progress up quickly as possible. There are several reasons the social ladder. Thus, Honda created the for this reverse in trends: Accura in the United States, just as Toyota created the Lexus and Nissan Infinity, since l Although it is easy to maintain several customers worldwide seem to equate brands simultaneously in industrial changing the brand of their car with proof of markets where different brands are some- financial success. This is why Renault really times used for the same product to ease needs to buy Volvo or Jaguar to add some top- relations with distributors, in the retail of-the-range brands to its portfolio. market it is nearly impossible. The direct This same rationale applies to the distri- consequence is that only a few brands in a bution networks. For example, Hanes – the portfolio will be promoted, to gain a signif- largest apparel brand in the world – is sold in icant market share. The others will be the big department stores but could not be abandoned. sold in supermarkets, so Eggs was created for l The concentration of the distribution trade this network. has reduced the number of retailers and has Basically, therefore, the purpose of multi- even almost suppressed certain retail brand portfolios is to better meet the demands channels and small businesses. Brands that of segmented markets, and any reassessment were previously uniquely handled by of the portfolio raises the question of the specific distribution channels and sold only segments to be retained. So when Procter & in certain stores may now be found in a Gamble decided to dispose of a number of single wholesaler or purchasing group. This brands in Europe, in 1999, it was because they tends to lead to the reduction in their did not fit into the group’s European segmen- numbers. The trade has also pursued a tation – premium, smart buyer and low-price. policy of creating distributors’ own brands. This, coupled with the fact that supermarket Inherited complex portfolios shelf space is limited, leads to the reduction of space allocated to the other brands, another factor causing a reduction in the The question of how many brands should be number of references or brands themselves. kept in each market has become a primary concern of all senior marketing managers. The l Industrial production has also become fact is that, due to historical reasons, most firms concentrated. International competition have to manage a large portfolio of brands. The has put the emphasis on high productivity natural tendency during the growth of firms and low costs and has led to the regrouping has been to add new brands each time they of production units and research and devel- wanted to penetrate new market segments or opment activities. There is less justification new distribution channels. This was done so as for large brand portfolios when the not to create conflicts with former segments products, however varied, come from the and channels which could have endangered same factories, and even the same their old brands. The vogue of company production line. mergers and acquisitions brought additional l Consumers, however, still have the last say brands that managers were reluctant to dispose and despite the fact that the objective of a of or merge with other brands. The size of brand is to clarify the market, their most brand portfolios, therefore, just grew and grew, frequent complaint is that they are with increased complexity and waste. MULTI-BRAND PORTFOLIOS 393

confused by the growing number of brands?). It also depends upon the long-term brands. A company is fooling the consumer corporate objectives, the degree of compe- if it sells two identical products under two tition and the resources of the company. The different brand names. Manufacturers appropriate number of brands results from a respond by rationalising their brands. multi-stage, multi-criteria decision process whereby various scenarios are presented and l The last point, but not the least, concerns evaluated. A good example of this approach brand internationalisation. In many areas is Michelin. today, national barriers no longer make sense. In Europe, for example, class, life- style and consumer needs are no longer From single to multiple brands: exclusive to a single country. The luxury Michelin goods industry has long been targeting the world market, as indeed have most indus- Companies’ attitudes to brands are changing trial companies. Not all brands are suited to – should they adopt a single-brand policy or the international arena, however. The penetrate markets from several different investment required to establish a signif- angles (multiple entries)? Some have decided icant global presence means that firms can to concentrate on a small number of interna- only maintain a small number of brands, or tional brands, which does not prevent them indeed just a single one for a mono-brand from promoting strong, local brands in their strategy such as that of Philips, Siemens, countries of origin – as l’Oréal did with Dop. Alcatel, Mitsubishi or ABB. Some have concentrated on a single brand (Philips), while others have changed from a How many brands, therefore, should be single-brand policy to a real portfolio – as in retained in a portfolio? It is obvious at this the case of Michelin, the world’s leading tyre stage that there does not exist any magic manufacturer. This last case is extremely formula or number. The question of the interesting. number of brands to retain is closely linked Initially, Michelin found it difficult to to the strategic role and status of the brands. accept the need for a brand portfolio. The In keeping only a single brand, we are company’s success was based on the fact that assuming that an umbrella brand policy is it focused on research in the interests of possible and indeed pertinent in the market quality, under a single name – the name of the being considered. For decades, the Philips family that had created a set of values and the brand included both brown and white means to achieve a valid long-term policy. products, yet they parted with the latter Culturally speaking, everything at Michelin markets, selling them to the American revolved around the Michelin name. Of company Whirlpool. The decision regarding course other brands existed, but they were the number of brands to be retained should often found in the basket of factories bought therefore be closely linked to an analysis of locally to penetrate the market – there are 80 the brand’s function in its respective market. Michelin factories worldwide. These factories Every market can be segmented, by product, did not receive any form of innovation or customer expectation or type of clientele. marketing support – they were purely tactical This does not mean, though, that a market brands. divided into six segments, for example, The problem with this is that the market is should necessarily call for six brands. This segmented. In the US automobile market, for depends on their function (do we need example, there are certainly customers who endorsing, umbrella, range or product want the best quality in the world, but there 394 CREATING AND SUSTAINING BRAND EQUITY are also customers who want a major brand Michelin’s major share in this market was aided that offers good value for money, and those by the ill will created by accidents in Formula 1 who only have US $100 to buy a set of tyres. racing that were linked to quality defects in the There are also the 4 × 4 and pick-up drivers tyres produced by the Japanese group who are conscious of changing fashions and Bridgestone-Firestone. As the Chinese car want customised tyres. For these drivers, the market becomes increasingly democratic, there Michelin brand is too staid. A single brand is a need to offer new buyers quality tyres, since cannot meet such a diverse demand, whereas those produced locally are dangerous at the a group can. This is why BF Goodrich is posi- speeds that can now be reached on the new tioned as a sports brand in a flourishing Chinese motorways. The Michelin group must market that pays little attention to price, therefore provide a response to the middle namely the 4 × 4 market. range and the economical segments (if not it In the United States, Uniroyal targets the will be marginalised), but without endangering cost-conscious customer and is referenced by the reputation of Michelin as the world’s General Motors. This market segment is number one brand for quality. The acquisition serviced by the Kleber brand in Europe where, of the leading local brand Warrior has enabled following a series of mergers and the restruc- it to complete its brand portfolio in this turing of groups, Uniroyal is still managed by segment. In Japan and Korea, there is also a Continental, Michelin’s German competitor. segment of clients demanding products ‘made In China, the role is fulfilled by the local in the United States’. This demand has been brand Warrior, which has the largest market satisfied by the acquisition of the US company share. Distributor requirements also have to BF Goodrich. be taken into account since distributors are The last aspect of Michelin’s global strategy, now demanding a quality tyre with their own required to complete the picture, is that, brand name. Michelin has two policies in this because tyres are relatively inexpensive to respect. The first is to supply a tyre with the transport, the tyre market is truly global distributor’s brand name, according to the (unlike the car market). Today, the group’s latter’s specifications. Thus, Michelin manu- Chinese factories manufacture tyres for factures tyres for the Liberator brand, sold distributors’ brands (private labels) in the exclusively by Wal-Mart in the United States, United States, and will soon be producing and for Norauto in Europe. The second is to Uniroyal and BF Goodrich tyres for Michelin supply the distributor with a brand that North America. One day, they will also be belongs to Michelin. Thus Warrior, positioned making Michelin tyres. Furthermore, the as a middle-range brand in China, is used as globalisation of production makes it possible the name for low-cost tyres in the United to circumvent customs barriers. For example, States and Europe. The same applies to the Japanese car manufacturers cannot export Japanese brand Riken, the Hungarian brand cars to the United States unless they include a Taurus and the Czech brand Kormoran. minimum percentage of parts made in the Michelin’s global strategy aims to encourage United States, which is why these manufac- customers to move from mass-produced turers fit their cars with Michelin tyres made products to middle- and then top-of-the-range in US factories. This has enabled Michelin to products, with the different brands making it penetrate the reputedly nationalistic and easier to emphasise perceived difference. closed Japanese market through this, as yet, Second, it involves adapting to the market. For fairly low-key distribution. example, the Chinese market was for a long This example illustrates the flexibility and time small and elitist because of the high adaptation made possible by a brand portfolio proportion of top-of-the-range vehicles. – from local brands through middle-range MULTI-BRAND PORTFOLIOS 395 brands to life-style and top-of-the-range brands on the market at the same time? brands, not forgetting the connection with To start with, market growth. No single the distribution networks via distributors’ brand can develop a market on its own. Even brands. All this adds up to global segmen- if it forms the sole presence at the outset, once tation and the logic of globalised product plat- the brand has created the market, its devel- forms. Even so, as has been seen for the opment requires a multiplication of players, Michelin group, the branches are totally inde- each investing to promote their respective pendent and the positioning of the brands is differences. The collective presence of a completely different in aviation, agriculture, number of contributors helps to promote a the truck division and the car industry. market. Beyond their differences, their combined advertising accentuates the common advantages of the product category. The benefits of multiple entries A multiple presence is necessary to support the market as a whole. It would not be in At the beginning of this chapter, we looked at Philips’ interest to see its competitors in the the practical reasons why the number of electric razor market disappear. This would brands had to be reduced, sometimes even to only decrease the number of messages a single brand. They all correspond to a praising the merits of electric razors, which strategy of domination and competitive could only benefit Gillette and Wilkinson advantage via low cost. While recognising the Sword. Philips should acquire a brand and market segmentation, it has been decided not maintain it as an active brand in the market. to take it into account at brand level, but only In the pharmaceutical industry, a laboratory in terms of products. discovering a new formula could certainly The multi-brand approach, on the contrary, profit from ‘co-marketing’ it with other labo- is the logical consequence of a differentiation ratories in order to accelerate its impact. An strategy and as such cannot coexist with a example of this is found in the case of low-cost policy, in view of reduced economies aspartame. of scale, technical specialisation, specific sales Multiple brands allow for best market networks and necessary advertising invest- coverage. No single brand can cover a market ments. Nevertheless, with the exception of on its own. As a market matures there is a exclusive luxury brands, pressure remains. In need for differentiation and it becomes order to take advantage of productivity gains, necessary to offer a wider range; the market is there is a tendency to fragment the becoming segmented. A brand cannot be production chain in the cause of differenti- targeted at several different qualities at the ation at the last possible moment, thus same time without running the risk of losing exploiting the benefits of the learning curve. its identity. In any case, consumers and This is the case in the domestic appliances retailers themselves will object to further industry, making industrial regrouping a brand ascendancy. This dual process is illus- necessity, as well as in the food processing or trated by the case of Rossignol. The company automobile industries. The policy of having Rossignol followed a dual brand policy: general car brands makes the most of all possible production and corporate communi- l a mono-brand multi-product policy: the cation synergism, and breeds the loyalty of hallmark Rossignol covers its skis, ski suits the customer who progresses from one model and ski boots (those coming from its acqui- to another within the same make. sition of the Le Trappeur Brand, since then With all the advantages of a mono-brand de-baptised); policy, what makes it necessary to have several 396 CREATING AND SUSTAINING BRAND EQUITY

l a multi-brand mono-product policy, with A multi-brand policy is necessary to protect the Dynastar brand on skis, Kerma brand the main brand image. This partly explains on sticks and Lange brand on boots. why the Disney Corporation uses a number of brands in film production, for example Buena With 20 per cent of the world ski market, Vista and Touchstone. This enables them to Rossignol is the leading manufacturer. Its share produce films of every type without endan- in the upmarket ski sector is thought to be even gering the revered Disney name. Similarly, greater, of the order of 40 per cent or more. This when the success of an innovation is not is an area where the company should not certain, it would be foolish to risk associating offend people’s susceptibilities by expecting it with a successful brand. This is why Procter them to dress from head to toe in Rossignol & Gamble launched their first liquid products. If the world leader wants to grow detergent under the brand name Vizir and not even bigger, it should be the one increasing the under the name of the leading market brand, choice, rather than its competitors. In this Ariel. The inverse policy was adopted by the market, the distribution is still handled by a Cadbury Schweppes group when it decided to large number of small independent retailers, launch its new fizzy drinks not under the who fear the control of a single supplier. This is brand Wipps but as Dry de Schweppes. This why each company brand has its own sales was not only because Schweppes’ name force. In the United States the Rossignol helped the sales but because it was thought company presence is assured by two separate that the new brand Wipps would reinforce the companies, Dynastar Inc. and Rossignol Inc. In slightly old and stuck-up image of Schweppes, the industrial sector, Facom and Legrand, two and would have, in the long term, threatened dominant leaders, successfully increased their the value of the brand. In order to avoid hold on their market by creating apparently having to lower the prices of its leading separate and autonomous brands. This enabled products, 3M created the sub-brand Tartan them to find new distributors, who were only which only covers the products where 3M is too happy to have at their disposal a near the dominant leader. This minimises the risk exclusive brand, different from those of other of unwanted cannibalisation. Where 3M is retailers in that zone. not dominant but a challenger, retailers might Multiple brands offer a tactical flexibility be tempted to move directly to the lowest which also enables one to limit a competitor’s priced alternative from 3M. field of extension. In this way Delsey, the leading European luggage manufacturer, cornered Samsonite. They created a new Linking the portfolio to brand, Visa, positioned to undercut Samsonite segmentation prices, while at the same time Delsey restrained them from moving into the top-of- The brand portfolio is indicative of a the-range market. company’s desire to better meet the demands A multi-brand policy can stop any new of the market, not only through differentiated competitors entering a market. A strong entry products but also through different brands barrier to a market can be created by offering a and therefore different identities. The organi- complete range to retailers, with a brand sation of the brand portfolio reflects the type name for each sector of the market. This is of market segmentation chosen by the why in on-premises in the European market, company. Ferrero (Kinder) bases its market soft drink companies create barriers to entry segmentation on narrow age groups and user by providing the full range of products needed status, l’Oréal bases it on distribution (Coke, Fanta, Sprite and so on). channels, Legrand on types of consumer MULTI-BRAND PORTFOLIOS 397 motivators, Procter & Gamble and motivation/benefit, as long as of course it is a Volkswagen on price brackets, SEB on profitable business. This is the basis of consumer populations and value systems, Danone Waters brand portfolio in Europe. Evian on the benefits sought from the water, Recent marketing research revealed the Guinness on occasions, and so on. following motivations to purchase: status, The following sections illustrate how port- good life (13 per cent); health (57 per cent); folio brands and segmentation are linked. and price (30 per cent). The macro motivation for health needs to be sub-segmented: for 16 Socio-demographic segmentation per cent it refers to an aesthetic vision of health, for 15 per cent it means vitality and Although certain people regard socio-demo- for 26 per cent this refers to specific problems. graphic segmentation as an outmoded Danone Waters reorganised its brand portfolio concept, it is still a useful tool when it comes of non-carbonated waters as follows: to understanding consumer behaviour and preferences, and as such, can be used to l Evian targets 29 per cent of the consumers establish a brand portfolio. Ferrero (Kinder) is (those seeking status and aesthetic health). Europe’s leading confectionery company. l Volvic is positioned on vitality (15 per cent Unlike the Mars bar, Kinder has developed a of the market), against Nestlé’s Vittel. portfolio that adheres rigorously to segmen- tation by age, with the development of needs l New brands were created on physiological and situations corresponding to each age needs: Taillefine against Contrex (Nestlé), group – from Kinder eggs for the very young both on remaining slim, and Talians, to snacks for adolescents. All magazine editors another new brand. produce different titles based on age and gender. Their magazines target extremely l A host of source waters to fulfil distribution narrow age groups and reflect progress at expectations of a low-cost brand. school or rather the child’s cognitive devel- opment according to Piaget. Lego also has a In this portfolio, Evian’s role is to be the brand portfolio based on different age groups, referent of the market, and to valorise water as from the very young to pre-adolescence. much as possible (in addition, this is consistent with the fact that Evian’s supply is Psychographic segmentation not unlimited: it takes time for the Alps to create this water). As a consequence, some To whom should Pernod-Ricard sell brand extensions are forbidden, such as the Ballantines in China? And to whom should it growing area of aromatised waters. The sell Chivas? Both are some of the best products second brand of the group, Volvic, priced 10 of Scotland. Clearly socio-demographics do per cent below Evian, has the ability to stim- not help. But the general life-style values, the ulate the market through such extensions. attitudes about heritage vs modernity of the Taillefine (known as Vitalinea in other coun- new rich in Shanghai, are not all the same. tries) is actually an extension in the field of water of a dairy brand positioned on 0 per Benefit segmentation cent fat. To compete in the weight-conscious segment, against Contrex (segment leader, A key criterion for segmentation is the main from Nestlé), instead of launching from benefit looked for by consumers. Companies scratch a new brand, it was decided to extend can organise their brand portfolio by posi- this global franchise to water. tioning each brand on one single 398 CREATING AND SUSTAINING BRAND EQUITY

Attitude segmentation Channel segmentation

Unlike most automobile manufacturers, This is a growing mode of segmentation and which organise their portfolio along a vertical organisation of brands. The rationale is that price line, PSA has chosen to develop two channels are fighting against each other. An parallel generalist brands, Peugeot and allocation of different brands to each channel Citroën. In 2007 PSA is the second largest avoids conflicts, price harmonisation European car manufacturer. What is the basis problems, and maximises the adaptation of then of the segmentation? Peugeot has in its the brand to the motives of channel patrons. roots, its identity, a number of core values In addition, taking the small appliance (reliability/quality but also dynamism and business for instance, being sold exclusively at aesthetics) which address primarily the Wal-Mart prevents brands from having a consumers who like to drive, to master their presence in the selective distribution car, deriving pleasure out of it. Citroën, channels, which still represent more than 55 although its cars share 60 per cent of their per cent of the market in the United States. hidden parts with the Peugeot models, This is why a portfolio is very helpful in allo- delivers a totally different driving and living cating brands to channels. experience. Once a brand with character, The paradigm of this approach is l’Oréal: all ingenuity, innovativeness, it went bankrupt its brands have to be sold in one and one only twice before being bought by Peugeot. channel: Reinventing Citroën, PSA has made it a car brand for people expecting their car to foresee l There are brands for selective premium the evolution of life-styles (Folz, 2003). distribution and department stores: There are strong gains in having two parallel Lancôme, Helena Rubinstein, Biotherm, brands, beyond sharing the same platform for Kiehl’s and Sue Emura. manufacturing. Aiming at the same price l There are brands for mass channels: l’Oréal segment, when one model of a brand starts Paris, Garnier and Maybelline. declining in its life cycle, the other brand launches its own model. As a result, the rate of l There are brands for pharmacies: La Roche innovation of the group within each price Posay and Vichy. segment is exceptionally high compared with l There is a brand for direct sales by mail competitors, a key success factor in modern order: CCB (Club des Créateurs de Beauté) markets. Also, with only two brands, one although this name is really a handicap for avoids the problems of Volkswagen with its the globalisation of the brand. four brands largely overlapping, a factor that negatively affects the profitability of the global l There are brands for the professional hair- portfolio. Salespeople trade consumers down dresser channel: l’Oréal Paris Professionnel, by suggesting they consider Skoda or Seat cars, Redken, Matrix, Kerastase and Inné. entry brands, which are essentially the same as Volkswagen cars. In addition, these two entry The first segmentation criterion is the brands now face growth problems: where channel. When this channel is not already should Skoda and Seat go? To capitalise on present, it is reconstructed thanks to the their recently built brand loyalty, they wish to presence of two or more brands in the channel trade their own consumers up with higher- so that costs can be shared. For instance, if priced models, but run the risk of increased pharmacies in Canada do not sell cosmetics, a cannibalisation, and of a still larger lack of specific counter can be developed in differentiation from Volkswagen’s lower lines. department stores, with a pharmacist to assist MULTI-BRAND PORTFOLIOS 399 consumers, selling both La Roche Posay and expensive (s1,000 for a replacement window, Vichy. with everything included), but in most of the Of course there is another segmentation cases, the windows that need replacing are criterion: price. In each channel, there is a standard in size and design. It is therefore a premium brand and a mainstream brand. standard window that is bought (not a Finally each brand epitomises one universal customised one), essentially the same product model of beauty. In the mass channels, every- as could be found at Lapeyre for instance at a where in the world, l’Oréal Paris symbolises fraction of the price, but without any service. Paris, and Maybelline the American style of The same reasoning applies to the other beauty. brands in the portfolio. L’Oréal’s profitability rests largely on this systematic channel-based brand portfolio Occasion segmentation organisation. It gives this group the ability to price the same product very differently from An increasing number of companies have one channel to another, capitalising on the become aware of the importance of occasion fact that consumers’ price sensitivity is not at segmentation (see also Chapter 9). All all the same across channels and purchase products are in fact purchased or consumed situations. For instance, a hair fixing gel sold on a particular occasion. The real issue is to consumers at a hairdressing salon for therefore to influence the occasions s9 under the brand Tecniart (l’Oréal Paris affecting consumption rather than the Professional) is bought by the hairdresser for consumers themselves. In fact, the same half this price, that is to say for more or less person can consume a product in different the price at which a consumer would find the ways during the course of the same day if he product under Fructis (Garnier) or Studio or she has encountered several clearly differ- Line (l’Oréal Paris) in mass distribution. entiated occasions. Each occasion gives rise Kerastase shampoos are sold at s8 to the to clearly differentiated expectations, and consumer in a hair salon, but the same therefore to a specific type of competition product is sold at s2.5 under the Elsève brand for the brand since, on each occasion, the at a multiple retailer. brand does not encounter the same set of The same holds true for an industrial group circumstances. like Saint Gobain. This group has created a In the case of Guinness, the occasion not portfolio of stores aiming at building and only forms the basis of the brand portfolio but construction: also structures the organisation of sales and marketing. Today, there are occasion l from Platform du Bâtiment, a cash and managers, just as there used to be brand carry for small general contractors; managers. Thus Guinness is positioned on the l to the mass multiple retailer Point P aimed so-called ‘affiliation’ occasion typical of the at craftspeople; pub environment, while Carlsberg corre- sponds to the ‘release’ occasion in nightclubs l to Lapeyre aimed at the DIY expert, able to and Budweiser targets the ‘relaxing at home’ buy a window and install it without profes- occasion. sional help; When dealing with occasion segmentation, l and K par K (literally, case by case), a chain the first thing a company should do before of mini-stores selling tailor-made new developing several new brands is to consider windows, fully installed. whether line extensions could enable a particular brand to expand by gaining a Of course, the last option is the most foothold in situations or places that have so 400 CREATING AND SUSTAINING BRAND EQUITY far been inaccessible. However, there are from the Twingo to the Val Satis. But they limits to this extension, which is where the cannot really enter the top-of-the-range brand portfolio comes in. market, even when they add a flattering extension to their brand name such as Price segmentation Avontime. This was also one of the aims of their association with Volvo, a brand more This is a most classic organisation of the port- easily associated with top of the range cars. folio. The whole Group Volkswagen brand Toyota took the approach of creating a portfolio is based on it, with entries ranging separate brand, Lexus. A brand portfolio makes from the low-end Skoda or Seat to Volkswagen it possible to cover the different price sectors itself, Audi and luxury brands like Rolls- without affecting the reputation of each Royce. Accor, Europe’s leading hotel group, brand. The Sanford group, having taken over has achieved its success by launching a set of Parker, Waterman and Paper Mate, can product brands, all positioned at a specific specialise its brands in terms of price and style. price. The Chanel-Bourjois company has two By reputation, Parker represents the top of the entries, the luxury brand Chanel, and range in each product segment, from the ball- Bourjois for the mass market. point pen to the ink pen. Waterman represents In the construction market, Velux is one of the middle of the range. The Whirlpool group the most global brands: it stands for roof allocates to each of its brands a price bracket. windows in 40 countries all around the world. The average price of the Whirlpool brand itself It has just introduced Roof Light as a low-cost must be that of the middle of the market. The alternative, targeting the price-sensitive average price of the Laden brand corresponds market segment. The price gap with Velux is to the lower quartile of the market price range 30 per cent, less expensive than Velux’s main and that of Bauknecht the higher quartile (see competitors (Roto and Fakro), which are sold Figure 14.1). with a 20 per cent price gap. It is also sold as a A multi-brand portfolio only makes sense if, private label of large multiple retailers in the in the long term, each brand has its own DIY market. territory. This is not always the case – In fact, very few brands have successfully companies hang on to brands whose images managed to cover substantially different price are not different enough to justify the ranges. It is true that generalist car manufac- economies of the multi-brand policy. turers like Renault build a wide range of cars,

Megabrand Whirlpool

Price fighter brand Trading-up brand Laden Bauknecht

0 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Figure 14.1 Segmenting the brand portfolio by price spectrum MULTI-BRAND PORTFOLIOS 401

Linking brand portfolio to prescription Italian company Bticino. It then specialised segmentation the brands, allocating Bticino to the prescribers, engineering bureaux and research In the business-to-business sector, the type of departments, while Legrand became the key influencer targeted constitutes a strategic installers’ brand, offering them a broad and criterion for segmentation. The market can in totally integrated range of products in which fact be segmented according to the decision- ease of installation is the cardinal virtue. making process. Along the value distribution Another example of this type of brand port- chain several participants play a key role, and folio organisation was provided by the UK brands have different ideas of what they company Arjo Wiggins, formerly a leading consider to be a key role. manufacturer of top-quality paper for For example, in the aluminium systems companies and professionals. This company market for the residential and service sectors, the reorganised its basket of brands to create leading European company HBS (Hydro mega-brands, whose size is critical, bringing Building Systems) has three brands – Wicona together what were previously small product from Germany, Domal from Italy and Technal brands under the umbrella of each one. The from France – all represented to varying degrees new organisation is structured as follows: in Europe, depending on the level of maturity and development of the markets. In reality, each l AW Curious Collection targets creators and brand targets a different operator-prescriber: designers in advertising and design agencies, since they are the key influencers l Wicona targets architects, research depart- for projects and creations in which inno- ments and engineering companies. vation and creativity count for a great deal. l Domal targets installation companies, For example, the Curious Collection ranges general companies that win tenders asso- include aluminium and steel paper. ciated with building sites. It supplies l AW Impressions targets the printers who flexible and inexpensive extruded are the key prescribers for a great many of aluminium systems manufactured in its the jobs they are asked to do by companies small plants. – for instance, letterheads. l Technal aims directly at the end-users via l Conqueror targets the general public, the television and a network of well-known end-users who want a quality paper to registered installers who also co-finance the reflect their company or their personal advertising. image.

Legrand, Europe’s leading electrical appliance company, uses the same type of organisation. Global portfolio strategy Legrand’s expansionist policy is based on external growth. In the electrical equipment For the last few years big groups have been sector, standards vary significantly from carrying out a policy of stuffing their port- country to county in order to prevent access folios with additional brands, either through to national markets. There is also a great deal acquisition or partnerships, at the same time of intense lobbying by operators who want to as extending the product range of some of perpetuate a situation that creates a network their brands. Nestlé has become the world’s of local markets. The only way to penetrate number one food processing company these markets is to buy the leading local thanks to its acquisition of Carnation and company, which is why Legrand acquired the Stouffer in the USA, Rowntree in the UK, 402 CREATING AND SUSTAINING BRAND EQUITY

Buitoni-Perugina in Italy and Perrier in brands: Ronron, Kit-e-Kat, Whiskas and Sheba. France. Philip Morris is another busy These can be classified into strategic, value and company; its foodstuffs division is made up tactical brands. Whiskas is strategically aimed from Kraft (cheeses), General Foods (coffee, at being the invincible brand in the market, cornflakes, confectionery, chocolate) and with the biggest range, large profits, central Jacobs-Suchard (coffee, chocolate). consumer benefit (best nutrition) and the In the mineral water market, outside Evian most expensive advertising campaign. Sheba is and Badoit, the Danone group, which already a value brand: its market share in money is owns Volvic, has bought La Salvetat, a three times as much as its market share in sparkling mineral water spring. Kraft General volume. Sheba, a high-quality product, is Foods owns three strategically important targeted at the most dedicated owners. Ronron chocolate brands: Milka, Suchard and Côte is a buffer brand, low in price and hardly given d’Or. any advertising support; it is there to counter- This trend towards company size growth is attack the distributor own brands. Strategic, partly motivated by the gains that can result niche and tactical brands can also be distin- from joining forces in research and devel- guished in the Heineken Breweries. opment, logistics, manufacturing, distri- bution and sales. Another reason is due to the levels of financial and human resources The case of industrial brand that are now necessary to compete on the portfolios world market. A third reason is the desire to buy a dominant position and be able to In the industrial world, multi-brand strategies restrict the market to a duopoly or an either have very few constraints, or there is a oligopoly. A final reason is to be able to resist multitude that is very often underestimated. the pressure exerted by the concentration of The first case is illustrated by the chemical distributors. industry in the agricultural market. As each It is worth remembering that besides this herbicide brand is associated with one unique quantitative aspect, the idea of a portfolio active principle, a single company often implies a global vision of the competition in a stocks 500 trademarks or even more! market or category. A portfolio also forces the When a brand is strategic and the portfolio relationships between one brand and corresponds to the segmentation of the final the others in the portfolio to be considered, market, the brand must mean more than a the idea being that a brand’s value can be mere difference in name or logo on the enhanced by belonging to a larger portfolio. product. In this way BASF used to sell paint to There are several decision grids, the most coach builders worldwide under two brands, famous being the Boston Consulting Group’s. Glasurit and RM. They are, in fact, the same Hence at Pernod-Ricard one speaks of growth product. In the car world there is a difficulty products (Clan Campbell, for example), with the idea of two different qualities – no contributors (Ricard, Pastis 51, Orangina) and one would buy the inferior one. The two the famous cash cows. To these can be added brands are thus supplementary and not the concept of a ‘strategic brand’: Pacific, a complementary. non-alcoholic aniseed drink, may not be Glasurit is aimed at the technically minded financially interesting but is vital for the long- coach builder. As its international slogan term prospects as it accustoms future points out, Glasurit is the ‘Preferred customers to the aniseed taste. Unisabi (Mars) Technology Partner’. As its slogan indicates, control half the cat food market thanks to a RM is the thoughtful coach builder partner, portfolio that is made up from the following ‘The key to your success’. It is aimed at the MULTI-BRAND PORTFOLIOS 403 other segment of coach builder who expect with the fitters. For the latter, the Sarel service to increase their activity. They see company was created. This increased the themselves rather as company directors than proportion of the market that could be as painters. reached, provided that all links with Merlin- To maximise their chances of success, BASF Gerin were hidden. In practice, in the various gave each brand the necessary means to countries they operated in, because of the defend itself. Dictating who did what would different turnovers of Merlin-Gerin and Sarel only weaken both brands and give the the constraints of their multi-brand strategy advantage to their competitor Akzo. Instead were soon forgotten for the sake of saving costs. BASF decided to: l Sarel could sometimes be found in the l create two separate management teams (as same office block as Merlin-Gerin’s local opposed to a common marketing headquarters. department, which was for a long time the case), based in two different countries; l The published organisation charts did nothing to hide the Sarel–Merlin-Gerin l have two separate sales forces in charge of link. Sound management on the organisa- the distribution, so as to minimise canni- tional front could instead dictate that, balisation from the inside; despite its small size, Sarel be directly l avoid all references to the parent company linked with Schneider’s, their common BASF, in order to increase the perceived parent company, and not Merlin-Gerin’s difference between the two brands; local manager. l develop services in line with the posi- l On occasions, in order to save money, both tioning of each brand; Sarel and Merlin-Gerin shared the same trade exhibition stands. l have different advertising campaigns on a worldwide scale. The organisation of brands in the business- to-business sector poses specific problems This is how BASF maximised its cover of the that need to be addressed as such. For market. It adapted itself to the two distinct example, industrial groups whose growth segments of the car refinish market and to the typically involves the acquisition of psychology of the constructors. Mercedes, for companies soon begin to wonder whether or instance, would not like the idea that its paint not to keep the brand name of the newly supplier also supplied Lada! acquired company, and how much inde- The constraints associated with multi-brands pendence it should have in relation to the are often underestimated in the industrial purchasing group. world, where a brand is considered just a name Furthermore, the engineering culture or a reference in a catalogue. When a brand might make the product central to the group corresponds to a strategic segmentation this or company identity, while the brand is little underestimation can undermine or even break more than an appendage and is often the the strategy. In the industrial electrical name of a reference. This explains the equipment market, the manufacturers have to increasing number of references, registered decide whom to favour, the installing throughout the world, that preoccupy company, the wholesaler/distributor or the companies’ legal departments and give rise to end-user. It is impossible to favour all three at regular complaints about the excessive the same time. Merlin-Gerin, who concen- number of brands. However, although there trated on the distributors, were losing touch may be a brand name in legal terms, there is 404 CREATING AND SUSTAINING BRAND EQUITY every reason to believe that these names are global services, and Suez Industrial not in fact real brands with real market Solutions. power. The integrating brand (usually the It is therefore a question of reducing the group) also ensures the transversality of number of brand names in the portfolio, and the product brands at the level of the cata- reorganising them around a few valid mega- logue, invoicing and shared vision (for brands that serve as an umbrella, a central example, when the brand/group issues a point of reference. From this it can be seen communication on ‘security’). that the task of rationalising the brand port- 2. The integrated brand is usually the name of folio is in fact indicative of the need to reor- an acquired company, internationally ganise the business. How do you manage renowned for a particular application, a multi-product mega-brands within a structure particular need or a particular area of of business units, knowing that the mega- expertise. However, the front office and brand may well cover several business units? sales force operates under the name of the Do you need to create a brand committee, group from across the business units, that meets on a regular basis with a view to making decisions 3. The endorsed brand only uses the name of about problems of coherence in the devel- the group as an endorsement (as with, a opment of the brand – coherence in terms of company that is a member of XXXX) and products and services, price positioning on has its own name and front office. This is the various markets, advertising and cata- typically the case when the brand uses a logues? At this stage, large-scale industry business model that is different from the begins to consider how other more ‘lowly’ group’s area of expertise. sectors – the mass-consumer market and FMCG market – have resolved this type of 4. The independent brand is presented as problem. completely independent, with no links to the group, which in theory implies The role of the sales force in designing separate offices in the different countries concerned. It therefore has its own name the portfolio organisation and front office and there is no visible relationship with the group. This type of In business-to-business contexts, it is essential brand makes it possible to overcome the to include sales in any consideration of brands problem of expanding market coverage since it is ultimately the sales force, the tech- when a brand is already dominant. Thus, nical and commercial engineers, and the front when a brand in the group already covers office who represent the brand. It is therefore more than 50 per cent of a particular important to distinguish four types of brand: market, it is logical to launch an inde- pendent brand for all those who do not 1. The integrating brand is usually the want to work with the first. Furthermore, corporate brand when it is used to sell a the independent brand is often used to global service to a single client. It is client- advocate a policy that contradicts the centred. To this end, it brings together the official policy of the group, in order to skills and synergies of the different increase market coverage without placing business units. The front office and sales the group in a precarious position. The US force represent the name of the group. group Rockwool is a typical example of Typical examples of this are Vinci, this type of portfolio organisation. Schneider Electric in its promotion of MULTI-BRAND PORTFOLIOS 405

Linking the brand portfolio to ionable enough, not different enough. It is to the corporate strategy these drivers that the group dedicated its US brand Goodrich, with a policy of offering a So how many brands does a company put on regularly updated range of large, custom- the market? Does it adopt the single-brand or made tyres. However, while Kleber is cheaper the brand-portfolio model? These are the type than Michelin, Goodrich is positioned in the of questions asked by modern company and same price bracket. group managers. And this is how group SEB, world leader in small household appli- policies evolve, based on the lessons learnt ances, decided to concentrate on four major from the development of their market shares brands (Moulinex, Tefal, Rowenta, Krups) to and from the diagnosis of the causes of a compete with Philips on the international possible upper limit on profits. market, while for the moment retaining As has already been seen, Michelin is a certain local and regional brands such as typical example of a group whose global Calor, SEB and Arno. However, there was a market share reached an upper limit in spite strong temptation to emulate Philips and its of the widely acclaimed excellence, not to say single-brand policy on the domestic market. superiority, of Michelin tyres, including But this would have been a mistake since Formula 1 versions. After years of using a there is no point in imitating a market leader virtually single-brand model, the Michelin on a smaller – and therefore less visible and group decided to change its policy. Michelin less successful – scale. certainly remained the flagship, but it was no The growth of Legrand, the market leader in longer the only brand to be the focus of inno- small electrical appliances for the residential vative ideas and new advertising. In the and service sector, was achieved through the private car market, Michelin realised the acquisition of specialist brands. Then Legrand advantages of double segmentation – the first picked up 80 per cent of its catalogue and linked to price, the second to the fashion for ‘Legrandised’ it, making it simple, ergonomic, status tyres. There are customers throughout user-friendly for installers and electricians, the world who want value for money but, and above all compatible with the rest of the while recognising the superiority of the catalogue (based on the Lego model). Legrand Michelin brand, are not committed enough to became the reference catalogue for the sector want to buy Michelin tyres. But should they – a business model that is repeated worldwide. simply be left, as in the past, to turn to the So what does Legrand do with the brands it competition in the form of Bridgestone? The buys? It keeps them to create a protective demands of this segment of smart buyers barrier, using them in a preventative capacity needed to be met, and this was done via to ensure its domination of the market. The Kleber in Europe – an old brand in the port- electrical installation market is no different folio that has been revitalised through inno- from other markets and Legrand, like other vation, such as the non-puncturing tyre – and market leaders, creates the desire to be Uniroyal in the United States. different among certain customers, making But there is also a segment of drivers, sure they do not want to have the same brand usually drivers of pick-ups and 4 × 4s in the as their colleagues and competitors. So, rather United States and Europe, for whom tyres are than leaving them to turn to its competitors, a kind of status symbol. They want their tyres Legrand keeps their custom by offering – to be flashy and ostentatious and are not albeit much reduced – specialist brands. As attracted by Michelin because, in their eyes, a already stated, these brands also create a brand that focuses on safety, performance and protective barrier for Legrand so that a long-term development is too staid, not fash- newcomer trying to penetrate the market 406 CREATING AND SUSTAINING BRAND EQUITY could not replace Legrand in the eyes of Key rules to manage a multi- wholesalers. It would be offered the place of a brand portfolio small specialist brand. There are also parameters linked to the There are a few principles to be followed to distribution strategy that explain why the optimise the results of multi-brand entries in a Volvo truck division that bought Renault competitive market. Although simple to Trucks has maintained the Renault brand express, they pose implementation problems name. But this can only be understood by to organisations built and organised on other taking account of the general strategy of principles than brand logic. manufacturers in response to the liberali- sation of the European car and truck market. Portfolios need strong coordination Agents are now no longer obliged to deal exclusively with a single brand so, if they Brand portfolios do not manage themselves, want to prevent another manufacturer from they need some form of coordination and filling the breach, it is better to offer two even a coordinator above brand level. fairly well differentiated brands, but which Experience has shown that companies are belong to the same group. And this is exactly ‘porous’, with ideas passing between depart- what Volvo did. To prevent the risk of any ments, across corridors and even between drift towards the lower-priced models (as is buildings. This gives rise to an – albeit invol- happening in the Volkswagen group), the untary – tendency to duplicate brands within price of Renault Trucks was re-evaluated, the same portfolio. The allocation of innova- which helped to greatly increase the prof- tions also gives rise to difficulties, with each itability of the division. brand wanting the innovation before the The l’Oréal group continues to buy new others. This is why companies have either a brands and thereby extend its portfolio. In brand coordinator or a brand committee fact, it is moving out of Europe, is currently responsible for addressing these problems. targeting the United States and has plans for Asia where it is still a modest player. Allocate innovations according to To accompany this expansionist strategy, the group buys strong local brands either each brand’s positioning because they are the leaders in their market It is a well-known fact that innovations are segment or because they anticipate the the lifeblood of a brand, since they renew its trends of the future. This is why it bought the relevance and differentiation. This is why it is US mainstream brand of make-up, essential to have clear and precise platforms (a Maybelline, as well as Softsheen Carson, charter of identity) for each brand – a tool for which specialises in haircare for African- clarifying the main lines of development and Americans. It has also bought the US brands innovation of the brand. This makes it Redken, a very fashionable haircare brand for possible to allocate innovation according to professionals, and Kiehl’s, a ‘long-term devel- brand values and not under pressure from the opment’ and ‘niche’ brand of cosmetics. In sales force, which wants each brand to enjoy Japan, it has bought the Sue Uemura brand. the same advantages. In fact, it should be One interesting fact that will be examined in quite the opposite – it is through innovation the chapter on globalisation is that l’Oréal that the brand reveals its identity. It is subsequently globalised these local brands. therefore important to distinguish between exclusive innovations (such as coupés for MULTI-BRAND PORTFOLIOS 407

Peugeot) and innovations that will be intro- might hesitate to commit itself to this option duced over a period of time (phased innova- for the only top-of-the-range model of a single tions), and also to establish the order in which brand. The future lies in partnerships with these innovations will be allocated to the other manufacturers. brands. Apart from brand values, positioning and Do not ‘rob Peter to pay Paul’ market share also influence the allocation of innovations. For example, there is no point in Since the aim is to create a portfolio of strong allocating a specialised innovation (targeting brands, you must avoid making this mistake. a small number of households) to a mass- Although it is standard practice to position market brand. It is far better to reserve an brands clearly in relation to one another in exclusive innovation for a top-of-the-range order to maximise their appropriateness for brand which, by definition, targets a more the segments targeted, a brand should not be limited clientele. This is how Elcobrandt prevented from becoming strong. Thus inno- manages the allocation of innovations vation is an integral part of the key values of between its mass-market brand Brandt and its PSA’s two general brands Peugeot and Citroën. top-of-the-range brand Thomson. Limiting this value (innovativeness) to one However, the rule for allocating innova- brand would destroy the other. There is tions as a function of brand identity comes up simply no future for non-innovative brands in against another type of logic, the logic of cost the car market. reduction. For example, the logic of platforms where an increasing number of parts are A brand portfolio is not an shared between different brand models totally accumulation of independent brands contradicts the principle of allocating innova- but the reflection of a global strategy tions according to brand value. Nothing could of market domination be more a function of identity than Citroën’s hydro-pneumatic suspension, which reflects This makes the procedures and intervention the identity and very essence of the brand – of the US Federal Authorities and the overcoming technical constraints to increase European Commission rather paradoxical passenger comfort. This suspension – the since, for these bodies, the fact of maintaining historic attribute dating from the famous DS a sufficient level of competition is essential to models – is only found at the very top of the accept or refuse a proposed merger or an Citroën range. But if it had to be invented acquisition. But there is no point in hiding the today, what industrial group governed by the naked truth. Corporate mergers and brand logic of production platforms would agree to acquisitions are largely determined by a single create and develop such an innovation for a objective – market domination – over and single brand, let alone a single model? above the synergies and cost reductions Conversely, to increase the relevance of the achieved by pooling resources. Why did Coca- Peugeot 607, it could be necessary to adopt Cola want to buy Orangina and pay US $1 the rear-wheel drive option typical of the billion for this predominately local brand? German top-of-the-range models that set Quite simply because it would have enabled the international standards. The 607 is the group to force Pepsi-Cola out of the constructed on the top-of-the-range Citroën market. Since it did not have a fizzy orange platform which, as everyone knows, is a front- drink in its portfolio to offset Coca-Cola’s wheel drive. Given the design issues and costs Fanta, Pepsico had in fact signed a strategic of a production line for a rear-wheel drive, it is distribution agreement with Orangina. easy to understand why an industrial group A portfolio is therefore a global approach on 408 CREATING AND SUSTAINING BRAND EQUITY the chessboard of competition, with a precise equally valid for daughter brands and their role allocated to each brand. Brand managers role in the construction, reinforcement and should therefore receive a set of instructions defence of the parent brand. It has already so that they understand their role and do not been seen that, apart from their specific deviate from the global plan by carrying out a positioning relating to a particular need or series of independent initiatives over a period clientele, the 14 daughter brands of Nivea of time. all had a specific role to play and made A portfolio is not a simple collection of their contribution to the Nivea ‘house’ in brands that just happen to be there as a result terms of a specialised area of competence as of the vagaries of history, but a well-structured well as an input of innovation, sensuality and coherent group in which each brand has a and fashion. There is no doubt that they place and clearly defined role: are all very much Nivea brands but nonetheless each adds a personal touch, l For example, this may be a financial role, in which is why, in spite of a very strong which the brand contributes to the ‘Nivea-ness’ and very precise guidelines on financing of another brand. This is typi- how the brand should be presented, it does cally the case of local brands which are not come across as monolithic. leaders in their own market. These brands l The consequence of the portfolio logic is are and must remain important contrib- that it is dangerous to acquire a brand utors to enable the portfolio under leader without the smaller brands that go construction to develop as a whole. with it. If Schneider had succeeded in l The role of a brand may also be to defend merging with Legrand, it would have been the brand leader. For example, Colgate crucial to preserve the network of more Palmolive, thinking that a price war was modest, more specialised brands main- about to be declared on its leading fabric tained precisely because they created an softener Soupline, was prepared to lower effective barrier that protected the star the price of its ‘flanker’ brand Doulinge to brand, Legrand. All too often, company avoid lowering the price of its brand leader. rescuers, especially if they are investment Legrand successfully covered the market funds, do not have this long-term vision. and rendered its general brand impervious They resell the small brands without taking to attacks from competitors by a precise account of their collective role. allocation of roles between the Legrand general brand and the specialist brands it Within all large companies, there is an had bought and maintained (Arnoult, inevitable tendency to replicate Planet Watthom and so on). These brands formed an outer barrier at wholesaler level Take the Seb group, managing four global in the event of foreign competitors trying brands of small appliances: Krups, Rowenta, to enter the market. If the wholesalers were Moulinex and Tefal. How do we prevent ideas disloyal to Legrand and referenced a and designs from being known by another newcomer, at least they only affected the and adopted, hence diluting brand identity? escort ships and not the flagship. This must be combated since it destroys the competitiveness and imagination of the l A brand can also fulfil the role of group brands concerned. It is partly because there is banner brand, especially if the brand has always an underlying competition based on the same name as the group. prices, since the basic function of groups is to reduce costs by pooling as many resources as l It is worthy of note that this rationale is MULTI-BRAND PORTFOLIOS 409 possible. The main danger of groups is that, in ‘brands’ in 2003. Distributors are also suscep- the interests of making economies (which is tible to the same risk when they rethink their quite natural), they tend to erode the identity portfolio of distributors’ brands (private of their brand in their portfolio by giving the labels). Decathlon managed to avoid this common areas too much prominence when pitfall; when it changed from the single they should be concealing them, or by publi- Decathlon brand to the so-called ‘passion cising too much information on the fact that brands’ portfolio, as many as 13 brands were the different brand models come from the envisaged before some were merged and the same platform. It is crucial to ensure that all company decided on 7. the visible parts of these brands are different. The Volkswagen group is currently subject to Now ‘visible’ does not only refer to design: this risk. Although Seat and Skoda should, in companies that buy trucks look at the engine theory, have been separated geographically, the and some key hidden technical parts of the four brands Seat, Skoda, Volkswagen and Audi truck, especially for long-haul models. are still found in several countries, each with its It will be a challenge for Volvo AG to keep own network of agents. Sustaining an inde- enough differentiating competencies between pendent commercial network requires a large long-haul Volvo Trucks and Renault trucks. product range and the ability to create customer The brand positionings should be the guiding loyalty. This means that Seat and Skoda have to force. move upmarket, but where do they stop and how are they to be differentiated from the very Focus each brand of the portfolio on a similar newcomers from Volkswagen and Audi? specific external competitor Price is one solution, but the publicity based on the fact that these four brands come from the This is one way of preventing the brands in a same factories and even the same platforms has portfolio from replicating each other, apart created the ideal conditions for internal canni- from permanent surveillance by the brand balisation. The agents selling Seat and Skoda use committee or brand coordinator. This reminds it as a sales argument. managers that the best way to cover the market is via the logic of multi-brand portfolios and not by ‘narrowing the focus’. Choosing a target The growing role of design in competitor for each brand increases the portfolio management chances of achieving this objective. Design plays a crucial role in the battle for differ- A classic risk of brand portfolios is entiation. It is design that structures customer their complexity expectations, design that evokes brand values, creates visible differences and develops new This is true since exaggerated fragmentation favourites on mature markets. This is why it has does not allow each brand to achieve its to observe several key principles: critical size. This is what business-to-business companies look out for since, for them, a l The principle of radicalisation. Design brand – even registered – is merely a name and cannot be vague – since the strategy is to not a long-term publicity and promotional attack the market with a small number of medium. This is why their legal departments brands, they must be clearly defined, with a are gradually collapsing under the cost of specific design, all the more so since organ- registering and monitoring trademarks (brand isations have a natural tendency to soften names), and it is what led Air Liquide to the hard edges, which leads to a resem- reassess its entire portfolio of more than 700 blance on the shelves that has a dramatic 410 CREATING AND SUSTAINING BRAND EQUITY

effect on perceived differentiation. Radical opinion leaders (the press) who decide design must also compensate for the whether or not a product is in good taste increasing lack of differentiation due to the when it is launched in a few months’ or industrial logic of platforms. There is no years’ time? Design is a risk. In the car place on today’s mature markets for half- sector, for example, how can you predict hearted designs. If there is a brand identity, which design will be perceived as avant- it must be clearly visible. garde in another four years, in the event that the brand could be said to be a trend l The principle of externalisation. If the setter? Renault took the risk with its auda- company is responsible for defining the cious (some will say over-audacious) story to be told by each brand, that is, design. But four years ahead of its time, it is creating its identity, it is important to seek difficult to forecast perceptions with any outside help for the design itself by degree of accuracy. appointing a designer for each brand who is totally committed to that brand. Thomson did the opposite and entrusted Does the corporate organisation the design of its four brands, Thomson, Saba, Telefunken and Brandt, to the same match the brand portfolio? designer, Philippe Starck, who was a brand A brand is only successful if the factors in his own right. This is why, within an governing its production work together in a organisation, design must be positioned at coordinated and motivated manner. The brand level, not corporate level, even if this success of a group logic and a brand portfolio requires robust coordination to avoid repli- cannot be assessed without analysing the cation between brands, a tendency that is conditions of its development and, above all, all too frequent. But this risk is avoided if the type of organisation. Since this is not the company appoints an external widely publicised, or may even be deliberately designer, for each brand, who is inspired by played down, it tends to be overlooked as a its strategic platform. key factor in the success of a brand portfolio l The principle of business. The function of policy. design is to promote and develop business, The main risk of a brand portfolio is the not art. Design should not become self- gradual de-energising of the brands, reduced absorbed. For example, the aim of to the state of increasingly undifferentiated designing a coffee pot is not to enable ‘outer casings’ that are little more than consumers to invite their friends round to publicity devices. This is exacerbated by the admire their coffee pot, but to offer them a fact that the economic press only talks in good cup of coffee. In short, the purpose of terms of groups and therefore publicises the design is to enable the brand not just to fact that brands that were once different are look good but to function efficiently. now produced by the same group. Its readers, often opinion leaders, are within their rights l The principle of courage. The key question to ask certain questions, behind the in design is whether a design can be bodywork, what remains of the brand properly tested. Certainly, the ergonomics identity? Do Jaguars still have a Jaguar engine and functionality of a product must always or do they have a Ford engine? Will the speci- be tested at user-status level. But apart from ficity of Saab disappear with its integration that, what is the relevance of a few indi- within the GM group? viduals’ (interviewees’) opinions of a The essence of a brand is differentiation. design when it is, by definition, the Anything that detracts from this is a threat – MULTI-BRAND PORTFOLIOS 411 within the context of a favourable economic this is impossible to achieve at a centralised equation, of course. level. At LVMH, however, each brand is a To a certain extent, over-centralisation is ‘house’, a mini-company, and this makes it responsible for the loss of differentiation. At possible to create the optimum conditions Fiat, the different brands are managed within under which extremely talented people from the same department, with Alfa Romeo these three areas of competence are able to alongside Lancia and Fiat, a type of organi- work together. As heads of their ‘brand- sation that leads one to wonder whether the company’, they are more motivated and their company still believes in its brands. remuneration is directly proportional to their Conversely, PSA – Europe’s second largest car financial results and the international repu- manufacturer, almost on a par with tation of the brand. Volkswagen – may use the same factories but Although it not as widely known, l’Oréal Peugeot and Citroën remain separate organisa- functions in the same way. It is significant tions with their own product plan, marketing, that within the l’Oréal group, reference is design, publicity, sponsorship and, of course, made to the Garnier ‘house’, the Lancôme distribution network (Folz, 2003). Volkswagen ‘house’ and so on. These ‘houses’ are has abolished the VAG (Volkswagen Audi) autonomous operational units that manage network and given each brand its own distri- their business with an international bution network. It has to be said that the sales approach. force in the VAG network had a strong In the field of distributor brands, changing tendency to push the Volkswagen models from the single brand – usually a store brand – rather than the very similar Audi models, to private labels also affects the organisation. which were 10 per cent more expensive. The recent transformation of Decathlon (the Part of Seagram’s problems can be explained world’s fifth largest retailer of sports clothing by the over-centralised organisation of its and equipment), from the Decathlon brand to international brands. The development of the so-called ‘passion brands’ portfolio, had international campaigns at all price levels is a far-reaching repercussions for the organi- classic tendency among all centralised organi- sation – is it in fact possible to develop sations. It is significant that the first thing the ‘passion brands’ within a centralising buyer of Seagram did was to decentralise the structure? The first people who have to be organisation of the brand portfolio. Thus the inspired by this passion are those within the management of Martell, the flagship of cognac organisation, the managers and the teams, worldwide, was relocated in Cognac where then the co-designers, the fans and the famous brandy is produced, while Chivas was opinion leaders. There is a need to recreate a returned to London. formal autonomy. LVMH, world leader in the luxury market with such famous brands as Christian Dior, Christian Lacroix, Vuitton, Moet, Hennessy Auditing the portfolio and Tag Heuer, has an interesting business strategically model. The group manages 45 international luxury brands. When asked about the upper Companies regularly reassess the relevance of limit on the number of brands in such a port- their brand portfolio. Numerous matrices folio, the group’s CEO, B Arnault, replied that have been devised to help them do this – all there wasn’t one. In fact, success in the derived from matrices used for the evaluation luxury sector depends on there being three of the activity portfolios created by types of people able to work together – in consultants such as the Boston Consulting design, management and marketing – but Group, McKinsey and Mercier. These matrices 412 CREATING AND SUSTAINING BRAND EQUITY incorporate profitability, the competitive situ- Another form of audit consists of regularly ation and the potential for growth. But can evaluating the ability of the current portfolio matrices for the analysis of an activity port- to ensure the profitable coverage of future folio be simply converted into matrices for the markets. Is the current portfolio the right evaluation of a brand portfolio? response to market developments and There are two possible levels of analysis. competitive logic? The first is the intra-brand level which eval- Thus, in the insurance sector, everyone is uates the portfolio of brand products (sub- familiar with the growth of new distribution brands or daughter brands) according to the methods, like the telephone and the internet. criteria mentioned above – are they in An insurance company cannot afford not to declining or non-cash generating segments, be represented in this way. However, since the what are the growth vectors for the future? conditions offered are so very different from The second level asks the same questions at those offered by the network of general agents multi-brand level, on the global chessboard of and brokers, they need to be represented by a actual and predictable competition. The lines specialist brand. This is how UK insurer Aviva and columns of the matrix are growth and structured its brand portfolio. Eurofil was profitability. The markets are then shown as created to cover the growing segment of low- circles whose size reflects the actual size of the cost car insurance without creating conflict market. Brands are represented as portions of with Aviva’s other insurance distribution these circles (markets) where the portions networks. reflect their market share. The segmentation of a market by user status The most classic way of structuring a port- (linking volumes, expectations and folio is to divide the brands into groups competitors to the use made of the product) according to attractiveness and function. This also makes it possible to identify unexploited makes it possible to identify: pockets of growth in the current portfolio. The first question to be asked is whether a l Global brands, which should theoretically range extension would offer an opportunity be the largest source of growth in the brand to gain a foothold in these areas. In this contribution, and as such should receive respect, all Nivea’s sub-brands reflect this the lion’s share of investment in adver- determination to exploit all the potential tising and promotion. sources of growth on the beauty-care market l Local or regional growth brands, which by capitalising on the single Nivea brand. have the potential to one day become When this cannot be done, a company global brands. must have the courage to launch a new brand. For instance, in 2003, after trying everything l Local or regional brands that can be qual- under the global Barbie brand, Mattel decided ified as ‘fortress’ brands and which are to launch the new Flavas brand. often the historic market leaders, Auditing the portfolio can also reveal that it ‘entrenched’, and therefore very profitable. does not constitute enough of a barrier to There is therefore a strategic interest in prevent competitors entering the market, or maintaining these ‘fortress’ brands since even an incitement for them to leave. For they in fact finance the development of example, it is impossible to find Orangina on global brands in their own country. They the French TGV (high-speed train) network or are often brands in mainstream segments. in many airports and stations, even though it is the second largest soft-drinks brand in the l Local or regional ‘cash-cow’ brands, which country. The logic of the operators of the café- have a low growth rate but a strong contri- hotel-restaurant network is to choose a soft- bution margin. MULTI-BRAND PORTFOLIOS 413 drinks distributor offering a complete port- meats. Finally, there is a fourth category of folio – from cola to lime and fruit juice. So local brands sold only in their country of clients of the Coca-Cola Company receive origin. Fanta (a fizzy orange drink) and Minute Maid Thus the Nestlé brand refers to several levels (fresh orange juice) but not Orangina. This and roles: therefore creates a local monopoly and prevents free choice among end consumers. l It is a corporate brand and as such acts as an endorsement for all the products and brands in the group. This endorsement A local and global portfolio – function means that the corporate brand Nestlé usually appears on the side of the pack- aging or on the labelling on the back. How do the multinationals organise their l The Nestlé brand is also one of the six brand portfolio to improve the efficiency of strategic corporate brands, with the status of their brands simultaneously? Nestlé is an a family brand or source brand. It covers interesting example of this. categories as diverse as baby products, The Nestlé portfolio of 8,500 brands is products for children, chocolates, ice cream, organised by geographical status and role. chocolate bars and fresh dairy products. Together they create a ‘hierarchy of brands’ in which each product is associated with at least l The Nestlé brand is sometimes simply a two brands, at different levels in the hierarchy product or range brand, as for example (not to mention brands of ingredients). The Nestlé chocolate or Nestlé condensed milk. geographical criterion allows three groups of These are the basic products, the symbolic brands to be distinguished – international, products that lie – both literally and figura- regional and local brands. tively – at the heart of the Nestlé galaxy. These brands fulfil different functions and roles, depending on the customers, and To help identify the different extensions of represent the principal families of brand archi- Nestlé the commercial brand, according to tecture. There are ‘family brands’ (or source category, the categories have a different symbol. brands), range brands, product brands and This means that, beyond the unity, there is endorsing brands. Eighty per cent of the Nestlé recognition of the fact that what customers Group’s activity is brought together under six expect from a yoghurt is not the same as what strategic corporate brands – Nestlé, Nescafé, they expect from baby food. Similarly, there is Nestea, Maggi, Buitoni and Purina. Seventy also a logo and symbol for Nestlé the company, strategic international brands, designating that is, the corporate brand. either ranges or products, come under – or It is worth pointing out that 20 per cent of even outside – the umbrella of these six Nestlé’s turnover is not produced under the corporate brands. They include Nesquik (an six famous ‘strategic corporate brands’. This is extensive range of chocolate milk products), the case with mineral waters, for example. but also product brands such as Kit Kat, Lion, Perrier, which is classified as a recreational Friskies and the mineral waters Perrier, San drink for adults, is indeed managed within the Pellegrino, Vittel and Nestlé Pure Life. Nestlé Water division. But this division does A third category of brands groups together not have a brand – its identification is a matter 83 brands known as ‘strategic regional of internal organisation. For clients the world brands’, which are regional rather than inter- over, Perrier is simply Perrier. national, such as mineral waters like Aquarel and Contrex, the Nuts bar, and Herta cold 414

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Handling name changes and brand transfers

One of the most spectacular aspects of brand that is not to be taken lightly. To this day, management, but also one of the most risky, is empirical studies on the question are either the changing of brand names. Some cases scarce (Riezebos and Snellen, 1993), or private immediately spring to mind: Philips– and confidential (Greig and Poynter, 1994). It Whirlpool, Raider–Twix, Andersen–Accenture, is possible though, thanks to the accumulated Pal–Pedigree, Datsun–Nissan. The industrial experience of ten or so cases, to define the world is now used to external growth by conditions for successful name changes on a company acquisitions and to the creation of local level or multinational plane. large groups such as Novartis, Zeneca, Alcatel and Schneider by the fusion of identities which were previously separate and inde- Brand transfers are more than a pendent. name change This growth in brand transfers is normal: it is the consequence of capitalisation, the key to Brand transfers are too often thought of modern brand management. The reorgani- simply as name changes, though admittedly sation of multi-brand portfolios and the this is the most risky facet of the change. In reduction in the number of brands has meant the customers’ minds a well-known name is that the products under brands due to linked with mental associations, empathy and disappear will have to be transferred to one of personal preferences. However, a brand is the remaining brands. The same applies for made up of many components, which cannot companies themselves. This approach is risky: be reduced to just one, the name. In fact, the abandonment of a brand means that the when you examine the numerous examples market is going to lose one of its benchmarks, that have occured both in Europe and the one of its choices or even one of the loyal United States, the situation is far from simple. customers’ favourite choices. The risk of losing Many of them involve other changes in the part of your market share is high. This is why marketing mix. the transfer of a brand is a strategic decision Some brand changes are also product 416 CREATING AND SUSTAINING BRAND EQUITY changes. What disturbed Treets fans, apart Shell Helix Standard oilcan. The long and from the loss of a product they loved, was that gradual change from Pal to Pedigree was M&Ms included two different products: accompanied by the adoption worldwide of a peanuts covered in chocolate and a sweet new colour, bright yellow, striking and eye- similar to Smarties. It was therefore a tran- catching, to reinforce the impact on the sition from a simple and familiar situation to a shelves. Since colour is the first thing that totally confusing one where all references had consumers notice in a self-service situation, changed, as, indeed, had the product itself. how risky such modifications can be is all the When Shell changed the name of its oil from more evident. Puissance to Helix it also modified the charac- The shape of packaging is the second most teristics of the product. However, the fact that important visual recognition factor. This is these characteristics are ‘hidden’, hardly why, despite the savings that could have been perceptible by the customers, meant that this achieved by adopting a unique European was not a risky move for Shell. The change of oilcan, Shell immediately refused to abandon the oil formula could be used as an alibi for its easily recognisable and very practical the introduction of the new name. ‘spout’ can. Part of Shell oil’s added value As regards name changes, the risks associated comes from this can. Finally, brand transi- vary immensely depending on whether we are tions can be accompanied by changes to the dealing with product brands, umbrella brands, logo or trade mark as well as to visual symbols. endorsing brands or source brands. Examples As regards this last point, the impact of the of the first two cases are Raider/Twix and disappearance of visual brand symbols Philips/Whirlpool respectively. The change shouldn’t be underestimated. Replacing only affects the one and only nominal indi- Nesquik’s gentle giant Groquick by a rabbit in cator of the product or products. Conversely, some countries for reasons of international Puissance has become Helix but still remains coordination is playing with the relationship under the mother brand Shell. Changing a children have with Nesquik. The same applies name when the product is defined by a hier- to people associated with a brand. The disap- archy of brand names is far less problematic. pearance of emblematic figures can have With self-service, visual identity has drastic consequences for a brand. become crucial as an aid to customers to Finally, with written and musical slogans quickly pick out their brand. Distributors’ now under copyright, it has to be realised how own-brands capitalise on this: their imita- important they are, as they are what people will tions, which aim at confusing the customer, remember. When Raider was changed to Twix, rely less and less on similar names (for Mars hesitated but decided not to keep the example Sablito against Pépito) and more and same brand music. Music is one of the vehicles more on near identical copies of colour codes of a brand’s personality. A slogan is also, in the of the national brands that are targeted on long run, an integral part of a brand and can the shelves (Kapferer and Thoenig, 1992). In now be put under copyright. The famous this way, in the UK, a fierce conflict arose slogan ‘Melts in your mouth not in your hand’ between Coca-Cola and the retailer was lost when Treets became M&Ms. Sainsbury, whose colas totally imitated the Coca-Cola colours: red for classic cola, white for sugar-free cola and gold for sugar- and Reasons for brand transfers caffeine-free cola. Conversely, some brand changes are accompanied by profound modi- What are the aims behind the numerous fications of the colour codes. Thus, the brown brand changes that we are witnessing? The Shell Puissance 5 oilcan became the yellow reasons are numerous: HANDLING NAME CHANGES AND BRAND TRANSFERS 417

l Many local brands are bought with the Horse’. The local industries in a country are intention of transferring their activities to often highly protected using all kinds of the buyer’s international own brand. In domestic regulations to prevent foreign this way, the latter becomes truly global. product invasions. The electrical This is what Electrolux is currently doing. equipment market is a typical example. Desperate to grow internationally, Merlin- l The creation of worldwide companies leads Gerin bought the famous Yorkshire to the same results. Ciba-Geigy and Sandoz Switchgear company as a way to penetrate merged under the new name Novartis. the British market. The transfer was carried Alcatel was born out of the joint venture out progressively. Yorkshire Switchgear between CGE and ITT. In a few years all the received the endorsement of Merlin-Gerin, company brands of both companies and then the names were switched round even a few product brands (such as their before finally being replaced uniquely with telephones) were given the Alcatel name. Merlin-Gerin UK, now Schneider Electric. l Firms decide to transfer brands when they l The fact that international markets are now decide to stop some of their activities. So more homogeneous than ever before is also when General Electric wanted to withdraw an explication for the number of brand from the small domestic appliances transfers. Companies that favour global market, Black & Decker took over with the brands are replacing all their local brands agreement that they could only use the GE with global ones. This is why Raider in name for a limited period. No brand would continental Europe became Twix, Pal want part of its image to be controlled by changed to Pedigree, and why the paint another company. It was the same for brand Valentine will be transferred to Philips and Whirlpool: the takeover of Dulux, the worldwide brand of ICI. In order the former’s ‘white goods’ activities by the to make sure European motorists can spot latter included the agreement that the their products in all European countries, Philips name could only be used for a Shell gave their lubricant a unique name, limited period. Looking to concentrate Helix, and where possible used the same only on its ‘brown’ products and small colour codes. domestic appliances, Philips only conceded its name to Whirlpool temporarily. l With time, the name attached to a brand Whirlpool bought the white activities for can become a burden to the brand’s devel- the European market share it immediately opment, for example when wanting to gave them, as well as the chance to be the access new activities, international markets world’s number one domestic appliances or simply when wanting to rejuvenate a manufacturer. brand. Corporate names that attract bad l The search for the critical size also provides will have to change: Philip Morris became an explanation for brand transfers. The Altria Group, Vivendi became Veolia. BSN Mars group abandoned its European brands became Danone in order to instantly gain Treets and Bonitos to merge them into the international recognition, which would global brand M&Ms. To compete against have been lengthy if not impossible with McDonald’s, the European Quick bought an acronym. Free Time and changed its trade name. l Brand transfers can also be the result of lost l Brand transition is a common tactic used court cases. For example, Yves Saint when trying to access a foreign market. It is Laurent had to abandon the name of its basically the same ploy as the ‘Trojan brand of perfume Champagne in several 418 CREATING AND SUSTAINING BRAND EQUITY

countries, turning it into Yvresse. The consumers would include Electrolux among sportswear brand Best Montana lost its case the ‘three brands they have in mind when against the luxury brand Montana and had entering an electrical appliance store’ – what to become Best Mountain. is known as an ‘evoked set’ or ‘consideration set’. In 2001, this could be said of only 21 per Moving local names to a single one, such as an cent of consumers. In 2007 the local names US name, allows the organisation to delocalise became Electrolux. plants easily under this foreign name. This Berated by financial analysts the world over also has fiscal reasons. The foreign name can for not having enough global brands with a receive royalties from the subsidiaries, turnover of more than US $1 billion, the reducing local tax liabilities. Unilever Group made the decision to reduce drastically the number of these brands in a process known as the ‘path to growth’. The The challenge of brand transfers group’s Elida-Fabergé division played a pioneering role – by reducing the number of Brand transfers are everywhere. This is hardly brands from 13 to 8, growth increased from surprising since this is the age of mergers and less than 2 per cent to 11 per cent. acquisitions, which always give rise to the But this objective of reducing the size of rationalisation of ranges, products and brand brand portfolios also creates challenging portfolios. Companies have to choose problems in certain product categories. This between brands that have hitherto been happens when the brands to be merged are competitive with parallel ranges. On mature, well established and do not have the same low-growth markets, the need to make positioning on the market. For example, the economies, create synergies and increase effi- famous detergents category is not particularly ciency has the same result. Finally, globali- profitable compared with other categories sation brings its share of brand transfers to the since distribution costs are extremely high advantage of the global brand. For all the and the market is fragmented. Many of the above reasons, reducing the number of brands smaller brands no longer justify the promo- is the order of the day. tional support. Throughout Europe, Lever has This explains the wealth of publicity organised its portfolio in three price-related announcing – if you know how to read segments – the premium segment with Skip between the lines – an imminent brand (in competition with Procter & Gamble’s transfer. For example, the Swedish company Ariel), the smart buyer segment with Omo for Electrolux, the world’s leading manufacturer example, and the economy (or low-price) of household appliances, prepared the segment with Persil (except in the UK where, worldwide transfer of its local brands – the for historical reasons, Persil replaced Skip). historic leaders of their market, acquired The question therefore arises, given the country by country. It acted as the market shares and Lever’s declared intention endorsement for these local brands – Zanussi of concentrating its business around strong Electrolux in the UK, Arthur Martin Electrolux brands, how to unite the brand in the smart in France, Rex Electrolux in Italy, and so on – buyer segment with the brand in the and appeared as such in the promotional economy segment. The difficulty becomes all publicity. It has to be said that, in 2003, only the more apparent since in many countries, 15 per cent of sales were made under the these are well-established brands that, over brand name of this international group. The time, have forged a very specific bond with a aim was to increase this figure to between 60 section of the public. The issue should involve and 70 per cent by 2007, so that 55 per cent of the distributors who, throughout Europe, are HANDLING NAME CHANGES AND BRAND TRANSFERS 419 wondering about the future of the low-price should not be made, if it presents too great a segment, positioned just above their distrib- risk for the business and the brand capital. utors’ brands. Should this segment in fact be Thus, when BP bought the German Aral allowed to survive? service stations in 2003, it decided not to Another illustration of the risks associated change the brand name as it had done in with brand transfers is provided by the California when it bought Arco. In the same example of Phas and La Roche Posay, two year, Shell bought the other major German brands of cosmetics in the l’Oréal Group that service-station group, DEA, but decided to were merged in 2000. Each represented bring it under the Shell banner. So who was approximately 15 per cent of the market share right – BP or Shell? in a sector that was losing momentum, namely In fact, they were both right. Aral is a very pharmacy. This should make it possible to strong local brand, almost a national symbol, begin internationalising the brands under a rather like the Continental tyres fitted on all single banner, with critical mass. Named after Mercedes manufactured in Europe. So why a thermal spring used to treat skin disorders, La would BP run the risk of severing this Roche Posay is associated with a guarantee of extremely rare bond that generates customer proven effectiveness in the treatment of skin loyalty, in a sector already threatened by conditions. Its business model was based on ‘commoditisation’? Conversely, although recommendation by dermatologists. DEA has a good customer service record, it Conversely, Phas was a brand of cosmetics – does not inspire the same emotional with no dermatological endorsement – for attachment and its transfer would therefore skins that were extremely sensitive to ordinary be less risky. Customer service relations are make-up. Its strength was hypo-allergenic created by the people who work for the tolerance rather than effectiveness. It is easy to company. So, if these people remain in situ, understand why this – albeit necessary – the continuity of satisfaction is maintained transfer ran the risk of diluting the brand and customer loyalty guaranteed. capital for La Roche Posay. The brand was There are other instances when a brand going to have to put its signature to products transfer should not be made to the advantage formerly under the Phas label and which had of a new, global brand and when it is better to no guarantee of effectiveness. retain the local name, for example when the When the risks are too great, it is better to meaning of the name to be internationalised avoid them and choose another strategy. proves problematic in the other country. Procter & Gamble’s German competitor Henkel could not extend its product brand ‘Somat’ – When one should not switch designed to make glassware shine – in the UK since the word ‘matt’ is the opposite of shiny. The internationalisation of companies raises There is no shortage of examples where, to the question of the globalisation of brand an outsider, the local brand seemed little more portfolios. This involves changing the name than a legacy from the past but was regarded of the products or services of a well-known locally as an icon. This happened in the case and very popular local brand to that of a less of many leading Eastern European brands, well-known and less familiar international which the multinationals decided had to be brand. However, before considering how a replaced by the global – European or US – company goes about making such changes brand. But they had not taken account of the in order to effect a brand transfer, the consumers who are often extremely following caveat should be borne in mind. emotionally attached to the local brands that There are occasions when this transfer are part of their everyday life and past 420 CREATING AND SUSTAINING BRAND EQUITY memories. The Danone Group had to reverse When brand transfer fails such a decision in the Czech Republic. After abandoning the Opavia brand in favour of the Companies that are overconfident in them- global Danone brand, it had to reintroduce selves often underestimate the emotional Opavia – famous for its biscuits and the attachment created by local brands, long country’s favourite food brand – because it since written off by the advocates of globali- was a national symbol. sation. In so doing, they do not realise to In this respect, the Bel group was well what extent brand transfers can destroy value advised not to pursue a potential brand and, above all, the value of the market share. transfer which involved replacing the German This is illustrated by the example of Fairy in brand Adler, famous for its processed cheese Germany. In 2000, the buzzword at Procter & portions, with the international mega-brand, Gamble was ‘globalisation’ at all costs. In The Laughing Cow, whose prototype is also Europe, the group introduced global segmen- processed cheese portions. However, the tation and all the brands that did not fit symbol of the Adler brand, familiar to all within the framework were eliminated Germans, has long been the imperial eagle. It (Kapferer, 2001, p 52). Furthermore, local is hard to imagine the juxtaposition of two brand names were to be replaced by the more paradoxical animal logos. global brand name corresponding to each L’Oréal is pragmatic when it comes to segment. brand transfers. In line with its expressed In Germany, Procter & Gamble had been intention of developing mainly via its 17 successfully marketing a washing-up liquid global brands, the group bought Maybelline, under the name Fairy for years, with the a brand of make-up sold on the US mass brand reaching 12 per cent of the market market. In the space of a few years, it share in terms of value. In the middle of 2000, launched the brand in 80 countries but to do the Fairy brand became known as Dawn, the so had to effect a transfer with the local brand name of Procter & Gamble’s international in the principal countries concerned. The brand. Nothing had changed except the problem was that the local brand was often a name, which is a good measure of the power strong brand that was popular with both of the brand. However, in spite of colossal distributors and customers – Jade in investments to inform people that Fairy was Germany, Colorama in Brazil, Missiland in now called Dawn, the market share plum- Argentina, Gemey in France – while meted and, in the last quarter of 2001, stood Maybelline means nothing in these coun- at just 4.7 per cent, whereas it was still at 11.9 tries. The group has carried out a deliberate per cent on the day before the name changed. policy of double branding for five years, It was estimated that, in 2001, Procter & introducing an increasing number of US Gamble sustained a loss in turnover in concepts and innovations but, even so, there Germany of US $8 million (Schroiff and is still no question of setting an exact date for Arnold, 2003). The group made the same phasing out the local brand. Yet, as far as the mistake in Austria when it tried to replace financial analysts and major multinational Bold with Dash. In view of the destruction of distribution groups are concerned, l’Oréal has value caused by these two costly mistakes, it achieved the desired effect – by increasing the was decided to return to the previous brand sales of co-branded products in each country, names. the group can say that Maybelline is the What was the reasoning behind these two leading international brand of make-up in brand transfers? Because Fairy used the same the mass-market sector. consumer benefit as Dawn, the ability to cut HANDLING NAME CHANGES AND BRAND TRANSFERS 421 through grease, Procter & Gamble thought forms. Furthermore, productivity is vastly that the brand transfer would be easy. improved by the convergence of brand plat- However, this transfer was not even attempted forms, which makes it possible to use a single in the UK, possibly because Fairy was posi- agency and employ the best designers. It is tioned according to a different consumer not important if a product has to have a benefit from Dawn. But the brand can also be different name in different regions. To quote much more than a name – it can be the sign of just three examples, a leading line of male a certain product guarantee. Local brands toiletries is known as Axe in Europe and Lynx inspire customer loyalty through their in the UK, a brand of washing powder as Skip origins, their being a part of everyday life, in Europe and Persil in the UK, while the their proximity, their confidence (Schuiling Opel brand in Europe is Vauxhall in the UK. and Kapferer, 2003). There is a real emotional dimension in the attachment to certain brands, as has been shown by Fournier (2001). Analysing best practices So what lessons can be learnt from this example? A transfer must first of all take There is not much academic research on account of consumer opinion. A transfer brand transfers. It is however possible to draw must offer some form of benefit and create on some brand and business models to clarify value for consumers. This is the key to the conditions of a successful transfer. We successful transfers. Second, in the process of selected them because they illustrate very convergence implemented within the multi- different market situations and brand role, nationals, the principle source of produc- from mere impulse to highly risky purchase tivity is the product platform. But people decisions, from products to services. tend to focus on the visible part of the product, the actual change of name, whereas From Raider to Twix this is not in fact the real issue – far from it. In globalisation, the homogenisation of In the autumn of 1991, continental Europeans names should be the last problem to be were informed by a massive advertising solved. There are also a great many fringe campaign that the chocolate bar Raider was to benefits to be gained by unifying and be henceforth called Twix, Twix being the reducing the number of different packages, name used everywhere else in the world from non-standardised parts and product plat- New York to Tokyo and London. The difference

Market Share 11.8 11.9 Former brand (Fairy) 4.7 New brand (Dawn) 6.5 6.4 6.2 5.8 4.7 4.4

1.1 0.5 0.2 0.1 0.1 JFM AMJ JAS OND JFM AMJ JAS OND 2000 2001

Figure 15.1 When rebranding fails: from Fairy to Dawn (P&G) 422 CREATING AND SUSTAINING BRAND EQUITY from the Mars group’s previous brand transfer reduce production, packaging and advertising (from Treets to M&Ms) where everything had costs. A fourth objective was to make its changed, including the product, was that this management easier. Finally, it was desirable to time, great care was taken not to disturb the have one brand name so as to make the prepa- customers. Nothing was changed apart from rations easier for the intended brand exten- the name. It was a success. sions towards new sectors such as ice creams. Why was the brand change necessary? Raider had a strong brand equity in Europe Philippe Villemus, the marketing director of so the transition was no small matter. It was Mars, explained (for more details see the second most popular chocolate bar after Villemus, 1996) that Mars was a worldwide Mars and it had an annual volume growth rate group with six brands each worth more than a of 12 per cent. This was thanks to its specific billion (US) dollars, and that it wanted only to concept and its slogan, which included a have mega-brands which satisfy the five physical description of the product as well as following conditions: its benefits for the customer. In France, for example, spontaneous recognition was 43 per l is able to meet an important, durable and cent, assisted recognition was 96 per cent and global need; that of the slogan was 88 per cent. Eighty-five per cent of all adolescents had tried Raider l represents the highest level of quality; and 44 per cent bought it on a regular basis. l is omnipresent all over the world, and Knowing this, Twix was marketed as the ideal within every one’s reach both physically snack for adolescents and young people and financially; between the ages of 15 and 25. Even though the customers thought that l creates a high level of public confidence; the transition was rapid, in truth it took over a and year. From October 1990 to October 1991, the l is the leader in their segment (when this is Raider’s wrapping carried the words ‘known not the case the brand is simply removed, globally as Twix’ and for six months after the like Treets and Bonitos). transition, ‘Raider’s new name’. The communication objectives given to the For legal reasons it can happen that a campaign by the marketing director were: trademark cannot be registered in a particular country or region. This was the case with the l to communicate clearly and simply that Twix name in continental Europe. As soon as only the name was changing; the legal aspect had been dealt with by the l to transfer all Raider’s values to Twix; acquisition of legal rights in certain countries, the group did not hesitate to rename Raider l to quickly obtain a high brand awareness and to give Europe the global name. within the target group of young people What were the objectives behind this (30 per cent unaided, 80 per cent assisted); change of brand? In the first instance, it was to l to make the change popular using the alibi gain more market share and increase sales, that the new name was in tune with the otherwise, according to Villemus, there would rest of the world, and that Twix was a have been no point to the operation. It is global brand for young people all over the important to remember that a brand transition world. is not an exercise in style, but a unique oppor- tunity to increase the share of the market. It is The key elements of the success of the oper- a competitive move. A second objective was to ation were due to the flawless implementation have a global brand. A third objective was to of the strategy: HANDLING NAME CHANGES AND BRAND TRANSFERS 423

l it was very rapid: 15 days to change every- well in advance. The bar code was kept the thing in one country (the whole transfer in same so that supermarkets did not take Twix Europe took three months); to be listed as a new brand and hence claim a listing fee. l Mars made a big event of it, which Six months after the operation, Twix’s maximised its visibility and the awareness market share was the same as Raider’s had created; been. But from then on there was only one brand name, one factory and far less l promotional activities at sales outlets complexity. Due to its young and interna- contributed to the impact and trial of Twix; tional status, Twix’s image was more modern l finally, great care was taken to ensure good than Raider’s. coordination with field activities. It was Looking back, all the decisions taken seem decided that, even if it meant buying back logical. All successful operations give the stock, on the day of the transfer no stocks impression of being easy. But the decisions of Raider should be left in any shops. were not taken without debate. For example, some people recommended improving the Looking more closely at the different means recipe and announcing ‘even better’. In of communication that were used, we see that the end it was decided, after reflection on the the packaging was the first medium. It was opposite approach of Treets/M&Ms, to change used for one year before the transfer to warn the product as little as possible. It might also customers of, and to familiarise them with, have been a good idea not to change the the new name. It was used for six months after Raider music in the change-over film to Twix. that to explain the transfer. In order to meet Was the modification necessary? It is said to the communication objectives the advertising have disturbed some customers, which goes to campaign was characterised by: show just how much the brand’s music is an integral part of its identity and personality. l a strong emphasis on the pack-shot to maximise the recognition; From Philips to Whirlpool l the interruption of all communication of On 1 January 1989, Philips and Whirlpool the Raider brand six months before transfer joined together to create the world’s biggest day to hasten the drop in its awareness; household appliances group, Whirlpool l a high-impact European commercial International, owned 53 per cent by starring David Bowie; Whirlpool and 47 per cent by Philips. This partnership was formed with the intention of l a strong concentration of means: in three attaining a significant global size which weeks as much as the total advertisement would enable and ensure the development of budget for two years was spent on tele- a long-lasting manufacturing firm. Besides, vision advertisements alone (it is now easy Philips wanted to concentrate on its core to understand why it was absolutely vital activity. Finally, both companies were highly that all Raider packets were removed from complementary, in their plant layout and all sales outlets). industrial capacity, in innovation and in their In shops, Twix was given prominence and was geographic market coverage. Philips was the put on visible display. Twix was the focal most important domestic appliances brand in point of all the sales force, and all other Europe. Whirlpool, for its part, was the brands were sidelined in terms of priority. number one in the United States, Mexico and Supermarkets had, of course, been informed Brazil. With 11.1 per cent of all the goods 424 CREATING AND SUSTAINING BRAND EQUITY manufactured, Philips Whirlpool overtook Another reason favoured the stage-by-stage Electrolux (9.6 per cent) to become the world approach. In order to ensure global leader in the household appliances market. In coherence, Philips’ products left in stores 1990 the Philips Whirlpool brand was would have had to have been bought back, as launched in Europe by a spectacular adver- Twix had been for the transfer to Raider. But tising campaign (US $50 million). In 1991, this of course would have been impossible for Whirlpool bought the remaining 47 per cent both practical and financial reasons. held by Philips. In January 1993, the Philips So what was Whirlpool’s transfer strategy Whirlpool brand became Whirlpool in all and why did they choose it? In the first communications, but the dual brand was kept instance early research had shown that on its products. In the last countries to make customers perceived favourably the Philips the switch, Philips was removed from all Whirlpool partnership. Both companies had products in 1996. Via this brand transfer very different images. Whirlpool had potential, Whirlpool became the world number one it evoked change, fluidity, movement and domestic appliance brand. The importance of dynamism. It had the ideal qualities required to what was at stake and the risks involved give the brand transfer a positive image. The during the brand transition become evident fusion of both companies gave the Philips when one looks at the significance customers Whirlpool brand an ideal image, the put on a brand when buying durable goods dynamism of one was tempered by the soli- which are perceived as high-risk investments. darity of the other. Research showed that the According to a study carried out by Landor, in Philips Whirlpool couple was perceived as ‘sure Europe Philips was the second-most powerful and dynamic, solid and robust, classic and brand over all sectors. In France, another stylish, reliable and innovating’. In Europe, the study showed that when customers were arrival of Whirlpool was seen by consumers as asked to mention names of brands from any bringing new impetus to Philips, a touch of sector off the top of their head, Philips was high tech to a reliable classic brand, imagi- placed fifth after Renault, Peugeot, Adidas and nation to a brand characterised by experience. Citroën (Kapferer, 1996). Nevertheless, it is The first thing that needed to be done was worth noting that Philips’ market share and to decide upon the nature of the dual brand its public brand recognition differed from and its visual form. To start with, should it be country to country. This is why it was quickly called Whirlpool Philips or Philips Whirlpool? apparent that it would be impossible to carry Tests revealed that the first option did not out the change in different European coun- inspire confidence and that it evoked a tries simultaneously. In the same way, the confused perception. People associated it with guarantee role of brands in the domestic jacuzzis and all ‘water equipment’. On the appliances market rules out a sudden, quick other hand, Philips Whirlpool evoked a transfer as was the case with Raider/Twix. healthy equitable partnership or even a slight In January 1990, the assisted brand predominance of Philips. Only a minority awareness of Whirlpool in Europe was non- thought that it referred to a Philips product existent. This was why a stage-by-stage range like that of the Philips Tracer razors. The progressive approach was decided upon. This second question regarded the graphic included a Philips Whirlpool stage before trademark. Should both names be written on Philips was abandoned. The case is different, the same line or one on top of the other? The therefore, from that of Black & Decker’s first choice was adopted because it inspired an takeover of General Electric’s domestic appli- image of partnership and looked better. ances activities in the United States where With regard to the communication, what both names already had a good reputation. target should it be aimed at? Obviously the HANDLING NAME CHANGES AND BRAND TRANSFERS 425 priority was the distributors. Only 20 per cent is impossible to pursue an image objective and of domestic appliance customers visit a shop an awareness objective at the same time, it with a specific brand in mind, and only 10 per was obvious that to the classic advertising a cent, ie half of them, actually buy that brand. media action had to be added so as to quickly This shows the importance of sales outlet staff reach the required level of brand awareness in the sale of these products. Whirlpool before the final brand transfer, ie two-thirds of started in 1990 a considerable communi- the assisted awareness of Philips. It is certainly cation effort aimed at retailers – this is a little true that, in the case of durable goods, the known facet of brand transfers. This, of involvement of consumers is low when they course, was addressed to the big European or are not actually engaged in the buying process national retail bosses, but it was also used by – which is most of the time. When the Whirlpool’s sales force with customers, shop consumer is not considering a purchase, the owners and sales staff whose opinions were so means of persuasion that should be adopted influential on consumers. Moreover, are very specific. When consumers’ attention Whirlpool’s image was that of an innovating disperses, a multiple contact approach should leader, so merely confining oneself to innova- be privileged, even if received incidentally. tions in products and services would have This calls for a high number of (gross rating been limited. Whirlpool brought about a point) GRP. Consumer resistance can become revolution in producer–distributor relations, a weak; in this case contact should be received new approach that distributors weren’t accus- in an agreeable ambience to benefit the effect tomed to, which not only touched on services of the affective transfer to the brand. Finally, but market information and more besides. As when the consumer is not ready to make a regards the consumers, the plan was to cognitive effort one must repeat the consumer reassure them as quickly as possible by the benefits of the brand rather than point out the rapid acquisition of brand awareness and a difference between specific products. strong image of quality and innovation. This is why, in some countries, Whirlpool These communication objectives had invested large amounts of money sponsoring several important operational consequences. prime-time TV programmes. This choice was On the one hand, wanting to associate with no coincidence; they represent viewers’ Whirlpool an image of quality and inno- favourite moments on the most popular vation implied that the brand transfer on the channels, and are often associated with a products themselves had to take place relaxed family atmosphere. Thanks to this progressively, in line with the launch of new strategy, the brand awareness made consid- products and the rejuvenation of Philips’ old erable progress. In all the countries where ranges. If this had not been the case the only traditional commercials were used, the project would have suffered from the Talbot- awareness reached was less significant. Chrysler syndrome, where the only thing that It was indeed important to separate the was changed on the vehicles was the name on treatment of the Philips brand in the media the bonnet. The Whirlpool brand on its own and in sales outlets. In the media, it was was not to be found on an old product. necessary to stop mentioning the brand as Launching a new brand implies taking great quickly as possible, otherwise the brand care over the early impressions the brand would only have been reinforced when the would create among the European audiences. objective was to see a decline in its sponta- Giving Whirlpool a quality image involved neous awareness. This is why, during the short prohibiting all promotional advertising of any period when the dual brand existed, Philips sort in the media during the first years of Whirlpool adverts finished with the dual establishing the brand in Europe. Finally, as it brand but the signature tune only mentioned 426 CREATING AND SUSTAINING BRAND EQUITY

Whirlpool. This was to ensure that only this simply transferred by this tactic of dual brand was associated with the innovations. naming for a while. Attaching two names is As early as January 1993, it was decided to creating a third one. In the Philips–Whirlpool remove Philips from all TV adverts. This put case, the dual naming gave saliency (brand an end to any reinforcement of Philips’ awareness) to Whirlpool, but did not transfer awareness. What is more, it sent the message the values of Philips onto Whirlpool. Its first to retailers that Whirlpool, the market leader, objective was to maintain the consumer or no longer needed the Philips guarantee and customer loyalty and the trade franchise, that the transfer programme was ahead of which would have deserted if the name schedule. Philips had not been maintained as an On a European level, how was the multi- endorser of the totally unknown American plicity of countries to be dealt with? Taking newcomer. into account the differences in the market shares and the brand equity that Philips had from country to country, all monolithic Transferring a service brand approaches were ruled out. Some countries wanted to pass to the single brand, Whirlpool, Services need to be analysed separately. On quickly. Others would have liked more time: the one hand, unlike product brands, service where Philips’ reputation was excellent, it brands have nothing to show: they are intan- could not be removed overnight if the gible. Their name is the proof of their exis- objective was not only to maintain market tence. Brand awareness and saliency is of vital share but also use the transfer to increase it. importance. On the other hand, their nature The order in which each country was to have can make brand transfers easier, because they the Whirlpool brand transfer was decided are often tied to a place (the specific using a multi-criteria analysis, which took geographical location of service delivery, of into account, for each country: ‘servuction’). In addition, the driver of loyalty is the direct relation with the salesperson, l Philips’ market share; agent or staff. This is not too say that the brand is of no importance: when BP and Shell l the presumed reaction of the distributors took over two German networks of petrol (based on an ad hoc survey); distribution, much care was taken in handling the situation. Not recognising the name and l the strength of the brand in the eyes of visual identity of the gas station they have consumers (brand recognition, evoked set, historically, if not ritually, used acts as a preference); deterrent for many German consumers. l the influence of retailers on the customers’ However, global brands are created by decisions; replacing local leaders by global names. This is how Axa built its global worldwide brand l the feeling that the management in the recognition, acquiring local leaders and country was ready for the abandonment of instantaneously moving them to Axa, as a the Philips brand. way of immediately indicating internally what the strategy was, namely to become the Recent research on the transfer from the local local arm of the first worldwide insurance brand Libertel to Vodafone seems to indicate brand. In the service business, hesitations and that a dual branding phase does not in fact dual brandings may create some internal transfer values from the former to the latter. In doubts about the future strategy, and lead fact brand values must be built, they are not people to defend their former identity instead HANDLING NAME CHANGES AND BRAND TRANSFERS 427 of thinking of the new future. As a result, the Global Curves. On 5 October, 68 names were internal phase comes first and foremost in screened for legal registrability, international service brand transfers. A lot of discussion semantic connotations, availability of the groups must be created, for the sake of domain name and so on. On 12 October, 29 communication and release of tensions, finalists were submitted to a vote at the firm’s whereby all parts of the company that has Miami Congress, and 10 of these were been taken over can express how they see the discussed by a brand steering committee on future and concretely build the pathways to 23 October. Finally, on 25 October, Accenture become the quality arm of the new global was selected. This name had been proposed by brand. Two recent cases are interesting in that the Norwegian senior manager, to convey respect, Accenture and Orange. putting the accent on the future. To help fulfil the mission (reinventing the business to win The Accenture case in the new economic context), the key words linked to this brand would be agile, visionary, On 7 August 2000 the International Arbitrage well connected and passionate. Court, in the case between Andersen As a rule, communicating a new brand aims Consulting (AC) and Arthur Andersen and at creating an immediate boost of unaided Andersen Worldwide, ruled that among awareness and suggesting the new values of others things, AC would not be allowed to use the brand. To regain its status within the very its existing name after 1 January 2001. It had closed club of the big five accountancy/ less than 145 days to transfer its intellectual, consulting firms, a blitz communication technological and reputational capital to a strategy was chosen in this case. US $175 new brand. million was budgeted to reach these two The first step in this process consisted of an objectives worldwide, and the goal was to internal wide-scale and in-depth interro- reach 30 per cent awareness in three months. gation on what was expected from the new Here again, the emphasis of service brands brand: is on employees. For the sake of an efficient brand alignment, 50 work groups were created l What new values should it foster? to manage the name change in 137 countries. This involved creating a new internet site, l It should attract what types of new internal communication kits, communication consultants? with 20,000 managers in client companies, l How could it contribute to the devel- communication with thousands of potential opment of business? candidates, and of course communication for introducing the name on stock exchanges. As l How could it reinforce differentiation? the global campaign put it, the company was l What changes could be suggested? renamed, redefined, reborn.

The process of name choice was also inter- Moving to Orange nally managed by means of a ‘brandstorming’ process. All employees were asked to partic- On 30 May 2000 the UK’s third largest mobile ipate. On 1 September 2000 various names phone operator, Orange, was acquired by FT, were proposed by Landor, a globally known the incumbent national French operator. As design agency. On 21 September, 2,677 with all former monopolies, FT needed a proposals were made internally, for such commercial brand to carry its offer and even- names as Future Creation Group, Global tually extend it to other services interna- Already, Deep Thought, Mind Rocket and tionally. British Gas had created a precedent 428 CREATING AND SUSTAINING BRAND EQUITY with the creation of a commercial brand to The director of human resources would offer services to households, including its naturally be part of the process of ‘Let’s live traditional utilities but also insurance and Orange’. For instance, an evaluation grid was financial services. The goal of FT was to make created, to help measure how each participant Orange the second largest operator in Europe, stood in achieving the brand values. In after Vodafone. In 2005, the objective was to addition, to foster group adhesion, this form be present in 50 countries. was to be completed by all the members of the In each country, the strategy was to rename individual’s team, as a measure of how others the local operating company as Orange, saw each person’s performance. Two other exploiting this opportunity to capture the regular features, ‘all in store’ and ‘all on line’ high-consumption-rate young consumers were intended to help employees understand segment. Up to then the former monopoly in practice the challenges of selling the telecomms organisations had not looked very Orange way. attractive to them. The success of Orange in the The ‘Let’s launch Orange’ phase was UK had been based on a disruptive approach to designed to provide the opportunity to make the mobile phone business, epitomised by the a strong impression, accentuating the idea simplicity of its name. In fact, its six brand that a radical new offer was now present in the values were dynamism, modernity, simplicity, marketplace. The media were key in transparency, proximity and responsibility. conveying this impression and helping to These values contrasted strongly with those of immediately capture new consumers. the UK’s former monopoly telecomms Employees were also involved, and each one company, BT. Orange in the UK had been a was sent a cassette and CD-ROM outlining the challenger brand, proposing a true relationship full launch process. Finally, all existing clients with consumers, an innovation after decades of were to be contacted individually to tell them monopoly offerings. about the name change and what it would In the countries in which Orange would mean for them. now operate, the challenge became to make a local former monopoly, often still the market leader, acquire the brand and adopt its values. How soon after an acquisition The goal of the brand transfer was first and should transfer take place? foremost to get across the ‘Orange attitude’. The difficulty was to align the company itself, There are two paths to growth: organic, the employees and the newly acquired brand internal growth, or the acquisition of brands values in each country. The process was and products from elsewhere. Companies are divided into three steps: ‘Let’s build Orange’ increasingly coming to rely on external (defining the brand’s values, and under- growth. In fact, we are used to hearing that standing them), ‘Let’s live Orange’ (under- one company has bought another: Google standing how to put these values into action), buys YouTube or MySpace. In industrial elec- and ‘Let’s launch Orange’ (the communi- trical equipment, Hager grows in Europe cation launch itself). through buying out local leaders (such as The second phase involved an in-depth Ashley and Klik in the United Kingdom) – immersion of each employee in the new leaders that have market share, reputation, a values, both individually and within his/her loyal client base and the respect of distrib- functional team. Scores of focus groups, utors. The question then arises of whether internal meetings, and global sessions would these brand names, with their reputations at slowly build up that understanding over a the local or technical specialist level, should period of one year. be retained. HANDLING NAME CHANGES AND BRAND TRANSFERS 429

Four factors explain the enthusiasm for Should it then follow the same architecture, external growth: in accordance with the dogma of globali- sation? Or should it adapt to the markets? I It is a consequence of saturated markets: Fundamentally, three phases of the decision growth is achieved by buying the market process can be identified: share of another company, linked to a headline product, an innovation and a I First is the question of coherence. Is this brand. innovation coherent with the brand the organisation hopes to build? Imagine that I We can also note a degree of dissatisfaction Philips wished to reinvent its brand with internal innovation. Spotting external worldwide around the values of sense and tendencies and snapping them up is the simplicity. Philips wants to be recognised – faster route. to a greater extent than current image I It is the end result of the tendency to fall studies show – as a leader in innovation back on the ‘core business’, on what the with sense, innovation that is close to and company is best at and where its compet- simplifies daily life. This kernel identity of itive advantage is greatest. This is why two values allows it to carry out an initial groups sell their so-called peripheral busi- sorting of innovations that do or do not nesses. Thus Bel (Laughing Cow, Kiri, and follow this direction, and of companies to so on) sold its ‘regional’ cheese business buy and not to buy. Sonicare was in fact (for example le Rouy) to Lactalis (Président coherent with Philips’ new desired identity. and Société) in 2003. During these acquisi- In contrast, when we worked with Citroen tions, the question of names and architec- on its repositioning, the brand’s executive tures raises its head. For example, should le director reminded us that since the Rouy be called le Rouy by Président? products designed three or four years ago had not yet been launched on the market, I Finally, these acquisitions are often part of it was impossible to enact a public reposi- a strategic plan consisting not only of tioning. It would have been immediately buying market share, but also of devel- contradicted by the models to be launched, oping a European or world brand. themselves the fruit of a previous vision of what Citroen would become. The question of architecture immediately arises for innovations stemming from I The question of strategy: should the external growth. Can the acquiring company product be launched alone, or should it be impose its name from the start, without losing part of a strategic alliance? In the case of an customers – in both senses of the word ‘lose’? alliance, the daughter brand is almost For example, Philips bought the Sonicare obligatory, since with co-branding neither company (no relation to Sony), a specialist in brand can innovate graphically. oral hygiene the world over. Sonicare sold an For example, Philips allied itself with the innovative product under its name, a revolu- Dutch coffee giant Douwe Egberts to create tionary electric toothbrush, which had Senseo, a coffee-maker that makes the best become the reference among dentists. What coffee at home, without having to pay the should this innovation be called once it had high prices for Nespresso. Note that in the entered the Philips fold, and what brand(s) latter case, Nestlé appears to have retained should it have? Sonicare has a good repu- mastery over the project, since the tation in the United States and Japan, but less daughter brand is a variation on the word so in Europe. The reverse is true for Philips. Nestlé, combined with the generic word 430 CREATING AND SUSTAINING BRAND EQUITY

espresso, whereas the coffee maker is made provide the brand’s identity kernel with by Krups, part of the Seb group. traits that it had previously lacked. Once these traits have been acquired, and the I The third question is that of acceptability gulf that existed between the brand and the to the market. In short, there may be a target has been reduced, the architecture difference between the brand’s 10-year originally chosen no longer has any reason vision and its current situation among for existing. It needs to evolve. This is particular targets. One must not mistake expressed in Figure 15.2, showing a desire for reality. In this case, the brand decision-making model developed with the cannot act alone. It needs an ally, an inter- Dutch consultancy agency VODW. mediary: this is the role of the daughter If everyone is in agreement with the final brand. For example, in order to penetrate objective of a brand transfer, the timetable and dominate the feminine shaving and the phases of the operation are crucial. market, Gillette uses a worldwide daughter As the schema shows, as the brand becomes brand, Venus. Furthermore, it follows the more coherent with the market’s expecta- endorsement brand architecture. Venus is tions, under the effects of communication written in large type, with Gillette and time, the brand can take greater visi- mentioned in small letters at the bottom of bility on the product and move from a the packaging. discreet endorsement or maker’s mark to In truth, Gillette is a masculine brand – that of the unique source or masterbrand in some might even say macho. ‘Masculine the final phase. perfection’ is the brand’s international slogan. This image profile is hardly likely to The decision-making tree is based on the generate value among the majority of image diagnosis among the targeted clients – women. They insist on maintaining their whether and how much the overall brand self-concept – even though there are (later to become the only brand) is in step genuine advantages to the product. Gillette with the specific category expectations in the remained pragmatic and discreet, and country in question. If it is already at 100 per emphasised Venus, a reassuring hymn to cent, then a rapid brand change is desirable. If femininity. This example shows clearly it is low, then the image of the generalist how the choice of a name arises from the brand risks causing offence and damaging the choice of an architecture. The product is product’s sales, making the competing sales indeed Venus – by Gillette. forces’ job easier. This is typically the case Depending on the gap that exists between the during the takeover by a generalist of a highly brand’s current profile and the expectations of specialised brand, fetishised by a particular the target of the innovation in question, segment,. It is important to not forget the different architectures will be selected. The final objective (to finally arrive at a single more the image is a handicap, the more likely name), but to proceed in stages. it is that reduced visibility will be selected We have sketched out the stages to indicate (maker’s mark architecture). Otherwise, it is the different phases to be followed in the possible to go as far as dual branding archi- graphical relationship between the product- tecture, or source branding. brand and the global brand. Through the different stages, an evolution of perception I The fourth question is planned evolution. occurs, bringing the global brand’s image In fact, the architecture selected in the first closer to the expectations of the category’s or phase is only provisional. Remember that segment’s customers in the country, or the one of the functions of the innovation is to segment in question. This makes it possible to HANDLING NAME CHANGES AND BRAND TRANSFERS 431

t1 t0

Brand Brand 100/0

66/33 Brand Brand Present image First name of the brand to be transferred 50/50 First name Brand by Brand First name

First name First name 33/66 by Brand

% of perceived values similar % of values contrary with those of the brand to to the values of the be deleted (first name) target and category

Figure 15.2 A stepwise approach to brand transfers (relating the type of transfer to the image gap) (Kapferer/VODW) move to the final stage, above. This process seen that a brand can only be successfully should be undertaken at a regional level: even extended to cover a new category of products for global brands, business is always local. if it is seen to be legitimate (Chapter 9). This Therefore, these progressive transfers should was Black & Decker’s principal challenge be implemented along a local timetable, when it took over General Electric’s domestic determined according to the local image diag- electrical appliance activities. nostic. A successful brand transfer also has to deal with distributors. In the industrial world with long distribution channels, retailers tend to Managing resistance to change choose a few complementary brands that they stick with. Having promoted these brands, It is a fact that brand changes arouse hostility, they have inevitably linked their reputation which can be a real danger in terms of the with them and their customer loyalty derives effect on market share. The source of the from them. To change a brand is therefore like opposition can be found with consumers, questioning 10 or 15 years of good and loyal with distributors and also internally. From service. A retailer loyal to a brand expects the clients’ point of view a brand change is something in return from the company. A not a superficial act, but it affects the very simple presentation of the strategic reasons identity of the product. There is therefore a why a company should replace brand X by perceived risk of altering the implied brand Y is not enough, even if the products contract. This is especially the case in remain identical. There must be some emerging countries. A change of design is compensation. The situation is completely interpreted as a sign of a counterfeit product. different when dealing with supermarkets who It is also the case in the service industry. care far less about brands apart from their own. When there is a lack of any tangible element Here their analysis is much more down to the brand becomes the heart of all earth: is this an opportunity to receive a listing contractual relations. Besides, we have already allowance for the new brand or a contribution 432 CREATING AND SUSTAINING BRAND EQUITY to the temporary hassle incurred by the policy. Only the people who worked closely transfer? Also, distributors will not hesitate to on the project were informed of progress. The criticise any operations aimed at placing a project itself was given a code name rather weak brand under the umbrella of a strong one than a title which would have given the game in order to improve its shelf prominence. away. Afterwards, when the deadline date was Finally, one must not forget the internal imminent, the personnel were told. The oper- and human elements of resistance. ation was presented as a step forward and not Generally speaking, all brand changes have as the end of the Valentine company once to pass through managers who will bought by the ICI giant. inevitably be attached to their own brand. The sales force was gathered for a big pres- When l’Oréal decided to give Ambre Solaire entation on the evolution of the European a modern technological dimension by market, on ICI and on its Dulux brand. placing it under the umbrella brand Garnier, Particular attention was given to the the division came up against numerous worldwide importance of Dulux, to its long pockets of resistance in Europe. In the UK, history (founded in 1930), to its sympathetic where Ambre Solaire had a good name and and relaxed communication strategy Garnier was unknown, the partisans against (projection of advertisements), to its content the change pushed forward the fact that the and to its corporate values. The change was future signature brand Garnier had little presented not as a big event but rather a recognition. The opposite was true in natural evolution which would bring real and France: the Garnier management argued on important benefits to the customer. the basis that Ambre Solaire suffered from a This gathering was held six months before bad reputation, and that the change might the brand change. A notable consequence of devalue their brand. In the end the oper- this date was that all internal rumours were ation did take place and Ambre Solaire sales avoided, at least on a large scale. increased from s4 million to s20 million. Some of the distributors were informed very The precautions taken by the British group early on of the name change. It is worth ICI when it made an apparently insignificant remembering that they were part of the cause brand change, transferring the leading paint of the decision to change, because they also brand in the French market Valentine to ‘ICI favoured a European extension and therefore Dulux Valentine’, illustrate the need to take wanted a European brand. They could not into account these three stumbling blocks. therefore oppose the principle of a brand The precautions aimed solely at the personnel change. All that was needed was to show them showed just how much they were involved. that everything would be done to assure a The personnel at Valentine were attached to smooth transition. their brand so much that they saw themselves Some retailers were informed a whole year as its trustees and looked after it as if it were before the name change directly by Valentine their own. This is why they took any brand managers, when internally only the people modification to heart, and the dividing line responsible for the project knew about it. On between evolution and dispossession was very the other hand, shopkeepers were forewarned fine. The importance of internal communi- by Valentine sales representatives only three cation during this brand change was therefore months beforehand. Finally, department or absolutely crucial if feelings of loss of identity shelf managers were informed by mail, just were to be avoided and all thoughts of disap- before the change, that on 23 March 1992, ICI pearance kept at bay. Valentine was to become ICI Dulux Valentine. As a result, one of the first things to be done The letter was accompanied by a free luxu- was the setting up of a selective information rious badge of the Valentine mascot, a HANDLING NAME CHANGES AND BRAND TRANSFERS 433 panther. And when the Valentine sales force stances this would have taken three years. next came by they distributed an ICI Dulux This makes the customers’ choice much easier Valentine watch (blue background, 12 yellow when they do not know what kind of paint to stars for the 12 hours of the clock and a black use in the room or on the surface that they are panther in the middle) which was such a great repainting. success that some people still wear it. In fact, if this brand transfer was carried out without any hitches, it is because it was Factors of successful brand presented as an adaptation to meet the transfers constraints of the retailers, and therefore Although the cases looked at and their more for their benefit than a revolutionary particular situations vary a lot, it is still brand change. What is more the new pack- possible to draw an overall lesson from the aging was intended to make the distributors’ principal experiences in this domain. For fast- life easier and the product clearer and more moving consumer goods a good summary is comprehensible for the consumer, and it by Philippe Villemus, former marketing permitted a more homogeneous organisation director of Mars, who remarks: of the shelves. It had already been established that it was Above all, this kind of operation requires a more practical, from the clients’ point of view, combined effort from all the company depart- to organise shelves according to purpose ments: production, logistics, sales force, (paint for floors, for ceilings, for wood, for marketing and general management. All will be steel, etc), rather than according to brands. concerned and any false note will be a source of Thanks to the new packaging, customers problems. Second, it is vital that this event be considered could easily find all the information they an opportunity and not a constraint. The transfer needed, paint for the kitchen, for the must be an occasion for reappraisal, when the bedroom, etc. strengths and weakness of the brand can be What is more, Valentine made sure that the rethought, and an occasion to gain new market brand change would not upset the shelf shares by profiting from the extra attention that layouts and that no extra work was needed by the new brand will have for a while. In this the distributors. They also decided that at no respect the transfer has to be seen positively by the personnel, the distributors and the point should there be the two different brand consumers, so the benefits that the new brand names on the same shelf. This is why 180 will bring for each of them must be specified. people carried out the necessary relabelling A brand transfer cannot be improvised, it when the transfer took place in each of the must be well prepared. The retailers, prescribers, 620 shops concerned. What is more, a opinion leaders and the personnel must all be freephone number was made available to the warned well in advance. The time factor is crucial: one must wait until retailers should any kind of problem occur. all the customers are aware of the change, and if Tests to measure consumer reactions were the operation has to be carried out quickly, one also carried out before the brand change. must have, at one’s disposal, the communications Tachytoscope tests (successive presentations means necessary to be able to let them know. of the old and new packaging) revealed that You cannot force a brand change on retailers. both versions of the packaging were equally Not only should they be informed but every- well associated to the brand. thing possible should be done to facilitate their work. That means no double stock. The same Another benefit for the customer was the product codes should be maintained. This opportunity to quickly reorganise the whole approach not only reduces demands for listing range of paint products into sectors according allowances, it makes the rotation of the new to the main kinds of uses. In normal circum- brand easier. In the case where a new code is 434 CREATING AND SUSTAINING BRAND EQUITY

introduced, the chances are that the optical intends to provide more value to them. Also, check-outs will not be able to read them because in order to not lose consumers at the point of the new reference has not been registered at a purchase, the former brand recognition signs central level nor in the shop’s computer system. are maintained for a while. Finally, a tag line Even when the transfer is to take place in tran- sitional phases, like a double brand phase before can be added on the packages, after the shift, the actual inversion, one should still opt for the reminding that ‘this the new name of …’. quickest time frame. It is true that the average Last, but not least, to achieve successful purchase frequency should be taken into brand transfers it is important to know what account; the frequency of paint purchases characteristics the customer identifies with the compared to that of ultra-fresh produce leads to brand and where its equity lies. The Shell Helix very different minimal transitional periods. To linger too long only results in being bogged case is revealing in this respect. Having down and losing one’s way. This was the case of decided to replace all its local lubricant brands the Pal to Pedigree transition which took several with one European brand, Shell left the coordi- years. Retrospectively, the process would have nation of the transition to its subsidiaries. benefited if it had been shorter, or even, as in the France was a particular problem in view of the Raider/Twix case, instantaneous and accom- share of the automobile oils market enjoyed by panied by a strong advertising campaign. Nothing is more shocking to the customer the self-service supermarkets (more than 50 than the strategy of ‘fait accompli’, imposed per cent). The strategy that was adopted without warning, information or explanations. consisted of the launch in September 1992 of a The loyalty to the brand is dented by this sudden top-of-the-range oil called Shell Helix Ultra. It disaffection and lack of consideration. Lessons was added to the local Puissance range of have been drawn from the Treets/M&Ms mishap. products, keeping its characteristic can with a (Villemus, 1996) practical spout, but in a different colour, grey. Shell Helix Ultra was launched in the auto- A typical ‘fait accompli’ is the sudden change mobile press and sold only in Shell service from Coke to New Coke on 8 May 1985. That stations. The print advertising campaign event was called the marketing blunder of the century. In fact the brand change nearly slogan, aiming at making Helix the market created a revolution in the United States that reference, was: ‘One day all oils will be like forced the return of the classic Coca-Cola to Helix.’ In the meantime the name Helix Plus the shelves and the disappearance of New was added in small letters to Puissance 7 and Coke. After having advertised during more Helix Standard to Puissance 5. In October than a century that Coke was the real thing, it 1993, in order to follow the European tran- was odd to force consumers to change sition, all the ‘Puissance’ brands were replaced without any warning. Consumers need to be by Helix. A small mention of Puissance under respected: they want to understand how a Helix survived for a few months. The change will create value for them. A brand Puissance 7 blue can became the Shell Helix transfer is always an act of violence, unlike Plus blue can, but the Puissance 5 brown can mere extensions which preserve the became the Shell Helix Standard yellow can. consumers’ freedom of choice. A brand is The advertisement campaign put the old much more than a name, it is an emotional Puissance 7 can and the new Helix Plus can link (Fournier, 2000). One does not lose a side by side under the slogan: ‘It may have friend without harm and pain, even changed its name but the spout remains.’ The resentment. problem was that the advertisement agency Today, most brand transfers are explained focused on the name change while the to clients or consumers. They are forewarned clientele paid more attention to the colour of and reassured. They learn how the new brand the can. Yet nowhere in the advertising HANDLING NAME CHANGES AND BRAND TRANSFERS 435 campaign did the yellow can appear. The external public, they generally under-evaluate customers looking for their brown can could internal problems. The name change does not not find it: instead they could only find a bring them any specific advantages so there is yellow can the name of which they had never no reason for them to pay too much heard of. In reality, despite the brand attention. But if they did understand they awareness scores of the name Puissance, the might go along with the decision, so the name strength of the brand was in fact associated not change must be made relevant to them. with its name but with its colour! The Finally, each micro-public demands a specific customers should have been informed of a action. In this way, with regard to the transfer transition from brown to yellow rather than to Connex, the first problem that had to be soley a name change from Puissance to Helix. resolved was that of the stock market traders. In durable goods sectors and in service The company was quoted in about 10 markets sectors, in fact in all sectors with high around the world, so they had to be certain perceived risk, it is important to stress the role that right from day one all financiers would of . Brands are not be looking for the letter A and not C in the abstractions, they are literally carried by finance sections of their newspapers. people who identify with them. To changing In July 1999 a small energy company, Total, the brand is to change their identification. took over the large Elf company, thus creating They need to adhere. This is of paramount the fourth largest energy company in the importance for corporate brand changes. world, and the only one that was not Anglo- Saxon in origin. Naturally, the success of such corporate mergers goes far beyond the topic of Changing the corporate brand the present chapter. Reducing it to a name change would be looking through a tunnel. On 1 January 1991, CGE became Alcatel ‘to However, names do play a role in such have a brand with a higher profile’. It had up mergers. In this case the names were not till then been handicapped by the confusion changed immediately to increase the chances that was occurring due to its similarity with of success of the whole operation. General Electric. In 2000 CGEA became According to the general management of Connex because its name, unpronounceable TotalFinaElf, the merger was a success because in international markets hindered expansion of the following factors : and the effectiveness of all communication. To the precautions to take when changing a l It was well prepared by the company taking brand name a few more can be added when over. For instance, they had already dealing with company names. These are based analysed all the personnel of the target on the fact that there is always a strong company. Just one month after the internal public and a multitude of external takeover, a new organisation chart was micro-publics. issued, so all the employees in the former The first problem that should be avoided is Elf company learned quickly where they that of rumours, which will always portray a would now stand. different picture of the change than the l The company taking over had the courage reality. The internal public is quick to of respecting a 50:50 equilibrium in all interpret any change in terms of a crisis, assignments, teams and staffs and did not serious problems or shareholder pressure, act as a victor. especially when new majority shareholders have arrived. A big effort is therefore needed l Hundreds of committees were created to to explain the situation. As regards the discuss all types of topics, so that 436 CREATING AND SUSTAINING BRAND EQUITY

yesterday’s enemies became less hostile, is a unique opportunity to create a leap learnt to know each other and eventually forward. Why come back to a former name, became friends. and not start with a clean slate as Novartis (formerly Ciba Sandoz) or Aventis l After the takeover the group took as its (formerly Hoechst Rhone Poulenc) have name TotalFinaElf and kept it for three done? These laboratories have brands as years. This name was chosen for internal assets, their medical and pharmaceutical purposes. It indicated that no one was product brands. The assets of an energy defeated. Keeping the name of the company are found in its petrol reserves. companies that had been taken over was a They depend heavily on the reputation the sign of respect. Externally it was a sign of company has built up under its name in all power. oil-producing countries over 50 years of l Only in 2003 was the group name changed activity. Total was a key asset: it meant trust to Total, after an intense probe of the all around the world. In addition, the inter- internal climate. However, the Total logo national financial community expect the did change at this occasion. The new Total Total team to is not the same as the former Total: the new continue in place, and the continuity was logo conveyed the new values of this intended as a way of reassuring them. leading European fuel company. A merger 437 16

Brand turnaround and rejuvenation

Because brands are assets, companies try to concepts: an old product relaunch, a rein- make them produce earnings as long as vention, an old product facelift and a brand possible. They do not believe in the brand life revitalisation: cycle. This is why even though their sales may have come to a minimum, or even after a l An old product relaunch consists in taking number of years of inactivity, it is frequent to a product from the past and selling it as it witness efforts to relaunch this activity. was. In 2001, Wal-Mart listed a new and Investment funds and business angels are unknown brand, Lorina. This brand comes fond of sleeping beauties, brands whose name from a small company selling lemonade. still evokes resonance in our memory. There For all distributors, lemonade is a are good reasons for that. As assets, these commodity: the cheapest is the better. One brands are still endowed with brand litre of standard lemonade is sold at around s awareness, attributes, beliefs: it is less costly to a quarter-euro. Lorina sells it for 4. It has start from these premises than to restart from recreated the exact lemonade people used scratch. This is why, for instance, in 2003 to drink in the 1950s, with a typical glass Unilever relaunched Sunsilk shampoo for the bottle, a very specific cap and a recipe from third time in Europe. that time. Who are the buyers? People of 50 Second, as old brands they capture a value and older. enhancing emotion, nostalgia. Part of the l An old product reinvention is the new VW past of many consumers in our ageing soci- Beetle. No one, except collectors, would be eties, they evoke the ebb of life and good prepared now to drive an old Beetle: it is times past. Some of these consumers may too insecure and uncomfortable by modern want to recapture these emotions, as a standards. This is why Volkswagen decided symbolic way to stop the passage of time to reskin it a little while keeping its unique (Brown et al, 2003). design, and to completely revise all its It is necessary to differentiate clearly functionalities to match a modern between a number of close and related consumer’s bottom-line expectations. Who 438 CREATING AND SUSTAINING BRAND EQUITY

are the buyers? Old consumers and those that brand to consumers, but also of the younger people who are willing to adhere muscles of the corporation operating it. to the brand community. Modern mass retailers also tend to value much more the capacity of a company to l Brand revitalisation in the narrow sense sustain competition, and to deliver products consists of recreating a consistent flow of efficiently to their storage facilities, than its sales, putting the brand back to life, on a possession of a known but old brand. growth slope again. When the brand is made up of many products, we shall see l Large companies are also interested in revi- that this typically entails two actions in talising old brands, but only if these brands parallel: keeping the old typical product are not perceived as old, that is to say as globally as it is (to keep its franchise) and brands with no relevance for today, asso- reinventing it for new and younger ciated exclusively with older consumers. consumers (that is to say asking the This is how Ford bought Jaguar and had to question, what would this product be invest as much again into putting it back to today, if we had to invent it from scratch use as a marque for quality cars. for the needs of modern consumers?). l Global companies might buy a leading l Brand facelifts (Lehu, 2006) are part of the local brand in order to ease and finance the revitalisation process. They refer to an local development of their international upgrading of the performance and/or stars. The local brand is a door opener with design of the brand to keep up with the local distribution. However, it is often competition. found that these so-called local leaders present the clear symptoms of ageing (no A lot of people are interested in brand innovation, too few younger clients, little revitalisation: challenge of the past practices, no systematic upgrading of packages, designs l Young investors or venture capitalists who and communication). buy an ailing brand at low price, often an old brand, with the objective of reselling it in a few years at a profit, after revitalising it. The decay of brand equity l Small businesses that will never have enough money to create their own brand, Although they may have ceased their but are willing to buy the name of a formerly commercial activity, brands do not immedi- active brand for a reasonable price. For ately lose their assets. Learnt through time, instance, 10 years after having stopped their brand image is not erased from selling the European yogurt brand consumers’ long-term memories. Indeed, Chambourcy, Nestlé thought it could sell it. after many years a brand can still evoke a A small company bought it, but the fact that number of positive or negative associations. the name was still known did not guarantee What is lost however is the key brand asset: the success of the revitalisation, and it soon brand salience, the capacity of the brand to went out of business. A brand alone without be evoked spontaneously in consumers’ a viable economic equation is of no use. minds as soon as the need to buy the product (Nestlé had, of course, put a number of type appears. This is why belonging to the restrictions on the use of the brand, since it consumer ‘evoked set’ (or consideration set) did not want to find it competing against is a key measure of brand equity, signifying itself). In addition, the sales of a brand are both brand presence and its perceived unique the result not only of the attractiveness of relevance for that need. BRAND TURNAROUND AND REJUVENATION 439

Table 16.1 illustrates how brand equity producers’ brands, which have become mega- decays over time. Brand X is a FMCG food brands. Typically, a shift of channel would be brand in a very popular category (with possible. For instance, a drink brand might be almost 100 per cent penetration). Until sold via on-premise distribution (for recently, this brand was the number two in consumption in canteens and business restau- its market. Then it was bought by market rants), if this were a channel where it could number three, which immediately sold all add value without meeting fierce compe- Brand X’s factories so that the acquisition of tition. Channel and use changes are a classic the brand paid off immediately. Most form of revitalisation for this very reason. important, it discontinued its activity and as This example illustrates a fact too often a result became the market number two in overlooked: the value of a brand does not lie volume and number one in value. Eight years in its assets, but in the ability of a company to after the end of any kind of commercial make a profitable business with these assets. activity, the brand equity had not disap- After eight years of inactivity the whole peared. Top-of-mind awareness had dropped commercial environment will have changed. from 13 per cent to 5 per cent and aided Nature abhors a vacuum, and business does awareness from 86 per cent to 55 per cent. too. As soon as the brand disappears from the Interestingly, there are still 13 per cent of stores, the shelves are filled with other consumers who declare that they have products from other brands, including the bought it at least once over the preceding 12 distributors’ own brand. In order to sell the months. This latter figure casts doubts on the original again, they would need to be validity of such indicators of brand equity in displaced. It costs a lot to induce the modern this FMCG category: it seems to be a mere distribution to reallocate space for a reflection of spontaneous awareness. comeback, with very little guarantee of How much would this brand be worth if its success. A brand is not enough to stage a owner decided to sell it? Not far from zero. comeback, one needs an innovation. The owner would never take the risk of selling It is clear why it is essential to prevent it so that it could be revived in its own market. decline, and how a brand loses value after a Out of this market, it is just a name with faded period of inactivity. But what are the factors of remote credentials: there will be no buyer. decline? Could the owner itself revitalise that brand? Probably in specific segments or niches. As far as the mainstream market is concerned, a The factors of decline return to the shelves would be impossible. They are now overcrowded, first by private Following the analysis of the factors of a labels, and second by the few remaining brand’s longevity in Chapter 10, one could

Table 16.1 How brand equity decays over time Years after the end of the brand’s commercial activity 12345 678 Top of mind (saliency) 13 12 7 7 6 3 1 5 Total unaided awareness 26 28 20 29 15 14 11 16 Aided awareness 86 83 76 73 68 50 55 55 Bought last 12 months 27 29 17 19 12 15 10 13

FMCG food brand; sample size 450/year; all figures are percentages 440 CREATING AND SUSTAINING BRAND EQUITY simply say that in contrast, brands decline against the product’s previous version: if when they are not respected. In fact, their consumers have a lower opinion of the decline always comes from mismanagement. changed product but statistical analysis When a company ceases to be interested in its reveals that the difference is not significant, brands (thus creating a lack of innovation, the company will not hesitate to carry out the advertising or productivity), it can expect the change to provide a source of financial consumer also to lose interest. And if the savings. The problem entirely rests with the brand loses dynamism, energy, and shows expression ‘significant difference’. All the fewer and fewer signs of vitality, how can one decisions are based on the so-called ‘alpha risk possibly hope that it will arouse passion and threshold’ (generally 5 per cent). As long as proselytism? Apart from these rules, which are the difference observed in the sample, just due so basic that it is astonishing that they can be to chance, affects less than 5 per cent of the forgotten, there are some factors that accel- cases, it is declared non-significant. In erate decline. These will now be studied. sciences, the aim of this high-risk threshold is to avoid taking for real a phenomenon which When quality is forgotten would not exist in reality. The problem is that in marketing, it is the ‘beta risk’ that should be The first and surest road to decline is through taken into account, the aim of which is to the degradation of the quality of the products. avoid considering as false a hypothesis that is The brand ceases to be a sign of quality. in reality true. For, through modifying a Economic factors oblige companies to cut product even by the smallest amount which corners with regard to quality, albeit in minor each time has been declared ‘non-significant’, steps, and unfortunately, far too frequently. a considerable risk is taken. Consumers are For instance, when l’Oréal bought out Lanvin, not fooled. They avoid the product, then its leading perfume Arpège was a mere shadow abandon it, even sometimes spreading by of its former self. The fragrance had originally word of mouth a very negative opinion. From been made up of natural oils but by then then on, any modification of the product included a fair amount of artificial ingre- must be approached with caution if it is rated dients. The bottle had even lost its round below the standard product, even if the shape. Consumers around the world were difference is said to be non-significant. conscious that they were no longer respected since Arpège had been so badly mistreated. Missing the new trend L’Oréal’s first step was to give back to this perfume the case, the bottle and the ingre- The third factor of decline is the refusal to dients of the quality that it deserved. This follow immediately a durable change. Thus task, which was not spectacular but was Taylor Made, for a long time the world expensive, was absolutely necessary. It reference for golf clubs, did not believe the enabled contact to be re-established with the gigantic head launched by the Callaway brand consumers who had been forsaken, and the under the suggestive name of ‘Big Bertha’ rebuilding of acceptable foundations for the would catch on. By clinging to a different brand. conception that was more demanding for the average player, ie for the majority of the Beware of non-significant differences market, Taylor Made suddenly lost its lead- ership. In the same way, Banga orange juice The change in the level of quality of a product continued to believe in glass bottles when the is rarely abrupt, but results from the insidious market, following the market leader Oasis, logic of statistical tests. Each change is tested turned towards plastic. BRAND TURNAROUND AND REJUVENATION 441

In 2001, according to Zandl, a specialised campaign (‘Hello boys’) and accompanying US marketing research company, the jeans publicity made this innovation famous. The was still number one in the youth clothing brand helped women who felt they had small preference. However, young people now breasts look more sexy and gain self-assurance quote 112 different brands as being their as a result. It created a new segment. In 1995, 5 ‘preferred brand for jeans’. The market has million units were sold in Europe, and 86 per become fragmented, a challenge for Levi’s, cent of its consumers were less than 35 years whose image and sales are very much asso- old. Now where is Wonderbra? Still trying to ciated with a mono-product, the 501. find pathways for growth, if not prevent Fragmentation led tribes, small groups to decline. Despite an aided awareness level of 70 prefer new types of jeans, more adapted to per cent, its goodwill has come close to bad will new usages, and new brands. A lot of new in some countries, in the trade channels. competitors filled niches. Pepe and Diesel After the peak sales of 1995, sales started to addressed the urban rebel, ‘For us by us’ and decline. Competitors with known brands underground streetwear. Gap also became a entered this segment too. major player. Levi’s had expressed disbelief in The problem was that Wonderbra became streetwear and neglected the rappers and associated not with a brand but with a gliders, who are in fact the opinion leaders of product, and its brand name became a generic the new youth. Tight 501s are totally name: people spoke of ‘the wonderbra’. This unadapted to skateboarding and roller- highly technical product (it had 42 parts, and skating. Skaters wish to wear an XXXXL rolled needed a specific manufacturing technology) up their knees, and rappers like multi-pocket was much adored inside the company. trousers. On the other end of the spectrum, Everyone was very proud of it. Where to go girls desired Tommy Hilfiger and Polo jeans, next? If innovation is the key to market pene- not to speak of Armani and Versace jeans. It tration, a brand has to become more than a was clearly the end of the mass market. Levi’s name of a product. But Wonderbra did not had not foreseen it, and worse, it had not innovate sufficiently, and consumers did not reacted when the trends were there. repurchase its products. Today, 61 per cent of Wonderbra consumers possess only one The mono-product syndrome Wonderbra. They wear it for special occasions, and rarely on weekdays. Wonderbra might Still at the level of product policy, the brands instead have capitalised on its sexy positioning associated with a single product are more but offered new products based on different vulnerable. They risk being carried away by reasons for purchase. The very same benefit the decline of that product. This again is part could have been expressed using different of what happened to Levi’s, with its too-long materials or shapes. Instead it remained too association with the mythical 501. Wonderbra narrow, preventing the consumer from is another clear instance of a brand that fell moving freely within the brand. into the mono-product trap. Another difficulty was the global Who has never heard about Wonderbra? Very management of the brand. New models were few, either women or men. Although the designed essentially for the UK, its leading product is in fact comparatively old (it was European market, because of an excess of invented in Canada in 1953 by Canadelle centralisation at Playtex (Sara Lee). The Corp), its real launch in Europe was quite recent management did not recognise that the tastes (1994). Sara Lee had bought the company and and wishes of Italian, French and Spanish gave Playtex the responsibility of launching the women were not those of English women. As a Wonderbra in Europe. The fantastic advertising result European sales became one-country sales. 442 CREATING AND SUSTAINING BRAND EQUITY

Distribution factors decline. This happened with Dim, a Sara Lee hosiery brand. Although the brand was by far The relationship with a distribution channel the main advertiser in its hosiery market, and can be a factor of decline if the brand does not even in the textile market in general, it live up to the new expectations of it. Because seemed to be declining, less active. Such an companies such as l’Oréal developed imbalance between the actual share of voice particular brands for supermarket distri- and the feeling of loss of energy felt by the bution, such as Plénitude for cosmetics, market worried the management of the Sara Vichy’s status in the field of pharmaceuticals Lee group. In fact, the diagnosis was clear: the is under threat. Consumers who go to a promotional tactics of the daughter brands chemist shop to buy such products expect had been carried so far that they had frag- from them a higher level of quality as befits mented Dim’s image. Indeed, it was appro- the laboratory guarantee. But over time, Vichy priate to clarify Dim’s wide range by had become a generalist brand more focused attributing names to different products which on life-style than scientific quality. It found did not propose the same customer benefits, itself, in 1995, carrying products which no hence the appearance of Sublim, Diam’s and longer corresponded with the products which other lines. On the other hand, this measure consumers wanted to buy in a chemist shop. produced a dispersion of the Dim image, even Vichy’s survival was contingent upon a quali- the disappearance of Dim to the benefit of the tative upgrade of all its products and its repo- daughter brands. sitioning on the benefit of better health The first symptom of this condition was the through the skin. packaging. There was no longer any homo- Other brands have collapsed because they geneity between the different packagings, and have allowed themselves to become trapped the mother brand appeared in a minor in a declining distribution network. The endorsing role in variable places. Moreover, in recent rise of large liquor stores in Japan, at the context of the organisational change, the expense of small convenience outlets, has further divisions had been introduced (tights, caused the immediate decline of all the brands lingerie, men’s items). Unfortunately, there lacking a sufficient level of public awareness. was no longer anybody in charge of coherence In small outlets, they did not need it: the store between the divisions and of the defence of owner pushed the brand, sold it to his clients. the Dim mother brand’s capital. Finally, since In modern distribution the brand has to sell the Dim logotype only appeared clearly on itself, it needs market pull. bottom-end products and was concealed on advanced products, this increased the Weak communication creates a perception that its quality had declined. At distance the same time, the market was moving towards opaque tights, a more durable and Finally, communication can accelerate the more top-end product, which could easily decline of brands. Beyond the obvious fact make Dim the symbol, not of today’s woman, that ceasing to advertise means ceasing to but rather of a poor quality. exist in the market and ceasing to be a key In order to correct these dangerous impres- actor, the sensible management of communi- sions, Dim undertook to increase the added cation consists of modernising the signs, but value of all its products, including the basic keeping the essence. product, to upgrade all its packagings, to If the daughter brands are too much in the return the status of source-brand by replacing spotlight, the mother brand can be adversely the first-name brands under a visible umbrella, affected and give the impression that it is in and to clearly advertise ‘Dim presents the new BRAND TURNAROUND AND REJUVENATION 443

Diam’s’ instead of ‘This is the new Diam’s by cause its decline. Thus, any dominant brand Dim’. (This example illustrates, in passing, a of a new product risks becoming a generic tendency which is fatal for a brand: its name. This can be prevented by taking certain systematic distance from the best new precautions, for example: products, thereby confining it to an offer which is static, obsolete or old-fashioned.) To l create a word to designate the product of complete the story, it should also be the brand; mentioned that, in parallel with the excessive l never mention the brand’s name alone, exposure of the daughter brands, the Dim but together with the product’s generic brand had been extended to leisure and indoor designation; clothing. This created an added danger for the brand, that of dilution. By leaving its field of l never use the brand’s name as a verb (in the competence (everything which is worn close United States, for instance, to xerox means to the body) to enter the sector of regular to make a photocopy) or as a noun, but as clothes, its added value became less tangible. an adjective; The existence of clothes with a Dim label l systematically protest whenever the without any tangible added value could only brand’s name is used as a common noun by raise doubts about the brand’s actual contri- third parties and the media; for instance, bution, not only in this new market, but also request that an erratum be published. in its basic markets: tights and lingerie. So, in Through not having reacted strongly the context of Dim’s renewal plan, an end was enough, Du Pont de Nemours lost the put to this extension, which was causing the ownership of Nylon and Teflon, which dilution of the brand’s capital. The priority was have since become generic terms; to return Dim to the field in which it was l nurture the perceived difference between recognised to have expertise. The history of the brand and competitive products, either ready-to-wear clothes contains too many with tangible attributes or with intangible examples of brands which have abandoned values. In any event introduce new their initial concept to experiment with new products. extensions and so lose their identity. This has been the case with Newman, which can no longer be associated with a typical product, of Preventing the brand from Marlboro Classics which has moved away ageing from its founding style, and so on. It is frequently said that a brand is ageing, shows signs of ageing or seems aged. This When the brand becomes generic impression may be felt by customers, non- customers, suppliers, distributors or The highest degree of dilution of the brand’s employees themselves, who acknowledge a added value occurs when the brand becomes difference between them and their generic. The brand is considered a descriptive competitors. Ballantines, Martini, Black & word, part of everyday vocabulary with no White, Club Med, Yves Saint Laurent and Guy distinctive properties. The classic examples Laroche have all been described as ageing. are well-known: Scotch, Kleenex, Xerox, The concept of ageing has in fact two Nylon, Velux. What causes a brand to be different meanings: reduced to the point of becoming generic? The abandonment of any communication on l The general meaning suggests a slow but the brand’s specific nature and purpose can systematic decline over a long period of 444 CREATING AND SUSTAINING BRAND EQUITY

time. The brand is not destined to end or those which seem not to have kept up to rapidly but seems likely to be inevitably date with progress or with the internet. phased out with time. Yesterday strong and A brand can be 18 years old and threatened active, it appears today much more with ageing. The challenge for the eau de mundane, as if it no longer had anything to toilette Eau Jeune (ie Young Water), launched say or to propose to the market and lived by l’Oréal for supermarket distribution, is to exclusively on its loyal clients. One be still considered Eau Jeune by the next symptom of this is the widening gap generation of 18- to 25-year-olds, but who are between the spontaneous awareness and so different. If this brand had remained a the assisted awareness. The brand still rings single product, it would have disappeared. a bell, but it is not one of the brands which What symbolised youth in 1987 no longer has an impact on the market. It does not symbolises it in 1997. launch new products as often as the The point of view expressed by the brand category actors. It does not surprise. It on its market can also sometimes seem to be repeats itself. There is only a small suddenly behind the new dominant values. As difference between repetition and long as decisions regarding Playtex in Europe boredom. were taken in the United States, the brand never seemed to take into consideration the l The second meaning refers to the reflected role of femininity in women’s choices. Even image of the customer. Everything points though the products were of high quality, to the typical customer being older. And they were purely functional, that is based on even in the case of a company whose the tangible problem of breast support. What marketing is deliberately targeted at older was relevant in the United States was totally customers, it is never advisable for the opposite to the way European women related image of a brand to be too closely asso- to their bodies. In its tone and inflexibility, ciated with an older clientele. Although it Playtex seemed to be addressing the mothers, is aiming at the flourishing older customer not the daughters. market (that is, customers over 50), Damart Although it was still the world’s leading must make sure not to be associated with brand for shoes and ski bindings, Salomon the clientele who are 60 or 70. Without recently realised that it was in great danger of going to that extreme, the Yves Saint ageing within a few years. In fact, Salomon, in Laurent label appears to young people to the same way as Rossignol does, has repre- represent a clientele older than that of sented the values of alpine skiing for half a Dior’s and Chanel. century: effort, order, competition, gaining one hundredth of a second, beating all others What is it that produces these impressions of by a microsecond. The new generations no ageing? Most of the time these impressions longer subscribe to these values: a counter- are well founded: the brand no longer seems culture, originating in the surf, is dominant to belong to its time and has lost its inner on the slopes, bringing with it new sports and energy. new values. What has been called the ‘glide Many brands allow themselves to be asso- generation’ has not learnt alpine skiing and ciated with the products of another age. With probably never will. They instinctively the acceleration of time, the notion of practise snowboarding on the slopes in winter another era now refers to a close past. In all and roller-skating or rollerblading in the markets dominated by technology, obsoles- streets. They put as paramount values cence can occur very rapidly. Little can be friendship and emotion: they eschew compe- done for brands linked to a dated technology, tition and the brands associated with BRAND TURNAROUND AND REJUVENATION 445 yesteryear. They have elected their own gods: riding a motorbike as they are for skiers and Burton, Airwalk, Quiksilver, Oxbow. All these autumn hikers. Through these significant brands are new and symbolise another vision actions, they address their future customers of sport. and put an end to the stagnation of their The lack of evolution in a brand’s outward clientele, for in 1990 Damart was attracting signs indicates its present lack of interest in hardly any new buyers, but was selling more attracting new customers. and more to loyal customers. Certain brands also come to a standstill As has been noted, keeping in touch with because they remain associated with the same young people implies a cultural revolution images. The fact that Yves Saint Laurent seems among management. The efforts to be made more dated than Dior or Chanel is connected may seem huge to an older internal team who with the omnipresence of the ageing creator often do not appreciate the danger they are himself and association with Catherine facing as their own reference points always Deneuve. Lancôme was sensible enough to seem secure. Finally, with consumers living bring in younger and international stars. longer, the effects of the clientele’s ageing As for the clientele, the loss of direct contact may pass unnoticed. The decline is slow and with young people is the surest symptom of never spectacular. But unfortunately, as with a ageing. This is what differentiates Johnnie cancer, without an obvious sign of decline to Walker from Jack Daniel’s or Martini from react rapidly to, it may sometimes be too late. Bacardi. To make the radical internal changes Without necessarily having to appeal to required to energise an organisation which young people between the ages of 20 and 25, has aged with its own reference points, there the brand should always be attractive to should be no hesitation in rejuvenating the tomorrow’s consumers. The buyers who are entire management with younger people. The today in their forties will modify their func- revitalisation of brands always starts with a tional expectations when they reach their major work of internal rejuvenation. fifties. But they will also like to show that they have not changed by staying with their usual brands. They will refuse to support the ghetto Rejuvenating a brand brands which signal their entry into old age. This is why Damart’s future depends on its How should one rejuvenate a brand? How can image among 45-year-old men and women a declining or a past brand revive? How do you even if its marketing is rather targeted at the recreate a durable growth for a brand that has 55-year-old senior consumer. Damart has to for long been declining? Although there exist a work on the evolution of its image, not of its wide variety of situations, the goal is the same: target clientele. To do so, they must improve to bring a brand back to life. This leads to the their image so as not to appear a last-frontier core question, what life? Whose life? As a rule, brand. This is why, besides the modernisation it will rarely be the same as formerly. of their main product, underwear, they have There is a big difference between respecting left behind their old methods of distribution: one’s roots and cultivating the past. some department stores now have a Damart Revitalisations, revivals are based on an lingerie department next to Playtex, Rosy or updating of the overall offer of the brand Warner. Damart also advertises products that while staying true to part of its identity. cross the generation barrier, allowing them to Revival means aiming at a new growth dissociate their image from one based merely market. The brand must find a new relevance on age: thick and coloured tights are just as and differentiation. The term ‘revival’ of a appropriate for a young girl in a short skirt brand is not quite accurate since it always 446 CREATING AND SUSTAINING BRAND EQUITY implies a change in the product, or in the useful to analyse this as shown in Figure market, or in the target market. It is a relaunch 16.1. but not necessarily among the same people as As a rule, declining brands have few before, or in the same distribution channels, positive salient evocations, or these evoca- for the same uses, or whatever. With time the tions are generic and lack differentiation. The consumers, the markets and competition will real potential usually lies in the latent associa- have changed. tions. It will be the role of marketing to choose the right set from among these buried Redefining the brand essence positive associations. Then the brand will have to embody them in new products or Even forgotten brands have an internal services and channels aimed at the new target. meaning, a domain of legitimacy to be exploited. The first task in a brand revitali- Revitalising through new uses sation is to understand which values of this brand still have a high relevance, and which The revitalisation of a brand usually follows have lost meaning. Burberry rediscovered its new paths that are very different from those DNA: the ability to epitomise the classic that led to its initial success. If there has been eccentric dandy in English fashion. Old a decline, it is because these paths did not lead brands have disseminated bits of associa- to any new demand or pocket of growth. tions in people’s memories, even among Revitalisation involves establishing new non-customers or newer generations. These parameters for the brand. Since its original weak memories act as a ‘humus’. It is consumers are no longer able to ensure its important to analyse this humus. What is success, it has to attract a new clientele, left about the brand essence? What are the develop new user occasions, new distribution potentialities emerging from it? What channels and new consumer networks. market opportunities could be met? It is Brandy is a classic example. It is typically

Salient evocations

Negative Positive

Latent evocations Figure 16.1 Analysing the potential of an old brand BRAND TURNAROUND AND REJUVENATION 447 associated with the ‘after-dinner’ and that are little prescribed these days. Some of ‘connoisseurs enjoying a brandy together’ them have become generic names. The type of occasion, an image and occasion that strategy consists in selling them on the have been responsible for a massive decline in shelves of supermarkets, where their name the volume of brandy sales worldwide. After triggers immediate recognition and trust. years of decline in the face of competition from white spirits, which are much easier to Revitalising through innovations drink and much trendier (Bacardi, Absolut, Seagram’s Gin and so on), brandy sales have Barely 10 years ago, Mercedes was under threat. recently soared in the United States. But with The brand had certainly gained international one major difference – 50 per cent of the acclaim, but the signs were nevertheless volume of brandy currently consumed in the worrying. In California, where new consumer United States is consumed by the black trends are created, Mercedes was no longer an community, which represents 12 per cent of aspirational brand. It had been replaced by the population. It has become the favourite Lexus, the top-of-the-range brand from Toyota. drink of African-American males, within the And in Europe the average buyer of the smallest context of a lively social situation, where Mercedes of that period, the C-Class, was status value is essential. They ask for Martell 51 years old. or Hennessy, as well as Thackeray (gin) and Clearly Mercedes was becoming a brand for Crystal Roederer (champagne). older people. The company’s CEO made a To target a new consumer group, a harsh but accurate diagnosis: either the brand company must be ready to call its traditional remain as it was and the company would go marketing into question and define an bankrupt (like Rolls-Royce) or it would have to optimum marketing mix for its new target evolve. group. The process begins with new The first step was to re-establish the condi- customers, their life-style and new occasions tions that would create a favourable economic on which the product is consumed or equation – the company would have to purchased. Innovation is therefore central to produce 1 million vehicles to lower the revitalisation of old brands. production costs to an acceptable level. The second was to attract a younger clientele – Revitalising through distribution they could not be left to the competition until change they reached 51! To do this, the company had to break with the standard design of all In fact, it seems that a classic revitalisation Mercedes cars for the previous 60 years. strategy is to use known brands in different This is why the event that revitalised distribution circuits. For instance, a super- Mercedes was the launch of the A-Class. This market food brand could be moved to a little car, which was in direct competition with channel that rests on ‘push’ marketing rather the Volkswagen Golf, was the brand’s new than ‘pull’ marketing. This is why one sees ‘prototype’ in Europe. It departed from the tradi- many formerly famous brands in canteens, or tional Mercedes image on two counts – it had office restaurants for instance. It creates value front-wheel drive and a completely different in the eyes of the clients (more than an design. However, it still had the interior space of unknown brand or a private label) and these the C-Class and the safety of the E-Class. In fact, brands are cheaper than well-known leading it currently accounts for 30 per cent of Mercedes brands. The obverse is also true. One company sales in Europe. Above all, it has attracted a has specialised in purchasing old medical younger clientele (with an average age of 37), products, with 100 per cent aided awareness, more women and the style conscious. 448 CREATING AND SUSTAINING BRAND EQUITY

In the United States, the new Mercedes including new entrants. In addition the ageing prototype is the luxury 4 × 4 M-Class, which brand is held as an icon of the past, and may has re-established contact with the trendy set attract bad will, not goodwill. of California and elsewhere. The task of recreating proximity through To target even younger consumers, the beau- direct contacts and shared emotional experi- tiful CLK Roadster was deliberately positioned ences will be difficult, but it is an essential part at an attractive price. Its beauty, sensitivity and of any comeback. Salomon, which had lost design are now part of the new Mercedes brand contact with the surfers who were its future contract. Of course, any form of extension market, had to create an internal cultural modifies the original brand, and Mercedes is no revolution, changing its management and longer an exclusively luxury brand. The new hiring young people who were likely to be Mercedes management is more segmented, able to recreate the lost connection. more attuned to the needs of its consumers and Apple had lost contact with today’s new their life-style. The brand regularly renews its trendsetters, who are no longer advertising status as the world’s leading car manufacturer agencies, but the kids seduced by Napster and via its top of the range models, of which the whose use of the internet is now mostly to S-Class is the symbol. exchange music within their virtual tribe. Ballantines, formerly at Allied Domecq, Revitalising through segmentation realised recently that it too had lost all contact with youth. Managers more concerned with To revitalise Burberry, Rose Mary Bravo knew their own fate in the midst of mergers and she had to segment the lines and sub-brand acquisitions in their sector concentrated on them. Burberry London is a modernised the brand’s core clients, not the future clients. offering for the classic clients. Burberry They forgot that sustaining brand equity Prorsum is very fashionable and modern. means addressing current and future business Thomas Burberry is aimed at teenagers. The alike. For instance, in 1995 brand equity first segment ensures cashflow and makes it monitoring showed that in some European possible to take a risk on cash-demanding countries, brand spontaneous awareness fashion stores. among 18–24-year-olds had dropped from 47 per cent to 13 per cent in seven years. It is not possible to get out of this dramatic Revitalising by contact with opinion problem just by changing one’s advertising. leaders Sometimes creating a new product is needed, because in between, everything has changed: Why did Hush Puppies become fashionable consumers, their habits, the competition, again in the United States in 1993 (Gladwell, places of consumption and so on. 2000)? Because East Side Manhattan fashion- Regaining contact is a preliminary. A brand is istas found them cute and appropriate for not a product with a name, it is a relationship. their quest of permanent differentiation. After years of indifference, not to say neglect by Ageing brands have generally lost contact Ballantines, the brand had to reconquer the with the trendsetters in their category, the lost relationship. It might still have been tribes that prefigure change. Advertising and number one in some countries, but that was product innovation will be of no help without because of a core of frequent buyers, all ageing. the active support of these trendsetting tribes. Benchmarking the best practice of Pernod- It is not easy to make friends again with people Ricard, the brand decided to invest massively one has not called for years, during which time in Europe, and also in South America, to they have been seduced by the competition, reconquer proximity by contact. Targeting is BRAND TURNAROUND AND REJUVENATION 449 crucial: what key tribe? The management iden- created, merging fashion, sport, music, tified snowboarding as representing the core dancing, entertainment and video games, values of the new generation. showing a high level of investment, and a In cooperation with the International very good understanding of the target Snowboarding Federation, which was fighting audience’s desires. A special logo was created, against the International Ski Federation, it Ballantines Urban High, which could even- sponsored all alpine snowboard events, and tually become a label for licensed products (a created a night event in discos. However, to be clothing line, T-shirts, music and so on), effective today at regaining contact, spon- certainly a website, and why not a franchised soring must go far beyond just stamping the store chain in the future? event with the brand name everywhere. The The event was well prepared for through brand must be at the centre, or a key ally of the selection phases and brand presence the event. across the country,. The budget Step two entailed recognition that urban commitment was high (about s600,000) for youth was the target. Ballantines decided to the Berlin event, which was attended by bring snowboarding to cities through the 100,000 young people (so it cost s5 per ‘Ballantines Urban High’ Tour. In the middle person for a contact that should create a of capital cities from Berlin to Rio de Janeiro, long-lasting emotional memory and or on their beaches, Ballantines had a huge involvement with the brand). ramp built, covered in artificial snow, to host three-day national contests to find the best Revitalisating through 360° freelance snowboarders. The contest was communications preceded by country-wide selection phases, thereby creating a mounting buzz through When Chivas was declining worldwide, its word of mouth. The event fuelled advertising said defensively, ‘When you involvement. The first event of the series took know’. In a major turnaround, Chivas 18 now place in October 1995 in Berlin, symbolically promotes the ‘Chivas life’. Its identity is rich at the Brandenburg Gate (which used to be and generous, its positioning sells an appetite the only gate in the Berlin Wall where people for life. This new platform is expressed from the former East Germany could come through 360° via global advertising, but also through to the free West). Because among major events, parties with celebrities, part- young people everything goes together, nership with luxury resorts worldwide, not to during the contest there were an open air mention product placement which concert (with the group Prodigy), grunge contributes to making brands ‘cool’. fashion shows, and night-time promotions in all the city’s discos around snowboarding Changing the business model themes. In addition for the cream of the cream, Ballantines created Ballantines orbit, a Once in a while daring entrepreneurs buy an huge mobile tent, with restricted invitation to old and ailing brand and decide to revitalise it. those perceived as style leaders to listen to live It also happens that big groups do so. What is techno music. After Berlin the tour went on to often presented as a brand revitalisation is Prague, Milan, Moscow, Rio de Janeiro – it still actually a change in the business model. In goes on. Chapter 1 we emphasised that a brand that The lessons that can be drawn from this cannot provide benefits has no real value. By case are that proximity today means bumping benefits is meant financial benefits, economic into the lives of the target group, not just value added (EVA) once the cost of capital had being there. A multidimensional event was been paid (see also Chapter 18). What makes 450 CREATING AND SUSTAINING BRAND EQUITY an ailing brand more valuable is the new success of the revitalisation is attributed to business model on which it will rely. ‘the brand’ as a short cut, because there is a For decades l’Aigle, a former subsidiary of lack of information on the company itself, the Hutchinson, was known for its rubber boots. strategy, the back office. Certainly the brand Its name was also its symbol: it came directly reputation was an invaluable asset, but that from the American Eagle. It had become a asset was worth nothing as long as it was not cult brand among fishermen, hunters, supported by a valid business model. nature lovers and country landowners. But Chinese imports and modern distribution created too many problems, the company Growing older but not ageing went broke, and it was bought in an LBO. Now there are Aigle stores opening every- Louis Vuitton is 150 years old! It is also the where in the world. Has the brand changed? most fashionable luxury brand in Asia. One In name terms it has lost a letter, moving way of understanding revitalisation is to from l’Aigle to Aigle, gaining simplicity and consider brands that have not ‘aged’. How have internationality. Most important, it moved they done it? Typically, the brands that have from a boots brand to a leisurewear brand, defied the passage of time have adopted a dual whose prototype (most symbolic product) logic, as illustrated by Nivea and Lacoste. To has moved from the rubber boots to a parka, follow their example and stay young, a brand a solid product, as the main value of the must implement three types of initiatives brand commands. The vintage rubber boots towards the product. These can also be used as are still there to nurture the myth, but a model for relaunching a brand. business grew through the new prototype. There are a lot of benefits in this change of Facelifting, reinventing and business model: innovating l Brands that rely too much on a mono- The management of a brand involves main- product are always in danger, as they taining the present (what the brand is now) cannot smooth out a drop in sales. Boots while at the same time working for the future. sell less when climate becomes dryer. Also, It is the present that constitutes the source of since the rubber boots were of excellent income and therefore allows the development quality, they lasted a long time. Brand of the growth products of the future. As loyalty was high but the time between shown in Figure 16.2, in order to stay young, a purchases was too long. brand must implement three types of initia- l Extending the line to leisurewear made it tives at the same time: possible to free the brand from the grip of modern distribution and build its own l It must continually modernise the selective distribution network. The ‘prototype’ in the same way that Nivea extended line made it more than possible introduced Nivea Soft to modernise its to fill each store. basic in the famous metallic blue jar. Nivea Soft is lighter and less greasy, and is l Leisure wear is fashion conscious: people marketed in a white jar. Lacoste regularly buy new garments each year even if they improves its famous 12 × 12 polo shirt in already own similar ones. It is also a less terms of the quality of the wool, the price-sensitive sector. colours, the sleeves and so on. This example is a reminder that too often the l It must also reinvent the ‘prototype’, just as BRAND TURNAROUND AND REJUVENATION 451

Brand Brand communication for image (signs, codes) and proximity (sponsoring, relationship marketing...)

Prototype Brand Line extensions upgrading extensions

To match the ever– To capture new Permanent upgrading of evolving needs and sources of growth sales platforms attract new consumer To extend the brand – new users (formats) franchise and reinforce – new desires (variety) brand authority and status – new needs (ingredients)

Figure 16.2 Sustaining brand equity long term: dual management in practice

Lacoste produced a tight-fitting shirt with Actively seeking out new types of behaviour Lycra since this is how the woman of 2005 means opening up to the idea of exploring liked to dress. It was an immediate hit. For new distribution channels, since new example, imagine a brand of haircare behaviour is often linked to new places and products whose basic product is a lotion. It situations. These innovations also provide would certainly have to modernise it in an opportunity to launch new and truly terms of the packaging, and update the groundbreaking publicity campaigns, both formulation. But it should above all consider in terms of their basic structure and espe- how today’s customers would want to apply cially their style. In this way, the brand the product. It is quite possible that rubbing sends out clear signals that it is reinventing a lotion into the scalp is something that is itself. At the same time, these campaigns no longer done, even though the product aim to launch the business of these innova- itself is extremely relevant. In this case, tions, just as they would for any new another method of application would product. certainly be the best form of innovation. You only have to think of Nivea, which Detecting the symptoms of ageing invented the first spray-on sun lotion. brands l Finally, it must innovate by actively seeking out the trends and behaviour that Brands are built by the sum of all their behav- currently dominate the younger consumer iours creating value at contact points with segments, since these are the segments that customers. This is why brands should regu- will generate customer loyalty in the larly monitor their behaviour. There are future. To return to the example of the hair- many sure symptoms of a brand dropping off, care brand, it simply cannot afford not to and they can be grouped into seven main create new products – which are of course types. in line with its brand contract. Young people are mad about hair gels, styling Insufficient preparation for the future products and hair colour. These markets certainly exist already, but the brand can l Insufficient rate of new products in the create new segments within these markets yearly sales. that work in its favour. 452 CREATING AND SUSTAINING BRAND EQUITY

l Low rate of patent registration. l Date of the last interview with lost customers. l Low rate of trademark registration (a sign of l Increase in proportion of customers little need to name new products and declaring they are ‘moderately satisfied’. services). l Date of the last blind test. l Insufficient investment in R&D, in market sensing, in trend spotting. l Lowering rate of repeat purchase. l Insufficient knowledge about new uses and l Decrease in spontaneous awareness new emerging situations of use. (saliency). l Date of the last executive committee l Decrease in number of spontaneous press meeting to address these issues. quotes.

Insufficient dual management Insufficient vitality at contact l Insufficient knowledge about non- l Lack of regular updating of the quality of consumers, modern consumers, tomorrow’s the logo and visual symbol of the brand. consumers. l Date of last change or facelift for the pack- l More and more sales to a reduced number aging (design, ergonomics). of clients. l Lack of regular facelifts for stores or l Following the demands of existing clients, concessions. not foreseeing the changes in the market. l Lack of organised merchandising, lack of l Slow but regular increase of the average age plans to regularly rethink it. of clients. l Lack of service (call centres, websites and so on). Insufficient capacity to capture growth l Lack of brand proximity marketing. pockets as they emerge l Lack of advertising. l Thinking the brand only through its historical product, without being ready to capture emerging new materials and Insufficient self-stimulation demands. l Lack of curiosity. l Excessive vision of what is called brand l Lack of desire to surprise. coherence, thus limiting the types of exten- sions to be made by the brand. l Lack of PR events. l Lack of contacts with new opinion leaders, Insufficient relevance with the press. l Weakening of the present positioning and values. Insufficient staffing l Weakening of the way values are l Lack of young managers. materialised. l Sex imbalance among executives (100 per l Date of the last customer satisfaction cent male or 100 per cent female). questionnaire. BRAND TURNAROUND AND REJUVENATION 453

Back to the future with this strategy. For instance, at Decathlon, as soon as operating margins get higher, the Often a brand’s decline is tied to forgetting alarm bell rings. Decathlon’s deep culture the brand’s mission. Little by little small focuses on making people happy through adjustments have been added to the strategy, sport and physical activities. This is achieved and cumulatively they have led the brand through a remarkable policy of providing own astray. This is how heavy discounters become brands with the best performance/price ratio less heavy discounters, luxury brands become on the market. Higher margins seem to less luxurious, feminine brands become less indicate that this ratio is becoming less excep- feminine and so on. ‘Back to the core’ is a tional than it should be. classic revitalising strategy. It does not mean This is also very typical of hotel management. being obsessed with the past, but if the early Regularly at Accor Hotels, each brand holds a vision and mission are still valid, trying to seminar called ‘Back to the future’. The goal is to come back to it while acknowledging that the assess if the strategy is being followed or if in product itself may need to be updated. fact it has subtly changed. If it is the case, what Many groups act preventively by regularly services should be deleted or added in order to checking the relevance of their identity and once more fulfill the brand’s mission? the fact that the operations are actually in line 454

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Managing global brands

Geographic extension is the necessary fate of successful. If on a global scale we cannot brands. On it depend the brand’s growth, and deny the existence of certain factors that its ability to innovate and to sustain its bring together countries and cultures, we competitive edge in terms of economies of must not forget that the speed of this coming scale and productivity. As such, marketing together is sometimes slower than reckoned. directors are no longer questioning the prin- Moreover, if at a certain level of generality or ciple of international expansion, but are social and cultural trends consumers in many preoccupied with the means by which this countries declare the same motivations and can be accomplished. They ask themselves: expectations, a closer look reveals slight Where should we go? What balance do we differences that must be taken into account. maintain between a global brand which shuns This chapter urges us to a pragmatic linguistic and national frontiers, and one approach. The empires built by Marlboro or which makes provision for local requirements Coca-Cola will not be replicated, as they and context? Which brands are destined to benefited from particular historical and time have global significance and which should factors. The international expansion of Coca- remain on a national footing? Finally, how do Cola was fostered in great part by two world we rationalise the portfolio of national brands wars and the presence of GIs in Europe and into a small number of global brands? Any Asia. It took Marlboro 35 years to conquer such transition must be carefully managed. the world and McDonald’s 22 years! A The debate between advocates of brand contemplation of these models, however globalisation and those of a sound adap- agreeable it may be, is quite useless for tation to local markets was set in an academic Danone, for example, whose brand image fashion in the 1980s through the articles of varies from one country to the next because Levitt (1983), and Quelch and Hoff (1986). the products through which it penetrated One had to choose sides almost ideologically. these countries cannot be the same: creamy Twenty years later, we are able to learn from desserts in Germany, plain yoghurts in France, past experience which was more or less fruit yoghurts in Great Britain. How do you 456 CREATING AND SUSTAINING BRAND EQUITY then create a uniform image around the Twenty years later, how far has this concept of health if in concrete terms the prediction of globalised markets been brand does not have the same products in fulfilled? Anyone who travels knows that the each market or country? This is the reality for same brands are found in countries most brands today. They are not much helped throughout the world, whether it is Philips, by the models of brands that have created a Michelin, Sony, Hugo Boss, Nike, HSBC or new category (Coke, Amazon, IBM, Chanel). Axa. However, beneath the surface, what do They need other models, more relevant to the companies really think of globalised brands? situation most companies and brands are Is it still what they want? Is it still their ideal? facing, when they operate in already existing It should first of all be pointed out that categories. Professor Levitt’s prediction was based essen- tially on factors associated with production and on the unmistakable competitive advan- The latest on globalisation tages of economies of scale. In fact, most globalisation has taken place at production In 2003 the G8 summit coincided with an level, which is why it has been the target of anniversary that went unnoticed. Twenty some of the criticisms levelled by the anti- years earlier, in May–June 1983, an article globalisation lobby. In her very interesting entitled ‘The of markets’, by book No Logo (1999), Naomi Klein berates Professor Theodore Levitt was published in the companies that do not have factories the Harvard Business Review. The direct and and, as a result, wash their hands of anything simple nature of its argument was to make it that goes on in the archaic factories of their one of the most quoted and influential Asian subcontractors. Nike is a good example articles in the field of business of this. By contrast, when Jean Mantelet, the management. According to Professor Levitt, creator of Moulinex, tried to keep national differences and preferences would employment in Upper Normandy at all costs, no longer carry any weight in the face of the it ultimately cost him his company (but not progress and reduced costs associated with the brand). The movement towards globali- international products and brands. With sation of the upstream (production) stage is everyone in the world travelling either therefore unavoidable. Successful companies physically or, in most cases, via satellite tele- have globalised their factories and supply vision, the desire to buy products and chains to bring them closer to their markets brands sold in other countries would also and/or take advantage of lower costs. The car greatly increase. industry is a typical example. In short, while recognising that the world It should, however, be recognised that this was indeed round, companies had a vested is a movement that has affected products interest in regarding it as flat, and treating it more than services. While the circulation of like a single market. This was the strategy the flow of money and information no longer adopted by Coca-Cola, McDonald’s and encounters any barriers and is instantaneous, Microsoft, and by the many companies that the movement towards the relocation of, for followed in their wake. The main obstacle to example, the processing of financial infor- the globalisation of markets was decentralised mation, data files and bank databases is only organisation and its symbol – national just beginning. UK banks and insurance marketing directors who, by their very nature, companies have taken the initiative by could not help but promote the opposite finding in Bangalore, the Indian equivalent of argument, the one that justified their Silicon Valley, a well-qualified but much less position. expensive workforce. Call centres serving MANAGING GLOBAL BRANDS 457

French customers are often based on the local test centres. Safety standards in the island of Mauritius. United States are less stringent than in There is one point on which the forecast of Europe and Asia. globalised markets can be challenged – the l The third factor concerns structural differ- downstream stage of brands and products that ences such as the type of roads, climate, are a long way from the predicted standardis- humidity and the resulting use of vehicles. ation. Of course, you find Porsche and Jaguar This therefore involves very different worldwide, but these are exported brands, like drivers of preference on either side of the Chanel. They are the standard bearers of a Atlantic. particular country or culture, and appeal to an international clientele. The car industry l The last factor is the customers themselves. provides a good illustration of why the Everyone knows that the Germans like a concept of the global product is in fact a certain type of comfort, the British and myth. Paradoxically, the most global product French another. Today, manufacturers are that ever existed in the car sector was Ford’s flocking to China which alone will shortly famous Model T – it was totally standardised, represent 25 per cent of the growth of the with 20 million cars manufactured and sold world car market. They are opening worldwide. Even though the domestic market factories and establishing joint ventures was by far its principal market, the Model T like PSA Peugeot Citroën, but not with the was a truly universal product. In 1981, the aim of slavishly duplicating European launch of the famous Ford Escort in the models. It is impossible to appeal to a United States and Europe appeared to be a market of 300 million Chinese who now sign of globalisation. In fact the US and have the financial resources to access the European models only had one part in market without taking account of the common – the radiator cap. Hardly a global customers themselves. product! More recently, the Ford Focus was launched in Europe (1990) and the United The time has in fact come to recognise the States (2000), and this time the models from post-global brand – the brand that no longer these two world regions had 65 per cent of tries to adhere unreservedly to the model of parts in common. But Ford does not think it total globalisation, which is no longer can go much further – there are too many perceived as ideal. Of course, globalisation at structural and long-term factors against it. So the upstream or production stage remains a what are they exactly? priority in many sectors. Like the car sector, which has reduced costs by sharing l The first is that energy is very cheap in the production platforms, companies can still United States, which it will never be again save more money by creating a smaller in Europe. Low-energy innovations that number of product platforms that are able, if have an enhanced value in Europe are the need arises, to produce differentiated regarded as irrelevant in the United States. models. The service sector could also benefit This is why the engine type cannot be the from upstream globalisation. same in both regions. However, the further you go downstream and the closer you get to the customer, the l The second is that vehicle standards and more obvious it becomes that the global testing remain primarily national and in concept tends to be replaced by the regional or any event regional. Manufacturers local concept in the case of a large country. therefore have to adapt their vehicles to There will therefore never be a car that is truly suit the specifications and requirements of global, but a more American type for the 458 CREATING AND SUSTAINING BRAND EQUITY

United States, and other types that are charac- Why are American brands ideogically teristically European and Chinese. This has more global, and the European ones less so? already happened on other mass-consumption We hypothesise that the American glob- markets. For example, the strategy of the US alised brands were exports of successful company Procter & Gamble is based on region- brands that had taken many years to find alisation, with the US flagship brands Tide, their optimal functioning and positioning Whisper and Clairol becoming Ariel, Allways in the United States. The idea that this and Wella in Europe. The company has a equation of success would simply apply else- factory in Europe for all its detergents. where seemed to be taken for granted, for It is becoming more and more common for the United States themselves constitute a companies to develop products for specific non-homogeneous market. As an example, geographical regions, in the way that it is noticeable that Wal-Mart’s first store Hennessy created Pure White for Europe. outside the United States, in Mexico, was Dannon (USA) could not sell its drinkable, created 30 years after the creation of low-fat yoghurts in Europe since they neither Wal-Mart (Bell, Lal and Salmon, 2003). Its correspond to local taste nor meet the current worldwide competitor Carrefour opened its food standards requirements. It is however first foreign hypermarket in 1969, only six true that initiatives designed to open up years after it created its first store. regional markets, such as the EU, Mercosur Unsurprisingly Wal-Mart applied the rules and Alena, help to make the region, in the that made its success in the United States, broader sense of the term, a relevant market but in some countries, more remote from segment. Furthermore, it is at regional level the United States than Mexico, such as that the world’s markets, and even its Brazil, the golden rule of everyday low price historical and cultural communities, are at does not seem to work. The average Brazilian their most permeable. consumer is instead eager to capitalise on Finally, even when a brand appears to be special bargains. Carrefour, being unsure global, when it is distributed and well known about its optimal formula, was more open to in countries throughout the world, closer the specificities of the new countries. examination reveals that the product is often The same holds true for Nestlé, number one far from standardised – it is more of a food company in the world. How can Nestlé composite, hybrid or highly adapted product. be sure that the situation is the same every- For example, l’Oréal differentiates between the where when it comes from a small country cosmetic products of its so-called global brands like Switzerland? In fact Nestlé internation- by basing them on the four types of climates in alised to four countries its first-ever product, China, since they determine four skin types. powdered milk, four months after it was The idea of a global market and the stan- launched in Switzerland. dardisation that it implies, has usefully served We tend to favour extreme solutions (to be to start a basic movement in all companies. or not to be global?), for they are rhetorically But over-globalisation leads to loss of rele- more provocative. Real life is in the middle, vance, a lesson that companies have often but it is more complicated. People have to learnt to their cost since 1983. This is why collaborate in the organisation. Then the today’s brands are post-global – they have question becomes how to build a collabo- assimilated the myth and distanced them- rative organisation (Hansen and Nohria, selves from it without exactly renouncing it. 2003). Today, it is more appropriate to refer to What is new then? Realism in globalisation, selective globalisation. the mark of the post-global brand. MANAGING GLOBAL BRANDS 459

Patterns of brand globalisation sation, the feeling of an inescapable loss of country differences. All commercial centres Before we move forward, it is important to sell now the same stuff, the same brands, specify the meaning of global. For most throughout the world. Human richness and managers a brand is global when it is sold diversity now seem dangerously eroded by the everywhere in the world. Finding ads in all law of economies of scale. Of course, those airports about Nokia, Dell, IBM or Alcatel who do not travel are pleased by the possi- seems to be a living sign of real globalisation. bility of accessing the brands and products However, this may be a superficial vision. they see on television while watching the We know from Chapter 1 that a brand is a world. system relating three facets, a concept, a What are these eight structural types name, and a product or service. It can be obtained by combining the two possible pictured as a triangle. As a consequence, when answers on each part of the brand system? one speaks of globalisation, one should specify of what? l Type 1 is the fully global model. Here there We saw that there are strong compelling are very few adaptations, except for details. economic reasons to globalise products or l Type 2 recognises the need for different platforms. There are also good reasons to use positioning strategy: Mars is a meal the same name, for the sake of capitalising on substitute in UK (have a Mars a day), but an one single name and exploiting the extra energiser in Europe. Cars follow the same value of global perception. Finally, some approach. What is a small car for the concepts are reflections of the existence of German market is seen as a family car in global segments. Actually, the combination of Portugal. these three poles creates eight possible alter- native strategies as far as the continuum from l Type 3 acknowledges the need for globalisation to localisation is concerned (see important product adaptations. Different Table 17.1). countries have different tastes for coffee. When people refer to globalisation, it is The skin and hair of Brazilians are not the generally in a loose sense, a feeling that the same as those of Argentinians. In China, brand is known, visible and distributed every- according to the l’Oréal Group, because of where. When we travel abroad some brands the differences in climate, sun, and do seem global: we see them on billboards as humidity, there are four types of skin soon as we land at an airport. It is this vision balance to be respected from north to that creates negative attitudes about globali- south, east to west. Connex is a world

Table 17.1 From global to local: eight alternative patterns of globalisation (Yes = global, No = localised) Type 1 2 3 4 5 6 7 8 Name Yes Yes Yes Yes No No No No Positioning Yes No Yes No Yes No Yes No Product Yes Yes No No Yes Yes No No Examples : Coke Mars Nescafé Persil Ariel/ Volks- Cycl- Pure Chanel Martell Garnier Tide wagen europe local Amex Vauxhall Opel (Group) (Group) Sony Benckiser 460 CREATING AND SUSTAINING BRAND EQUITY

ground transportation brand: it operates Looking more specifically at two of these vari- railways, buses and metro systems ables, the brand name and the product wherever municipalities want to create platform (is it common or are there widely concessions for this public service. different products?), there are four strategies. However, the same concept, ‘security’, Danone for instance, like Unilever, is not means very different things in Stockholm, obsessed with common names, but with the where Connex operates the metro, and in creation of products/concepts that reach an Rio de Janeiro. Thus, obedience to the annual turnover worldwide of s1 billion. The same brand values cannot mean providing CEO, Frank Riboud, states that ‘our ambition the same secure product everywhere. is not to develop brands that are number one Local expectations are not as high in in the world, but brands that are number one South America as they are in Scandinavia locally with global world concepts/products’. for instance, or the capacity to pay the For instance ‘Taillefine’ (literally, slim waist), price. whose name changes according to the country (Light’fit in the United States, l Type 4 is the result of brands being split Silhouette in Canada, Corpus in Brazil, Ser in between companies. This is the case of Argentina, Vitalinea in Spain, Vitasnella in Persil: this brand is operated by Unilever Italy, Vitaline in Greece), is a concept of and by Henkel. The same holds true for adult tasty food aimed at those maintaining Gervais, an ice cream brand at Nestlé, and a a low-fat diet. It is stretched over the three range brand of dairies at Danone. divisions of Danone group, dairies, water and l Type 5 results when the company cannot biscuits. As such one finds the products of use the same name for legal reasons every- this concept either as purified water, or as where. For instance Vauxhall in the UK is biscuits under Lu source brand, or as dairies Opel in Europe. under Danone source brand. But in Argentina the group has kept the endorsing l Type 6 results when almost similar local brand Serenissima, with its 65 per cent products are sold under two world brands market share, to reinforce its competi- with different price positionings. It is what tiveness. This local brand, number one in is currently happening at the high end of Argentina, now endorses the global the Volkswagen range, where the cars are concepts. very close even in design to the Audi entry Another global concept is Actimel, a models. specific yoghurt designed to reinforce the l Type 7 is the business model of Cycleurope, body’s natural defences. It is sold in 22 coun- leader in the bicycle market. Cycleurope is tries, with a sales turnover of half a billion a Swedish company, which has bought the euros, and a sales growth of 40 per cent in market leading bike brands in other coun- 2002. A final example of a world concept is tries. These are typical local names, with the aromatised water sold as Danone high recognition and proximity. There are Activ’Aro in the UK, Volvic Magic in France, strong differences in the bike standards and Bonafont Levite in Mexico. On the whole expected by the Dutch, Swedes, Germans, more than 60 per cent of the Danone group French and Italians: the size of the wheel, sales are made by concepts that are the market the gear, the height of the bike are leader in most of the countries where they are different. Standardisation can only concern sold. the frames. Unilever has been criticised for having more than 1,400 brands, none of which reach l Type eight is the fully local model. the critical size (US $1 billion) to become a MANAGING GLOBAL BRANDS 461 world mega-brand. It is now engaged in a Why globalise? fierce reduction of the number of brands. However, to take the ice-cream business, it is An economic necessity operated under the endorsement of the well- known names of the former local market Very few people dispute the need to interna- leaders (Walls in the UK, Miko in France and tionalise business. World commerce has so on), all presenting a common international existed since caravans brought spices from all logo. But their sales are made through power over Asia to Europe. The great naval explorers products that are sold globally and managed of the 15th and 16th centuries were also moti- as real brands: Magnum, Solero and so on. In vated by the prospect of opening new routes the margarine business, trust is very to merchandise. Colonisation had economic important. Local names have been main- motives: access to raw materials, to gold, then tained, but the whole company operates four wheat, then oil. typical product platforms for the whole Production was the first business function European market. to be delocalised. Finance is international. It is The matrix in Table 17.2 reminds us that the time of marketing. Why then global most companies started in quadrant A. They brands? Why not simply international or were international in sales before they multi-local brands? thought they had an asset called a brand, and In the competitive race, economies of scale by default before they realised they had to provide a strategic lever in that they contribute globalise their business. Mostly operating in to competitive pricing. A company designing a existing categories, and they do not consider car with worldwide market potential in mind Coke or McDonald’s as a valid benchmark for has a competitive advantage over the manufac- them. turer who only sets his sights locally. Even From A they can move either to B or C. though the latter may produce a car which B entails rationalising the products: it is the better reflects the tastes of his own country, the main source of profits and synergies. C means difference in price from that of a Japanese or a creating brand transfers to reduce the number Korean car designed from the start with a of brands. The output is less strong and the worldwide market in mind will naturally make risks higher. However, for all disruptive new even the most patriotic motorist hesitate. This is products such as Actimel, the quadrant D why Renault’s Twingo, whose low price is a key strategy should be adopted. element of positioning for the easy-to-live-with car, was designed from the start for a whole continent: the same product everywhere.

Table 17.2 Globalisation matrix Different brands Same brand everywhere Same products Different brands, Global brands, or concepts identical platforms no adaption of product (Unilever, Danone) (Coca-Cola, Chanel, Sony) (B) (D) Different products Sum of local Nestlé (Nescafé) or concepts tastes Yoplait Franchises President (A) (C) 462 CREATING AND SUSTAINING BRAND EQUITY

The local company – even if it is positioned It is also necessary to retain a single brand in a niche – has no other way of overcoming when the brand itself corresponds to the the price handicap than to extend its outlets signature or griffe of its individual creator. while innovating. Geographical extension is Take the luxury trade – Pierre Cardin is Pierre an essential condition in the race for survival. Cardin wherever his products are found, just If the brand is to remain competitive, its as Ralph Lauren is Ralph Lauren. Their innovation must be offered immediately to all creations are bought around the world at the lowest possible price. The marginal cost because their signature bears witness to the of each progressive feature rises day by day. values of their creator. Whether or not the Hundreds of researchers are needed to even creator lives on in body or in spirit does not hope to innovate. Industrial investments and change the rule: from a single source comes a research costs must now be set against low single name. unit margins. Using the awareness and public These cases apart, the single brand permits the confidence which it has acquired, the brand exploitation of new international opportunities: provides the firm with access to outlets on an l As tourism develops, for instance, it is a ever-widening scale. Without these, such disadvantage that certain products have investments could not be economically different names in different countries. If justified. The manufacturer’s brand opens the this were not the case, tourists could find way to progress and, at the same time, makes their brands. Seeing the queues of it available for all. comforted tourists from all countries in To summarise thus far, globalisation partic- front of McDonald’s instead of Quick is ularly affects products by allowing overall enough to convince anyone. This savings and leaps in the experience curve. But argument applies, however, more to some a global product does not necessarily signify a sectors than to others: to food more than global name, in other words moving from a lingerie and to car oil more than cooking single product to a single brand needs further oil. But the main advantage is linked to the discussion on the subject of economy of signs synergy: the exposure of an American exec- and symbols. utive to DHL in Europe will benefit the renown and the reputation of DHL in the The global name: a source of United States. Brands acquire additional advantages credibility when they prove to have inter- national appeal. This is why in 1989 Ariel In certain market areas, the global brand is a brought out the first advertising necessity, whereas in many other cases it is a commercial featuring testimony from means of exploiting and taking advantage of housewives from different European coun- new opportunities in communication. tries. The single brand is a necessity whenever the clients themselves are already operating l The more international media develop, the worldwide. Firms using IBM or Dell in London greater the opportunities they provide for would see no sense in having the same the single brand. This has long been the equipment in their Bogota or Kuala Lumpur case with traditional media; it now offices under a different brand name. The concerns satellite, cable and the internet. same applies to most technological industries. Real opportunities for worldwide coverage Caterpillar, Sumitomo, Schlumberger, are provided by such events as Grand Slam Siemens and Alcatel are of necessity world tennis tournaments, the Tour de France, brands – quite apart from the fact that they are the World Soccer Cup, the Olympic Games, global enterprises. Formula 1 motor racing, etc. Through its MANAGING GLOBAL BRANDS 463

sponsorship of the Roland Garros tour- are decided upon according to the global nament, the BNP Bank is known as far competitive system. Thus, whereas tradi- afield as California where they speak of the tionally each subsidiary planned their activ- tournament as the ‘BNP Tournament’, just ities based on their own resources and the as there is a ‘Volvo Grand Prix’. These domestic market, within a global strategy the programmes reach an international following is the case: audience and therefore in practical terms exclude on-the-spot local brands, since the l Certain countries have the task of devel- costs involved in appealing to only part of oping a marketing mix for a new product, the audience would be prohibitive. Only testing its capabilities in their home global brands can be present in worldwide markets before its extension to other coun- events such as the Olympic games or tries. This therefore constitutes a test, not Formula 1 motor racing. Only the global of the best marketing mix on single brand can justify the cost of sponsoring national lines but of a global marketing such worldwide stars as Tiger Woods, or mix prior to extension. As a consequence, Michael Schumacher. nowadays it is insufficient to keep an eye on the competition in one country alone – From single name to global brand every country should be included. l Certain countries are assigned to develop How far do we push the global idea? To what know-how on a particular brand or a type extent do we continue to make marketing of product brand so that they can act as a decisions on a national level? Should we glob- precursor and coordinator for others. alise positioning, creative concepts and even the ads themselves? The fact is that, though In contrast to the global approach, many no one denies that a single name is often an multinational firms follow a ‘multi-local’ advantage, there is some dispute over the philosophy, preferring to follow specific brand strategy to be adopted, together with trends in each country’s market. Not only will the form it should take. For some, the essence the same brand differ from one market to the of marketing is to stick close to customers, next both in positioning and in price level, while for others, the advantages offered by but it is also supported by its own specific homogeneous marketing on a global scale advertising campaign. Coca-Cola follows a offer no alternative. global marketing policy, while Nestlé prefers Before dealing with the respective argu- multi-local marketing. Thus Maggi ready- ments, it is important to be precise about the snacks were launched: terms used. Global marketing implies the wish to extend a single marketing mix to a l in Germany under the name ‘Maggi, particular region (eg Europe or Asia), or even 5 Minuten Terrine’ and positioned as a to the world. It also denotes a situation in practical nutritious food for men and which a firm’s competitive position in one women and between 30 and 40; country can be significantly affected by its l in France under its own name ‘Bolino’ position in other countries. The global (with Maggi in small print) and positioned approach sees the role of individual countries as an instant snack for the young single as only part of a wider competitive action. person; The global approach considers countries and their roles in a widened competitive field. l in Switzerland under another name, ‘Quick The aims of marketing in each country are no Lunch’, and positioned as a quick meal longer determined by the local subsidiary, but approved by mothers. 464 CREATING AND SUSTAINING BRAND EQUITY

In these three countries, the product achieved Finland and spread to other European its sales objectives. Manichean comparisons countries to benefit from the emergence of should, therefore, not be made between a trend towards natural goods. The global and multi-local policies in terms of worldwide drink Malibu was created in either customer appreciation or sales. South Africa. However, a company’s ultimate aim is not l A global policy allows a firm to slip the simply to achieve maximum sales – marketing stranglehold of the major retailer, whose globalisation leads to profitability. commercial demands are closer to a systematic toll than to a payment for real l In the first place, it cuts out duplicated services to the producer. A national brand tasks. For example, instead of bringing out may have few means of extricating itself; different TV advertising for each country, such is the intensity of distribution concen- the firm can use a single ad for the region in tration that it is forced to use a small mind. Bearing in mind the high cost of number of major retailers in order to reach producing these ads (up to US$1 million), the consumer. The global brand is fortu- the potential for savings is considerable. nately less susceptible to local pressures. The McCann-Erickson agency was proud of the fact that they have saved Coca-Cola l When a brand goes international, it can US$90 million in production costs over 20 however benefit from the internationali- years, thanks to producing ads with world sation of its main domestic retailers. Thus appeal. Even if production costs are, from Wal-Mart acts as bridgehead to many North now on, low compared to the investment American brands, and Carrefour to many in the media themselves, rendering the European brands. economy argument less forceful, it is still worthwhile for middle brands used to The emergence of global segments developing one campaign per country! All sociocultural studies underscore the l By launching a product in several countries convergence of life-styles. There are fewer simultaneously, it eliminates the problems differences between top executives in Japan which arise when a new product appears at and in Germany than between executives and staggered intervals from one country to the employees within Germany. In addition iden- next, depending on the local situation. tification models act on a worldwide basis: This has the drawback of allowing some Chinese women identify with American competitors time to pre-empt certain ideas woman, others with the French, and a in one country which they have seen in growing number now identify with Korea’s another. style of beauty. The same may be true in l Globalisation allows a firm to exploit good Holland or in New York. This is why l’Oréal ideas wherever they come from. Since good has developed a wide array of global brands: ideas are rare, they must be made far from pushing towards uniformity, this maximum use of. By getting representa- group diffuses heterogeneity. This is why it tives in several countries to put their minds takes much care in offering brands that to a particular question, there is a better symbolise not one single type of beauty but all chance of coming up with a strong idea of them, from Softsheen Carson for the black that can be used on a global plane. This is community worldwide, to Sue Uemura or how the global idea ‘Put a tiger in your Maybelline. The group takes much care in tank’ came to be used around the world. leaving each of its brand’s headquarters in its The Timotei shampoo was developed in home country to preserve its specificity. MANAGING GLOBAL BRANDS 465

However, they must globalise their concept price differences from one country to another, and products and communications. Global identical products need to be sold under segments should each have a global brand different brand names in each country. This is corresponding to their needs. the strategy followed by Benckiser, which buys strong local brands. R&D are indeed by Pricing issues necessity European, using the principle of a ‘lead country’ for the development of new Finally, the price factor will be a key products and the definition of the marketing component of the homogenisation of brand mix. strategies in the future. Indeed everything points to reducing the price span within Fighting the grey market which the same brand can evolve from one country to another, from one area to another. A classical consequence of economic hetero- geneity is the grey market. To reach public l The existence of a concentration of distrib- accessibility, brands must align their prices on utors on a regional or international level the local economic level. However, when a creates a major destabilising threat to gap exists among countries not too far apart in brands that optimise locally their price distance, a grey market grows, disturbing the policy. There is nothing to prevent the sales and trade goodwill in the country distributors from demanding the lowest invaded by parallel imports. Of course, in the price to be seen in Europe, which may be case of luxury goods with selective distri- in Portugal for instance, or in a country bution agreements, the first reaction is to that has lowered its prices as a means of install some form of trace, in order to identify competition. those commercial agents that break these agreements, reselling outside their zone. l The emergence of parallel markets needs to A second approach is to change the brand. be avoided as these would destabilise the Thus in Northern Europe Viakal, an anti- normal distribution channels of a country limescaling household product, became and therefore the relationship between a Antikal to stop the grey market of Italian brand and its distributors. Viakal products, which were sold there at a price 30 per cent lower. Without going to such There is indeed a close relationship between extremes, Hennessy cognac decided to stop price positioning and market positioning. A selling its VSOP product in Western Europe, brand cannot be the most expensive on the and instead created a customised product market in one place and in the mainstream in called Fine de Cognac. Europe was in any case another. The price level situates the brand in drinking less and less VSOP, but it had become terms of perceived quality, performance and a source of a grey market for Russia. In fact, prestige. In the market for special vintages of throughout the world, global brands are champagne, for example, to be the most developing more and more regional products expensive, on a par with or cheaper than Dom for these commercial reasons. Perignon, does not position its challenger A final approach of course is to create a Veuve Clicquot in the same way. Reducing the price corridor across all countries of a region international price variance of a brand is a or continent. This cuts the risk of a grey factor which encourages uniform positioning market growing, but handicaps the sales and, by extension, affects the whole brand where the brand is overpriced for the sake of policy. Unless a policy is explicitly chosen that respecting the international corridor. As an allows optimum prices locally and strong example, the net trade price of Absolut vodka 466 CREATING AND SUSTAINING BRAND EQUITY in Europe is around s5.5 on average as participate in a global culture. In fact, perceived evidenced in Table 17.3. globalness primarily influenced the perceived quality, and second the perceived prestige, of the brand. These effects were however not The benefits of a global image quite as strong for ethnocentric consumers, that is, those who were more focused on A great deal has been written on the subject of national values. These results needed to be global brands, but what exactly do we know extended to other countries and include other about them? In fact very little, until recently criteria for consumer segmentation, since the when the subject was further clarified by the cultural connections between South Korea and three studies outlined below. Two of these the United States are well known. studies focus on the benefits of having – that This was done by Holt, Quelch and Taylor is, being perceived as having – a global image. (2003) when they studied how global percep- But how does perceived brand globalness tions drive value, using a sample of 1,800 (PBG) create value? There are a number of respondents in 12 countries. According to the reasons for creating a global brand – study, perceived globalness influences brand economies of scale, synergies between coun- preferences via five levers: tries, the speed with which innovations created worldwide can be brought onto the l As an indicator of quality (higher quality market, the existence of exploitable global due to perceived globalness). This effect is segments and finally, as has already been in fact the most important, and explained suggested, the benefits of having an interna- 34 per cent of the variance in preferences tional image. Today, in the age of cultural observed by the study. integration, modernity is expressed via inter- l The second effect is the increased status nationalism. The perception of globalness conferred on the brand by its perceived would therefore increase perceived value. It is globalness. This explained 12 per cent of symptomatic that, in countries throughout the variance and coincides with the results the world, young people’s favourite brands are of the previous study. usually international, whereas the reverse is l The third lever is linked to the images and true for adults. special characteristics attributed to indi- One of the studies (Alden, Steenkamp and vidual countries. Global brands are often Batra, 1999) set out to validate this hypothesis. associated with a country of origin and In a quantitative study carried out in the therefore a stereotype of competence, such United States and South Korea, the authors as clocks and watches (Switzerland), TGV demonstrated that perceived globalness (the high speed trains (France). This accounted fact of being perceived to be selling products for 10 per cent of the variance. worldwide) exerted a strong influence over purchase decisions. But contrary to expec- l Increased responsibility, fostered by tation, this influence was not because perceived brand globalness. Because they perceived globalness enabled consumers to are represented worldwide, global brands

Table 17.3 How Absolut copes with the grey market: corridor pricing Country Germany France Spain Italy UK Greece Portugal Net price 5.21 5.81 5.16 5.35 5.97 5.66 5.77 Prices are estimates of net/net trade retail prices in Europe in euros MANAGING GLOBAL BRANDS 467

have a higher profile and therefore have to called global brands are American in origin, be more environmentally and socially their status is ambiguous. They are selling aware than other brands. Being big is everywhere in the world but they seem to be equated with being more responsible. This deep local brands. effect only explained 8 per cent of the Schuiling and Kapferer (2004) have variance. However, it was extremely compared the distinctive properties of local important for 22 per cent of respondents, and international food brands, separating, and important for 41 per cent of this group. however, international brands in their home country from the same brands in other coun- l Finally, the American image, or the tries. In fact, their data show that the best American dream, is associated with a brand profile is that of the international number of global brands. This effect did brands in their home country. No wonder: not explain the variance in preferences countries export their best in class brands. between brands when consumers were The data also show how global brands really taken as a whole. However, as soon as these differ from local ones. Working on a database international consumers were segmented, of 507 brands in four countries, and 9,739 the American image was a dream for 39 per respondents, Schuiling and Kapferer have cent, which made it a factor of preference, isolated the discriminant properties of each while it was anathema for 29 per cent and type of brand: local (that is, sold in one therefore a negative factor and rejection. country, whatever its perception by the public) and international (sold in all coun- To their credit, Holt et al segmented the tries, whatever the perception of the public). consumers. In the seven segments that The authors first notice that on the whole resulted – from ‘pro-west’ to ‘anti-globali- local brands that have been present for a sation’ – the hierarchy of the five levers was much longer time in the country are completely different. How people understand endowed with a higher brand awareness score and value global brands is very segmented. than more recent international arrivals. Since Countries are also heterogeneous. China, for brand awareness is correlated with image (see instance, is both pro and anti American page 21), are the so-called differences of values: it has consumers belonging to both image only an outcome of this brand groups. Muslim countries such as Indonesia, awareness gap? When the data are adjusted Turkey and Egypt are very influenced by the for awareness, there do remain differences in perception of globalness. However, one image, some negative, some positive, as should recall that the interviewees were not evidenced by Table 17.4. laypeople, but well off ones, probably with a It is noticeable that, compared with local westernised life-style. People in India, Brazil brands, global brands have a significant and South Africa were not very much influ- deficit on: enced by perceptions of globalness; is it because they have a strong local culture they l health value (–3.29 per cent); are proud of? Finally, those least influenced by the perception of brand globalness are US l reliability (–3.05 per cent); consumers. l trust (–1.88 per cent). This should not be a surprise: the Americans do not consider that the choice of On the other hand, they outperform local other countries is relevant. It is an ethno- brands on the following levers: centric country. Also, since many of the so- 468 CREATING AND SUSTAINING BRAND EQUITY

Table 17.4 How global and local brands differ (in percentages, after adjusting for brand awareness level) Local brand Global brand Global–local (B. Aw = 85%) (B. Aw = 85%) High quality 25.29 27.07 +1.78 Trust 22.11 20.23 –1.88 Reliable 22.11 19.06 –3.05 Fashionable 14.04 15.50 +1.46 Original 13.57 14.64 +1.07 Distinct 12.56 13.70 +1.14 Sympathetic 11.74 13.19 +1.45 Funny 9.76 12.90 +3.14 Pleasing 7.08 12.90 +5.82 Healthy 15.56 12.27 –3.29 Innovating 6.08 11.50 +5.42 A leader 8.07 9.33 +1.26 Unique 4.40 7.61 +3.21

(Base 9,739 respondents , 507 brands) Source: Kapferer and Schuiling (2004) l pleasing (+ 5.82 per cent); prevailing national values, it is open to outside influence from abroad. In drinking l innovativeness (+5.42 per cent); Coca-Cola, we are drinking the American l uniqueness (+3.21 per cent); myth – in other words the fresh, open, bubbling, young and dynamic all-American l fun, thrill (+3.14 per cent); images. Youngsters form a target in search of l high quality (+ 1.78 per cent); identity and in need of their own reference points. In an effort to stand out from the rest, l fashionable (+ 1.46 per cent); they draw their sources of identity from l sympathetic (+ 1.45 per cent). media-personified cultural models. Levi’s are linked with a mythical image of breaking away down the long, lonely road – the rebel. Conditions favouring global Nike encourages them to strive to surpass brands themselves, turning its back on the national confines of race and culture. Women also Certain situations make global communi- constitute a clientele looking for new models; cation and brand policy easier. They are linked Estée Lauder could portray the free, inde- to the product, to the markets, to the force of pendent and seductive woman, and use this brand identity and also to the organisation of image for its own globalisation. Brands corre- companies. sponding to new eating habits also have to Social and cultural changes provide a impose forcefully their view of the world in favourable platform for global brands. Under order to rally consumers in search of change. these circumstances, part of the market no In this way, the brand is seen as a new flag- longer identifies with long-established local waver. values and seeks new models on which to New, unexplored sectors have not, by defi- build its identity. Turning its back on nition, inherited a system of values. MANAGING GLOBAL BRANDS 469

Everything is there for the making, and it’s up breaking national bounds. It conjures up a to the brand to do it. This is why there is meaning of robust performance in any nothing to prevent the global marketing of country. The Barilla name is another high-tech, computer, internet, photographic, stereotype built on the classic Italian image of electronic and telecommunications or service tomato sauce, pasta, a carefree way of life, brands. Dell can, and must, spread its brand songs and sun. Volvo, Ericson, ABB and Saab everywhere, because brands themselves are epitomise Sweden. the only point of reference in these markets. Finally, certain brands represent archetypes Only the themes of the campaigns will change or ‘universal truths’, to paraphrase Zaltman to take into account the country’s level of (Wathieu, Zaltman and Liu, 2003). Snuggles economic development, hence its preoccu- fabric softener not only arouses the same pation. Globalisation also applies to new notion in every country – that of gentleness services: Hertz, Avis and Europcar globalised (which is not in itself original) – but also the their campaigns by portraying the stereotype image of reliance, love and security as in one’s of the hurried businessman – and in any event childhood, as symbolised by the teddy bear. an Italian businessman wants to identify more This is why, in order to express the notion of with being a businessman than with being an ‘snuggling, caressing, cajoling’, the brand Italian. The argument of novelty works also name is translated as Cajoline in France, for McDonald’s, Malibu or Corona! Kuchelweib in Germany, Yumos in Turkey, The world has been standardised by the Mimosin in Spain and Cocolino in Italy. La increasing and levelling power of technology Vache-Qui-Rit, which corresponds to the – this is Levitt’s point (1983). Its products no archetype of the generous mother, is likewise longer stem from local culture but belong to translated (Die Lächende Kuhe or The our times. They are the fruit of science and Laughing Cow). Marlboro embodies the time. They therefore escape the local cultural archetype of the macho man – alone and contingencies that hinder global communi- untouched, authentic, yet modernised and cation. popularised throughout the world in Western In general terms, globalisation is possible – sagas of the conquest of America. Maybelline and indeed desirable – in markets which expresses American beauty. Lancôme revolve around mobility. This applies to expresses the French woman. multimedia, the hotel industry, car rental, Several of the above factors explain why airlines, and also the transfer of pictures and luxury brands and griffes have gained a sounds. When the brand is perceived as being worldwide appeal. In the first place, they bear international, its authority and expertise are a message – each creator is expressing his or automatically accepted. Again, brands have a her own personal values. They were not clear opportunity to organise and structure conceived as a result of any market study or those market sectors which symbolise the consumer analysis from one country to the disappearance of time and space constraints. next. It is the creator’s identity and his or her It is their role to deploy their system of values, desire to express his or her own values that which can only be unique faced with mobile form the automatic basis of the brand’s clients. identity, in no matter what part of the world. Globalisation is possible when the brand is Second, behind every luxury brand there is a totally built into a cultural stereotype. AEG, guiding standard – sometimes even an Bosch, Siemens, Mercedes and BMW rest archetype. Cacharel and Nina Ricci represent secure in the ‘Made in Germany’ model, the dawning of femininity, a dawn tinted with which opens up the global market, since the shyness and modesty. Yves Saint Laurent stereotype invoked is a collective symbol stands for female independence, even 470 CREATING AND SUSTAINING BRAND EQUITY rebellion. Finally, the ‘Made in France’ label Gamble in the whole of Europe leads to a and the myth of Paris imbue these brands with standard product offer throughout and to the definitive cultural undertones. All these are spread of technical innovations to all coun- reasons why such brands are able to impose tries at the same time. In markets where the their own vision of the world on national product advantage is key in the positioning outlooks. Like any religion, brands that set out of the brand, this centralisation of to convert must believe in their message and production and of R&D leaves little room for spread it unerringly among the multitudes. differentiation on a local basis. On the whole, brands whose identity focuses on the product and its roots can more easily go Disruption versus optimising products global. Jack Daniel’s whiskey builds the pivot of its brand identity from its distillery and its Apart from factors linked to the market or to tradition, which leads to advertising which has the organisations themselves, the same been remarkably stable throughout time and company may have to follow two different similar in all countries. Even though it is policies according to the status of its products. working with different agencies, the articles One analysis that explains the differences in and conditions are such that each one observed behaviour is linked to the type of produces commercials or announcements that marketing. Certain products are the optimi- are typically Jack Daniel’s. sation of an existing offer. Others are Certain organisational factors also ease the complete breaks from what is on offer, inno- shift to a global brand. One-man companies vations even to the extent of creating a new and brands that bear the name of their creator segment that did not exist before. This who is still alive are from the start more global. distinction has an impact on the chosen inter- Countries have less ability to modulate locally national policy. Optimisation marketing leads the identity of Ralph Lauren since the head of to more flexibility when there is a need to the company is precisely Ralph Lauren. It is adapt to local conditions. Strong innovation, also true for Bic or Paloma Picasso. however, that which conveys new vision, American companies are more ready to tends to impose itself on all countries and globalise because marketing on their domestic hardly needs any adapting. market is in essence global, considering the Generally speaking, a strong new concept is social and cultural diversity of the American capable of breaking the rules and borders. For melting-pot. Organisational factors also point example, alcoholic beverages are generally in the same direction. When expanding promoted using local strategies. What is more towards Europe, these companies created cultural than alcohol? Moreover, it is drunk European headquarters from the beginning, by adults and as we get older our tastes and based most often in Brussels or London. preferences solidify (unlike with soft-drinks Individual countries therefore had to account for teenagers). However, very new concepts in for their results to these European centres. As this field are able to have a worldwide impact: seen from the US, there was very early on the Corona, Absolut, Bailey’s, Malibu. It is the need for a centre for ‘European operations’, same for cheese: La Vache-Qui-rit is a global for considering Europe as a single and homo- concept. geneous area. Finally, a single centre for production in Europe or South America is also a strong The excess of globalisation factor for globalisation, at least for products. The fact that one factory centralises the Arguments against globalisation are, in fact, production of detergents for Procter & arguments against a strict and rigid mono- MANAGING GLOBAL BRANDS 471 lithic international marketing policy. In fact, tioned on efficiency, sold in hypermarkets there are plenty of examples of failure and much more expensive than usual brands. resulting from undue haste in adopting a The adopted communication mix in no way global marketing policy without certain bettered the situation of this shampoo: precautions. These examples have been analysed by corporations. They have learnt l Procter & Gamble had decided not to their lessons. translate the name, relying on the evidence Globalisation has become associated with that it had been well accepted in Holland as deafness or blindness. Naomi Klein (1999) has it stood. However, outside the UK, Holland called the attention of global brands to the is the EU country that speaks the best fact that some of them have become busi- English, so there is a considerable inherent nesses without any production facilities. They risk in extending a policy tested in Holland outsource all their production. However, the to a country such as France. absence of plants does not mean the brand l For its launch, Procter & Gamble used their can feel unconcerned by what takes place in British film showing a face divided in two the plants of its suppliers: working children, so that the results could be seen. The sweatshops and poor conditions of work all punchline was ‘Dandruff talks behind your impact on the brand image. Today, big means back’. In France, however, dandruff is seen responsible: ethics will be part of the evalu- as a social problem – one should not point ation by the financial markets (see Chapter the finger in blame, but should sympathise 18). In the present chapter we address another with the problem. The tone adopted in the issue, strictly managerial: the lack of adap- British approach was perhaps in keeping tation to salient differences between markets. with Dutch levels of sensitivity, but Arguments against globalisation are in fact scarcely applicable to the French. arguments against a strict and rigid mono- lithic international marketing policy. There Head and Shoulders illustrates the harsh real- are plenty of examples of failure resulting ities of different levels of sensitivity and from undue haste in adopting a global competitive forces in the marketplace, both of marketing policy without certain precautions. which make a monolithic global policy a Thus, in January 1984 Procter & Gamble perilous strategy. launched in France the anti-dandruff Such reverses do not, as such, amount to a shampoo Head and Shoulders relying on rebuttal of global policy, since we have such exactly the same marketing mix and posi- universal successes as Dell, Sony, McDonald’s tioning which had led to its success in the UK and Volkswagen. The idea of global marketing and the Netherlands. At the end of 1989, Head has an inescapable draw, even though its and Shoulders still had only 1 per cent of the implementation has been seen to vary consid- French market. The problem was that they erably in speed according to the markets, the had not taken sufficient account of a feature public and the companies themselves, and in particular to the French market and present spite of the fact that certain idiosyncratic nowhere else. Consumers either buy anti- brands are destined to remain on a local dandruff shampoos in pharmacies, the footing. pharmacy being a guarantee for efficiency and treatment, or they pick up the line extension of their usual brand in their hypermarket Barriers to globalisation (Palmolive dandruff shampoo, etc) for everyday use. In between these two brand What are the strongest barriers to globali- groups, there is scarcely room for a brand posi- sation? What are the parameters that, 472 CREATING AND SUSTAINING BRAND EQUITY according to managers themselves, make same way as the English market, where it difficult, even impossible, brand globali- occupies a niche in the premium segment of sation? Table 17.5 is particularly revealing in carbonated orange soft drinks and competes this regard. with Fanta, Sunkist and Tango, the local The first and only factor that justifies for dominant brand. This has a deep impact on most people interviewed (55.2 per cent) the market strategy and positioning, but the non-application of a global strategy is legal Orangina identity is nevertheless the same. differences. It is true, for example, that laws Moreover, since they are known in advance, which deal with the definition of products, these very different market situations can be the right to sell, the authorisation and integrated when filming commercials. Some manner of advertising of alcohol and the use commercials destined for countries where of children in advertising vary considerably. Orangina is not known will need longer However, because of the Single European Act, sequences on the product and on shaking the Mercosur in South America or the GATT, these pulp. At the other end of the scale these differences in legislation will have to be sequences can be reduced in other countries. evened out, thus suppressing the major The significance of this factor concerning the obstacle to globalisation. The second factor is local competitive situation explains in some linked to the local competitive situation measure global success of brands such as Mars, (number and strength of competitors, levels Gillette, McDonald’s, Coke, Bailey’s, Dell, of brand awareness, type and level of distri- eBay, Ryanair, Somfy and so on. They didn’t bution, stage in the product life cycle). Taking really have any competitors in the market, the example of Orangina once more, it is not and they were new products, creating new possible to approach the market where segments or revealing the start of a latent Orangina is a close second to Coca-Cola in the transnational demand. They were driven by

Table 17.5 What differences between countries would compel you to adapt the marketing mix of the brand? Type of difference Necessary adaptation (%) Legal differences 55 Competition 47 Consumption habits 41 Distribution structure 39 Brand awareness 38 Brand distribution level 37 Media audience 37 Marketing programme success 34 Consumers’ needs 33 Media availability 32 Brand images 30.5 Norms for products manufacturing 27.5 Brand history 25.2 Life-style differences 25 Cultural differences 25 Subsidiary sales 23 Consumers’ buying power 22 Consumers’ age differences 12

Source: Kapferer/Eurocom pan-European survey MANAGING GLOBAL BRANDS 473 the feeling that they had an excellent product (the marketing mix). It is the fixed image of and extended their programme to all coun- the brand (its fixed logo) that is the most glob- tries. The third factor hindering globalisation alised, a sign that image precedes sound. is the differences in consumer habits: these What counts is that the exclusive typography are, as we have seen, fatal for products such as and the red colour of Coca-Cola can be found Ricard that are deeply rooted in a particular throughout the world, even if it isn’t written culture. Moreover, to become truly global, a ‘Coca-Cola’. Unilever does not use its Motta brand must play down its ethnic component. brand of ice cream everywhere, but its local As long as Bailey’s was an ‘Irish Cream’ its equivalents use the same colour and signal potential was limited. An ‘exotic’ beverage codes. The brand name comes in second. It is coming from afar, its ‘strangeness’ relegated it true that most companies have inherited to small sales volumes, to fans of Ireland who some odd situations where what is called Dash would sip it in the evening by the fireplace. in Italy is called Ariel in Europe and so on. But how many people know Ireland When brands are local strengths it is not a throughout the world? Who will still drink good idea to risk standardising too fast. The alcohol as a liqueur? The globalisation of operational facets of the marketing mix are Bailey’s consisted of breaking away from the naturally adapted to local markets, all the association with the liqueur set (‘The Bailey’s more so as we approach below-the-line activ- moment is whenever’) and the promotion of ities or local financial optimisation regarding Ireland as a tourist destination, and the price. In the era of television and multi- promoting instead ‘Baileys on ice’ (see page media, image wins over word. All the more so 239). in Third World countries where illiteracy is Table 17.6 presents the facets that are most common. Colour codes and graphics must be easily globalised for pan-European brands. global: Coke is red, Heineken is green. As we can see, the percentage varies from 10 However, even the strongest brands hesitate per cent to 93 per cent. Such a variance is when the question arises of what to call them linked to the fact that the phrase ‘brand glob- in the enormous Chinese market (see below). alisation’ refers both to identity and to action Let us analyse in depth how these barriers impact the internationalisation of brands. Table 17.6 Which facets of the brand mix are most often globalised? (Kapferer/Eurocom) Coping with local diversity % How do global brands integrate the true Logotype, trademark 93 diversity of the world, economic, legislative Brand name 81 and cultural? How do they build a global Product features 67 brand in such heterogeneous conditions? Can Packaging 53 the brand be in fact truly global? After-sales service 48 Distribution channels 46 Sponsoring (arts) 32 Coping with economic heterogeneity Sponsoring (sports) 29 How should the global brand cope with the Advertising positioning 29 reality of widely differing levels of devel- Advertising execution 25 opment of markets? This certainly concerns Relative pricing 24 emerging countries, but also the very Direct marketing 18 advanced countries when a new category is Sales promotion 10 concerned. 474 CREATING AND SUSTAINING BRAND EQUITY

The first approach is, of course, by adapting The third approach is by a phased intro- the product lines to the markets. One does not duction of innovations. Thus, Danone as a sell the same cars in China and in Europe. Car group is totally positioned on ‘active health’. manufacturers use more entry-level models in However, this concept is a broad one, and China. Interestingly, since they want to build cannot mean the same thing in India and in a global brand, which means a global Scandinavia. As a matter of fact, Danone perception and not only a global name, care distinguishes three stages of development must be taken in launching these models corresponding to three levels of market under the same brand values as any upper maturity: quality /security, health and model of the range sold elsewhere in the nutrition, and active health. Markets at each world. This causes difficulties in creating a of these stages will see the launch of products homogeneous concept. that correspond to their meaning of this large For instance Wyborowa, probably the most concept, ‘health’. exquisite vodka (made in Poland, the Interestingly, although it is very much homeland of vodka), has to expand in two centralised, Absolut adapts its advertising to widely different markets: the most advanced the level of maturity in relation to its category and largest market for international brands of each country. Thus the consumer benefit (the United States), where there already exists used in advertising varies according to a fixed a premium and super premium segment, with ladder of market development and sophisti- very sophisticated brands as Skyy, Belvedere, cation, from purity (Absolut Perfection ads) to Grey Goose and Ketel One, well above the closeness, topicality, taste variety (such as prices set by Finlandia and Absolut, not to Absolut Lemon) during the growth phase, and speak of Smirnoff; and Europe, which is just creativity/originality in the maturity phase. discovering the category, and in comparison A fourth approach is to stick firmly to the many consumers hardly know what vodka is brand values through different levels of opera- and why they should drink it. Clearly, to tionalisation. The best example is Connex. succeed in the United States the brand needs This world brand of public ground trans- to launch a super premium version, used as portation was launched in 2000. Its market the prototype of the brand, but this is not comes from the growth in the privatisation of needed in Europe. How then can a brand former public transport services. Connex has present a united concept with two different been promoted on a number of added values – prototypes? regularity, safety, comfort – but because of A second approach is by segmenting the wide differences in the level of economic product line. For instance Arc International, development and cost constraints, it is impos- the leading group in the world for glass sible to operationalise each value the same tableware, has recently rationalised its brand way all over the world. Expectations of service portfolio, concentrating on four brands, along regularity are not the same in Lagos (Nigeria) a double market segmentation by channel of and Perth (Australia), for instance. Connex distribution and by price level. Luminarc is to could have decided to restrict use of its name be the unique mass market brand. The whole to circumstances that met the highest service range has been subdivided into three subsets, delivery standards, but this would have casual, modern and formal, and each of these created a very elitist and restricted brand, and families has a positive name. In developed would have been contrary to its global countries, many people would not consider strategy: Connex’s future growth potential is buying products from the ‘casual ‘ family, but mostly found in countries that want to accel- these same products are used as gifts in many erate the level of satisfaction attached to developing countries. public services by outsourcing them. MANAGING GLOBAL BRANDS 475

As a consequence, it was decided to stick to with the significance of the category in the the brand values but to define locally how different countries. they are operationalised. In addition, since a The example of yoghurt is relevant. At first brand represents a permanent search for glance it would seem possible to sell plain added values, in each city or region where Danone yoghurt to everyone in Europe in the Connex operates, these operational standards same way, whether it be flavoured Danone Kid must be upgraded year after year, and the or Danone Activia. However, despite appear- result made public. ances, yoghurt is a typical case of non-trans- versality because of the different Coping with differences in legislation circumstances in each of the markets when and norms yoghurt was first introduced. In France, the market is still influenced by the fact that Best practice seminars and books are replete yoghurt was first introduced as a health with examples of globalised brands such as product and therefore was sold exclusively in Coca-Cola, Mars and Microsoft. Certainly pharmacies (in much the same way as mineral they are interesting examples. However, they water). Though this is no longer the case and also have their limits, imposed not least by most younger consumers would not be aware differences in taste, in legislation, in norms. of it, this has a deep and unconscious impact Thus none of the yoghurts sold by Dannon on attitudes in the market. Thus, in France the USA could be described as yoghurts in the EU, product reference is a plain yoghurt, a symbol because they contain too high a proportion of of good health, while fruit and flavourings starch and stabilising agents, and their taste were only added a long time afterwards. In too is unlikely to meet with public acceptance Anglo-Saxon countries, on the other hand, in Europe. Why? Because Dannon USA, since where there weren’t any pharmacies in the its creation in 1942, has tried to build its French sense, yoghurt was first introduced as a business in the United States. low-fat product containing fruit for In the United States there was no custom of enjoyment, and in this sense it was a product eating yoghurt when Dannon began, unlike for adults. The motivation to purchase in the in Holland, Germany and France. Moreover, yoghurt market therefore comes from very the fact that it is eaten with a spoon gave a different impulses in different countries childish personality to the category. As a because of the way the market was first result, the whole market started as a niche created in those countries. Moreover, as a market, mostly aimed at women, promoting result of these differing motivations, the same the health benefits, a little like Slimfast. Also, product will be regarded in a different light in unlike in Europe, Dannon yoghurts actually the various countries involved. compete in the snack market, and US For example, in the UK, the origins of the consumers typically drink a cola (diet or yoghurt market mean that the product is otherwise) while consuming the product. As a regarded as being one for pleasure, for the consequence, the yoghurts needed to be enjoyable experience of eating. Flavoured sweeter and thicker. yoghurt, ie yoghurt without the fruit, is therefore a lesser product, and also means it Coping with category differences cannot be positioned in the market for children. Moreover, plain yoghurt without Although products may have the same name, either flavouring or fruit – and therefore they do not mean the same thing from one without pleasure in the eating – is thus a boring country to another. Thus, the same apparent product only for those on a diet. In Spain and product needs to be positioned in accordance Portugal, on the other hand, where fruit is 476 CREATING AND SUSTAINING BRAND EQUITY abundant, the fruit yoghurt does not have the Coping with differences of segment position of product reference in the market. Indeed, there, where the standard of living is The same product may belong to different lower than in other European countries, segments in different countries. It then faces flavoured yoghurt constitutes the main different competition and aims at different segment, and is eaten as much by children as it targets. In the car industry, the small car is by adults: it is a family product and does not segment represents 38 per cent of cars on need a first name (such as Kid). Again, in Italy, average in Europe, with extremes reaching 59 the reference is blended yoghurt with a per cent in Portugal and 18 per cent in Austria different texture, and flavoured yoghurt is posi- or Germany. In Italy, the small household car tioned for very young children. Yet again, in is nevertheless the main car, in which the France, flavoured yoghurt is regarded simply as whole family fits. This determines a stream of a plain yoghurt with added flavouring, so the structural expectations (five doors for logic of the health benefit prevails, as testified example) very different from France where by the slogan ‘Petit à petit on devient moins the segment corresponds to the second or petit’ (literally ‘Little by little we become less even the third car. Another problem arises little’). To emphasise this promise and to differ- when Germany is considered: in this country entiate it from competitors, Danone chose to the segment simply does not exist. Here it is give the first name ‘Kid’ to this type of yoghurt, the Golf that is considered the small car, when thus identifying it with a child reaching a later it is in the middle range segment everywhere stage of development. else in Europe. It was, therefore, difficult to In a similar way the reaction to Activia is speak of the Peugeot 106, for instance, in the different depending on the country. In France same way in all countries. In France, in order Activia is perceived as the rebirth of plain to compete with the Renault Clio and not to yoghurt, conveying health and pleasure. In the poach sales from the Peugeot 206, the amount UK Activia was the first to introduce the health of interior space was emphasised, despite the aspect of the product to the market. In Italy, on small size of the car (hence the slogan ‘la the other hand, cultural morality frowns upon surprise de taille’ – ‘the size surprise’). In the taking of pleasure in the taste of food and it Germany, the 106 was positioned like the is not considered possible to taste good and and Austin Mini, as a second car, small, feminine be healthy at the same time. This is reflected in and urban, and after that as the most environ- the related commercials – the internal body mentally friendly because it was the smallest. clock of the UK commercial instead of the nude In the countries of Southern Europe the woman chosen in France. interior space was again emphasised to make Thus by considering one of the few food it a good first family car. In the UK the 106 was markets that does not have a long history but positioned as a feminine car which was small is actually an industrial product, we can but which allowed escape through its clearly see that the conditions under which comfortable and dynamic aspects – two qual- the market was created in each country have ities that make Peugeot a valued brand in this determined the long-term perception of that country. product in each specific market. Only Yop crosses these borders. Positioned for teenagers like a soft drink around the concept of Coping with differences in meaning freedom, Yop has a European commercial that works well in all countries, provided of course The danger with international communi- the market understands the concept of a cation is that there may seems to be a common drinkable yoghurt. understanding of words, where in fact there is MANAGING GLOBAL BRANDS 477

not. Simple words as ‘ nature’ and ‘well-being’ l The line of girdles that feature long-lasting do not mean the same thing across countries. comfort is called ‘18 hours’, which can be If they did, it still remains to be proven that translated in each country. the best way to communicate the concept is l A line of bras is called ‘SuperLook’, a similar across countries. Often it is not. name which in this case needs no trans- According to the country, the same idea lation. Wonderbra itself was launched must be expressed through different symbols. untranslated. This established fact has the paradoxical consequence that it is not by using the same Despite the legitimate willingness to glob- brand name from one country to another that alise, we must not overlook real cultural one stays closest to the initial brand concept. differences and differences in perception. The concept behind Jif is better expressed by This is why Procter & Gamble has created Viss in Germany and Cif in France. One can different versions according to the country change a local name to a global name when for the Mr Clean brand, while nevertheless the former has little intrinsic meaning and the remaining within the limits of a common name precisely encompasses the concept of strategy (shine). Indeed, the symbols of the product. Otherwise, a fundamental ‘shine’ change with the culture. In France, it element of the identity is shattered. The is expressed by the idea of the mirror (‘You diversity of names draws the product closer to can see yourself in it’), while in the USA, the its consumers in each market. This is why emphasis is on reflection off water (‘Is it Playtex applies a modular policy: the Playtex water? No it’s the shine!’). Throughout the name is worldwide. On the other hand, the world, Camay is the soap which implies company adapts the names of individual ‘seduction’. This is the line which Procter & products to the markets. Indeed, Playtex only Gamble have always taken. However, though launches new product concepts if they are customer habits and expectations are the international. The marketing strategy is same the world over where soap is concerned, homogeneous within large geographic areas cultural blocks call for different approaches (Europe for example): thus the ‘Cross Your when speaking to a woman about intimate Heart’ range has the same positioning, the moments. same consumer benefit, the same advertising theme and the same execution in all coun- l In France, the seductive power was tries. Cross Your Heart adapts to local markets portrayed by a woman beautifying herself in terms of fabric (cotton in Italy for instance) in her bath for her husband. The success of or of packaging (to take into account differ- this commercial tempted the Japanese to ences in distribution circuits). As for the introduce it in their market where it caused name, it is ‘Coeur Croisé’ in France (a direct fury when the advertisement was screened. translation), but ‘Crusado Magico’ in Spain (a In Japan it is considered an insult for a man slight shift to a ‘magic cross’). To stick to the to enter the bathroom while his wife is common concept and convey it as best it can, performing her ablutions. Playtex does not hesitate to change the name of the products if necessary, to provide a more l In Italy, they preferred to show a fawning appropriate translation. wife and her macho man. l The Austrians just use Paris as a backdrop to l Thus the line of bras without underwires is signify seduction. called ‘WOW!’ in the US (‘WithOut a Wire’), but ‘Armagiques’ in France. l In Greece, they added a more sensual note, bringing in the proverbial vamp. 478 CREATING AND SUSTAINING BRAND EQUITY

Flexibility at the creative stage not only quality of production, which gives local satisfies local cultural requirements, but also consumers access to levels of quality worthy of allows Camay to establish its own status in the name. Is not the primary function of a different countries. brand to guarantee quality? The brand therefore serves to endorse production and symbolise the newly acquired quality and reli- Building the brand in emerging ability. By adopting this logic, the interna- countries tional brand becomes a strong umbrella brand from the outset, a source of reputation and Today, all eyes are turned towards the East, power. The way to creating a strong brand where companies are keen to compete in appears to be clearly mapped out. countries that were once part of the Soviet It should be pointed out that most bloc. Beyond lies Asia – the five ‘tiger examples of globalisation cited in managerial economies’ and China. Pioneer managers sent literature written in English are in fact into the field are faced with the task of ‘product globalisations’ based on a model of achieving major sales objectives within a geographical extension from the country of short space of time. There is a great temp- origin, as with McDonald’s, Mars and Coca- tation to use an internationalised version of Cola. In many cases, however, this model is the flagship brand as far as possible, for not applicable since companies are not example the Kraft, Müeller or Campina dairy seeking to impose specific tastes on the inhab- brands. In fact, everything encourages itants of other countries, but to recreate their managers to do so: brand (Kraft, Müeller or Président) at local level. For example, while it is reasonable to l Their managerial freedom – in these distant assume that most Russians would not want to countries they feel less restricted by the eat Camembert, it is quite legitimate for constraints of head office. Lactalis to try to globalise its flagship brand Président. But this can only be done via large- l The pressure of sales and objectives, volume local products to get the business off combined with a lack of resources. to a good start, otherwise it is not worth l The pitfalls of market research – since the investing in a sales force or advertising. brand is weak and not yet crystallised The first problem is that, by covering all around a prototype, it seems able to be used segments in a new country, the brand may anywhere. deviate from the strategy (positioning) that has been fixed for it, in Europe or the United l It is therefore tempting to actually use it States for example. What is not a problem for anywhere, on all products, all the more so Thailand or China can be a serious issue in because this type of initiative proves Russia. But the strategy is global and has to be effective at sales level. As a symbol of reflected in each country. Creating an quality, in countries that are not used to umbrella brand that covers all segments in a quality, a brand is reassuring and boosts the country from the outset may favour short- sales of anything it endorses. Any new term sales but does not really prepare for the initiative works. future. The second problem is that establishing an It is a well-known fact that the first thing umbrella brand quickly from the outset may multinationals do in these countries is to ratio- fill the brand catalogues but does not really nalise production. The skill of manufacturers create a strong brand for the future. So what lies in their ability to significantly increase the will happen exactly? MANAGING GLOBAL BRANDS 479

It will not take long before all the brand’s l Second, the name can be a problem in western competitors will be in the country as terms of its meaning in a specific language. well. The levels of quality between these There is no shortage of anecdotes about competitors will therefore be comparable. So brand names that have sexual connota- what will differentiate the brand from all the tions in other countries. others? It will be a general brand, with no real l A less common problem is the translation identity, no prototype, no strong differenti- of descriptive names. Traditionally, the ation. Americans do not translate their How long can you go on introducing new descriptive brand names – Pampers are initiatives that keep working? This type of Pampers the world over, as is Head & success can be short-lived if a competitor also Shoulders. But for an international brand decides to launch an innovation. Taking the of cheese such as La Vache Qui Rit (The easy option does not lay foundations for Laughing Cow), the name is important the future. It is essential not to lose sight of because it conveys a message and permits the long-term objective and to bear the the correct interpretation of the brand middle and long term in mind when consid- symbol (a cow’s head). Without it, the cow ering short-term initiatives, for example when could appear stupid, smiling or mad. In this promoting difference(s) to create preference case, there is a link between the brand over future competitors. name and brand symbol. The question It is therefore essential to build firm founda- therefore arises as to whether or not to tions at the outset and extend the brand later. translate this descriptive brand name for This means making choices and selections, each country, and if so, whether to keep a despite the temptation not to do so. But this is reference to the brand name in French. If the way global brands are constructed. this is done, should this reference be above or below the local translation? Finally, Naming problems should the answers to these questions be different for each region, since the answers depend on the added value desired? The ultimate symbol of successful globali- In certain areas, there is a real problem of sation is the ability to use the same name counterfeited goods and therefore a need to worldwide. However, a brand name often reassure consumers that the product is in poses problems for globalisation. The main fact the real thing. In some areas (such as ones are outlined below: Saudi Arabia, the Middle East and Germany), the added value comes from the l First of all, there is the problem of prior reference to France, while in others, the registration by a local company. For ‘made in France’ label can be a negative example, the name Eurostar had already factor due to changing economic circum- been registered by a service company and stances, for example in the United States in had to be bought from that company, a 2003. solution that is not always possible. Less straightforward was the problem of the l Finally China poses a specific problem Crocodile brand, registered by a Chinese because of its very different regional dialects. company and rapidly reinforced by a vast network of stores known as The Crocodile Naming in China Shop, just as the global brand Lacoste accessed the Asian market. Lacoste’s logo is Naming in China often forces managers to a crocodile. face a choice: should they name semantically 480 CREATING AND SUSTAINING BRAND EQUITY or phonetically? (Schmitt and Zhang, 2001). country, market segment and even ethnic The dilemma is as follows: should one respect groups, communities or individuals on a one- the sound of the name even if it has no local to-one basis – and the economic requirement meaning and is therefore difficult to of reducing costs. As with any dilemma, every pronounce and to memorise, or should one company knows there is no single solution, respect the concept even if it means parting just progressive adaptations and even policy from the international sound of the brand reviews when they have placed too much name? Ideally of course, one would say both. emphasis on localisation or standardisation. The Chinese sound should resemble the inter- Cosmetic groups (such as Estée Lauder, national pronunciation, but the meaning Shiseido and l’Oréal) and car manufacturers should also be appropriate. Microsoft’s are in the throes of this dilemma since they semantic name would be Wei Jua, which are both ‘high-tech’ and ‘high-touch’. It is a means micro flexible and soft. In addition it is well-known fact that globalisation was born a pleasant sound to a Chinese ear. Coca-Cola of technology, and aids the diffusion of and Carrefour found both a semantic and research via the ever-decreasing costs of that phonetic appropriate translation: Keu Ko Keu technology. However, because cosmetic Leu means ‘good to drink and makes happy’, brands target the beauty of individual women, Tia-leu-Fu means something close to ‘the they must be ultra-sensitive and therefore house of happiness’. The leading worldwide ‘high-touch’ and, as such, adapt as far as brand of insecticide, Decis from Aventis, is possible to specific physiological character- pronounced Di-Cha-Seu which luckily means istics, as well as to the basic and cultural char- ‘at them until death’. acteristics of women in countries throughout Others are less lucky. Peugeot is said as ‘Piao the world. There is no longer an overall Je’, but in Cantonese, it evokes a prostitute. concept of beauty, but an acceptance of the Orangina starts with an O: in Chinese there diversity of different types of beauty within are no nice words starting with an O. the same country and between generations. There is a danger however in localising the The dilemma is equally acute for the car name too much in China. Foreign brands are industry when a car is not simply positioned now valued much more than local brands. All as a low-priced vehicle. A car has a special signs which accentuate the perception of significance for individual consumers, and being a local brand may erode brand equity in since each consumer is different, there is not the long term. The size of this market requires only an expectation of diversity at brand that all due precautions be taken. level, but also in respect of models, line exten- sions and even the personalisation of the rela- tionship with the brand. Achieving the delicate local–global balance Each to his own balance?

Each company has to find its own balance To take one category, cosmetics for example, it between localisation (the adaptation of its is significant that the brands positioned as products to local markets) and the deep- ‘mass market’ have to develop their proximity rooted raison d’être of globalisation, the much more than the so-called elitist brands. As pursuit of a competitive advantage through such, they not only make greater use of direct- reduced costs. It is therefore possible to say contact marketing but also tend to adapt that there is a contradiction between the need products and publicity much more within the to create value – via the adaptation of well-defined framework of the brand identity, products and symbols to suit a particular on the one hand, and the brand’s economic MANAGING GLOBAL BRANDS 481 equation, on the other. Thus Garnier and country’s ethnic melting pot – is characteristi- Maybelline adapt much more than Lancôme, cally dry and unmanageable and needs a and in the case of Garnier, this adaptation is moisturising conditioner. Brazilian women automatic and built in from the outset. For are proud of their hair, which they regard, example, Garnier offers the most extensive even more than their faces, as the symbol of range of cosmetics to meet the demands of all their sensuality. They therefore want it to be skin and hair types in Europe and the United long and flowing, to move with their body, States. Depending on the country, its what the Brazilians call cacheado, or curling subsidiaries select the products best suited to and wavy. So the European laboratory their requirements, since each country developed a unique formula and then l’Oréal develops its own market. The same applies to considered the economic equation. Could the format of the packaging and labelling. The enough of this new product be sold in Brazil differentiation is situated at national level and and, of course, elsewhere in the world? It was not at the level of the region or zone, since the called Elsève Hydramax and soon became the women of – albeit geographically close – coun- most popular haircare product in Brazil before tries such as Korea, Taiwan and Japan in fact being extended to other countries. have very different expectations. The Lancôme Maybelline provides another example. customer, on the other hand, is widely trav- Although it is a US brand and its teams are elled and expects to be able to buy the same based in New York, the Japanese laboratory products in Tokyo or Paris – by being over- discovered an innovative active ingredient adapted, these products would lose their that was able to meet the very specific status. Naturally, Lancôme develops specific demands of very trendy and ‘hip’ young skin-whitening products to meet the very Japanese women, typical of Tokyo’s Shibuya strong demand among Asian women in these district, for a particular type of lipstick. These countries. are young women with small mouths, and in So how do companies reconcile this fine- Japan mother-of-pearl is very popular. This tuned adaptation and the economic molecule created the effect of water, giving the equation? By making the economic equation lipstick a ‘wet look’. After careful economic the criterion for the acceptance of the adap- analysis, the product was developed in Japan tation. Thus for l’Oréal, innovation assumes under the name Maybelline Watershine the status of a religion, with over 500 patents Diamonds. In the space of a year, it made registered each year. This innovation can Maybelline the best-selling mass-market make- come from one of three sources: up brand in Japan, and was subsequently extended to the United States and Europe l one of four basic research laboratories – two where it enjoyed a similar meteoric success. in the United States, one in Europe and one In both these cases, the local innovations in Japan; were only accepted when they were considered ‘globalisable’ with the potential l from brand marketing teams throughout for global successes. This is a far cry from the the world; ‘think global, act local’ business model. It is l from any of the various national retail more a case of ‘think local, act global’. distribution subsidiaries. Competitive advantage through Sometimes there is a strong local demand in a adaptation particular country. For example, in 1997, Brazil expressed a desire for a specific haircare Globalisation at all price has a cost: failure. On product since Brazilian hair – the result of the the other hand, some examples, not much 482 CREATING AND SUSTAINING BRAND EQUITY publicised, show how market adaptation Because it is not possible to sell a lychee mixer helps in developing a profitable business and drink the same way in Japan (where it is now slowly gaining market leadership. the number one brand) and in Europe. In Year after year, Nestlé has tried to compete Japan, Ditta is aimed at young women who against Kellogg’s in the cereals market. This is typically go to bars to chat together, a classic normal: cereals are close to the core product of of Japanese social behaviour. The communi- Nestlé, milk. They address the same target too cation target was the bar staff who promoted (children), and the same benefit: growth. imaginative new cocktails. In Europe, the As long as Nestlé copied Kellogg’s it was brand called Soho is mostly sold off-premises, unsuccessful. In addition, Nestlé had no in multiple retailers, thanks to in-store wet know-how in cereals. It needed an alliance. trial campaigns. The target market is women General Mills in the United States was itself as a basis for cocktails (with grapefruit for looking for a way to enter Europe, after instance). Here again, leadership came from Kellogg’s, Quaker Oats, and the private labels adaptation. of strong or even dominant multiple retailers. To compete against a leader one needs an Adaptation: a necessity for growth innovation. Because of Nestlé’s decentralised through time culture, local subsidiaries have some autonomy. The French subsidiary identified a A final example is Barilla, a mainstream need so far untapped by Kellogg’s: children popular pasta brand that is number one in love chocolate. They wish to have chocolate Italy. It decided to extend geographically in for breakfast. Why didn’t Kellogg’s identify Europe, by means of a positioning very this need? First, it was a local need, and different from its own domestic positioning: centralised global companies are not fitted to it created the premium pasta market in adapt to local needs. Second, it did not fit with Europe. Barilla was introduced almost as a the ideology of cereals for growth and health. luxury brand (see Table 17.7).This was imple- Finally, leaders tend to defend their acquired mented through cartons with a specific position instead of looking for new markets design and the launch of a collection of forms (Christensen, 1997). Also, as a chocolate of pasta unknown in most countries. brand, Nestlé had more insight into this Naturally the price was 25 per cent higher market. The result was the launch of a local than the local leader, which itself often had new product, thanks to the know-how of an Italian name but did not play on this General Mills, marketed and distributed by image dimension, having lost all links with Nestlé: Chocapic, the first cereals in Italy a long time ago. chocolate. Soon this product became the Barilla’s goal is not to remain a niche player market leader with a share of 11 per cent: all in all foreign countries, but to become the multiple retailers had to distribute it. This is number two if not the number one. This how Nestlé fought back successfully. It inno- necessitates addressing the local habits of vated in a high-volume market, then average consumers, not elitist ones. As a Chocapic was rapidly extended to other consequence, the brand has to widen its range European and world countries. and lower its prices on new lines adapted to Everyone has heard about Malibu, a white children and family consumption, even if this rum and coconut light drink. What about means producing products that are hardly Soho or Ditta, which recently passed Malibu typically Italian but represent a large part of in volume and value sales? Soho and Ditta are local consumption (like noodles). This also the two names of the same product, a mixer entails packaging these lines in a far less based on lychees. Why are there two names? premium style (no more cartons). Finally, the MANAGING GLOBAL BRANDS 483 advertising itself should bring the brand part, buying a value based on the idea that, if closer to the markets: it has to stop being they travelled to Paris, New York or Tokyo, perceived as the brand of Italians. Positioning they would find exactly the same product. a brand on export markets as the one This is why luxury goods and top-of-the-range preferred by consumers in its domestic market cosmetics do not try to appear local – their contributes to reinforcing an alien image. added value stems from their global image Some consumers may like to imitate the and their foreign origins. Finally, this basic choices of foreigners, but becoming a local trend does not affect brands whose added leader means addressing the needs of this value stems from their association with a market, the first one being to be relevant for particular country. For example, Coca-Cola that market. and Levi’s are universal symbols of the United States, while Lacoste symbolises French sporting elegance. Today, young consumers Being perceived as local: the new worldwide, who have grown up with mixed ideal of global brands? cultures, tend to favour brands with a strong national identity which allow them to exper- A curious turnaround appears to be taking iment with their own particular identity. place. In multinationals the world over, CEOs However, the search for popular success on are proudly producing figures proving that the world market forces companies to their brand is perceived as ‘local’. In fact, recognise that being close to consumers is a brands that have been very successfully ‘glob- key factor of this success. L’Oréal was quick to alised’ for some time are now perceived as realise this and, within its very diverse brand local brands, a phenomenon that is just as portfolio, the name of the typically French true for Nivea and Kodak as it is for brands of brand Laboratoires Garnier was changed to medication (Aspro and Rennies), washing Garnier in 2001. The change of name was not powder (Ariel and Omo) and even Shell, accidental – it was designed to facilitate the which the Swedes firmly believe to be their brand’s acceptance by countries on all five national brand. Is this desire to appear local a continents. In spite of a ‘brand identity’ concession to fashion, a concession to the platform that is the same in all countries, World Social Forums against capitalist globali- Garnier readily adapts its products and ingre- sation, or does it reflect a deeper awareness? dients to suit local hair and skin types, as well It should first of all be pointed out that this as adapting its packaging to suit local practices trend does not affect all brands, only those (large formats in Portugal, tiny formats in that want to be accessible, popular brands Korea) and its advertising (using local models) reaching a wide public in countries to appeal to local consumers. This strategy is throughout the world. By definition, ‘high- therefore the direct opposite of that used by tech’ is not local – if it is, it is perceived as the group’s top-of-the-range brand Lancôme, ‘low-tech’. It is technology that unites the which is extremely globalised in all aspects of world, which is the essential factor of globali- its marketing mix. Thus, the higher up the sation and the attendant standardisation, by range the brand, the less it has to adapt. creating the same desire for a particular piece If brands are seeking to maximise their or pieces of new equipment in consumers the integration within a country, it is because world over. Thus, the big technological brands companies have realised that the global are clearly perceived as global, a perception brand was above all a consequence of the that invests them with additional perceived pursuit of economies of scale and the compet- quality and prestige. Similarly, ‘high-touch’ itive advantage they provide. Consumers brands are also global – their customers are, in have never been known to ask for global 484 CREATING AND SUSTAINING BRAND EQUITY brands. There is, therefore, a difference Kodak and Philips are considered French by a between being a global brand that is repre- third of the French population, as Bic is sented on all continents because it meets a thought to be an American brand in the USA. universal need, and proclaiming a global brand from the rooftops. Furthermore, our Integration factors recent research has shown that the key asset of local brands is confidence, and in these How does a company speed up perceived inte- times of doubt, food scandals and capitalist gration and acquire the desired level of assim- crises (like Enron), the confidence factor is a ilation in a country? This is an issue that even distinct advantage. involves high-tech companies if they do not This is why groups like Danone say they want to be perceived as cold, distant and want to be ‘a local global company’, but in indifferent to public concerns, simply content Danone’s case the brand is actually – and to sell and therefore a symbol of the predatory legally – a local brand in several countries. multinationals. The first thing is to tune into local needs and then implement a local Being relevant before being global? marketing campaign – on the streets, in sports stadia, as part of local life. Media advertising The global brand results from a deliberate will should be balanced by direct contact and to rationalise its management and less from a involvement in a country’s everyday life. It demand from the market. The typical was not by chance that Garnier launched its consumer does not buy a global brand per se, new Fructis Style product on, among other but on the contrary, individualistic brands things, more than 100 buses in each country – that correspond exactly to his/her specific buses that would travel back and forth across needs. Even when it is global, the brand is towns and cities, in direct contact with the bought in an individualistic fashion. The general public. buyer of Mr Clean in France compares it to Last but not least, and bearing in mind Ajax and to other local competing brands: that the brand and company are one and he/she has no notion of the existence of Mr the same thing in the eyes of the general Clean in another country, with the same posi- public, it is a distinct advantage to have tioning and the same promise of shine. The factories and produce the product in the buyer is sensitive to the latter and to the countries in question. This not only helps personality of the brand, just like the buyers the brand to put down roots but also of Mr Clean in these other countries. Thus, increases its status, since it provides when in several countries, groups of buyers employment. If the company also has a appear sensitive to the same advantages and well-developed social policy, people will expect the same features, there is an oppor- talk about it and it will gain respect and tunity for a global brand. We should speak confidence. Far from behaving like a here of ‘coincidence of globalism’, referring to coloniser or a predator, the brand will be the fact that globalism expresses a corporate seen as seeking to share its success. The view, whereas at the consumer’s level in each local publicity given to the social initiatives country, in spite of so-called similar needs, of Danone (the company) in Mexico greatly their choice remains individualistic and helped to speed up the brand’s assimilation egocentric (Buzzell and Quelch, 1988). The in this key country. As can be seen, in the brand must therefore often be a chameleon age of the responsible and ethical brand, and seem ‘just like back home’. This does not companies no longer hide behind their apply to international high-tech, service, brands (quite the opposite, in fact) in their luxury or alcoholic beverage brands. But penetration of foreign markets. MANAGING GLOBAL BRANDS 485

Local brands can strike back regarded as a local brand. Strangely enough, according to its directors, the German brand The criticism of local brands has therefore Nivea also aspires to be perceived as a local been exaggerated (Kapferer, 2001) and their brand even though it is one of the most strength underestimated. Because they tried widely distributed brands in the world. The to replace local brands with global brands too same applies to the Danish brand Velux, the quickly, Procter & Gamble and Danone were number one roof window manufacturer, Bic, forced to back-pedal and try to win back the Garnier and others. customers they had lost. It should be remem- In 1998, the trend was for globalisation at bered that pro-global propaganda was a one- all costs, and having bought the Czech way street and did not brook any form of company Opavia, the Danone group decided opposition. However, it is worth considering to replace this local brand with its own global how many leading brands are in fact not local. brand. However, Danone had seriously under- The leading brands on a number of markets – estimated the strength of the local brand and fruit juices, beer, cooking oil, butter, cheese – had to back-pedal. Opavia had more than 70 are all local brands. It could be argued that per cent of the market share in the Czech these are traditional products, but it is signif- Republic. During the communist era, the only icant that in Korea and Japan, the number one ‘treat’ available to the Czechs was biscuits, hamburger is not McDonald’s or Burger King, and Opavia had become their friend and ally. but Lotteria (an offshoot of the Lotte Last but not least, Opavia was also the name department stores). The same is true in of a Czech town, which made it a patriotic Belgium where Quick is still the market leader, brand. All these factors were difficult to appre- more than 10 years after the US giant pene- ciate when legislating from a distance. Each trated the Belgian market. The paradox is country has its own icon brands and globali- explained by the ‘first mover advantage’. In sation simply cannot afford to ignore the these countries, it was the local brands that consumer. established the hamburger restaurants and The international study referred to earlier the market for which they became the (Schuiling and Kapferer, 2004; see page 468) referents. There is no difference in the struc- identified the levers specific to local brands – tures of these competitors, but the key factor confidence and proximity. These are key of the success of any restaurant is its position – factors of success if the local brand also knows when McDonald’s arrived in Korea and how to market its products effectively. Belgium, the best sites were already taken. Today, many global brands affirm that they Developing local brands try not to appear global. This is certainly true in the case of Danone, which is in fact legally Since many brands are and will continue to the local brand in four different countries. remain local, how can they be developed in The Danone brand, the result of an inno- the face of international competition? The vation, was created in Spain in 1919 by Isaac strength of local brands has already been Carasso, who named it after his son (Danon is demonstrated (Schuiling and Kapferer, 2004) the Catalan diminutive for Daniel). Danone and their strong points compared with global was registered in France in 1929, while brands. But confidence and proximity will not Dannon Milk Products, Inc. was created in provide indefinite protection – they have to New York in 1942 by Daniel Carasso, who had be maintained, and the strategies that emigrated to the United States. The brand was maintain them are therefore particularly subsequently extended to Mexico. In each of important. But it is equally important to these four countries, Danone or Dannon is address the weaknesses of local brands – a lack 486 CREATING AND SUSTAINING BRAND EQUITY of innovation, fun and fashion, according to therefore understand the new markets and the new, younger generation of consumers. segments, who can identify consumer Local brands also suffer from a number of insights and convert them into ideas. weaknesses and limitations at management l Local brands are too self-restricting. In an level, and these are outlined below: age that glorifies globalisation, there is little in the way of advice or articles to l The first is often inertia – too used to support local brands (Kapferer, 2001). They simply being there, because of their history therefore run the risk of being too self- rather than their ambition, local brands restricting, as in the case of the Norwegian often lack energy because they lack company DBS, a local market leader in the ambition. The brand therefore needs to be bicycle sector. DBS did not think it would revitalised from within, and its aims, be able to sell modern mountain bikes mission statements and advantages clearly under its own name, in the face of compe- redefined. tition from Giant or the US company l Local brands are often too widely dispersed. Cannondale. In fact, it was a huge success – It is therefore crucial to refocus resources on consumers were delighted to be able to buy certain markets or market segments in quality products throughout Norway (due which they can hope to dominate or at least to the extended distribution of the brand), be joint market leaders. They also have to under the national brand name. Of course, accept the need to part with some of their there are always people who will only buy business in order to concentrate on the international brands, but it is important to segments with the potential to dominate the take account of the less obsessive majority. market. Alternatively they can target niches, l There is another form of geographical self- small but profitable markets, in a way that restriction. There is no reason why a local the multinationals are unable to do. brand should not seek opportunities for l Local brands often lack innovation – they growth in neighbouring countries, which rely too heavily on loyalty as a driver of are often familiar with the brand or have preference and have therefore lost their cultural similarities that favour its assimi- relevance because their products are no lation. Thus, it is quite natural for local longer modern enough or sufficiently well Estonian brands to be sold in Lithuania and adapted to meet present-day demands. It Latvia, or for Polish brands to be sold in cannot be said often enough that innova- Hungary and the Czech Republic. But the tions are the lifeblood of a brand. There are geographical area can extend further afield. several types of innovation. Some demand One of the key factors of the success of small huge investments in R&D and are beyond and medium-sized enterprises is their assim- the scope of local brands, while others are ilation at international level very early on in more closely identified with the user values their development (Simon, 2000). It is of the products and are therefore more significant that in the case of Wal-Mart, the accessible. A third type is related not so world’s leading distributor, a development much to basic research (new active ingre- team travels the world in search of inno- dients) as to the search for new concepts vative products that will differentiate the that are linked to a consumer insight. store’s ranges from those of its competitors and add an element of surprise for l Local brands tend to have an established customers. This was how the micro- form of management. There is a need to company Lorina, which had relaunched the bring in new managers who relate to and ‘orange crush’ drinks popular in the past, MANAGING GLOBAL BRANDS 487

was spotted at a trade exhibition for new higher marketing investments. products and then referenced in the United l Third, brands are permanently nurtured by States a year after its creation. This refer- innovations. encing with a mega-distributor is often tied to an exclusivity agreement that guarantees l Fourth, local brands do not look at all local. a certain continuity for a brand’s interna- La Neige for instance aims at the youth tional development. market, with a French looking name and l Finally, local brands must not appear local. capitalises on its proximity to French Except in the case of ethnic or traditional customers. Hera (the name of a Greek craft products linked to a particular region, goddess) is a direct competitor of Lancôme modernity is expressed via cultural inte- and Estée Lauder: as such it is strongly gration. Who knows whether or not visible in all premium department stores as Hollywood chewing gum is a local brand? in the duty free zone of Korean Airports. Or Gemey, Dop, Tango or Wall’s ice cream? l Finally, Amore Pacific has extended its best The top three brands in the world’s largest brands to other countries. La Neige has market in terms of volume (France) for been successfully launched in Hong Kong Scotch whisky are all local brands. Certainly and Shanghai, as Hera. There is a growing these whiskies come from Scotland, where demand in Asia for Asian brands that whisky is produced to excess, but these understand Asian women better than brands were created by wines and spirits western imported ones. merchants – two low-price brands, based essentially on trade marketing (William Peel, Label 5), and a mainstream brand The process of brand (Clan Campbell). It was these brands, less expensive than the big international globalisation brands, that enabled the French market to While there is no shortage of examples of double in size in the space of 15 years. globalisation in books, articles and at confer- ences, most focus on product brands such as A good example of management of local Coke, Marlboro, Starbucks, McDonald’s, brands against increasing international Amazon, eBay and Intel. However, these competition is Amore Pacific, Korea’s examples are centred around unpredictable dynamic and leading cosmetics company, and and/or radical innovations which, after strong market leader thanks to a wide brand becoming leaders in the United States portfolio. How did Amore Pacific strengthen (a domestic market that is equal to 50 per cent its brand proactively? of the world market), were able to be exported on the basis of their reputation. They do not l First, the brands are allocated by distri- correspond to the reality of most global bution route: one brand, one channel. This groups and brands, which often have a small includes the very dominant direct sales country of origin and have to become global channel (door to door or through from the start. This was true in the case of customer-led parties), a channel imported Nestlé (the world’s leading food company), brand cannot penetrate for it requires a which originated in Switzerland, Unilever know-how and resources it will not possess. (the Netherlands), Absolut (Sweden), Grey l Second, small brands have been merged Goose (the Netherlands), Finlandia (Finland) into larger ones, to create mega-brands and and Velux (Denmark). It is significant that, reach a higher critical size, a condition of four months after the launch of the first 488 CREATING AND SUSTAINING BRAND EQUITY product ever manufactured by Nestlé (baby value, like ‘the best toothpaste for helping cereal), it was already being sold in five prevent tooth decay’). It is a source that has to different countries. Nestlé made diversity part be defined. To avoid problems of under- of its strategy from the outset and still standing and translation, globalisation very continues to do so today – Nescafé currently often involves the choice of all-purpose words offers a range of no less than 32 different that have the advantage of creating consensus coffee-related products in Europe. This is a far the world over, such as ‘high quality’, ‘client cry from the single Coke-style product. focused’, ‘dynamic’ and ‘competent’. But it is Whereas US brands promote the ‘American important to be wary of international way of life’, this does not apply to other consensus since it usually reflects a certain brands and groups throughout the world. The weakness in the brand definition and object of this chapter and indeed the entire therefore the brand identity. book is to try to re-establish a certain balance Brands are based on differentiation. They and to suggest alternative, and sometimes have to have character, salient and original more relevant, models. points. But would Marlboro dare to launch its Key stages in the process of brand globali- brand today using the symbol of a solitary, sation are: macho, craggy, outdoor figure? l defining brand identity; Global brands are universal stereotypes l choosing regions and countries; As a rule each brand should be based on a l accessing the markets; consumer or customer insight. An insight is literally an insight into the consumer or l choosing the brand architecture; customer, a short sentence encapsulating the l choosing products adapted to the markets; state of mind or expectation or attitude the brand is responding to. l constructing global campaigns. As a consequence, global brands tend to address universal truths, global insights. Defining brand identity Taking the spirit market, what are the universal truths of alcohols? Here Brand globalisation presupposes the defi- consumption is conspicuous: by drinking, nition of the brand to be globalised. That is, men try to enhance their male status. By its the brand must have an identity that will symbolic character, and the values it serve as a medium for its globalisation, in promotes (‘keep walking’, that is to say both tangible and intangible terms. The persevere) Johnnie Walker represents the company must therefore start by defining and adult male achievement. It is about effort and writing the parameters of the brand’s identity. masculinity, about being a real male This is essential for coherence, all the more so throughout the world. J&B is about social since globalisation will greatly increase the success. Chivas encourages joy and brand’s centrifugal tendencies, with everyone conspicuous consumption. Bacardi is an wanting to interpret it in their own particular escape to paradise. way. To limit these tendencies, there must be a clear and concise platform with salient points Give flesh to your identity and flesh. It should be remembered that the modern There are several ways of preventing the brand is no longer a simple ‘product plus’ salient points of the brand identity becoming (a mere definition of a product with a plus lost in the globalisation process: MANAGING GLOBAL BRANDS 489

l by accompanying the facets of the brand antee success in the rest of the world, or at identity with a comparison, saying what least the key countries in which it is to be the brand is and what it is not; marketed? There is therefore an interaction between the first (defining brand identity) l by accompanying the words with images and second (choosing regions and countries) (brand concept board); phases of brand globalisation. When a brand l by reinforcing the facets through training is exported, it immediately acquires the added initiatives and creating local brand relays values associated with its international (keepers of the flame); perception, and it enjoys the ‘spillover effects of international perception’. Absolut is not l by not delegating strategic implementation highly rated in Sweden, but in the United (such as advertising and the web) to the States – where it is perceived as an imported local level. vodka, while Smirnoff (the local leader) is produced in the United States – it has created At this point, it is important to distinguish the premium segment. between exported brands and global brands in the strict sense of the term. Jaguar, Porsche Separate the domestic and the and BMW are exported brands – Jaguar’s international positioning brand values have not been redefined for globalisation, while BMW and Porsche When it leaves its country of origin, a brand is certainly incorporate the characteristics of the transformed, and changes its nature. For global market (in fact the US market) in order example, Barilla in Italy is a popular ‘main- to define the specifications of their future stream’ pasta brand that offers good value for products. The Porsche 928 was designed for money and inspires confidence. As shown by the United States, its broad highways and Table 17.7, in other countries it is positioned style of driving, and the design of the latest as the ultimate Italian ‘must have’, top BMW Series 5 was developed entirely with the quality, traditional and fashionable, but loses United States in mind. But what you are its ‘value for money’ and ‘confidence’ – it buying is Coventry, Stuttgart or Munich – the takes time to build up confidence. brands have not changed in the slightest in Generally speaking, exported brands must respect of their identity and core values. The be positioned at the top of the range since same is true of Chanel. These are brands they have to support transport costs and exported worldwide. customs duties. Furthermore, it is an oppor- The brand to be globalised must think tunity to take advantage of the spillover about its identity. Will the identity that has effects of perceived brand globalness (PBG). ensured success in its country of origin guar- In this way, the Swedish vodka Absolut

Table 17.7 Barilla’s international and domestic image Percentage perceiving Italy France Germany the brand to be: High quality 34.9 56.9 40.6 Trustworthy 56.6 44.8 17.4 Good quality/price 33.8 26.8 17.2 Fashionable 11.0 19.6 26.1 Authentic 8.9 16.0 13.7

Source: Kapferer and Schuiling (2004) 490 CREATING AND SUSTAINING BRAND EQUITY created the top-of-the-range (premium) ments and the growth of purchasing segment in the United States, where it is sold power; for 20 per cent more than the local market l consumer insights on their prospects for leader (Smirnoff), which has factories scat- rapid development; tered throughout the region. l the nature of any competition and its Choosing regions and countries ability to react – does the brand in question have the potential for strong differenti- An examination of the so-called global brands ation, or a ‘plus value’? reveals that they are far from being as widely l the existence of a rudimentary brand distributed throughout the world as we are led equity in the country or region (via tourism to believe. Of course, this could be because or the international media which transmit conquering world markets is a gradual process brand images into homes throughout the and a company must first of all establish itself world); as the leader in its domestic market. For example, the first Wal-Mart was not estab- l the existence of adequate distribution lished outside the United States until 1991, 30 channels likely to promote the brand years after the creation of the first store in this concept; famous US chain, while McDonald’s accessed l the existence of a media network; other markets gradually, one by one. However, there is another explanation – not l the existence of adequate commercial all countries are potential customers for the partners at local level; brand in question. For example, dairy l the non-existence of barriers to market products are not part of Asian culture, which access – customs, formal and informal is a handicap for Danone. Similarly, yoghurt is regulations; not a part of US culture and this is a handicap for Dannon USA which, although created in l the potential for registering or buying the 1942, has not managed to impose itself as a brand name (a check that it is not already major brand. The Japanese do not like their owned locally). perfume to impinge on others, which is a handicap for all brands of strong perfume. The presence of trade barriers was why coun- This is why brands such as Paloma Picasso, tries like India, fearing a sort of neocolo- with its characteristically Spanish values and nialism through the intermediary of strong essences, sell better in Texas, California companies, for a long time remained closed to and of course southern Europe, but also in imports. It would have been theoretically countries (such as Germany) whose tourists possible, for example, to manufacture a major visit southern Europe. brand of car in that country, but this would At this stage a strategic analysis should be require all the subcontractors who are a carried out to assess the potentials of each necessary part of the production process to do country and the barriers to accessing their the same thing. In the absence of subcon- markets. This analysis should incorporate: tractors and adequate partners, there is a risk of departing from the brand contract in that particular country – its cars will sell but will be l the size of the existing market; of inferior quality. This was also a problem in l indicators of growth and/or the latent Brazil for a long time. potentials of this market, and its As has already been stated, the key issue in ‘segmentability’ – sociocultural develop- brand naming is the globalisation of product MANAGING GLOBAL BRANDS 491 platforms – for example, Unilever defined It will come as no surprise that, today, all five platforms for margarine. It is not a major western brands are looking towards the East: problem that one of these platforms is Becel in Portugal and ProActiv elsewhere – since l Eastern Europe and Russia are two of the global economies and synergies must first of long-awaited growth regions for brands all be achieved at production and battling it out on saturated western markets. concept/positioning level, the name becomes They also offer a competitive advantage for a secondary problem. As the focus of media Scandinavian brands that have long-estab- attention, a name that is the same every- lished ties with these regions, and for where is of course desirable, but it is not the Germany whose area of influence has always central issue because it is not the principal historically been Eastern Europe. But given source of increased profitability. the present low purchasing power, it is also The result of the strategic analysis of the an area of expansion for brands positioned countries in question sometimes explains the according to price, such as the Korean distribution of sales of international brands. brands LG, Samsung, Daewoo and Khia, and Thus, the three key countries for The the Turkish brands targeting Romania, Laughing Cow brand are of course its country Bulgaria and Albania. of origin but also Germany and Saudi Arabia, where temperatures are so high that processed l China is another growth region – today, cheese is the only way to provide the daily one-third of its billion inhabitants are cred- milk intake for both adults and children. The itworthy. It is significant that barely two creation of factories in Morocco and Egypt has years ago, l’Oréal was achieving 49 per cent also reduced the problem of customs barriers. of its turnover in Western Europe, 32 per Within the context of globalisation, the cent in the United States and only 19 per order in which countries, regions and conti- cent in the rest of the world. Given the nents are ‘conquered’ is also a strategic issue. considerable needs of Asia in general, due For example, Amore Pacific is the international to the size of its population and its flagship brand of the Korean company of the improving standard of living, it is easy to same name – it embodies its know-how, values understand that l’Oréal’s priorities now lie and ethics. It is also a modern brand that seeks in this direction. This is reflected by the to ally itself with the concept of western fact that one of the group’s basic interna- beauty without rejecting its Asiatic origins. In tional research centres was established in 2003 the question arose as to which it should Japan, and also by the group’s acquisition penetrate first, the US or European market. of Japanese brands. Gone are the days Apart from the issues addressed above, the when Chinese women only looked at company was concerned whether it was in its western brands. Today they are very much best interest to advertise success in Europe aware of their Asiatic origins and are now then the United States, or vice versa. Given turning to luxury and top-of-the-range that perceived brand globalness is not a driver Japanese and Korean brands – as evidenced of preference in the United States, or at least by the success of the Korean brand, La less so than in Europe (Holt, Quelch and Neige, in the department stores of Hong Taylor, 2003), it was decided to penetrate the Kong and Shanghai. This is why l’Oréal US market first. In addition, the United States bought the Japanese brand Sue Uemura, seem geographically, socially and culturally whose global brand portfolio reflects much closer to Korea than Europe, which is cultural diversity. Finally, the 11 global not only distant and fragmented, but also has brands in the l’Oréal portfolio are to be strong well-established brands. launched in China. 492 CREATING AND SUSTAINING BRAND EQUITY

l India, which is slowly emerging from a Globally speaking, there are two major protectionist phase in respect of its identity strategies for accessing national markets, by and the desire to preserve its inde- creating a new category or segmenting an pendence, will be the other growth region existing category. of the future. The competitive positions are already being taken up. The same applies to Creating a new category Brazil. Garnier is a typical example of this. The Accessing the markets parent brand establishes itself by launching a daughter brand that becomes the reference, A brand is not a simply a name on a particular the pioneer of a new category which has the range of products – it is what distinguishes benefit of the ‘first mover advantage’, little or those products, and a source of added value in no competition and easier negotiations with the eyes of the target market. A brand is estab- distributors who are eager for creative innova- lished over a period of time, and nothing is tions and value rather than a mere change of more important than a brand’s first initiatives brands between competitors. The downside of in a country, since these are what determine this strategy is that it requires a greater its long-term representation. The mainstay or investment in marketing and advertising. Its basis of this representation is the ‘prototype’. success also establishes the meaning of the It should be remembered that this key notion parent brand, which enables it to launch its was identified by the psychology of abstract other daughter brands at a later date. concepts (see Chapter 11) – the prototype is Nivea uses the same strategy even though it the ‘best exemplar’ which embodies the brand has an ‘umbrella brand’ architecture. It identity. launches Nivea Cream before the lines that Today, in response to the demands of ratio- establish its competence in the facial and nalisation and efficiency, many brands have body care sector, the keys to creating a long- two levels of branding – the parent brand and term bond of confidence. the daughter brand. A typical brand archi- tecture is that of the source brand, a branded Segmenting an existing category house with two levels. Frito Lay, Garnier, Dannon, Müeller, Campina, Ford, Toyota and The alternative strategy involves the imme- Renault are all typical source brands. The diate creation of a significant volume of brand can only be globalised via its daughter business by launching a differentiated brands, which themselves cover a range of product, based on the brand values, but in a products. The key to globalising these parent large-volume local category. For example, in brands is therefore a good daughter brand. Lebanon Yoplait began by launching two It is significant that Garnier was able to traditional local dairy products, Laban and begin its globalisation in 2001 when it realised Labneh. The aim was to quickly become the that it finally had a suitable prototype, one referent for traditional fresh dairy products by that could embody the brand’s modern values giving the country what a large industrial (see Chapter 13). This prototype – Fructis company can give – superior and consistent Style, created in 2000 – was the most recent of quality, more hygienic products, a more all the Garnier daughter brands, but it was the subtle taste, products with a longer shelf life, one that enabled Garnier to be launched in and more practical packaging. the United States, the Republic of South Lactalis, an international giant of the Africa, Brazil and China. It is now the segment cheese industry, globalised its umbrella brand leader in all these countries. Président in the same way. The Président MANAGING GLOBAL BRANDS 493 business model is the segmentation of generic profitability in other markets, including the categories. Created in 1968, it became the country of origin. Depending on the country, leading brand of France’s leading cheese the type of brand architecture used will be the (Camembert) and then the leading brand of ‘horizontal crunch’ and/or the ‘vertical butter, before extending to other products crunch’. such as Brie and Emmental. By segmenting The ‘horizontal crunch’ involves reducing the generic category, Président introduces the horizontal range of brands and ‘nicheing’ modern quality, practicality, adaptability to certain brands below others. Thus, in the new uses and so on. The mistake would be to United States, it is possible to find a Mini try to globalise Président by exporting Babybel cheese with a taste of Bonbel, the Camembert – for example, why would the whole being endorsed by The Laughing Cow, Spanish, Russians or Kazakhs want to eat whereas in France and Germany these three Camembert? At best it would appeal to a tiny names correspond to three different brands. minority (a niche). This is not how a leading But when a company moves into the United brand is recreated – and this is the key issue. States, the problem is not so much ensuring It is the business model of the brand that greater market coverage with a portfolio has to be globalised. For Président, this containing a range of speciality products as involves recreating – in Russia, Kazakhstan, surviving by capitalising. What was an inde- Spain or any other country – the initiative pendent brand becomes a daughter brand or used to successfully create the original brand, an additional item under the same brand by segmenting a large-volume traditional name (line extension). local category. The ‘vertical crunch’ has the reverse effect – It is worth noting that Danone, unable to vertical brand architectures with three levels create a new category of dairy products in of branding are reduced to two levels for Asia, decided to establish itself by segmenting reasons of efficiency and practicality. This an existing category to embody its key value, type of crunch is subdivided into the ‘top- health. Throughout the world, Danone is down crunch’ and the ‘bottom-up crunch’. famous for its yoghurts and mineral water. In The ‘bottom-up crunch’ helps to reduce the Asia it puts its name to biscuits – that promise number of levels by suppressing the one in the health (growth and vitamins) to parents and middle and raising the one at the bottom. In children – via global daughter brands such as Europe, l’Oréal Paris is represented in the Prince and Pepito, or by endorsing an ultra- shampoo market by the Elsève brand, whose popular, leading local brand such as Jacob’s in products have names (such as Color Vive) that Indonesia, Thailand and Singapore, and Tiger describe the function of the product. They are in China. therefore referred to as Elsève Color Vive by l’Oréal. The driver (what the consumer Adapting the brand architecture actually buys) is Elsève, while l’Oréal Paris acts as an endorsement. Should the brand architecture be the same in In the United States, it was decided to do all countries? Maybe it ‘should’ but can it in away with Elsève but to give all the products fact be the same? The gradual globalisation of in the range the suffix ‘Vive’: Nutri Vive, Vita a brand with two levels of branding (including Vive, Color Vive, Curl Vive, Hydra Vive, Body a source brand or endorsing brand) automati- Vive. This makes the relationship between cally raises this type of question. Also, adap- l’Oréal and its products much stronger and tation is governed by practical considerations more direct, which in turn promotes a recip- – it is impossible to recreate what was rocal regeneration. The brand now has a co- achieved without the pressures of time and driver since US consumers are not buying 494 CREATING AND SUSTAINING BRAND EQUITY l’Oréal shampoo or Color Vive, but a combi- Products must be a source of rapid growth nation of the two – l’Oréal Color Vive. This and yet comply with the sphere of influence also avoids the fragmentation of publicity in a that the brand wants to establish over a period country where media costs are extremely of time. Product campaigns, especially in the high. initial stages, can help to achieve this. The The ‘top-down crunch’ occurs when an different ways in which products are adapted endorsing brand becomes a driver and rele- to suit different countries, areas and regions gates the daughter brand to the role of were examined earlier as part of the locali- descriptor. It is significant that in Europe, the sation-globalisation dilemma. European brand of biscuits Lu is sold by speciality brands. According to the packaging, Constructing global campaigns Lu comes under the aegis of its daughter brands Prince, Pim’s and Mikado. Below the Not all brands want to globalise their commu- names, each specific product may even be nication. Japanese companies typically allow described as an ‘energy added’ biscuit, for their subsidiaries, in all their branches, a great example. deal of freedom at local level. Of course, this In the countries to be ‘conquered’ by the creates an impression of disunity since the brand (like the United States), Lu has been images projected by the various branches upgraded from an endorsing brand to a range within the same country tend to be very brand, while the other names are less different. But from a cultural point of view, prominent on the packaging and become large Japanese – and more recently Korean – descriptors. groups seem to want to offset the extreme standardisation of their global products (the Choosing products adapted to the source of economies of scale) by allowing this markets freedom at local level. These local subsidiaries are mainly sales subsidiaries whose purpose is Managing the growth of business and the to optimise the sales of global products in a establishment of the brand simultaneously particular country. Their local managers are means constantly adapting the marketing – judged on these results, not on the attendant and therefore the product ranges – to the creation of brand equity. Their marketing market, but within the framework of a well- structures are essentially operational defined and coherent strategy. As has already marketing structures, with the exception of been stated, the ‘prototypes’ must be chosen Sony, which has developed its brand concept as a function of the image to be created. Gone in other countries, and Toyota in the United are the days when importers decided which States. products would be allowed into a country on Another brand that favours a local the basis of purely short-term requirements. approach is Bonduelle, a leading company on These importers were merchants and interme- the European vegetable market, where it has diaries, not shareholders in the company, and to confront an amazing diversity of situations. therefore had no long-term objectives. This In Spain, for example, the brand had to access was why many brands were launched via the market via the frozen foods sector, in different products in countries that were in Russia via tinned sweetcorn. Peas, its flagship fact quite close to the country of origin. product, vary greatly from country to country. Within the space of a few years, this led to The Germans and Dutch like large, green peas, discrepancies in the product image and while the French prefer small, sweet, extra therefore to significant discrepancies in the fine peas. In Italy, Germany and the price premium. Netherlands, peas are mainly used for deco- MANAGING GLOBAL BRANDS 495 ration (as in a salad), which gave rise to the These must be identified before moving any launch of Bonduelle’s ‘Crea Salad’. Faced with closer towards an identical copy strategy, a such diversity, the company has centred its common creative concept or even a global globalisation initiatives around internal campaign. Companies also vary depending on values and company dialogue. Furthermore, whether they impose a certain discipline or the name, logo and packaging are the same for encourage the search for standardisation. all products, although advertising remains Contrary to appearances, McDonald’s is not very local. particularly prescriptive when it comes to An increasing number of brands want to brand advertising. Of course the marketing is control their global image. While it is global, like the product. With a few exceptions important to start by creating a brand identity and adaptations (which are the focus of media platform, this serves no purpose unless it is attention), the concept is strong because it is presented coherently throughout the world. standardised the world over – even though So, if a brand has decided to conduct a volun- McDonald’s is organised according to national tarist policy of globalisation, it needs to subsidiaries that are virtually independent. develop its own procedures for constructing With regard to advertising, the company’s its global campaigns. The most typical are corporate headquarters run the Ronald outlined below. McDonald films and charity initiatives, and offer guidelines without seeking to impose any form of obligation or control. This is explained Globalising communications: by the McDonald’s business model – the form processes and problems of the advertising cannot be imposed upon those who pay for it, the franchisees in each Today, brands want to globalise their adver- country who pay 4 per cent of their turnover tising, although this may not be possible in for the franchise. Once a month, a vote is certain situations for practical reasons. There is taken at the country’s executive headquarters no shortage of questions on this score. How do in respect of future campaigns. brands construct global campaigns without Even so, an incredible impression of damaging promotional creativity? How do ‘commonness’ emerges from the television they avoid demotivating the countries ads in all the franchise countries. But this is concerned? How do they inject a positive spiral not the result of any form of constraint – at into the company, throughout the countries McDonald’s, informality is the unifying prin- concerned, to destroy the not-invented-here ciple. It is due to the high level of under- (NIH) syndrome? The great progress made in standing and sharing, by the group’s this field provides benchmarks from which advertising managers worldwide, of the lessons can be learnt. In the following analysis, following elements: it will be noted that, first and foremost, these campaigns identify what unites the brand, l the state of mind of the brand, its concept which is what it wants to globalise: (food, family and fun, simple human truths) and the essence of the brand (the l the brand spirit, the parameters of brand child within us); identity; l the brand promise expressed according to a traditional ‘laddering’ (features, functions, l the brand’s visual identity; rewards, values, personality); l the strategic product (prototype); l the golden rules of advertising (tenets of l the executional codes of the campaign. Great McDonald’s Advertising), such as 496 CREATING AND SUSTAINING BRAND EQUITY

‘every McDonald’s ad is a brand ad’ or Skoda and Seat brands, the brand concept has ‘show human relationships’, ‘stay current: evolved – it is now based on the democrati- understand me, the client’ or ‘woven into sation of excellence. Then there is the the fabric of local, everyday life’, or ‘always platform of the daughter brand, the put emotion into it’. framework of the positioning of the model and the consideration of all the models in the As a result, the baselines vary greatly ‘Tone and Style of VW Advertising’ depending on the country, but they all framework. This framework is reminiscent of represent the same source, the same identity, the principles used by the Tribal DDB adver- whether it is ‘Mac your day’ (Australia), ‘Every tising agency since 1960, which have created time a good time’ (Germany), ‘Smile’ (South the exceptional distinctiveness of VW adver- America), or ‘You know our products from the tising and invested the brand with its unique cradle’ (Poland). personality. It includes such principles as: ‘Do To promote even greater standardisation, not exaggerate: call a spade a spade’, ‘ Don’t without damaging the McDonald’s business shout, he can hear you especially if you talk model, advertising films from all over the sense’, ‘Be authentic, honest, human, open, world are shown at the Creative Brand accessible’, ‘Make people think and smile’, ‘Be Seminars held on a regular basis. This teasing, elliptic: one should understand only encourages countries to use very creative films at the point of revelation’ and finally and that, although produced in other countries, most importantly ‘Be original’. In DDB ads, are still extremely relevant. The ‘best prac- Volkswagen cars rarely move. tices’ are posted on the intranet and discussed The positioning of the Polo that provided a at McDonald’s Hamburger University. Finally, worldwide framework was ‘Polo inspires self incentives are offered for using other coun- confidence because you can feel it is the only tries’ films. Today, 50 per cent of McDonald’s car in its class that is built without television advertising is based on the sharing compromise’. Then a creative brief was and use of these ‘best practices’. produced that summarised the advertising The car manufacturing group Volkswagen is objectives, the advertising target and the extremely centralised in respect of marketing, consumer insight (‘I feel I can take on the but when it comes to advertising, allows great world’), the product range and the reason to freedom of expression within a strong brand believe. Using this brief, local DDB agencies framework. For example, each country can set to work and came up with the creative idea produce a different film (based on the same that was finally used: ‘Tough new Polo, careful strategic and creative brief) for the market’s it doesn’t go to your head’. Then the films most popular models, because creative adver- based on this creative concept were produced tising is not centralised. However, for less by the local teams in each country. ‘mainstream’ products such as the 4 × 4 Philips was recently restructured as a Touareg or the Phayton, a single film is centralised organisation for a global brand, produced by the German group’s corporate with its headquarters in the Netherlands. The headquarters. new ‘unique’ brand concept was established – The new Polo provides a good example of ‘A unique experience’ – valid for all three the creative process. It is based on the very market segments (home entertainment, strong Volkswagen brand platform. In the personal expression and professional business past, the brand concept was centred around products). The company’s senior man- reliability and the tone characterised by an agement now decides on the choice of implicit understanding (humour) with the transnational products that will form the basis consumer. Today, due to the presence of the of the brand’s publicity. It centralises briefings MANAGING GLOBAL BRANDS 497

and develops the advertising campaigns with l Start by globalising at regional level. For local design teams. The pretest procedure is example, start in Asia and then incorporate centralised, as is production, with additional the United States and Europe, or vice versa. items built in at the filming stage of the ad, to l reduce the cost of line extensions. Establish common brand platforms Nivea uses a similar model, with very (identity) and share the spirit of the brand explicit guidelines on the brand identity, the to create an implicit sense of affinity. personality of each sub-brand, and the strict l Establish guidelines for the handling of provisos for handling the publicity that advertising, which are either limited to create the ‘Niveaness’ so typical of all the using common symbols of recognition or brand ads, in spite of their diversity. The go much further in order to bring out the director of Nivea’s Worldwide Marketing, personality of the brand. based in Hamburg, appoints three local marketing directors to work on a project, in l If necessary, admit that the angle of attack partnership with the TBWA Hamburg adver- cannot be the same for all markets (posi- tising agency. They are chosen from countries tioning versus competitors, the unique throughout the world and their task is to compelling competitive advantage), define the creative platform. This is then sent depending on regions and/or continents. to the local TBWA agencies of the three l Remember that, while a single adver- marketing directors which produce creative tisement is of course economically justi- ideas and then campaigns. The campaign fiable in the pursuit of this objective, the chosen is then imposed in all countries unless objective of branding is not to save money it has to be customised. This happened in the but to boost business. Working at interna- case of the campaign to relaunch Nivea Soft, tional level is expensive since it requires the for which the creative idea was ‘soft as the creation of an international structure, the morning rain’. But this had to be adapted for organisation of lots of meetings, and so on. three countries – the UK, where it rains a lot, Saudi Arabia, where it hardly rains at all, and l Possibly be more prescriptive with regard to Indonesia, where rain is associated with the common strategic products than local devastation caused by monsoons. The tactical products. adapted ideas for each of these countries were: In conclusion, it is important to define the rela- tionship to be established with the countries l so light, soft sensation for beautiful skin concerned – is it a logic of supplier and (UK and Australia); customer or one of authority, between decision maker and subordinate? Depending on the l it feels like under the trees (Indonesia); possibilities, there is a choice between decen- l it feels like the summer rain (Saudi Arabia). tralised or centralised management. There are six types of relationship or different managerial These case studies illustrate the typical functions, as summarised in Figure 17.1, that processes of groups wanting to globalise their can be applied to all elements of brand advertising. But it should be remembered that marketing. The globalisation process of each globalisation must be pragmatic and take company can be represented on this grid by account of strong regional differences marking (with a cross) the point of intersection (different competitors, different consumer between an element of the marketing mix and needs). It is therefore advisable to: the type of relationship with the countries concerned, in respect of this particular element. 498 CREATING AND SUSTAINING BRAND EQUITY

Function Ignore Inform Persuade Approve Decide Oblige Brand mix

Product Concept Positioning Price Distribution CRM Web activity Activation Promotion Advertising – creative concept – executional guides – production

Decentralised Centralised

Source: TBWA Figure 17.1 Managing the globalisation process between headquarters and subsidiaries

Making local brands converge Two scenarios are then possible:

A classic strategy for globalisation consists of l The company changes the names of the unifying the local brands inherited during local brands by substituting the name of its the growth of the groups. Big groups have, own brand. historically speaking, often chosen a strategy l In the second scenario, the company of external growth through the buying up of decides to keep the local brand equities strong local brands. The industrial sector connected to the brand names. General typically uses this strategy: Schneider has Motor’s branch in Europe is called Opel never stopped purchasing local leading while in the UK it is known as Vauxhall. brands of electronics, for instance. In buying However, these brands do need to these well-established reputations, these converge. companies were able to smooth their way through local markets. This approach also The harmonising process of a brand portfolio involves fast-moving consumer goods. The is quite tricky and should always be former BSN took over the famous Belgian conducted on a voluntary basis, since the biscuit brand, Beukelaer, the local equivalent initial situations of each separate brand name of Lu. The Swedish group Molnycke bought are never the same. A systematic programme Nana in France, which then joined the of unification according to the style, but Scandinavian brand of sanitary protection, above all according to the product basis, must Libresse. be implemented. The example of Mölnycke is Given this patchwork type of situation interesting from this point of view. In the where there is not much standardisation in female hygiene market, the intimate rela- the brand portfolio, companies proceed to tionship which has slowly been built up with regroup brands around the same positioning. the client is a key factor in the capital of the MANAGING GLOBAL BRANDS 499 brand, of course, there is the product benefit, This second step was brought about by but there is also the climate of a relationship specific communications, but then having within the brand identity. This relationship achieved a single concept for the brand, the must be maintained. Having judged it third step consisted of launching new necessary to preserve the brand capital products shared by both brands with the same attached to Nana in Southern Europe and to commercial. Libresse in Northern Europe, at the same time In conclusion, analysis of this internation- as Procter & Gamble was entering the market alisation strategy enables the definition of the with Always, the Mölnycke group progressed typical pathway to follow in all countries with in three steps. similar constraints. The process is made up of The first step consisted of determining seven basic steps (see Table 17.8). A consensus together what the unique positioning of these of opinion about the kernel of the brand, the two brands could be. The positioning revolved deep identity to which all subsidiaries must around the concept of what is ‘natural’. Deeper adhere, is the essential starting point of these examination revealed that this concept gave seven steps. This adhesion is revealed through rise to different readings, according to the visible signs such as logos, codes, tone and country under examination. In Scandinavian style. The ultimate phase is the quest for countries, the home territory for Libresse, commercials that resemble each other more nature in its strictest sense was evoked, whereas and more, until a single commercial is in the home countries of Nana nature possible for all. connoted spontaneity. The second step The reader will have understood by now consisted of bringing the brand image of that whether or not to have common adver- Libresse and Nana closer together as they were tising is not the important issue. One cannot quite different to start with. Libresse had to reduce the question of globalisation to develop a more feminine image and more knowing whether it is possible to produce a humour, going so far as to include a man in the standard commercial. advertisement for the first time. As for the Nana Of much greater importance are the exis- woman, she had to evolve in her commercials, tence of one common invisible kernel and become more natural with less frivolity, more competitive positioning and economies of pared down to the essential, more thoughtful. scale at the production level.

Table 17.8 How to make local brands converge Step 1 Is internationalisation necessary? Pertinence of globalisation for the brand or brands? Step 2 Which brand facets should be internationalised? Which ones should not? Step 3 Agreed-upon description for the network of the common kernel, brand platform, identity prism and positioning Step 4 Definition of the common visible facets, of the graphic charters, packaging charters, charters of advertising expression Step 5 Definition of the common copy strategy Step 6 Definition of the common advertising execution Step 7 Global launching of common products

Source: Adapted from F Bonnal/DDB 500

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Brand valuation 502

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Financial valuation and accounting for brands

In 2007 Fortune brands announced it wanted When one company is bought by another, to sell the world-famous vodka brand Absolut. there is often a huge difference between the Rumours say Ford wants to sell Volvo and book value of the company assets and the even Jaguar. What price for these businesses? price paid, especially if there are strong brands What part of the price represents the value of and positive forecasts of growth. This the name itself and its power worldwide? difference is called goodwill: it is actually a Financial evaluation and accounting proce- measure of the financial markets’ positive dures for brands have become subjects of attitude to the future of the company. For considerable interest and debate, as can be accounting purposes, the payment by the seen by the numerous articles that have been acquiring company must lead to the inclusion published on the subject. This intense interest in its balance sheet of what has effectively in the subject has several technical, economic been bought (assets minus debts) so as to get a and fiscal aspects, but especially reflects the perfect match between these elements and the discovery of the importance of intangible price paid (see Figure 18.2). investments in modern companies, and of the In all modern accounting systems and growth that a brand can generate in certain norms, goodwill must be allocated to the cases. The debates are international, as they specific items that have created it. Brands are concern the IAS new norms of accounting as one of these, as well as patents, know-how they affect large multinational corporations and databases. Hence, it can be said that the that they acquired and hence need to value question of brand valuation has stemmed fairly, and revalue regularly. from the necessity to account for sometimes The reason for the sudden interest in this huge goodwill payments when major corpora- subject – it was hardly mentioned before 1985 – tions were sold. There are other situations is the large increase in the number of takeover where brands need to be evaluated. For bids for companies with brands. The financial instance, when a brand is purchased, the and tax implications of the new problems value of this asset must be made explicit. posed by goodwill were considerable. Accounting is governed by the principle of 504 BRAND VALUATION

Price

Volume premium

With a Price strong brand Without a premium strong brand

Volume

Figure 18.1 What is ‘brand equity’? prudence. Its evaluations must be shown to be of the company (which of course is very valid, coherent and reproduceable. This is subjective) or, following the accounting why, paradoxically, only the brands that have prudence principle, to include only objective been bought individually, or that were data and to assess only past and recorded included in the price paid for a company, can transactions? Until now the second idea has be posted in the balance sheet of the acquiring been chosen in all countries: therefore only company. The overall price paid gives an transactions involving external brands are upper limit to their value. So far, all over the recorded. If the internal brands were to be world, the principle of prudence has led noted, the principle of reality would be national and international accounting norms respected at the expense of reliability and of and standards to forbid the posting in the the consistency of accounting. In fact, what balance sheet of internally grown brands. It is would we think of a balance sheet which was of course possible to propose brand valua- based on non-uniform and sometimes tions, but as long as the brands have not been subjective methods of evaluation? The bought and sold, there is too much doubt inclusion of an acquired brand does not about the validity of these estimates. Brands violate the principle of bookkeeping at acquire value through the market. historical costs, which is a fundamental accounting principle. How then can internal brands be valued? As we will see later on, the Accounting for brands: the debate valuation methods, which are based on historical costs or replacement costs, are not The debate on the inclusion of all of the good enough. The best methods are those brands, whether they be purchased or based on projections of future income, which created, raises basic questions about the very are highly subjective. A certain amount of essence of accounting. Why do balance uncertainty and heterogeneity, which are sheets and company accounts exist? Is it to against the rules of caution, would be created give an estimation of the true financial value if these were included in the balance sheet. FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 505

Price paid

Goodwill Goodwill in the literal sense Patents Sources of the gap: Goodwill Intangible and Brands (large meaning) tangible Database etc Equipment (economic value) Buildings (economic value) Net assets (Book value)

Figure 18.2 The issue of fair valuation of brands

But one may contend that the function of the creation of a brand. It is for the finance accounting is to present a framework to people to estimate the market value of these identify and deal with a company’s assets according to their own methods. This commercial expenses which are accumulated reasoning already exists for buildings and thus in the form of intangible assets that are can also be applied to brands. developed internally. For the moment, these Here, a first conclusion is taking shape outlays are treated as expenses and are concerning the monetary value of brands: deducted from the company’s income for the ideally for a valuation method to be year in question; this in turn reduces the acceptable it should be possible to apply it amount of tax that the company has to pay. equally well to brands which are to be bought However, some tax authorities are beginning and to brands that already exist within the to clamp down on the payment of back taxes. company, with a financial aim as well as an For example, they now consider that the accounting aim. However, this is not possible. money spent to produce advertising commer- The notion of value is highly dependent on cials can no longer be classified as expenses your position. Rowntree was worth £1 billion but are rather investments and thus are no for its shareholders and £2.4 billion for Nestlé! longer exempt from tax. For Midland Bank, Lanvin was worth £400 Accountancy, just like taxation, is inter- million; for Henri Racamier and l’Oréal it was ested in the recording of costs (as expenses or worth £500 million. On top of this, as investments). Financial analysis estimates accountancy is controlled by a principle of the discounted value of certain assets as a prudence, objectivity and coherence through function of the probability of the future time. By definition, in its own evaluation, a income that they are supposed to generate. raider thinks and acts differently. He does not Thus, there will not be only one value of the want to be prudent and is rather subjective. brand because valuation methods depend on The valuation of brands in the context of the goals of the valuation. The accounting mergers and acquisitions is a one-off oper- principles already exist and can integrate with ation: it aims to fix a price at the start given some reservations the costs accrued during the intentions and synergies that can be 506 BRAND VALUATION expected by the potential buyer. Accounting too far from the core activity. On the other for brands should obey different norms since hand, looking for gains in awareness at any their value derives from a different point of price may not always add to the marginal view. When there is no transaction involved, increase in brand equity and thus should be the internal brand is valued either as a halted, with the money put to better use. function of accrued costs or as a function of its More generally, the value of a brand can be everyday usage (and not what another party measured if the sources of this value can be could do with it). Therefore, there will defi- located, in other words to measure is to under- nitely be a gap between the value of the brand stand. Therefore the resulting figure does not which is bought and of the brand which is interest marketing as much as the process by created. Moreover, the need to constantly which it is acquired, that is, the under- revalue brand values either up or down, in a standing of how a brand works, of its growth, subjective manner, if they are legitimately of its increase or loss in value. This under- noted in the balance sheet introduces fluctua- standing is a learning experience and intro- tions which undermine the reliability of duces logical and analytical elements to areas company accounts. We can reply that the where magical beliefs dominated. It also value of the inventory which, in Europe, is supplies the means for a real communication indicated annually in the notes to the between people working in marketing, accounts does not have this effect. It is under- accounting, finance, tax and law. Finally, even standable why the accounting experts at the if, for reasons linked to tax or respect for the London Business School who were studying principle of objectivity and accounting the case for the inclusion of all brands on the coherence, the inclusion of internal brands on balance sheet gave an unfavourable opinion the balance sheet is still not recommended (Barwise, 1989) concerning home-grown and should not be practised by the company, brands. brand valuation remains a worthy exercise to It is a paradox that those who support the be carried out internally, for all the above most the argument of posting brand values mentioned reasons. Mergers and acquisitions are the marketing people. Perhaps they are are in the end exceptional events even though hoping to find a method accepted by they do catch the media’s attention. The valu- accountants and financiers of valuing the ation of brands should not be restricted long-term effects of marketing decisions. simply to mergers and acquisitions, it is also However, even though everybody agrees needed for the benefits that can be obtained orally that, for example, advertising has both from the point of view of management: for short- and long-term effects, controllers help in the decision-making process, for analyse brand performance within a short management control, for information span of time. Product or brand managers have systems, for marketing training and for to produce positive annual operating education of product and brand managers. At accounts, positive profit and loss accounts. this time when much is being said about the Thus, evaluation and control are done on an decline of brands, it is healthy to wonder what annual basis. This type of behaviour the real value of their awareness, image and encourages all decisions which are profitable public esteem is. Brand equity is based on in the short-term. Marketing people would psychological indicators, which are measured like to have a way to counterbalance this from the consumers’ point of view, and is only short-term bias, which has the effect of worth something if it results in extra profits. ballooning annual earnings but of eventually The demands which arise from the presen- undermining brand equity through rapid tation of company accounts and from share- promotions and brand extensions which are holder and investor information are one FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 507 thing, those arising from a management What conclusions should be drawn at this control system are another. The two should stage? Financial valuation of brands allows for not be mixed up because they do not have the the multidisciplinary meeting of all the same objectives nor are they faced with the company’s departments: marketing, audit, same constraints. There is no single value. finance, production, tax, etc. A capitalistic The notion of value is ambiguous and a perspective is introduced in the long run, source of several misunderstandings. It is counterbalancing the logic of annual valu- important to understand that there is no ation perspectives. It acts as a reminder of the single value for a brand; in fact, there are fact that a company’s wealth no longer comes several because the valuation will be different solely from the land, plant and equipment but depending on its aims: also from its intangible assets (know-how, patents, brands, etc). l the value of liquidity in the case of a forced The debate on the value of brands and the sale; way to account for them as assets is essentially an accounting one. This is not the essential l the book value for company accounts; benefit, but rather the integration of brand l the value needed in order to encourage value in evaluating marketing and advertising banks to lend the company money; decisions, which have been up to now subject l the value of losses or damage to the worth to one single criterion: the preservation of the of the brand should an adverse event occur; annual operating statement of the brand. Before we start to talk about the different valu- l the value in order to estimate the price of ation techniques, it is important to remember licences; that the real objective of a valuation (for an l the value for management control, which acquisition or for the presentation of depends on the behaviour encouraged by company accounts or for management) managers; modifies the criteria of valuation for these methods. Depending on this objective we will l the value for the partial sale of assets; have to choose between these demands which l the value in case of a takeover or of a are, unfortunately, not very compatible: more merger and acquisition. validity or more reliability? more subjectivity or more objectivity? more present value or For the last case the buyer only asks one more historical costs? question: by how much will actual income rise due to the acquisition of a company with a strong brand? In order to reply to this question What is financial brand equity? the company will evaluate any possible The 1990s witnessed the flourishing of the synergies that may exist between the two concept of brand equity (Aaker, 1990). The act companies, any resulting cost savings (due to of combining a financial concept (equity) production, logistics, distribution, marketing), with a manifestly marketing-based notion any extra capacity to impose one’s decisions (the brand) is symptomatic of a growing on distributors or the possibility of brand awareness of the financial value of brands, extensions or internationalisation. The which has emerged from the exclusive world proposed price for buying the company will be of advertising and marketing to become a very shaped by these questions. However, none of serious factor which – given the importance of these questions will have any influence on the equity – has a major impact on overall book value of the company’s brands. management. (Figure 18.1) 508 BRAND VALUATION

It is worth mentioning again what is meant world’s strongest brands – owes its strength by ‘equity’ in financial terms, and thus what and attraction as much to a product with connotations emerge from the combination special, unique performance as it does to the of the terms ‘brand’ and ‘equity’. Literally, image of its owners that the brand conveys. equity is ‘the owner’s claim on the business’. It Others (Aaker, 1990) maintain that brand represents an ownership interest in an enter- value incorporates all of the following vari- prise. This equity (called equity securities) is ables: recognition, perceived quality, imagery, opposed to debt securities, although both are loyalty and patent quality. Note that sources of funds, hence liabilities in the according to this definition – and in contrast balance sheet. The use of the term ‘equity’ to the previous definition – the product is when attached to a brand refers in fact not to included in brand equity because of the a liability but to an asset, built over time patents that make it different or even superior. thanks to the investment of the business in it. Still others, taking a highly cognitive For the sake of precision one should speak in approach (Keller, 1998), see the brand as a fact of brand assets, not of brand equity. collection of memory associations that Curiously enough, although the term generate a different reaction to the brand. ‘brand equity’ represents an invitation to Keller, for example, speaks of positive combine the marketing perspective with the customer-based brand equity if identification economic and financial perspective, subse- of the brand produces a more favourable quent events have revealed a disagreement reaction than if the brand is not identified. within the community of experts. When it However, he also defines negative customer- came to measuring this brand equity and based brand equity as a situation in which discussing what makes a strong brand, there such identification leads to a less favourable was a split between what some called reaction. Note that in the financial context ‘consumer-based brand equity’ and others which produced the notion of equity, there is referred to as ‘financial brand equity’. no such thing as negative equity. The latter The former school of thought (consumer- school of thought is populated by financial based brand equity) approaches the question analysts whose role it is to evaluate assets of brand value by taking the customer’s point (which can sometimes include intangible of view. This in turn leads to several different assets, and thus brands). From their economic theories. Some believe that brand value exists perspective, brand equity is the value today of wherever the preferences expressed for a profits imputable to the brand in the future. brand are greater than a simple assessment of An economic analysis of brand equity the utility of the product or service’s attributes requires us to look more closely at the word would have suggested. We can see that this ‘imputable’. The question is, imputable by approach considers the brand as a surplus, a whom? In contrast to the consumer-based preference that cannot be accounted for by approaches, the economic analysis prompts a the product alone. It is measured as a residual: simple yet fundamental observation: the brand is a conditional asset (Nussenbaum, BE = Declared preference – preference predicted by 2003). After all, without a product (or service) product utilities there is no brand. In order to produce a profit or EVA (economic value added), there must As we can see, this theory sees the brand as the already be sales, and thus a tangible base for degree of influence that exists over and above the brand and its distribution. Here, ‘already’ the product itself: the brand is thus restricted means in advance: spending and paying come entirely to an intangible, emotional before receiving. This gives us the basic dimension. However, BMW – one of the equation: FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 509

Value = –I + R brand is only worth anything if a profitable economic formula can be built around it; This equation is exactly the same as the which is something of a paradox, given that following, more fully developed, version this is an entirely consumer-based concept. giving the value of any asset. Since an asset is However, the economic realities are clear: even a factor with inherent future values, its value if a name has an attraction for consumers, it appreciates by the present sum of its future does not guarantee future profits. expected profits once the initial investment This can be illustrated by an example. The has been deducted. now-defunct Ribourel (property devel- opment) brand was the subject of a debate on n − the exact theme of this chapter. How much =+ (RDii) VI∑ i was it worth? It was shown that it was worth = ()1 + r t 1 nothing: the brand’s image was associated with value for money, but there was no way of Imputation of added value to the conditional turning this into a profit margin. The Ribourel asset that is the brand presupposes the concept was founded on an idea that was following: strong and attractive, but economically unachievable. The brand had no economic 1. That a value already exists to be shared. value under such circumstances. The reader may remember the terse, 2. That the tangible and intangible factors shocking statement issued by Daewoo in required for its production have been offering to buy Thomson for the symbolic price factored in. of s1. The point being made was that the brand 3. That a residual or excess profit remains had no value. One might retort that quite the after paying for these advance assets, reverse was shown to be true under the which make production and distribution management of CEO Thierry Breton; but in possible. fact, what Thierry Breton did was to bring about a change in the business model in order We believe it is time to bring the two to return the company to added value. approaches to the concept of brand equity Using the same logic, if a brand can induce together. After all, the brand is a tool for the consumer to pay a price differential but the increasing business: its value is linked to, and cost of creating the brand is greater than the dependent on, this objective. price increase, the brand has no value. Economic analysis tells us that, irrespective We should therefore put forward a unifying of a brand’s reputation, image, preference definition of a brand that has value (strong factors and loyalty, the brand has no value if brand equity): a strong brand is a name that the company does not produce an excess influences buyers through the value it offers and is profit capable of paying off the existing assets backed by a profitable economic formula. (tangible and intangible). Reputation and In this definition, several points should be image do not constitute value in themselves if noted: they do not translate into a profitable product or service. l Modern competition revolves around Seen in this way, it is an illusion to believe concepts and ideas. A name is associated with that a brand has value simply because it has an attractive, unique value that provides the ‘magic’. Many entrepreneurs have bought source of its purchasing influence. brands on this basis, but have never been able l Strength can also refer to the number of to convert this value into a hard profit. A 510 BRAND VALUATION

people who associate the brand with this l How do you reliably assess the value of a idea. A brand is a strong shared idea; for brand? example, everyone says that BMWs are the best cars. These issues should not be perceived as being of academic interest only: in fact, they ask l This must be turned into an economically important questions as to the very nature of profitable reality. brands and their impact on the added value created by the company over the lifespan of We can clearly see both the connection and the brand. This last point thus prompts the the ambiguity between the purely consumer- following question: do brands have a life based and purely economic approaches. It all cycle? We know that in retrospect, we can hangs on the use of one common word reconstruct the life cycle of a product, with its ‘value’, which takes on two different typical launch, growth, maturity and decline meanings. From the point of view of the phases. We say ‘in retrospect’ because during marketer, taking his cue from the work of the the life of a product, it is always possible to psychologist M Rokeach, a value is an ideal to maintain that the situation we know as the be attained, mobilising our energies and mature stage simply points to insufficient directing our choices. For the economist, effort (too few line extensions, too little inter- however, it is a balance: V = – I + R. national expansion, and so on). A strong brand thus focuses its efforts on Now, by feeding on new products that attaining a value through the consumption of replace the old, the brand ‘surfs’ product life a product or service which is given its cycles and acquires from them an apparently meaning by marketing and advertising. indefinite lifespan. Nevertheless, the debate However, this same brand has no economic on the depreciation of brands leads to very value if this approach does not result in EVA: different conclusions depending on whether it is useless. one believes that brands have a life cycle (and An economic formula for the brand does should thus be depreciated), or that they do exist: this is one of the two keys to its value. not. If a brand’s lifespan cannot be deter- mined in advance, there is no justification for From economic value added to the depreciation. brand However, we should start at the beginning, with the question of the nature of brands. Over the last 10 years, intense accounting Remember that a brand cannot exist without debates have raged in the United States, a product (or service): a product or service is mainland Europe and Great Britain over the needed before the brand can perform its evaluation of brands. These debates centre economic role, which is to add value through around questions with significant repercus- the differentiation it creates and the added sions for companies and their profit-and-loss values it promises. In this respect, a brand is a accounts: true conditional asset. Its value can take a tangible form only if the company has already l When can a brand be activated and made a capital investment in producing and recorded on the balance sheet? Does it have deploying the brand platform – its products or to have been bought? If so, this excludes services. The consequences of this point are home-grown brands. crucial: the brand is an added value, and thus l Should brands be depreciated? If so, over if we are to take financial advantage of it, we what period? must have profits, but only once we have allowed (at a given rate, t) for the capital FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 511 required for its production (Nussenbaum, of different economic mechanisms, or markets 2003). The company must therefore already in which factors such as the relative value of have produced EVA. Remember the EVA the brand in comparison to other assets might equation: not be the same. For example, the relative importance of the brand in sales of a hair EVA = nett EBIT after tax – t (Tangible Assets + products brand is not the same in all distri- Working Capital Requirement) bution channels: it is important in the modern channel (supermarkets and hypermarkets), but Still following the basic theory which dictates very weak when the same product is sold that the brand is a conditional asset, we directly by hairdressers, on account of the should also factor in the cost of other intan- strong influence of the hairdresser’s recom- gible assets that have contributed to the mendation to the customer. To develop this business; for example, patents (which are idea further: for any given brand in any given crucial in the high-tech or medical marketing channel, the degree to which this brand influ- industries). Once these directly evaluable ences the customer’s purchasing decision will assets have been factored in, the residual thus vary depending on whether the product is a derived will create the envelope within which shampoo or a hair colouring product. Analyses we find the economic value of the brand and must therefore be conducted individually at of other intangibles that cannot easily be eval- the relevant level, not collectively at the uated directly. overall level. The question thus becomes: do This once again raises the question of iden- we have the appropriate reporting data that tifying these other sources of added value. It such an analysis requires? stems from an assumption which forms the basis of economic and accounting practice The brand: an identifiable asset? worldwide – that a brand has no value unless it is able to produce excess profit even after We know that according to standard taking into account the factors that enable the accounting practices, an asset can only be production and distribution of the products entered in the accounts if it can be identified and services, regardless of whether these and clear future economic benefits can be factors are physical and tangible or non- attributed to it. Inter-country debate currently physical and intangible. rages on the criteria for such identifiability. This theory of conditional assets accounts Some countries implement a difficult for the progressive, steady process of evalu- criterion: transferability. It is a tough ating brands by means of allocating successive condition because before an asset can be residual balances: EBIT, nett EBIT (after the transferable, legal rights for this asset must be imposition of company tax), EVA, and EVA held; not only this, but a market must also after the direct identification of certain intan- exist. An alternative criterion has a more gible assets. economic basis: it is sufficient to be able to Theoretically speaking, then, the brand trace specific revenue back to this asset. How evaluation process is simple (it consists of a is this viewed in worldwide terms? series of successive residual balance alloca- Under current international accounting tions). However, for reasons related not so standards (IAS), an asset is deemed to be iden- much to methodology as to the company’s tifiable if we hold rights over it: in other information system, it is tricky to implement words, if these rights can be protected. in practice. To put a value on a brand, we have Logically, therefore, according to this concept, to be able to identify its profits – yet a brand the company can exercise no legal rights over can span many markets governed by a variety market share or a client base. From the IAS 512 BRAND VALUATION standpoint, an intangible asset can be the form of an upper threshold, once all other recorded if: assets within the company have been deducted at their economic value. When l the recorder controls, holds the aforemen- there is a market transaction, then, the value tioned legal rights; acquires a physical form. Until that time, it is merely a virtual, potential value. In all coun- l it is transferable (separable); tries, recording unreliable information in the l it is the source of specific future revenue accounts is perceived as a much greater evil extending beyond the yearly accounting than that of failing to take an economic value period. (the brand) into consideration.

In other countries such as France, market Value depends on the evaluation goals share can be activated and posted in the balance sheet. Incongruous though it may seem, the brand The US position is a pragmatic one: what contains not one value but many: everything conditions must be met here before an intan- depends on the evaluation goals. Thus, if the gible asset can be entered separately into the goal is to assess a contribution containing an consolidated accounts once a company has intangible asset, to be checked by an auditor, a been absorbed or bought out? They are two- prudent approach should be taken. fold: separability (it can be transferred inde- Similarly, it is a universal truth that value is pendently of the rest of the company) and the in the eye of the beholder. For example, only unambiguous allocation of specific revenues. Coca-Cola could offer US $1 billion to buy the Pragmatically, to avoid ambiguity, the US little round Orangina bottle. With its network standard supplies a list of intangible assets. In of bottlers in all countries worldwide, it would the Statement of Financial Accounting instantly be able to multiply sales of the Standards no 141, (FASB), this list specifies product – which was based on the same exactly what can be allocated: no reference is business model as Coke (selling syrup to made to market share. Nor is know-how bottlers) – ten-fold. Pepsi-Cola offered less, as included, as this is an abstract concept (except did Schweppes: hardly surprisingly, since their in the form of computer software). However, brand development plan was simply not on it does include the valuation of a customer the same scale as Coca-Cola’s. database. The US position thus concerns itself Lastly, we are bound to get different figures less with legal property, instead taking a more when evaluating for estimation purposes than economic approach. when evaluating for balance sheet recording The new draft IAS, which will become purposes. In producing an estimate, it is prevalent in stock-exchange-listed companies permissible to include future plans, new throughout the world, is similar in design to production factories and shops that may be the US model. opened, or brand extensions into other cate- However, a case does exist where the brand gories. This makes the brand’s future potential is, and remains, unrecordable: when it is an look even brighter. However, when it comes to ‘internal’ brand, that is, one created by the recording for accounting purposes, prudence company itself and thus not bought, or one is required. It is not possible to make use of found in a company that has been bought by such predictions, since the projected factories, or merged with the company. Accounting is stores and extensions do not actually exist, subject to the principle of prudence: what is a and therefore cannot be included. Under brand worth? The price paid by a party buying European accounting law, no allowance can the company already offers an indication in be made for that which does not exist. FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 513

However, under IAS such possibilities could be when this valuation is needed. They can be taken into account, taking their cue from the positioned on a two-dimensional mapping. more flexible US standards. The horizontal axis refers to time (but do we In the Coca-Cola/Orangina case, we base the analysis on the past, the present or therefore find ourselves in an odd situation: the future?). This axis discriminates between the value of the brand appears to differ valuations based on historical costs (those depending on which company perspective we that helped build the brand), valuations based consider the question from. In the consoli- on present earnings, on market price, and dated accounts of Coca-Cola in the United those which rely on a business plan: that is to States, the value recorded for the Orangina say, a forecast. The vertical axis is a real/virtual brand would have taken into consideration dimension. Some analysts rely on hard facts the expansion potential from its new distri- (historical accounts are facts, as well as bution. In the accounts of Pernod-Ricard, the present earnings). However, some methods company originally holding the Orangina rely more on estimates about the present (the brand, it would have had a different value as replacement method), or about the future (the part of a transfer operation. discounted cashflow method). We now analyse these methods in turn.

Evaluating brand valuation Valuation by historical costs methods The brand is an asset whose value comes from A number of methods have been proposed to investments over a period of time (even define the value posted in the balance sheet though accountants do not strictly regard this when a brand is part of the assets of an as a true form of investment). The logical acquired company, or any other instance approach would therefore be to add together

Virtual data

Royalties

Replacement costs

Net discounted cash flows

Past Future Market price

Historical costs Multiple T–1, T, T+1

Real data Figure 18.3 Positioning brand valuation methods 514 BRAND VALUATION all the costs associated with a particular appropriate discount rate which has to be period: development costs, marketing costs, calculated. advertising and communication costs, etc. These costs can be determined objectively, On top of the subjective nature of the answers and will have been in past income statements. to the above questions, valuation by costs As we can see, this approach allows us to causes several basic problems which are linked overcome the tricky problem of separability, directly to a partial understanding of the by isolating the direct costs associated with brand: the brand and also by attributing to it the indirect costs such as the sales force and l When creating a brand, a large part of the general expenses. Even though this method is long-term investment does not involve a simple and logical, it nevertheless raises the cash outlay, and therefore cannot be posted following practical difficulties, which rein- to the accounts. These include stringent troduce a certain subjectivity: quality controls, accumulated know-how, specific expertise, involvement of l Over what period should costs be personnel, etc. All of these are essential for accounted for? Numerous brands are very encouraging repurchase, for the brand’s old as we have seen: Coca-Cola dates back long-term reputation and for word-of- to 1887, Danone to 1919, Lacoste to 1933, mouth. There would be no trace in the Yves Saint Laurent to 1958, Dim to 1965. accounts of brands like Rolls-Royce because Should we include costs right from their there were no advertisements for it. beginnings? Everyone knows of old brands that no longer exist. Companies must go l One of the major strategies to create a back in time and ask themselves if past strong brand consists of choosing a advertising still has an effect today. competitive launch price, which may be the same as that of competitors’ even l Which costs should be taken into account? though the product is upgraded. Swatch is Investment in advertising has a dual an ideal example of this. They could have marketing role: one part generates extra opted for a slight price differential, or a sales, which can be measured immediately, price premium, to cover the costs of inno- while the other part builds brand awareness vation and of upgrading the product. They and image which facilitates future sales. decided, however, to set an aggressive price The practical difficulty is in estimating year that was equal to that of their competitors, by year the weight that should be thus maximising the brand’s price/quality attributed to each part. Also, how far ahead ratio and enhancing its attractiveness. This are we looking when talking about future is one of its key success factors. sales? On top of this we have to look at the Unfortunately, this non-cash investment advertising wear-out curves over a given would not appear in a system where only time period. If, as has been shown in cash expenditures are registered. studies on the persistence of attitude changes, such effects decrease in a linear l The method therefore favours brands manner over, for example, five years, it whose value only comes from advertising may be that expenses arising over this and marketing and which have a signif- period, including only 20 per cent of those icant price premium. It would not apply to for year n –5, can be posted. brands such as Rolls-Royce or St Michael (Marks & Spencer’s brand) which advertise l It is not simply a question of adding up the very little. It could also be said that past costs, you also have to take into account an expenditure is not a guarantee of present FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 515

value. There are several brands that are l It is difficult to imitate the performance heavily advertised but of little value and are level of brand leaders. Backed by research coming to the end of their life. and development and an intangible but very real know-how, they enjoy a long- l This method is favourable to recent brands lasting competitive advantage and a and a fortiori to internal brands that are in resulting image of stability. Any challenger the process of being created, as we have is taking a risk. Unless they have access to already seen. the necessary technology, their chances of encouraging repurchasing and loyalty are Valuation by replacement costs virtually zero.

To overcome the difficulties arising from the l Major retailers have now become exacting historical costs approach, it might be better to gatekeepers. They give pride of place to place oneself in the present and to confront their own brands, only selling one or two the problem by resorting to the classic alter- national brands that tomorrow will be native – as we cannot buy this brand, how international. much would it cost to recreate it? By taking its various characteristics into account l Finally, considering the high failure rate of (awareness, percentage of trial purchases and new product launches, it is easy to under- repurchases, absolute and relative market stand the uncertainty of the return on the share, distribution network, image, lead- large amount of money that has to be ership, quality of the legal deposition and invested in the long term. If you are going presence in how many countries), how much to pay a lot you might as well buy certainty. would we have to spend, and over what Hence, the clutter of takeover bids, raids, period, in order to create an equivalent brand? mergers and acquisitions of firms with Is it possible to remake Coca-Cola, strong brands that are already market Schweppes, Mars, Buitoni or Martell? leaders. Probably not. How about Benetton, Bang & Olufsen, Saab or Epson? More than likely. For On the other hand, when these factors which a certain number of brands, the question no hinder market entry are no longer present, the longer arises since it is impossible to recreate market is more accessible. The possibility of them. The context has changed too much: creating tomorrow’s brand leaders from scratch ceases to be theoretical, even though l They were created in an era when adver- uncertainty and the necessary time element tising expenditure was negligible and the may still exist. Therefore, future Benettons brand was nurtured over time by word-of- will probably be created. Franchising allows mouth. Today, it costs so much for a 1 per wider market penetration without admitting cent share of voice that it has become defeat at the hands of major retailers. What is impossible to create a leading brand more, the fashion industry is open to new through unaided awareness. In any case ideas. In this domain, style is more important unaided awareness is a restricted area and than technology. Computer services and the to gain access a competing brand must high-tech world in general are also open to leave. This is because of memory blocks. innovation. Generally speaking, the future There is no reason why today’s well-known will see the emergence of new international brands should allow themselves to be brands, each positioned in its own particular thrown out. niche. They will thus no longer seek global awareness but will aspire to be leaders in 516 BRAND VALUATION particular market segments. future strategy. Why did Unilever pay s100 Brand valuation by replacement costs million for Boursin, the well-known brand of nevertheless remains very subjective. It cheese? It can be explained by the pressing requires the combined opinions of experts need of this group to acquire shelf space in and ambiguous procedures. On top of this it major supermarkets in which it had previ- should be remembered that the aim of the ously been absent. Having at its disposal a valuation process is not, in itself, to arrive at a compulsory brand, they saw a way of opening value but to get an idea of the economic value the door to other speciality products. In April of the asset in question – in this case the 1990 Jean-Louis Sherrer was bought for three brand. Cost methods focus on the inputs, times less than the price that Mr Chevalier whereas the economic value is based on the paid for Balmain two months earlier. For Mr outputs – what the brand produces and not Chevalier, Balmain was a means of entry – or what it consumes. Profit is not generated rather re-entry – into the luxury market. through investments but through market Hermès, which was already present on this domination and leadership. market, didn’t need to pay this price (Melin, 1990). Valuation by market price In abstract terms the purchase price is not the price paid for the brand but is the inter- When valuing a brand why not start with the action between brand and purchaser. To use value of similar brands on the market? This is the price paid for a similar brand as a reference, how property or second-hand cars are valued. without knowing the specific reasons behind Each apartment or car is inspected and given a that brand’s purchase, ignores the fact that an price that is above, equal to or below the essential part of the price probably included average market price of similar goods. the synergies and the specific objectives of the Even though this method is very appealing, buyer in question. Each buyer has his/her own it raises two major problems when applied to intentions and ideas. The value cannot be brands. First, the market doesn’t exist. determined by proxy. Although such transactions are often cited in This is what distinguishes fundamentally the financial pages, acquisitions and brand the market for brands from that for real estate, sales are relatively few. Brands are not bought or for example for advertising agencies. In the to be sold again. In spite of this, we can get an case of the latter, norms and standards exist idea of the multiples applicable to each sector that are not dependent on the buyers’ inten- of activity (from 25 to 30) thanks to the tions (50 to 70 per cent of the gross margin on number of transactions that have taken place top of the net assets). Despite this, valuations since 1983. Thus, such an approach could in the luxury market frequently take into tempt some wishing to value a brand. account recent transactions and use a However, there is a major difference multiple of the sales (1.5 for Yves Saint between the real estate market and the market Laurent, 2 for Lanvin and for Balmain, 2.9 for for brands, which is relatively small. On the Martell, 2 for Bénédictine). real estate market the buyer is a price-taker, Considering the difficulties which are that is, the price is fixed by the market. inherent in the cost-based methods or in the Irrespective of the use that he or she will make referential methods on a hypothetical market, of the property, the price remains the same. prospective buyers tend rather to look at the For brands, the buyer is a price-setter, that is, expected profits from brand ownership. Since he or she sets the price of the brand. Each the third type of approach relies on two major buyer bases his/her valuation on his/her own philosophies, we are devoting a special views, on potential synergies and on his/her section to it. FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 517

Valuation by royalties of synergies, complementary marketing processes and the attainment of strategic What annual royalties could the company market positions. hope to receive if it licensed the rights to use The process of valuing the expected profits the brand? The answer to this question would of the brand can be divided into three inde- form a means of directly measuring the pendent stages (see Figure 18.4): brand’s financial contribution and would also solve the problem of separability. The figure 1. The first step involves separating and obtained could subsequently be used to isolating the net income associated with calculate the discounted cashflows over the brand (and not with the company for several years. The difficulty is that this is not a example). very common practice in most markets. They 2. The second step is to estimate the future are found in the luxury and textile markets. cashflows. This requires a strategic analysis From a conceptual point of view, it is not of the brand in its market or markets. certain that this method properly separates just the value of the brand (Barwise, 1989). In 3. The third step involves choosing, by using fact, companies often use licences to reach a classic financial method, a discount rate countries where their brand is not present. and period. However, the royalty fee does not include This is the classic method of valuing all invest- solely the use of the brand. The brand owner ments, whether tangible or intangible. The also undertakes to supply a package of basic analyst calculates the anticipated annual materials, know-how and services, which income attributable to the brand over a 5- or 10- allow the licensee to maintain the brand’s year period. The discount rate used is the appropriate quality level. weighted average cost of capital, which if necessary is increased to take account of the Valuation by future earnings risks arising from a weak brand (that is to reduce the weight of future revenues in the calculation Since the brand aspires to become an asset, it is of the present value). Beyond this period, the best to begin by a reminder of what an asset is. It residual value is calculated by assuming that the is an element which will generate future profits income is constant or growing at a constant rate with reasonable certainty. Valuation methods for infinity (Nussenbaum, 1990). The following have been developed on the basis of expected formula is used: returns of brand ownership. Naturally, these tie in fully with the purchaser’s intentions. If N = RBt + Re sidual value he/she wishes to internationalise the brand, it Value of the brand ∑ tN = ()11+ rr()+ will be of more value to him/her than to a buyer t 1 wishing to keep it as a local brand. The value where : = measured by expected profits cannot be sepa- RBtt Anticipated revenue in yeart, attributable rated from the characteristics of the future to the brand buyer and from his/her strategies for the brand. r = Discouunting rate This explains why the stock market value RB RB Residual value after year N = nNor compared to a predator’s value of a branded r r-g company will always be structurally lower. The where : former valuation is related to the existing g = rate of revenue growth business, taking into account current facts and figures provided by the firm. The latter comes from the overvaluation created by the prospect 518 BRAND VALUATION

Isolate brand net revenues STEP 1 (separability problem)

Strategic evaluation STEP 2 of brand strengths and weaknesses for the future: will its revenues grow or decline?

STEP 3

Brand Business plan strength evaluation of score future revenues & discount rate

Determining the multiple Multiple

Brand strength

Brand valuation Brand valuation V = M × Brand present V = Discounted cash- revenues flows of the brand

External approach Bankers', financial analysts' (Interbrand) internal approach

Figure 18.4 A multi-step approach to brand valuation

This is the classic model for valuation by the l Knowing that milk is a commodity, what discounted cashflow method, even though percentage of Candia’s future sales will be analysts offer numerous variations of it generated by products which are heavily (Mauguère, 1990; Melin, 1990). This method marketed, differentiated and have a strong was used to value Cognac Hennessy at 6.9 identity which justifies a price premium? billion francs, based on a capitalisation of its l At how much do we estimate the price net revenue over 25 years at a rate of 6.5 per premium that Candia can demand over more cent (Blanc and Hoffstetter, 1990). ordinary products? In such markets, even a This method was also used to value the tiny difference may amount to huge profits. Candia milk brand as part of a restructuring programme. The final figure, which was Sceptics of this method (Murphy, 1990; Ward, around 1.8 billion francs, was the result of a 1989) object to its three sources of uncer- business plan within which two questions tainty: the anticipation of cashflows, the were discussed: choice of period and the discount rate: FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 519 l By definition any forecast is uncertain. This Valuation by present earnings does not apply only to brands, but to any investment evaluation – tangible or intan- Who can predict the future? How can one be gible – which is calculated by the above sure that the forecasts of a business plan will method. For brands, cashflow forecasts be matched? In fact, one of the reasons so could be ruined if a competitor launched a many internet brands have been heavily over- superior product which was not accounted valued is that they made no profit whatsoever for in the calculations. This argument over- (eBay excepted). The brand valuation process looks the fact that these forecasts were relied exclusively on forecasts and business made after an in-depth analysis of the plans which were created just to attract new brand’s strengths and weaknesses (on the investors, so the founders could resell before basis of the criteria presented earlier). It can the collapse of the illusion. be assumed that these were included when Interbrand, a major brand valuation the anticipated cashflows were calculated. company, has promoted a specific approach to In any case the discounting rate takes into circumvent this problem. No business, no account the anticipated risk factor. brand. Interbrand valuations rely exclusively on three years: last year, this year and next year. l A second criticism lies in the subjective After partitioning each year’s revenue to pay for nature of the choice of a discounting rate. the invested capital which made the business However, on the one hand analysts test the possible and other direct intangible assets, one sensitivity of their findings against varia- is left with a global residue, made of a weighted tions in this rate, and on the other hand, average of the residues of each of these three this rate is fixed by taking into account years. This residue should be then multiplied stable company data, such as its average by a figure called ‘the multiple’, hence the cost of capital. The only subjective factors name of the Interbrand proprietary method: are the risk premium and the future rate of the multiple method. Although Interbrand inflation. Furthermore, very often the risk seems to have moved now to the most is zero from the purchaser’s point of view as orthodox method (discounted cashflow), we he or she feels that success is a certainty. analyse this former approach on which many l Finally, there are those who criticise the brand valuations have been based. choice of period for calculating cashflows. In the financial valuation of companies, it is Why 10 years and not 15? What is the typical to examine what is known as the price/ value of forecasts made so far ahead? On earnings ratio (P/E). This ratio links the the one hand, the brand may disappear market capitalisation of a firm to its net after only a few years and on the other, in profits. A high ratio is a signal of high investor certain volatile sectors three years is already confidence and optimism in the growth of a long time (eg laptop computers). future profits. Even though the brand is not the company, the same reasoning can be This is where certain valuations come from: applied: brand value should be based on that which is certain, ie the net income of the brand at the Market value of equity Firm:/ P E = moment. This is the basis of the multiple Known profits method (see Table 1.3). Brand value is calcu- Valuue to be calculated lated by applying a multiple to the current Brand: Multiple = profits of the brand, measured over three years Net profits of brand (t–1, t+1). This approach does not need internal data. 520 BRAND VALUATION

The only difference lies in the fact that for a (an indicator of confidence about the brand there are no data on its market capitali- future) and this score for brand strength. sation because it doesn’t exist, therefore it is this If this relationship was known precisely, that we are trying to calculate. This notional the multiple would then be predicted by market value of equity is the price to be paid for the brand strength score. For this, the brand (before the effect of overbidding). In Interbrand developed a model known as order to calculate this, it is necessary to the ‘S-curve’ which plots the multiple determine M, the multiple which is equivalent against brand strength. to the P/E ratio specific to the brand. The model is based on Interbrand’s There are four stages to this method: examination of the multiples involved in numerous brand negotiations over recent 1. Calculating the applicable net profit. periods – in sectors close to the one being Interbrand used the profits for the last studied. The P/E of the companies with three years (t–2, t–1, t), thus avoiding a the closest comparable brands are used. possibly atypical evaluation based upon a Interbrand then reconstructed the single year. These profits were discounted company’s profile and brand strength. to take account of inflation. A weighted Plotting the multiples (P/E) against the average of these three figures was calcu- reconstructed scores results in an S-shaped lated in accordance with what we consider curve (see Figure 18.5). to be the most and least important years. 4. Calculating brand value. This is calcu- This weighted average after-tax net profit lated by multiplying the applicable net which is attributable to the brand forms brand profit by the relevant multiple. the basis of all calculations. 2. Assessing the brand’s strength. This We can illustrate this method by an actual method uses a set of marketing and case. In 1988 Reckitt & Colman valued its strategic criteria to give the brand an brands in this way. They valued household overall mark. Interbrand uses only seven and hygienic goods where they were market of these factors and takes a weighted sum leaders, as well as food products (condiments) of the individual marks for each factor in where they were also a leader, and finally order to calculate the overall mark, as can pharmaceutical goods where they had an be seen in Table 18.1 (Penrose, 1989). average position. The specific situation enjoyed by those 3. Estimating the multiple. A relationship brands in the first group is as follows: necessarily exists between the multiple

Table 18.1 A method of valuing brand strength Factor of valuation Maximum score Brand A Brand B Brand C Leadership 25 19 19 10 Stability 15 12 9 7 Market 10 7 6 8 Internationality 25 18 5 2 Trend 10 7 5 7 Support 10 8 7 8 Protection 5 5 3 4 Brand strength 100 76 54 46

Source: Penrose/Interbrand (1990) FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 521

Sector maximum

Multiple

0 50 100 Brand strength

Figure 18.5 The Interbrand S-curve – relation between brand strength and multiple l world leadership; l food products: £24.7 million; l growing markets, with few new entrants l pharmaceutical goods: £17.1 million. except for distributors’ own-brands; l unaided brand awareness (eg Airwick) high What multiple should be applied? For the first in the UK and in Anglo-Saxon countries group, the multiple used by Reckitt & Colman but less so in France; in 1985 when buying Airwick was applied. A multiple of 17 was used for food products and l customers’ brand loyalty; was based on recent transactions in the sector l strong brand image and assurance of during the last few years, for example the quality; BSN–Nabisco takeover bid. Finally, a multiple of 20 was used for the pharmaceutical group. l for each of its brands, little possibility for In fact, recent transactions in the pharmaceu- diversification. tical industry had been using multiples which were closer to 30. A lower multiple was chosen Reckitt & Colman estimated that 5 per cent of in this case because of Reckitt & Colman’s profits on these brands came from sales under relatively weak position in the sector. By distributors’ own-brands. Interbrand applying these figures to the net revenue in considered that the remaining 95 per cent was each category, the following brand values the brand’s gross profit. The income generated were estimated: by the brand can be calculated by subtracting the expected return on investment from net l household and hygienic products: 53.8 × assets. The net revenue was weighted 20 = £1,076 million; according to the importance of each brand and discounted for the previous three years. l food products: 24.7 × 17 = £420 million; The following results were obtained for each l pharmaceutical goods: 17.1 × 20 = £342 category: million. l household and hygienic products: £53.8 million; 522 BRAND VALUATION

Comparison of the cash flow and l an S-curve, using information from a multiple method database to plot these multiples (or P/E ratios) against brand strength scores. The multiple method, which was developed in the UK, is becoming a classic. It was, in fact, However, face validity (or appearance) does used by such companies as Rank Hovis not mean validity per se. In its present form, McDougall and Grand Metropolitan whose Interbrand’s method poses various problems: decisions to post brand values to their balance sheets caused a controversy which is still not 1. Market multiples, which were used as settled. It is also the method which communi- parameters for the S-curve, are not valid cates the most through books, articles and indicators of the strength of the brands seminars. The simplicity of the method used is even though they were the mainstay of such that it is uncharacteristic of the stringent these transactions. In fact the final trans- world of financial analysis. All this said, is it action price includes both the estimated valid? value of the brand and a certain amount First, the multiple method is not all that which is due to overbidding. For example, different from the classic method of discounted in the fight between Jacob Suchard and cashflow. It is a particular example of it. Nestlé, the initial bid was 630 pence and When a constant and infinite annual the final bid was, 1,075 pence! Market cashflow is expected, the present value of the prices include the effect of this overbidding brand is defined thus: and thus overvalue the brand. It is therefore RB RB RB RB RB Brand value = + + ++… = rather curious that we are trying to link ()()()11+ rr+ 23 1+ r () 1+ rr∞ market multiples to a value for brand strength as this value ignores the effect of As we can see, the multiple is none other than overbidding. For this reason a certain doubt the inverse of the cost of capital adjusted for arises about the applicability of this risk (1/r). If a constant growth rate (g) of method to value and post to the balance annual income is expected, the multiple is: sheet unacquired, internally created 1 brands. The value attributed to the asset B = rg− will be greater than the value of the brand as it will include an unspecified amount Equations aside, the point to remember is that which is a result of overbidding! The fact we cannot reproach the method of discounted that companies may nevertheless have cashflows for making certain hypotheses, since used this method to represent their brands the multiple approach is itself a particular as assets in no way validates this approach. hypothesis, which is equally as questionable but not explicit. It draws its apparent validity 2. Even in a market where there is no over- from the fact that all its calculations are based bidding, the stated multiple measures the upon: value of the brand from the point of view of the potential buyer. It expresses his l net known profits attributable to the brand vision, his strategies and any synergies over the previous three years; that he may expect. The fact that in 1985 BSN did not buy Buitoni despite it being l marketing data and the subjective opinions reasonably priced does not mean that of managers regarding brand strength; Buitoni was worth less but means that it was worth less in the eyes of BSN. In 1988 l multiples based on recent transactions by Nestlé valued it at several billion Swiss similar companies; FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 523

francs. It again seems strange to try to difference between Buitoni’s purchase relate market multiples, which are closely and resale price signalled the transition of linked to the buyer, to the scores for brand a national brand to a European wide one. strength, which are calculated by an Experience shows that brands are outsider and do not include the syner- susceptible to large threshold effects. Their gistic benefits. This poses a problem when strength with customers and retailers is internally created brands are posted to the developed in stages. Thus, today, a moder- balance sheet. They are valued in the ately known brand may be worth virtually context of a ‘going concern’ according to the same as a little known one. However, their current benefit to the companies beyond a certain threshold, it grows in who own them. On the other hand, value. Research on brand awareness has multiples supplied by the market are shown that, in markets with intensive calculated with the idea of using them for communication, it is only once a brand a totally different reason. has reached a certain level of aided awareness that its unaided awareness will 3. For the moment, no illustrations of the S- start to increase. This is due to a memory curve showing the variance around the block. Likewise, major retailers are curve have been published. This variance replacing middle-of-the-range brands with is a measure of the quality of the empirical their own products. These brands rely relationship between the two variables. As more on supply than on demand and they it is, the curve would have us believe that would cease to be sold if the retailers there is zero variance, which is impos- replaced them with their own brands. Thus sible. A single brand strength score their future is very unstable. This would probably corresponds to several multiples lead us to believe that the relationship or at least to a range of values (within between brand strength and the multiple – which the S-curve is found). Such uncer- provided that both are assessed by the tainty causes problems as in reality the same potential buyer – is better illustrated financial value of a brand is very sensitive by a stepped graph (See Figure 18.6). to even a slight change in the multiple. Going back to the Reckitt & Colman’s In conclusion, the widespread use of the household and hygiene brands, we see multiple method is not proof of validity, as we that a one point variation in the multiple have just seen, but testifies to its simplicity results in either a £53.8 million increase and handiness for non-specialists, and or decrease in the value of the brand. This therefore its internal educational value. A is a far cry from the principles of small variation in the chosen multiple leads to prudence, reliability and rational important differences in the value of the certainty which govern accounting brand. The present method of choosing the practice and information. multiple is unsatisfactory from the point of 4. The very validity of the S-curve is ques- view of reference multiples and of the brand tionable. Interbrand uses the following strength scores. What can we make of a total argument: a new brand grows slowly score which is obtained after subjective during its early stages. Then, once it weightings of factors which are sometimes moves from being a national brand to redundant or in any case correlated? This wish being an international one, its growth is for simplicity is to the detriment of the exponential. Finally, as it moves from the method’s validity. Despite its claim to be international to the worldwide arena, its accurate, the multiple method in its present growth slows once more. For example, the form is just as subjective as that of discounted 524 BRAND VALUATION

Multiple (overbids not included)

0 Brand strength 100 (for purchaser)

Figure 18.6 Stepped graph showing relationship between brand strength and multiple

cashflows. To use a hundred or so criteria Table 18.2 Another estimate of the instead of seven would change nothing. By financial value of brands (2007) doing this, we introduce a certain amount of Rank Brand Value (US$ billion) redundancy between the criteria, which results in more weight being given to some 1 Coca-Cola 65,324 factors. As long as the method is subjective, it 2 Microsoft 58,709 should remain transparent. The multi-criteria 3 IBM 57,091 method gains nothing from being 4 GE 51,569 summarised in a single score since there are 5 Nokia 33,696 many implicit hypotheses in the weightings. 6 Toyota 32,070 The brand profile should be used instead to 7 Intel 30,954 make a realistic, valid business plan, material- 8 McDonald’s 29,398 ising in discounted cashflows. 9 Disney 29,210 Last but not least, the multiple method is 10 Mercedes-Benz 23,568 too sensitive to small variations of the 11 Citi 23,443 multiple itself. Multiplying 800 million by 12 Hewlett-Packard 22,197 seven or eight makes a lot of a difference. Such 13 BMW 21,612 sensitivity is at odds with the principle of 14 Marlboro 21,283 prudence. Brand valuation is not an exact 15 American Express 20,827 science. It is not acceptable to obtain outputs 16 Gillette 20,415 that can vary by millions of pounds just by 17 Louis Vuitton 20,321 changing the multiple by 1 unit. This is 18 Cisco 19,099 probably why recently Interbrand moved 19 Honda 17,998 unobtrusively towards the classic financial 20 Google 17,837 methodology, the discounted cashflow Source: BusinessWeek/Interbrand, 6 August 2007 approach (Table 18.2). FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 525

Brand valuation in practice process varies from product to product. Lastly, sales and growth potential also How do we evaluate the brand in practice vary from product to product and from using the discounted cashflow method? channel to channel. During a company acquisition, as soon as the 2. The second stage will be to build the fore- target company has been taken over by its casted profit accounts using the business buyer, it becomes necessary to record its assets plan. Like any asset, the brand has no at their true value in the consolidated accounts value apart from the potential for future of the buyer company or group. These assets profit derived from its use. What will this include tangible and intangible assets; the use be? What sales do we expect? At what brand falls into the latter category. price? With what sales and marketing Given that the purchase price for the expenditure? company is generally well above its nett This second stage aims to define the accounting value, the difference (or gap) is overall share imputable to intangible known as the first consolidation difference, or assets in the financial results forecasted goodwill in the wider sense of the term. It for each of these units, and is known as must be allocated to its various components, the EVA (economic value added). This is the company assets, evaluated at their ‘fair obtained by taking the product or value’. The non-allocated residual balance will business’s trading profit and subtracting be referred to as goodwill in the strict sense. company tax (which gives nett EBIT), How then do we determine the value of each then allowing for permanent invested asset and, in particular, the value of a brand? capital and working capital requirement This takes the form of a nine-stage procedure: (which gives the EVA). Invested capital is entered at a ‘normal’ rate (t), the average 1. The first key stage is to segment the brand cost of the capital. This produces the into strategic units. In order to be able to following sequence of residual balances: isolate the share of added value imputable to the brand, we need to work from the EBIT – Taxes = t (Tangible Assets + WCR) + t’ bottom up, starting with the factors that (Intangible Assets) produce the sales and profits: the ‘cash- generating units’ and ‘reporting units’. Nett EBIT – t (Tangible Assets +WCR) = EVA = t’ We must identify the excess profit of each (Intangible Assets) of these strategic units, which then allows us to establish what share of this excess Remember that these calculations are profit is imputable to the brand, remem- based on a business plan: they are fore- bering that this share can vary from one casts for future profits under a specific unit to another. Furthermore, the indi- growth hypothesis. vidual profitability structures and growth 3. The third stage is where we deduct from potential for each unit may be very this EVA the contributions of other intan- different. gible assets once they become directly Thus, for a hygiene and beauty brand, evaluable: for example, assigning a value the relevant unit would operate at to patents based on the usual rates applied product level for each distribution in this area, or the virtual allowance made channel. Each product has its own indi- for a portfolio of customers or subscribers, vidual profitability structure; and a function of market practices. We should furthermore, the relative weight of the add that if the brand operated exclusively brand in the consumer’s decision-making 526 BRAND VALUATION

through licences (as is the case with 6. Given that the ultimate goal is to produce certain luxury brands), its contribution a discounted sum of these revenues specif- could then be evaluated directly. This ically attributable to the brand, we must deduction, made in order to account for first fix on the discount rate to be used. It other intangible assets required for will depend on our understanding of business, reminds us that the brand is risks: in other words, are the brand’s levers indeed a conditional asset. of added value durable in the long term? How is the market growing? Is it open to 4. So is this residual balance the share of the competition? Is it becoming commodi- profit attributable to the brand? Not neces- tised? Is it becoming sensitive to price, sarily: this is where the allocations to the and thus to distributor’s brands? What is brand and to other potential candidates its state of innovation? What is its R&D stage comes in. Here, we should ask potential, and so on? ourselves what weight the brand carries in the customer’s purchasing decision for each 7. The purpose of this seventh stage is to analysis unit (that is, each product in its conduct a strategic audit of the brand and distribution channel). This is a question for a ‘risks and opportunities’ audit, by exam- an expert jury to answer. Other methods ining (see Table 18.3): exist. The customers themselves could be interviewed. A typical study consists first of – the risks associated with the market; identifying all the product choice criteria, – the risks associated with the brand then measuring the influence each one has and the long-term status of its differ- in the customer’s decision, and lastly evalu- entiating features; ating the brand’s share in the perception – the risks associated with the product associated with each criterion. For example, itself; we know that the brand has a strong – the risks associated with the influence on the perception of taste: in company, its staff and its finances for blind testings, consumers preferred Pepsi to developing the brand; Coca-Cola, but as soon as the brand is iden- – the opportunities for geographical tified, they claim to have preferred the glass expansion; of Coca-Cola. Conversely, recognition of – the opportunities for brand extension the brand has no influence on the into other product categories. perception of its presence in stores. By This strategic analysis produces a risk adding together the respective influence of evaluation, and thus a discounting rate each of these criteria and balancing these for future use. against the role played by the brand in eval- 8. This stage is that of the discounted sum of uating each of them, we obtain an overall profits attributable to the brand, based on percentage which measures the brand’s the discount rate identified above, after the total influence in the purchase. A typical strategic audit of the brand. It produces the service station brand will score a 30 per cent brand’s value, which will in theory be rating, whereas a soft drink brand will be of taken as a deduction from goodwill and the order of 70 per cent. recorded on the balance sheet as such. It is 5. Once armed with this percentage, we can a good idea at this stage to check whether then calculate year by year, in the the value obtained is especially sensitive to business plan, the share of excess profit the discount rate used. attributable to the brand for each cash- 9. Finally, an evaluation should not be generating unit or reporting unit. confined to one single method. The goal FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 527

Table 18.3 Assessing brand strength: strategic diagnosis Risks associated with the future market Growth of the market Profitability of the market Importance of competitor and retailer brands Expected technological innovations Changes in customer expectations Strength of barriers to entry Risks associated with the sources of brand value Quality of past advertising support Image and reputation Quality of trademarks and their registration Customer loyalty Distributor attitudes and loyalty Attitudes of opinion leaders Relative position in the market Risks associated with the product Life of patents Existence of ‘me-too’ brands and product copiability R&D perspectives Risks associated with the business Financial support Strategic coherence Potential Potential for geographical extension Licensing potential Potential for extension into other product categories

of reliable accounts and fair value evalu- sector, l’Oréal would pay Jacques ation demands cross-checking against Dessange 3 per cent of its turnover for other evaluation sources. It is true that products sold under its licence name. only the discounted cashflow method is If the gap between the results produced economically valid and accepted by by these two approaches is too wide, a official accounting and auditing bodies. complete rethink is necessary in order to But it is also true that other methods exist; identify the sources of the discrepancy these may not be accepted to the same and, if appropriate, to correct them. For degree, but they can be used for cross- example, in an evaluation, the value of checking results. Fair value has to be non-directly-calculated intangibles works obtained through a narrowing-down out at a royalty rate of nearly 30 per cent. process; it cannot be calculated directly. This is impossible. After analysis, it is For this reason, it is common to cross- decided to impute one-third of the value check results obtained from the to the brand and two-thirds to the market discounted sum of revenues imputable to share (an asset that can be recorded on the the brand with an evaluation based on balance sheet in some countries). the royalties method. To do this, we An alternative version of the above procedure calculate which royalty rate would, when exists. It consists of taking (during Stage 4) the applied to forecasted turnover, give the discounted sum of the combined value of all same overall current royalty value after intangible assets; that is to say, the EVA taken discounting. It is reassuring if this rate as a whole – after having used the strategic matches standard figures for the sector. audit matrix to establish the discount rate to For example, in the haircare products 528 BRAND VALUATION be used, of course. This overall intangible that reputation and image are worth nothing asset value is thus distributed between each of unless they produce profit – with the help of them afterwards. As we can see, this variation other assets, which have to be factored in. assumes that the basis for distribution remains more or less the same regardless of The case of abandoned and which cash-generating units and products are subsequently resold brands involved. Companies regularly kill off brands; in order for mega-brands to be created, business opera- The evaluation of complex cases tions have to be contracted to just a handful of brands, and many must thus be disposed of. The above method works well for most For example, Nestlé abandoned Chambourcy, brands, and is the standard approach. and PSA abandoned Talbot. Nevertheless, However, there are cases where, in order to brands can be sold on after several years of evaluate certain brands – or brands in unusual inactivity. How can we use the multi-stage market situations – we have to use one of the approach shown above if there has been no other methods examined above. economic activity, and therefore no profit or loss figures? How, for example, can we estimate the value of a brand which has lain The case of loss-making companies dormant for years, such as Talbot, Simca, Studebaker or Plymouth? According to the The above procedure is based on the theory that successive residuals approach, we should the brand is a conditional asset, and hence its assess it as part of the new business plan incor- value is obtained after the deduction of an porating this revitalised brand; or in any allowance for the capital invested in event, this is what the buyer should do before production. This poses the problem of how to buying. value brands owned by loss-making companies. Another evaluation method consists of According to the above approach – which measuring the additional price and margin assumes a profitable balance – if there are no that the use of the hitherto defunct brand profits then the brand has no economic value would enable its new user to command. in its current sphere of activity. It acquires We have to consider this in terms of the value only if a new business plan, with very differential margin: although the brand might different cost structures, can demonstrate not make it possible to charge a higher public only that the company can generate a profit, price at the retail level, the retailer might well but also that there will be excess profits even keep the majority of this increase and hand after an allowance has been made for the over only a modest proportion to the end- tangible and intangible assets required for the purchaser. In fact, this is often what actually production and distribution of the product or happens: when the brand is weak, and returns service. to the marketplace after a long absence, Financial valuation thus dispels any retailers take advantage of the fact to increase mirages surrounding the brand: regardless of the size of their cut. its reputation and image, a brand acquires It is in the interests of the seller to use a value only if it is backed by a profit-making different valuation method. A good candidate is business plan. The term ‘mirage’ is an apposite the replacement cost method (the amount that one, as many buyers allow themselves to be has to be spent now to rebuild the brand and its seduced by brand awareness and image residual reputation, along with all of its copy- statistics. The economic approach reminds us right registrations worldwide, for example). As a FINANCIAL VALUATION AND ACCOUNTING FOR BRANDS 529 last resort, there is always sale by auction. Graphic are daughter brands. So how can we calculate the value of parent brands such as How can weak brands be evaluated? Garnier and l’Oréal Paris? Remember that the first essential stage in Some brands remain brands only in the legal the process is segmentation into strategic sense: they have become mere names, and no units: cash reporting units. longer influence buyers. How are these to be It is this requirement that the analysis be evaluated? This is a common scenario. Given conducted at the level of reporting units and that money was paid for these brands, the cash generating units that provides an expla- replacement cost method is advisable. For nation of how to evaluate parent brands that example, how much would need to be spent contain several daughter brands. Typical today to: examples are Chanel and Dior. For example, there is no such thing as a Chanel perfume; l create a brand in this sector: name research, rather, there are products with brands such as name tests and so on; Chanel No 5, and Chanel No 18. These are daughter brands. The same is true with Dior l trademark it in all relevant countries; Parfum: the reason it has created a Fahrenheit l devise a graphic theme for a new logo and unit, producing profit and loss accounts, is that so on? value is being created at this point. By adding up our evaluations of individual daughter How can young brands be evaluated? brands, we arrive at an overall cumulative value for them. The value of Dior itself, separated This case is similar to the previous one. Once a from its daughter brands, is thus a residual one. young brand has proven that it can be prof- itable (for example, in the fashion market), the commodity being sold is in fact the time and What about the brand values money saved in establishing the legal and published annually in the press? image foundations of the brand (its name and visual identity). Going beyond this means Given the rigour and hard work required in an indulging in the same sort of risks taken by all evaluation of intangible assets conducted by investors in the dot.com brands, often to their the company itself, which has full access to all cost. Unlike our fashion example, these brands relevant information, what should we make of had provided no proof that they could one day the annual ‘hit parade’ charts which appear in make money. Without a business, and in any the economics press, giving new values for the case without profits, they could not be eval- top worldwide brands (see Tables 1.3 and 18.2)? uated in any reliable way. This was the cause of Why such big differences between valuations? the internet boom: five-year business plans The Interbrand research company, which is produced estimated revenues which, when overwhelmingly the main producer of such multiplied by a factor of between three and data, has used two methods over time. seven, resulted in exorbitant valuations. Historically, it has attempted to derive values for brand EVA from public information in the How can parent brands be evaluated? annual reports of stock-exchange-listed companies and a variety of other public Today, brand theory dictates a two-level archi- sources. Not being able to work with a tecture with a parent brand and daughter business plan, given the confidentiality of brands. For example, Garnier is a parent company plans, Interbrand instead analysed brand, while Fructis, Ambre Solaire, Feria and data from the last two years. So how does it 530 BRAND VALUATION make the leap from EVA to brand value? It auditor appointed by the company to value its used an estimation of the share of EVA attrib- brands). They are thus obliged to obtain an utable to the brand, multiplied by a figure (the external estimation based on the accounts ‘multiple’), itself derived from a statistical published by stock-exchange-listed com- model based on the analysis of the panies, and the figures are subject to a wide price/earnings ratio (p/e) for stock-exchange- margin of error. Furthermore, these league listed companies such as Gillette. The tables cannot measure the value of brands price/earnings ratio is actually a multiple belonging to family-run companies such as itself. It compares the stock value with the Mars, Levi’s and Lacoste, which do not release profits associated with that stock: this will public figures. Nor can they include brands indicate, say, that a stock is worth 10 times its belonging to companies producing consoli- dividend price. dated accounts that are not broken down by Interbrand configured its statistical model brand. Lastly, they exclude cases in which using stock-exchange-listed companies. sales may be attributable to factors other than Knowing the multiple (p/e) for each company, pure demand. Consider air transport, for it performed a strategic analysis of its brands, example, where the policy of alliances means following a method similar to the one we that it is possible to end up flying with Delta have described for our strategic audit of the Airlines after having bought an Air France brand. The end result of Interbrand’s strategic ticket. Also, a significant part of demand is evaluation of the brand is an overall score for influenced by exit barriers such as frequent the brand, measuring the strength of the flyer cards: this is not pure demand driven by brand (the ‘brand strength index’). This is the customer preference. sum of the partial scores obtained from each Other critical remarks may be made about of the individual audit criteria (see Table 18.1). this approach, as we have already seen, The criteria are leadership, stability and so on. including sensitivity to variations in the It is then easy to identify the statistical rela- multiple, and the validity of the graph. tionship between the recalculated strength of Recently, Interbrand has changed its the brands and the virtual multiple approxi- method of producing its ‘global brand value’ mated by the price/earnings ratio (p/e) on the league tables, moving towards a more conven- stock exchange. This statistical relationship tional financial and economic approach. has never been published, but has been repre- Although its methodology has not been sented as shown in Figure 18.5. explicitly published, reference has been made Having produced an external estimate of to ‘net present value of future brand earnings’, the EVA for each brand, it was then easy for which would be more in line with our recom- Interbrand to calculate the brand strength mended nine-step process. However, ques- index which, when factored into the statis- tions must be asked as to the validity of tical model, identifies the virtual multiple. All estimating these future brand earnings, that remained at this point was to measure without internal access to the company in this virtual multiple as the share of estimated question, by ‘experts’ with no knowledge of EVA allocated to the brand. the actual business plan or the real financial Several remarks can be made about this data. Yet it is on such fragile estimates that the external procedure, which is used to produce annual brand table published by Business the published ‘league tables’ of global brand Week – and faithfully reproduced by the value. world’s economic press – is based. The other The tables are based on this logic, except source of brand valuation, Brandz, still relies that they are not in possession of all of the on multiples. relevant information (as opposed to, say, an 531

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Index

NB: page numbers in italic indicate figures or tables

3M 249, 348, 349–50, 351, 362, 371–72, 375–76, managing two levels of branding 293–94 377, 381, 384, 396 respecting brand DNA 292–93 and Scotch 348, 349–50, 371–72, 375–76, 381, specialist and generalist brands 275–78, 278, 279 443 Adidas 32, 169, 184, 195, 203, 249, 250, 265, 267, 324, 424 Aaker, D 13, 171, 297, 299, 322–23, 351, 353, 377, advertising 158, 163, 214–15 507, 508 and brand capital 244, 244, 245 and early measures 13 ageing brands, symptoms of 451–53 brand personality scale 184 Ahrenberg, A 1 Aaker–Keller paradigm 320–21 AIDA (attention, interest, desire, action) model Aaker, J 184 258 ABB 349, 372, 393 Ailawadi, K 76 Abric, J-C 272, 275, 284, 333 Air Liquide 51, 52, 116 Accenture 415, 427 airways 125, 169–70, 195, 253, 275, 343, 530 Accor 66, 234, 258–59, 348, 351, 356, 372 Air France 3, 92, 93, 156–57, 169, 195, 275 Formule I hotels 230–31, 231 British Airways 92, 153, 253, 345 loyalty programme 259 Ryanair 92, 153, 345, 472 accounting for brands 50, 505, 505–07 Ajawadi 83 adapting to the market: identity and change (and) Alba, J 318 269–94 see also brand identity Alcatel 39, 374, 388, 393, 417, 435, 459, 462 bigger vs better brands 270 alcohol 13, 15, 18, 45, 57, 150, 178, 179, 181, brand and products: integration and 185, 195, 196, 198, 207–08, 209, 216, 219–21, differentiation 273–75 see also main entry 223, 225, 238, 261, 263, 276, 305, 329, 332, brand layers: kernel, codes and promises 290, 337–38, 343, 357, 359, 380, 397, 399, 411, 443, 291, 291–92 445, 446–47, 448–49, 458, 465–66, 470, 472–73, building the brand through coherence 279–290 474, 482, 487, 488, 489–90, 503, 516 see also see also brand coherence whisky and wine consistency 272–73 Alden, D 466 customer reassurance and stimulation 271–72 Aldi 60, 67, 68, 74, 90, 92, 151–52 546 INDEX

Amazon 55, 56, 119, 120, 121, 158, 193, 203, 365 Botton, M 359 American Express 33, 181, 184, 185, 198, 237, Boush, D 282 243, 259 brand, definitions of 9–13 Anderson, P 335 as name that influences buyers 11–12, 12, 13 Apple 1, 18, 22, 56, 148, 150, 156, 157, 160, 184, customer-based 9–10 185, 193, 206, 212, 229, 283–84, 347, 350, 366, financial 10 382, 384 legal 10–11 Arnault, B 95, 98–99, 411 brand Arnault 128 capital 244 Arnold, D 420 communication 291 Asch, S 284, 333 communities 162–63, 164 Asda 53, 60, 92, 209 concept 282–83 Asia 166, 270, 282, 293, 348, 385, 450, 457, 478, employers 105 493 globalisation 290 and sweatshops 29 kernel 332–33 Auchan 68, 70, 78, 87, 154 leadership 63 automobile market/car industry 10, 21, 28, 33–35, life cycle 238–40 38, 40–44, 58, 96–97, 131, 157, 168–69, 173–74, loyalty 226 184–185, 189, 190, 195, 196, 197, 204–05, 228, name/slogan 39 237, 246, 256, 269, 270, 273, 276, 362–63, 405, policy 47 459, 461, 474, 476, 503 promotion 257 and car design 209–10 purpose 33 Ayer’s model 312 requirements 39 Axa 348, 426, 456 service 275 Azoulay, A 184 signature 275 strength 143 B to B to C marketing 152–53 see also business-to- triangle 12, 12, 13 business (B2B) value(s) 143, 240, 274–75 see also brand equity ballpoint pens 229, 232, 234, 299, 310, 321, 322, (and) 342 brand and products: integration and differentiation Balachander, S 46, 230, 315 273–74, 274, 275 Banerji, S 83 and brand values/segment expectations 274–75, banks/banking 4, 28, 29, 104, 195, 210, 243, 256, 275 463 and service brands 275 Barwise, P 506, 517 brand architecture (and) 347–390 Batra, R 466 adapting 493–94 Bedbury, S 233 brands, type and role of 349–56 see also main Bell, D 458 entry Benetton 156, 184, 191, 248, 291, 515 choosing appropriate branding strategy 372–76 and brand laddering 193, 193 see also brand strategies Bernbach, B 197 corporate brands and product brands 388–89, Bezos, J 120 389, 390, 390 Bic 24, 66, 139, 148, 229, 232, 299, 301, 310, 321, dysfunctions 379–81 322, 324, 342, 366, 470, 484 group and corporate brands 385–88 and Chinese lighters 89, 153 group and subsidiary relationships 386–87 Bickart, S 328 group style and branding strategy 387 Black & Decker 115, 248, 417, 424, 431 internationalising group/subsidiary architecture Blanc, C 518 387–88 Body Shop 65, 75, 175, 181 internationalising the 379–381 Bosch 144, 306, 324, 469 key questions 347–49 see also brand strategies Bottomley, P P 320–21, 322 main types of 356–72 see also brand strategies INDEX 547

method of organisation 355–56 brand DNA (and) 188–97, 292–93 naming new products 381, 382, 382–85 advertising: content and form 196–97 automobile industry case study 384–85 brand characters/emblems 194–95 sub-brands 381–84 creator’s identity 196 brand assets 143 geographical and historical roots 195–96 strength and value of 13–14, 14, 15 power of brand names 193–94 brand building 52–57, 138 typical products 190, 191, 191–93, 193 from product to values and vice versa 55–56, visual symbols and logotypes 195 56, 57 brand equity (and) 9–29, 63, 141, 142, 142–43, in emerging countries 478–79 143, 144, 144, 252–60 through coherence 279–90 see also brand corporate reputation and corporate brand 26–29 coherence decay of 438–39 through systematic extensions: Nivea 306–07, definitions 9–13 see also brands, definitions of 307, 308–09 differentiating between brand assets, strength and without advertising 52–55 see also wine value 13–15 conditions for 52–53 financial see financial brand equity brand coherence (and) 279–90 goodwill 18–19, 19 analogy of family 280–81 indicators of 17 cognitive psychology 281–82 tracking 15–17, 17 concepts 282–83 value creation for companies see brands and value degrees of 281–83 creation for companies growth, diversity and managing coherence value creation for customer see brands and value 275–90 creation for customer checking coherence worldwide 289–90, 290 brand equity vs customer equity (and) 252–60 defining core identity of brand 285–87, 287 customer demand for dialogue 255–56 graphically representing overall system of database marketing 254–55, 255 brand 288–89, 289 product to attention: client to VIP 259–60 identifying product role in brand construction profitability of relational marketing 256–58 287–88 segmenting loyalty programmes 258–59 key facets in product 287, 288 brand essence 197–99, 199 reasons for 279–80 brand extensions, keys to successful 336–40 relationships between concepts and examples, competition 338–39 brand and products 283–85, 285 extending the extensions 339 brand contract 38–39 feedback effect 340 and brand requirements 39 full marketing mix 337–38 brand diversity 95–133 see also individual subject management 336 entries and diversity, local names 339–40 business-to-business brand 113–19 see also resources 338 business to business brand (and) strategy and planning 336 celebrities as brands 131–32 trade expectations 338 country brands 123–25 values 337 fresh produce 106 brand extensions, research on 316–17, 317, 318–24 internet brand 119–23 conclusions 324 luxury brands 95–103 early experimental studies 317–18, 318, 319–20 pharmaceutical brands 108–13 see also formation of attitudes about extensions 320–21, pharmaceutical brands (and) 322 service brands 103–05 limits of early research 322–23 television programmes as brands 132–33 new perspective of typicality 323–24 town brands 125–28 brand extensions 296–98 see also growth through universities/business schools brands 128–31 brand extensions wine 107 as recent discovery 296 548 INDEX

and avoiding risk of dilution 326–30 brand identity 37, 171–88, 204–06, 206, 211, downward stretch 327–30 271, 271, 272 see also brand positioning and example: Vichy 326–27 brand DNA economics of 312–13, 313, 314, 314, 315, 315–16 as contemporary concept 173–74 identifying potential 310–11, 311, 312 brand identity prisms 182, 183, 183–88, 188 and impact on brand 324–25 confirming 488–89 and internationalisation 309–10 defining/definition of 205, 488–90 managing 298 global brands are universal stereotypes 488 modifications of 296–97 separating domestic and international necessity of 303–06 positioning 489, 489, 490 and respect for physical identity 332–32 and graphic identity charters 173 remote 333, 334, 334, 335, 335 and image 174, 174, 175 research on see brand extensions, research on meaning/definition of 172 successful see brand extensions, keys to reasons for 178–82 successful six facets of 182–88 see also brand facets systematic 306–07, 307, 308–09 see also brand brand identity and positioning 171–99 see also building brand DNA; brand essence; brand identity and vs line extensions 298–300 brand positioning brand facets 182–87 164–66 culture 184–85 brand management, scope of 160–63 customer reflection 186 activating brand at contact 163 personality 183–84 bonding through aspirational values 162, 162 physique 182–83 from purchase to satisfaction/experiential rewards relationship 185–86 161 speaking to self-image 186–87 from transaction to relationships 160–61 brand globalisation 459, 459, 460–61, 461, importance of communities 162–63 462–66 see also diversity, local; global brands brand management (and) 137–70, 219, 222, 271 and local brands B to B to C marketing 152–53 and adaptation: growth through time 482–83 brand building 138 barriers to 471–72, 472, 473, 473 brand building through retail 158 and benefits of global image 466–68, 468 brand equity 141–44 see also main entry and competitive advantage 481–82 brand or business model power 153–54 conditions favouring 468–70 building brand in reverse 154–55 disruption vs optimising products 470 co-branding and growth 166–70 see also co- excess of 470–71 branding and local–global balance 480–83 cycle 33–34, 34 patterns of 459–61 enlarged scope of 160–63 see also brand process of 487–95 see also brand identity management, scope of accessing markets 492–93 efficiency, experimenting for 159–60 adapting brand architecture 493–94 experiential dimension of brand: 360° choosing products adapted to markets 494 experience 156–58 choosing regions and countries 490–92 in service sector 104 constructing global campaigns 494–95 key principles of 137–38 creating and segmenting categories 492–93 licensing 164–66 reasons for 461–66 limits of traditional marketing 139, 140, as economic necessity 461–62 140–41 emergence of global segments 464–65 new brand realities 144–52 see also brand fighting the grey market 465–66, 466 realities (and) from single name to global brand 463–64 of two levels of branding 293–94 global name as source of advantage 462–63 openness and communication 158–59 pricing issues 465 passion 155–56 INDEX 549

brand names 211–14 brand transfers 415–36 see also name changes and choosing 211–14 brand transfers and copying/counterfeiting 212–13 and analysis of best practices 421–26 descriptive 212 as more than name change 415–16 and development time 213–14 challenge of 418–19 generic 443 corporate 435–36 in China 479–80 failure of 420–21, 421 international 214 managing resistance to 431–33 problems with 479–80 of service brand 426–31 vs product name 212 reasons for 416–18 brand personality 183–84 successful 433–35 brand positioning 175, 176, 177, 177, 178 timing of 428–31, 431 diamond 222 brand turnaround and rejuvenation (and) 437–53 process and phases of 207–09 see also brand equity (and) and rejuvenating exploration 207–08, 208 brands (through) implementation and activation 209 ageing, prevention of 443–45 strategic evaluation 208–09 dilution and generic brands 443 test 208 distribution factors 442–43 understanding 207 and weak communication 442–43 reasons for 178–80, 180, 181–82 factors in decline 439–41 brand realities (and) 144–52 missing new trends 440–41 choice economy 149–50 mono-product syndrome 441 community power 150–51 neglect of quality 440 fragmented markets 146–47 non-significant differences 440 limits of mono-distribution 151–52 growing older but not ageing 450–53 see also media fragmentation 147–48 relaunching a brand (by) shoppers 144–46 brand valuation, nine steps to 525–26, 527, 527–28 technology and the consumer 148–49 brand valuation methods, evaluating (by) 513, brand role, functional analysis of 23 513, 514–24 brand strategies 300, 347–49, 356–79 comparison of cash flow and multiple method brand levels 347 522–24, 524 choosing appropriate 372–76, 376 future earnings 517, 518, 518–19 endorsing brand 362–63, 363 historical costs 513 globalisation 348 market price 516 and group style 387 present earnings 519–20, 520, 521, 521 line brand 359–60 replacement costs 515–16 maker’s mark 362 royalties 517 mixed approaches 370–71, 371, 372 branding (and) 31–35 naming products 347–48 as art at retail 247–48 new trends in 376–79 brand system/pyramid 34, 34 branded houses 377 classic conception of 300–03 industry and branding 378–79 dilemma of modern 271, 271 loyalty and transverse brands 378 long-term vision 33–34 product brand 356, 356, 357–59 meaning of 31–35 range brand 360, 360, 361–62, 362 obstacles to implications of 45–49 source brand 367, 367, 368 transforming the product category 31–33 creating: from patchwork to unity 368–70 branding strategy 300, 348 umbrella brand 364, 364, 365–67 and brand valuation 354–55 encompassing 366–67 brands, type and role of 349–56 flexible 364–66 alternatives for: branded house/house of brands brand supporters 216–17 351–52, 352, 353, 353, 354 550 INDEX

brands Brown, S 437 ageing 443–45 Brown, T 28 as conditional asset 10 Buchanan, W 328 as genetic programme 36 Built to Last 270 bigger vs vetter 270 Buitoni/Buitoni-Perugina 4, 18, 340, 402, 515, building trade 113 522–23 generalist 275–78, 278, 279 Business Administration, Master’s degree in (MBA) generic 443 57–58 see also HEC and Insead local see local brands business schools 129, 129 and other signs of quality 44–45 business-to-business (B2B) 2, 40, 95, 113–18, 120, perceived difference of 240, 241, 241, 242, 149, 168, 305, 366, 380, 381 242–43 business-to-business brand (and) 113–19, 138, rejuvenating 445–50 329–30 specialist 275–78, 278, 279 activation points of 117 with long-term impact 36, 36, 37–38 as prescription 117–18 and word of mouth 217–18 differences of 113–14 brands and business building (and) 51–63 see also functions of industrial brand 114–15 brand building and cola drinks moving away from commoditised market 118–19 brands and business models comparison: cola the corporate and the grand 116–17 drinks 59–63 weight of industrial brand 115–16 breaking rules and acting fast: Insead MBA buyers, influencing 11–13 example 58–59 Buzzell, R D 484 companies 51–52 leading brands and best products: MBA example Cabat, O 301 57–58 Cadbury Schweppes 227, 248, 396 see also value curve of target 58 Schweppes brands and business models comparison: cola Calvin Klein 97, 179, 185, 189, 237, 270, 279, drinks 59–63 293, 303 brands and products see product–brand relationship Candia 227, 247, 382, 518 brands and value creation for companies 23–24, Canon 28, 196, 324 24, 25–26 Carpenter, G 316 and effect of brand reputation on advertising Carrefour 45, 60, 65, 67, 68, 70–71, 73, 74, 75, 79, 26, 26 86, 92–93, 116, 138, 141, 151, 152, 168, 209, and investment in 253, 324, 365, 382, 458, 464, 480 listing allowances 25–26 cars see automobile market/car industry production, productivity and R&D 24–25 Cartier 96, 97, 250, 326, 328 research and marketing 25 Caterpillar 24, 298, 306, 462 brands and value creation for customer 19–23 Cegarra, J J 359 and brand awareness 20–21, 21 Chan, C 228, 230 and brand functions 22, 22, 23, 23 Chanel 97, 100, 192, 196, 250, 270, 279, 293, 326, and transparent and opaque products 21–23 328, 339, 385, 444, 445, 456, 457, 489, 529 brands as strategic assets 3–5 Chaudhuri, A 26 branducts 359 cheese 44, 45, 94, 147, 357, 362, 373, 420, 429, Branson, R 61–62, 195, 196, 217, 283, 342–45, 469, 470, 478, 479, 491, 492–93, 516 346 Bel 362, 373, 420, 429 Braun 323, 347, 383 Boursin 18, 146, 147, 516 Brazil 97, 234, 270, 309, 458, 459, 467, 481, 490, La Vache Qui Rit 469, 470, 479, 491, 493 492 Chestnut, R 37 Breton, T 509 China/Chinese 15, 82, 96, 97, 115, 124, 141, 149, Bridges, S 297, 300, 328 164, 228, 234, 270, 364, 394, 397, 457, 458, Broniarczyk, S 318 459, 467, 473, 474, 478 INDEX 551

as growth region 491 Connex 355, 435, 459–60, 474–75 counterfeiting 101–02, 251 consumers/consumer behaviour 215–17, 217, 218 imports 139, 450 copycat labels 78, 79 and naming brands 479–80 corporate accounting 45–46 products 89, 93, 153, 234 corporate brands 26–29 Chinardet, C 225 Corstjens, M 70, 79 Christensen, C 262, 265, 482 cosmetics/toiletries 339, 361, 398–99, 419, 421, Christian Lacroix 164, 189, 411 442, 464, 480–81, 487 Claycamp, H 312–13 counterfeiting 101–03, 212–13, 250–52, 358 Club Med 224–25, 292–93, 342, 443 and consumer motivations 102 co-branding 166–70, 170 and copycat labels 78, 79 and alliances/partnerships 169–70 defending against 250–52 reasons for rise in 166–67 fight against 102–03 typical situations leading to 167–69 and imitation 251, 358 Coca-Cola 33, 59–61, 78–79, 88, 107, 123, 126, country brands 123–25 141, 142, 144, 151, 154, 160, 164, 169, 177, evocative power of 123–24 183, 184, 185, 186, 192, 203, 211, 213, 220–21, and ‘made in’ stereotype 124 223, 224–25, 237, 242, 247, 248, 250, 296, management of 124–25 299–300, 316, 337, 341, 344, 358, 407, 416, credit cards 243, 329 434, 446, 455, 463, 464, 468, 472, 473, 475, Cross, R 253 478, 480, 483, 512–13, 514, 515, 526 customer bonding 253 and Tab 296, 316, 358 customer loyalty 37, 161 Cohen, J M 88 customer relationship management (CRM) 46, cola drinks 59–63, 107, 123, 146, 162, 177, 178, 158, 219, 252, 262 179, 192, 221–22, 235, 247, 249, 272 see also group CRM 234 Coca-Cola and Pepsi-Cola customer relationships 164 and anti-competitive manoeuvres 61 Coke 339, 344, 456, 461, 472, 487 Dacin, P 28 Coke Light 300 Damart 168, 444, 445 Coke–New Coke 434 Dannon (USA) 458, 475, 485, 492 Diet Coke 296, 299–300, 316 Danone/Groupe Danone 18, 28, 33, 39, 79, 84, Diet Pepsi 316 125, 126, 138, 142, 144, 150, 151, 153, 157, Mecca Cola 62 166, 167, 190–91, 206, 237, 238, 243, 254, 273, and Monarch Beverage Company 62–63 281, 282, 288, 304, 325, 326, 342, 348, 370, President’s Choice 62, 63 374, 384, 385, 388, 397, 402, 417, 420, 455, Virgin Cola 15, 61–62, 154192, 247, 342, 343, 460, 474, 475–76, 484, 485, 490, 493, 514 344 Actimel 93, 281, 460–61 Colgate/Colgate Palmolive 87, 90, 301, 408 and Opavia 420, 485 Collins, J 262, 270 Darby, M 21 Collins, L 161, 254 database management 219 colour 191–92, 198, 250, 416, 435, 473 database marketing 254 communication 158–59 Davidson, J H 311 and brand language 210–11 Dawar, N 335 creative 360o 214–15 Day, D 156 and distribution factors 442–43 Decathlon 65, 72, 74, 77, 79–82, 85, 143, 168, globalising 495–98, 498 248–49, 411, 453 investing in 243–44, 244, 245, 245 passion brands 81–82 and wasted advertising 215 definition(s) of communities 150–51, 163, 164 brand 9–13 see also brand, definitions of competition brand equity 13–14 against distributors’ brands 87–90 Degon, R 247 552 INDEX

Dell 3, 40, 47, 57, 74, 104, 141, 153, 155, 158, earnings before interest and tax (EBIT) 14, 511, 525 181, 228, 248, 299, 459, 462, 471, 472 Eastern Europe 66, 234, 239, 419–20, 491 detergents and soaps 240, 356–57, 359, 420–21, EasyJet and easyCar 345–46 477–78, 483 eBay 119, 120, 122, 153, 214, 472, 487 Ariel 40, 90, 139, 203, 224, 226, 239–40, 242, e-business 46 245, 296, 301, 336, 348, 353, 356–58, 388, e-communities 163 396, 418, 458–59, 462, 473, 483 economic value added (EVA) 15, 449, 511, 525, Dash 205, 226, 296, 301, 348, 353, 356–58, 420, 527, 529, 530 473 Edwards, H 156 Dove 56, 66, 179, 181, 234, 308, 310, 332 efficient consumer response (ECR) 75 Persil 205, 306, 418, 421, 459–60 Ehrenberg, A 40, 184 Skip 40, 226, 234, 239–40, 242, 247, 357–58, Eiglier, P 104 418, 421 Electrolux 48, 228, 417, 418 Tide 40, 240, 259, 296, 336, 348, 353, 358, 458 entry barriers 248–50 Dholakia, N 232 and DOBs 248 Dior/Christian Dior 4, 95, 96, 97, 98, 99, 196, Estée Lauder 216, 274, 275, 468, 480, 487 250, 359–60, 375, 411, 444, 445, 529 European Commission 407 Disney Corporation/Disneyland 61, 97, 105, 166, European Union 126, 214 396 law on selective distribution networks 247 Distributor’s brand, evolution of 66–69 regulations 44 Distributor’s own brand (DOB) 69–79, 140–41, Evian 32, 66, 92, 105, 169, 181, 185, 196, 227, 225, 227, 240–41, 242, 244, 248, 249 234–35, 291, 295, 299, 300, 339, 341, 348, 357, competing against see competing against 397, 402 see also water distributors’ brands (and) consumer relationships with 72, 72, 73, 73 Farquhar, P H 300 and Decathlon case study 79–82 fast-moving consumer goods (FMCG) 51, 214, entry barriers to 248–49 404, 439 factors in success of 82–83, 84 Feldwick, P 14 financial equation of 75–77 Feral, F 45 future increases of 76–77 Ferrero 24, 151, 354, 396–97 management of 69–72 financial brand equity 507–13 optimisation of 77 brand as identifiable asset 511–12 optimising marketing mix of 84–85, 85 from economic value added to the brand and real brand issue for distributors 85–87 510–11 reasons for 74–75 value as dependent on evaluation goals 512–13 three stages of 77–79, 79 financial valuation 503–30 see also accounting for distributors’ brands, competing against (and) 87–90 brands and financial brand equity non-toleration of brand imitations 87–88 brand valuation methods, evaluating (by) price reductions 89–90 513–24 see also main entry re-communicating risks 88–89 brand valuation, nine steps to 525–28 see also diversity, local 473–78 main entry category differences 475–76 brand values published annually in the press differences in meaning 476–77 529–30 economic heterogeneity 473–75 and evaluation of complex cases 528–29 legislation and norms, differences in 475 brands abandoned, then resold 528–29 segment differences 476 loss-making companies 528 Donaton, S 148 parent brands 529 Dow 118–19 weak brands 529 Dru, J-M 59, 218 young brands 529 Du Pont 193, 205, 249, 368, 390, 443 Firat, F 232 Dubois, B 152 flagship products 209–10, 327, 491 INDEX 553

Fleury Michon 65, 70, 71, 106, 138, 151, 159–60, global targets 27 167, 341 globalisation 123–24, 129–30, 234, 270, 303, 348, Folz, J M 228, 398, 411 456–58 see also brand globalisation Fombrun, C 27 barriers to 471–72, 472, 473, 473 and six pillars for global reputation 27 excess of 470–71 Fournier, S 161, 421, 434 ‘globalization of markets, The’ 456 fragmentation, market 146–47 goodwill 18–19, 19 managing 232–33, 233, 234 accounting 18–19 fragmentation, media 147–48 effects of customer and distributor 19 France (and) 26, 65, 67–68, 75, 76–77, 82–83, 88, Google 55, 119, 120, 121, 122, 141, 147, 148, 150, 90, 92, 122, 124, 125, 129, 140, 143, 145, 147, 153, 158, 159, 160, 428 154, 158, 231, 247, 293, 306, 348, 418, 455, 46, Greig, I 415 470, 471, 476, 477, 479, 484, 487, 492–93, 512 growth in mature markets (and) 219–35 see also Dutreil circular 76 growth through and innovation (and) Galland law 76 disrupting markets through value innovation Paris and Roubaix cycle race 127 230–32 television (TFI) 132–33 existing customers 219–23 fresh produce/vegetables 106, 494–95 line extensions: necessity and limits 223–27 Fry, J N 37 managing fragmented markets 232–33 growth through Galeries Lafayette 69, 158, 75, 277 cross-selling between brands 234 Gali, J 324 existing customers 219–22 Galliano, J 99 and barriers to consumption 221–22 Gamble, T 295 and building volume per capita 219–21, 221 Gap 23, 65, 72, 84, 80, 232, 441 innovation 227–30 see also innovation (and) Gardberg, J 27 internationalisation 234–35 Garnier/Laboratoires Garnier 232, 350, 354, new uses and situations 222–23, 223 368–70, 374, 398, 432, 481, 483, 484, 492, trading up 223 529 growth through brand extensions (and) 295, 296, Garretson 83 297–346 see also brand building and brand General Electric (GE) 28, 214, 299, 324, 349, 374, extensions 377, 386, 372, 417, 424, 431, 435 assessing what should not change: brand kernel General Mills 18, 341, 482 332–33 General Motors (GM) 28, 58, 228, 237, 256, balancing identity and adaptation to market 362–63, 394, 410, 498 segments 330–32 Germany 65, 67, 83, 90, 124, 140, 194, 232, 237, extension-based business model: Virgin 342–43, 289, 293, 306, 420, 426, 455, 457, 464, 476, 343, 344–45 479, 491, 494 EasyJet/easyCar case study 365–66 Ghose, S 230, 315 limits of classical conception of brand 300–03 Gillette 94, 139, 227, 240, 249, 296, 383, 395, market attractiveness (and) 340, 341, 341–42 430, 472 partnerships and licences 341–42 Girard, R 96 resources 341 global brands 290, 475–519 see also brand research 316–24, 336 globalisation and globalisation successful brand extensions see brand extensions, and benefits of global image 486–88 keys to successful being perceived as local 483–84 growth through existing customers 219–23 being relevant 484 building volume per capita 219–21, 221 and integration factors 484 building volume: addressing barriers to global campaigns 494–95 consumption 221–22 global communication 212 Gucci 96, 164, 319 global positioning 13 Guest, L 37 554 INDEX

Hagel 163 and brand extensions 309–10 hairdressing/hair products 132, 154, 165, 166, of companies 419–20 182, 214, 216, 224, 226, 243, 253, 261, 298, internet 148, 150, 158–60, 214, 227, 448, 529 307–08, 328, 359–60, 369–70, 378, 398, 399, internet brand 119–23 406, 451, 471, 481, 493, 511, 527 communication methods of 122–23 Hallberg, G 254 and customer(s) 119–21 Hansen, M 458 virtual and psychological closeness of 121 hard discounting 153–54, 237, 246 Italy 140, 418, 469, 477, 482, 489, 494 Harding, D 67 Harlam, B 76 J Dessange 154, 165, 328, 354, 527 Harley-Davidson 163, 232–33, 250, 257 Jacoby, J 37 HEC 57–58, 87, 129, 130–31 Japan 17, 47, 124, 154, 155, 166, 185, 196, 207, research data 94 228, 235, 238, 246, 339, 353, 364–65, 366, 373, Heilbrunn, B 257, 272 374, 377, 394, 406 Henkel 87, 165, 205, 306, 419 Joachimstahler, E 377 Hermés 96, 97, 194, 313 Jobs, S 193, 283 and Wagons-Lits Group 313 Johnson and Johnson 235, 309, 362–63 Hewlett-Packard 3, 298, 299, 300 Jonas 65 Hirschmann, E 161, 232 Hoch, S 83 Kami, E 21 Hoff, E 455 Kapferer, J-N 9, 11, 20, 27, 40, 70, 72, 73, 74, 78, Hoffstetter, P 518 83, 84, 87–88, 93, 96, 109, 110, 114, 124, 155, Holbrook, M 161, 232 163, 171, 184, 213, 218, 250, 298, 349, 357, Holden, S 320–21, 322 363, 416, 420, 421, 424, 467, 485, 486 Holt, D 466–67, 491 Kapferer, P 192 household products/appliances 145, 301, 315, Karl Lagerfeld 169, 196 329, 342, 358, 367, 373, 405, 418, 423–24, 465, Keller, K L 10, 13, 299, 322–23 520–21, 523 Kellogg’s 18, 167, 249, 341, 368 Kenny, D 226 IBM 3, 4, 57, 115, 141, 149, 181, 184, 185, 196, Keynes, J M 240 205, 211, 254, 299, 352, 456, 459, 462 Kirmani, A 297, 300, 328 ICI 363, 389, 417, 432 Kleenex 32, 152, 204, 242, 443 Dulux and Valentine 432–33 Kleiber, G 190 Ikea 5, 23, 65, 158, 232, 248, 276 Klein, N 9, 29, 92, 456, 471 Ind, N 29, 104 Klein, R 66 India 2, 97, 123, 124, 164, 234, 309, 467, 490, 492 Klink, R 323 influencers, sustaining proximity with 260–62 Kodak 211, 324, 483, 484 innovation (and) 227–29, 229, 230 Korea 124, 148, 164, 207, 228, 235, 246, 339, 355, as brand oxygen 229 364, 366, 377, 388, 394, 460, 461, 464, 481, as source of competitive advantage 228 483, 485, 487, 494 creating desire in saturated markets 227–28 Kotler, P 2, 123, 130, 152, 161 disruption of markets 230–31, 231, 232 Kozinets, R 161, 437 effect on sales 230 Kraft/Kraft General Foods 179, 227, 304, 368, 402, increasing experiential benefits 232 478 mass retailers 228 Kumar, N 66 virtuous cycle of 229 Insead 57–58, 129, 130, 166 l’Oréal 18, 48, 52. 65, 82–83, 94, 97, 125, 131, Intel 40, 52, 115, 487 133, 151, 153, 154, 156, 157, 165, 166, 179, international accounting standards (IAS) 511–12 182, 203, 213, 215, 216, 227, 232, 234, 238, International Tool works (ITW) 114–15, 357, 377 239, 243–44, 249, 253–54, 259, 274, 303, 306, internationalisation 13, 234–35 309–10, 328, 342, 350, 359, 370–71, 372, 374, INDEX 555

378, 386, 393, 396, 398, 406, 411, 420, 432, low-cost companies 92 440, 442, 458, 459, 481, 483, 491, 493–94, 505, low-cost revolution 90–93 527 loyalty programmes/cards 258–59 l’Oréal Paris 66, 304, 348, 353, 365, 369, 378, 379, luxury brands 95–98, 98, 99, 100, 100–03, 260, 398, 399, 493, 529 310, 469–70, 480, 482 La Roche Posay 150–51, 215, 238, 309, 398–99, 419 approaches to building 97–100 Lachmann, H 349 and consumers 96–97, 97 Lacoste, R 192 and counterfeiting 101–03 see also Lacoste 32, 42, 91, 99–100, 158, 164, 186, 192–93, counterfeiting 203, 229, 239, 287–88, 302, 311–12, 325, and griffes 98, 98, 469 450–51, 583, 514, 530 history and story-based 101, 101 and Crocodile Garments 103, 251, 479 LVMH 28, 95, 97, 166, 238–39, 353, 386, 411 Lactalis 140, 143, 373, 429, 478, 492–93 Lycra 52, 82, 118, 168, 249 Lafarge 51, 52, 347, 381, 387–88, 390 Lai, K 102, 251 McCain 185, 223, 295, 302, 309, 321, 331, 335, 340 Lakoff, G 190, 282, 324, 335 McCartney, S 102 Lal, R 70, 458 McDonald’s 4, 44, 45, 60, 86, 105, 180, 180, 213, Lancôme 49, 195, 260, 275, 374–75, 398, 445, 220, 224, 249–50, 302, 331, 417, 455, 456, 461, 469, 481, 483, 487 462, 469, 471, 472, 478, 485, 487, 495–96 Langeard, E 104, 105 McGarty, C 283 language and marketing 54 Macintosh 350, 384 see also Apple Lanvin 440, 505, 516 McKenna, R 254 launching the brand (and) 203–18 see also brand mad cow crisis 44, 45, 71 identity; brand names; brand positioning and makers’ marks 69–72, 469, 479 see also communication distributor’s own brand (DOB) brand campaign vs product campaign 210 managing global brands (and) 455–99 see also building brand foundations: opinion leaders and brand globalisation; global brands; communities 215–17, 217, 218 globalisation and local brands defining brand platform 204, 205, 206, 206, achieving delicate local–global balance 480–83 207 barriers to globalisation 471–73 determining flagship product 209–10 building brand in emerging countries 498–99 launching a product 203–04 see also brand building Laurent, G 11, 20, 70, 73, 74, 83, 93. 110, 114, 353 conditions favouring global brands 478–80 Leif Heim Egil 320, 322 coping with local diversity 473–78 see also Legrand 116, 118, 146, 349, 396, 401, 405–06, 408 diversity, local Leuthesser, L 14 excess of globalisation 470–71 Levi Strauss/Levi’s 13, 22, 65, 72, 185, 193, 247, global brands perceived as local 483–84 391, 483, 530 globalising communications: processes and Levitt, T 104, 455, 456, 469 problems 495–98, 498 Levy, C 73, 84 naming problems 479–80 see also brand names Lewi, C 83 process of brand globalisation 487–95 Liddy, I 312–13 Mantelet, J 456 Lidl 67, 68, 90, 92, 151–52 Marconi, J 254 Lifshitz, R 99, 101 market fragmentation 146–47 Lindstrom, M 391 marketing 145, 158–59 line extensions 298–300 B to B to C 152–53 Liu, Y 469 community 150–51 local brands 485–87, 498–99 database 254 converging 498–99, 499 experiential 161 developing 485–87 niche 151, 160 Loken, B 37, 319, 327 proximity 46 556 INDEX

regional 458 design in portfolio management 409–10 relationship 161, 219 corporate organisation and brand portfolio research 124, 271 410–11 segmentation 146 global portfolio strategy 401–02 Marketing Management 66, 152 industrial brand portfolios 402–04 Marketing of Nations, The 123 and role of sales force 404 Marketing Science 13 inherited complex portfolios 392–93 markets key rules for managing see multi-brand portfolios accessing 492–93 management, key rules for choosing products adapted to 494 linking brand portfolio to corporate strategy grey 465–66, 466 405–06 modern 135–219 Nestlé portfolio: local and global 413 Marks & Spencer 21, 23, 66, 72, 333, 514 segmentation 396–401 see also main entry Marlboro 4, 22, 28, 123, 141, 180, 181, 181, 211, single to multiple brands: Michelin 393–95 237, 245, 247, 455, 469, 487, 488 multi-brand portfolios management, key rules for Classics 305, 325, 443 406–09 Mars 222, 273, 281, 285–86, 289, 295, 314, 332, allocation of innovation according to positioning 341–42, 357, 386, 402, 416, 417, 433, 459, 472, 406–07 475, 478, 515, 530 focusing on external competitors 409 and Raider–Twix 421–23 global strategy and market domination 407–08 Masterfoods 286, 357, 386 replication 408–09 Mattel 167 risk of complexity 409 and Barbie 391, 412 strong coordination 406 Mauborne, R 228, 230 Murphy, J 518 Mauguère, H 518 MySpace 119, 121, 147, 150, 428 Maybelline 398, 399, 406, 420, 464, 469, 481 MBAs 57–58, 130–31 Nakamoto, K 316 Melin, B 516, 518 name changes, examples of 415, 416, 421–26, Merlin Gerin 299, 349, 385, 403, 417 434, 435 Mishel, G 272, 273, 284, 286, 333 Anderson–Accenture 415, 427 Michelin 15, 17, 57, 83, 115, 117, 139, 140, 145, CGE–Alcatel–Connex 435 157, 190, 195, 237, 276, 353, 393–94, 405, 419 Coke–New Coke 434 and guidebooks 306 Datsun–Nissan 415 and sponsorship 163 Pal–Pedigree 415, 416 Microsoft 115, 117, 141, 159, 239, 380, 456, 475 Philips–Whirlpool 415, 423–26 Migros 23, 67, 80, 295 Raider–Twix 415, 421–23 Milligan, A 132 Total–TotalFinaElf 435–36 Minute Maid 61, 166, 167, 413 name changes and brand transfers 415–36 see also Mitsubishi 185, 207, 229, 334, 353, 364, 393 brand transfers mobile phones 15, 65, 148, 150, 158, 160, 168, analysing best practices 421–26 193, 230, 340, 347, 427–28 reasons for not switching 419–20 Moingeon, B 172 Nelson, P 21 monopolies, local 220 Nescafé 240, 368, 383, 413, 488 Monoprix 65, 68, 69, 70, 76, 154 Nespresso 93, 95, 155, 169, 228, 429–30 Moss, G D 348 Nesquik 318, 368, 413, 416 Moulinex 4, 227, 456 Nestea 331–32, 337, 413 multi-brand portfolios (and) 391–413 Nestlé 18, 22–23, 29, 65, 67, 79, 80, 138, 143, 166, and benefits of multiple entries 395–96 169, 181, 195, 198, 206, 213, 227, 228, 235, auditing strategically 411–13 254, 282, 283, 296, 304, 333,337, 341, 350–51, brand types: integrating, integrated, endorsed, 368, 373–74, 385, 383, 385, 397, 401, 413, 429, independent 404 438, 458, 460, 463–64, 482, 487–88 INDEX 557

net promotion score (NPS) 120 Philip Morris 79, 245, 402, 417 Neyrinck, J 209 Philips 48, 166, 190, 205, 228, 293, 324, 347, 364, Nike 13, 28–29, 55–56, 74, 80, 92, 102, 131, 147, 374, 366–68, 377, 382, 383, 393, 395, 405, 415, 151, 155, 161, 181, 184, 185, 194, 195, 196, 417, 423–26, 429, 484, 496–97 see also Whirlpool 203, 214, 232, 233, 239, 249, 250, 251, 291, Playtex 342, 441, 444, 477 337, 342, 456 Porras, J 262, 270 Nina Ricci 42, 292, 380, 469 Porter, M 130 Nivea 83, 146, 157, 166, 198, 203, 213, 229, 234, Poynter, R 415 238, 274, 283, 284, 306–07, 307, 308–09, price comparisons 245–46, 246, 247 330–31, 339, 353, 365, 366, 373–74, 378, 408, private labels and store brands (and) 65–94 see 412, 450–51, 483, 492, 497 also distributor’s own brand (DOB) No Logo 29, 92, 456 distributor’s brand, evolution of 66–69 see also Nohria, N 458 main entry Nokia 15, 350, 374, 459 facing low-cost revolution 90–93 Nussenbaum, M 508, 517 manufacturers’ production of goods for DOBs 93–94 opinion leaders 215–16 Procter & Gamble 27, 59, 74, 87, 90, 94, 97, 138, Orange 4, 29, 56, 65, 105, 122, 168, 193, 203, 280, 139, 141, 156, 179, 205, 226, 227, 234, 245, 383, 384, 427–28, 348 249, 254, 296, 301, 303, 306, 348, 349, 353, Orangina 33, 156, 164, 167, 175, 183, 192, 224, 356, 357, 358, 365, 372, 373, 377, 385, 388, 250, 332, 339, 402, 407, 412–13, 472, 480, 392, 396–97, 418, 412, 420–21, 458, 471, 477, 512–13 485, 499 origin, certification of 44–45 product–brand relationship 39–41, 41 Owen-Jones, L 52 products advertising through the brand prism 42–43, 43, 44 Palmolive 24, 46, 297, 333, 471 flagship 41–42, 42 Colgate-Palmolive 90, 301, 408 pyramid model 34, 34, 290–91, 291 Pastoureau, M 198 Pauwels, K 76, 78, 89 quality, seals and certifications of 38, 44–45 Pendergrast, M 242 country of origin/‘made in’ 124 Peppers, D 161 Quelch, J A 67, 226, 455, 466–67, 484, 491 Pepsi-Cola 17, 60, 61, 62, 154, 177, 184, 192, 213, Quiksilver 147, 151, 264, 445 221, 248, 316, 344, 407, 512, 526 perceived difference of brands 240, 241, 241, 242, Raider–Twix 415, 416, 417, 421–23 242–43 Ralph Lauren 28, 61, 97, 99, 100–01, 102, 146, perceived risk 20, 110 157–58, 181, 185, 232, 233, 250, 252, 270, 288, perfume industry 56, 124, 125, 131, 165, 179, 299, 303, 462, 470 see also counterfeiting 196, 213, 270, 279, 293, 301, 302, 303, 339, Ramsay, W 227 342, 359, 360, 367, 417–18, 440, 444, 529 range extensions 225–26 Pernod Ricard 155, 157, 397, 402, 448, 513 see Rapp, S 161, 254 also Ricard Rebuilding Brand America 123 Perrier 178–79, 181, 211, 299–300, 337, 402, 413 Reichheld, F 120, 219 see also water rejuvenating brands (through) 445–50 pet food 176, 206, 360, 386, 402 360° communications 449 pharmaceutical brands (and) 108–13, 238, by contact with opinion leaders 448–49 305–06, 358, 483 by redefining brand essence 446, 446 awareness of intangible factor 112 changing the business model 449–50 branding and medical prescription case study distribution change 447 109, 110, 110, 111, 111, 112, 112 innovations 447–48 factors in brand building 108–09 new uses 446–47 laboratory brand 112–13 segmentation 448 558 INDEX

relaunching a brand (by) 450–53 Schnaars, D 316 ‘back to the future’ 453 Schneider Electric 349, 355, 372, 385, 417, 498 facelifting, reinventing and innovating 450–51, Schroiff, H-W 420 451 Schuiling, I 421, 467, 485 and symptoms of ageing brands 451–52 Schwebig, P 172, 206 research/studies (on) 16, 76, 78, 141–42, 142, 219, Schweppes 175, 179, 211, 512, 515 314, 315, 334–35, 424 Seb group 355, 397, 405, 408, 430 Brand Asset Monitor (Young & Rubicam) 16, 241 segmentation 161, 216–17, 222, 223, 274–75, brand extensions 316–24, 336 see also brand 396–401, 448, 476 extensions, research on attitude 398 brand values (Interbrand) 529–30 benefit 397 DOBs (Brandz) 72, 72 categories 492–93 Euromonitor car tracking study 41 channel 398–99 jeans (Zandl) 441 global 464–65, 476 Megabrand system (TNS) 16 occasion 399–400 opinion leaders (Valette Florence, 2004) 216 prescription, linking brand portfolio to 401 use of language in marketing 54 price 400, 400 return on investment (ROI) 74–76 psychographic 397 Riboud, A 33, 238 socio-demographic 397 Riboud, F 460 Serog, P 88 Ricard 33, 261–62, 329, 338, 380, 402, 473 service as relationship 185–86 Paul Ricard 217 service brands 103–05 racing circuit 217, 261 employer brand 105 Ricoré 78 human component of 104 Ries, A 295, 373 process and recruitment brands 104–05 Riezebos, H 415 Sever, J 27 Rijkenberg, J 302 Shell 416, 419, 425 Roedder John, D 37, 319, 327 Helix oil 434–35 Romaniuk, J 184 Sherry, J F 437 Roosen 65 Siemens 205, 348, 349, 372, 393, 462, 469 Rosch, E 190, 324 Simmons, R 328 Rowntree/Rowntree Macintosh 4, 18, 401, 505 Simon, H 486 Rubinson, J 226 Simpson, R 78 Russia 96, 97, 234, 239, 270, 379, 465, 478, 491, Single European Act 472 494 slogans 32, 39, 104, 416 Smith, D 323 Sage 113, 116–17, 350, 380 Smith, J 253 Sainsbury 53, 63, 65, 152, 247, 249, 416 Snellen, M 415 Salmon, W 458 Somfy 51, 52, 66, 329, 472 Salomon (and) 263–67, 298–99, 324, 444, 448 Sony 4, 28, 36, 42, 47, 74, 206, 255, 255, 306, communication 267 319, 333, 354, 377, 382, 456, 471 path of brand 266 Sony Ericsson 350, 374 product innovation 266 Sood, S 297, 300, 328 proximity to customer 267 sponsorship 27, 48, 61, 157, 218, 261, 305, 411, Stations 264 463 Samsung 124, 347, 350, 355, 374, 491 sport 61, 74, 77, 80–82, 100, 131–32, 147–48, Santi, M 94 150–51, 157, 160, 163, 164, 169, 171, 181, 182, SAP 113, 117, 380 186, 193, 214, 218, 220, 229, 233, 248, 261, Sara Lee 18, 65, 383, 441, 442–43 263–66, 302, 305, 306, 310, 312, 324–35, 394, Sattler, H 16 411, 418, 444–45, 453, 462–63 Schmitt, B 156, 161, 232 Srinivasan, S 76, 78, 89 INDEX 559

Starbucks 1, 75, 86, 104, 105, 158, 487 trademarks 11, 75 and Howard Schultz 86, 105 transformation ratios 17 Steenkamp, J B 66, 466 Trout, J 295, 373 strategic brand management, key principles of Tubiana, A 164 137–38 tyres 394, 405, 419 see also Michelin strategic implications of branding (and) 31–49 see also brand contract; branding (and); brands and Unilever 18, 27, 28, 66, 79, 87, 97, 165, 179, 234, products 254, 303, 308, 349, 357, 379, 385, 418, 437, permanently nurturing the difference 35–36 460–61, 473, 487, 516 product–brand relationship 39–41 United Kingdom/GB 44, 52–53, 55, 59, 61–62, 72, strategic targets 260–62 162, 178, 181, 189, 192, 208, 214, 228, 235, Sullivan, M 28, 316 243, 263, 293, 295, 338, 343, 344, 416, 418, sustaining a brand long term (and) 237–67 see 419, 421, 427–28, 432, 441, 471, 475–76, 497, also branding (and) 519 brand aim: customers vs future buyers 262–63 United States of America (and) 4, 68, 77, 80, 82, brand equity vs customer equity (and) see main 96, 123, 153, 235, 249, 307, 332, 339, 348, 362, entry 379, 394, 396, 424, 448, 457, 460, 479, 487, brand life cycle 238–40 491, 493 creating entry barriers 248–50 see also entry cheap energy and vehicle safety standards 457 barriers cola/coke 316, 434, 513 defending against brand counterfeiting 250–52 Federal Authorities 407 see also counterfeiting Rossignol 396 investing in communication 243–45 see also Statement of Financial Accounting Standards 512 communication Uniroyal tyres 394, 405 nurturing perceived difference 240–43 see also universities/business schools brands 128–29, 129, brands 130–31 price comparisons 245–47 strategies for 130–31 reinventing the brand: Salomon 263–67 see also Salomon case study value innovation and disruption of markets sustaining proximity with influencers 260–62 230–31, 231, 232 see also innovation (and) Swatch 40, 155, 232, 278, 302, 514 van der Vorst, R 283, 284, 286 Swiners, J L 357 Veolia 349, 355, 417 Switzerland 23, 67, 80, 130, 195, 295, 458, 463, Velux 26–27, 400, 443, 487 466, 487 Vichy 49, 238, 326–27, 333, 339, 398–99, 442 Szymanowski 73 Villemus, P 422, 433–34 Virgin 15, 56, 61–62, 63, 92, 154, 158, 168, 181, Taylor, E 466–67, 491 187, 192, 195, 217, 231, 232, 247, 283, 273, Tefal 167–68, 169, 316 275, 295, 298, 300, 333, 342–43, 343, 344–45, and Jamie Oliver 168 346, 365, 366, 377 Terrasse, C 72–73 Visa 33, 184, 185 television 147–48, 158, 160 Vuitton/Louis Vuitton 95, 96, 102, 141, 157, 238, Tesco 53, 66–67, 68, 69, 74, 76, 85, 140, 151, 152 239, 248, 277, 282, 411 see also counterfeiting Thoenig, J C 9, 78, 357, 416 Tide 40, 240, 259, 296, 336, 348, 353, 358, 458 Wal-Mart 1, 60, 66, 70, 74, 80, 151, 209, 394, 398, Toshiba 47–48, 57, 205, 206, 355, 364, 365, 377 437, 458, 464, 486, 490 Total–TotalFinaElf 435–36 Ward, K 518 town brands 125–28 Warin, G 164 and introduction of concept of 125–26 water 24, 32–33, 66, 178–79, 181, 227, 234–35, example: Roubaix 127–28 282, 291, 205, 227, 235, 299, 300, 326, 337, implications of 126–27 339, 348, 357, 397, 402, 413, 423, 493 tracking studies 17, 17 Wathieu, L 469 560 INDEX

Weight Watchers 165, 167 Yamaha 298, 322, 324, 374 Whirlpool 48, 190, 210, 237, 374, 400, 415, 417, yoghurt 3, 190–91, 191, 214, 313, 325, 342, 413, 423–26 455, 457–76, 475–76, 490, 493 whisky 26, 32, 44, 329, 332, 359, 443, 445, 470, YouTube 121, 147, 150, 428 487, 488 Yves St Laurent 98, 180, 185, 196, 368, 417, 443, wine 22, 52–55, 107, 129, 144, 152, 153, 214, 238, 444, 445, 469–70, 514, 516 243, 305 World Trade Organization (WTO) 103 Zaichkowsky, J 78, 102, 251 Wozniak, S 193 Zaltman, G 469 Zara 1, 23, 55, 141, 153, 158, 232, 277 Xerox 32, 213, 239, 443 Zhang, S 156