What are the benefits of branding? Branding is one of the most important tools of product differentiation, benefitting both buyers and sellers. A brand is a name, a term, a symbol, or a design that distinguishes a company and its products from all others. For buyers, well-recognized brands reduce the shopping time necessary to find the quality and consistency they desire in a product. Branding also reduces the risks involved in some purchases when buyers are unable to objectively determine quality. We rely on established brands to consistently deliver an expected level of quality. Comparing product descriptions and ingredients takes much longer than simply picking up a trusted brand. Consumers are also able to express themselves by buying brand names with which they wish to be identified. For example, some buyers seek prestige by buying exclusive brands, such as Mercedes-Benz cars, Rolex watches, Dom Pérignon champagne, or “cool” trendy items, such as Beats headphones.

Branding also helps sellers highlight the special qualities of their products, which can lead to repeat purchases as well as new sales at higher prices. Companies with trusted brands are also able to introduce new products quickly and at a relatively low cost. By expanding their brands, companies add length to their product lines, widen their product mix, and enhance their profitability. Marketing a product using the same brand name but in a different product category is known as brand extension. Because Kraft has a wide diversity in its product mix, the company can market its brand to just about any person in the world. There is something for everyone among Kraft’s product lines.

Well-branded companies are generally recognizable by the trademarks they put on their products and the advertisements for them. A trademark is a name, symbol, or mark that is legally protected and cannot be used by anyone else without the owner’s permission. Trademarks benefit sellers by distinguishing their brands from the competitors’ knockoff brands, which are illegal copies or cheap imitations of another product.

Can a company’s trademark legally be put on another company’s product? Yes, if a brand license is obtained. A brand license is an agreement between the owner of a brand and another company or individual who pays a royalty to use the trademark in association with a new product, such as the pasta-making machine in our opening story. Brand owners use licensing to extend a trademark or character onto different products. The Walt Disney Company is a good example. Characters such as Mickey Mouse appear on toys, books, and clothing that are not made by Disney. The national sports leagues are also big licensors and leading retail sellers of licensed products.

How does a logo help to build a brand? A logo is a graphic representation or symbol of a company name, trademark, or abbreviation. Sometimes trademarks and logos are the same, but sometimes a company can have a logo that is not trademarked. Logos are an important element of a company’s identity. They help make a company stand out from the competition, build trust and confidence about the brand, and increase customer loyalty. No doubt you can describe the logo for Starbucks, Apple, and Ralph Lauren. A good logo makes it easy for customers to associate products with a company’s set of standards. When you are miles away from home and see McDonald’s “golden arches” rising above the horizon, you know exactly the type and quality of food you will be served.

Can branding promote customer preferences? Brand loyalty, the degree to which customers consistently prefer one brand to others, is another major benefit of branding. In fact, companies hope that customers recognize their brands by their attributes, such as the logo, slogan, or colors (brand recognition), and prefer them regardless of convenience or price (brand preference) and then eventually insist on them, not accepting a substitute or generic product in its place (brand insistence). When consumers insist on a brand, it is the highest degree of brand loyalty. It can turn a product into a specialty good or service that can command a much higher price. Ultimately, the degree of brand loyalty depends on satisfied customers. Perhaps the most significant contemporary example of brand loyalty is the fervent devotion of many Apple customers.

What is brand equity? Strong brand loyalty contributes to brand equity, the overall value of a brand’s strength in the market. Although this value may be difficult to measure, it represents the value of the brand to the organization. In addition to brand loyalty, perceptions of quality contribute significantly to brand equity. Quality products not only are free from defects but also consistently perform at high levels. For example, many customers purchase Levi’s jeans because of the brand’s high quality and durability. This reputation adds significantly to Levi’s brand equity.

What also contributes to brand equity? Besides brand loyalty and quality, two other perceptions of a brand lead to a brand’s equity: brand awareness and brand association.

• Brand awareness is the extent to which a particular brand name is familiar within a particular product category. Companies participate in mass advertising as a way to help their product’s brand name become the most recognized and thought of for that category. For example, what brand first comes to mind when you think of laundry soap? If it is Tide, then P&G has succeeded in its brand awareness campaigns for laundry soap. Similarly, what brand do you think of first when someone mentions coffee? You might think of Starbucks if you get your coffee on the go, or perhaps you might think of Folgers. Either way, those companies have succeeded in making you aware of their brand.

• Brand association involves connecting a brand with other positive attributes. Hiring celebrities to endorse a product can be an effective tool for nurturing brand associations. The success of Nike’s Air Jordan line of sneakers is a result of its association with Michael Jordan. Disney has been successful in associating its brand with wholesome family values. Images invoked by symbols and slogans can also be very powerful brand association techniques.

What strategies are used to brand products? There are several different branding strategies a firm can use, depending on how it wants to portray its products. Is the brand meant to convey thriftiness or luxury? A different branding strategy would be chosen for each of these objectives. Branding strategies also differ depending on the characteristics of the target customer.

There are several different types of brands that a product could be categorized into (see Figure 13.7):

• Manufacturer’s brands

• Family brands

• Individual brands

• Private brands

• Co-brands

• Generic brands

Figure 13.7

Branding Strategies

What is a manufacturer’s brand? A manufacturer’s brand is a brand created by those who produce or manufacture the product. A manufacturer’s brand is also known as a national brand, even though the brand may be distributed globally. Well-known brands, such as Ben & Jerry’s and Google, are considered manufacturers’ brands. Manufacturers spend much money creating, promoting, and building their brands. There are two types of manufacturers’ brands: family brands and individual brands.

What is a family brand? A family brand is a brand that markets several different products under the same brand name. Apple and Kellogg’s are examples of companies that have family brands. Consumers are more likely to try new products in established brand families they are familiar with and trust. These established companies are therefore able to penetrate new markets successfully with their brand names. Bic, first known for making disposable ink pens, successfully added Bic disposable razors and lighters to its family brand. There’s a drawback of extending a company’s brand name to new products, however: If one of them is unsuccessful, it can tarnish all products with the brand name creating a negative brand image.

What is an individual brand? An individual brand is a brand assigned to each product within a company’s product mix. For example, Sara Lee uses individual brands among its many food, beverage, household, and personal care products. Some of the brands may be familiar to you: Ball Park Franks, Hillshire Farm meat products, and of course, Sara Lee’s frozen and packaged foods. A major advantage of individual branding is that if a new product fails, it won’t damage the image of the other products.

What is a private brand? A private brand is a brand created by a distributor, or a middleman. Middlemen can be wholesalers, dealers, or retail stores. As a result, private brands are also called distributor, wholesaler, dealer, store, or retail brands. The key characteristic of a private brand is that the manufacturer is not identified on the product. Examples include Sears’s line of DieHard batteries, Kenmore appliances, and Craftsman tools. These products are made by other well-known and recognized manufacturers but are sold under Sears’s private brand labels. Grocery stores often sell similar products under their own private labels. Safeway, the supermarket chain, has several private labels, including Open Nature (100 percent natural foods), Lucerne (dairy), and In-Kind (personal care products). In addition to putting a different label on the same product, a manufacturer may make special products just for the private brand. The advantage of private branding is that an individual distributor has more control over a product’s price and promotion. The competition is heating up between manufacturers’ brands and private brands, as many private brands have gained national recognition. Private labels are big business for many stores because they are generally perceived as being of similar quality but more economical than the national labels since they are generally offered at a lower price.

What is a co-brand? A co-brand is packaging two or more brands affiliated with a single product, such as Kmart’s Martha Stewart Everyday line. The objective is to combine the prestige of two brands to increase the price consumers are willing to pay. Co-branding is also used to foster brand loyalty for one product while extending loyalty to the contributing product.

What is a generic brand? A generic brand is a product that has no brand at all. The product’s contents are frequently identified by black stenciled lettering on white packages. Generic brands often look nearly identical to branded products and, in fact, may be made by the branded products’ manufacturers. So, a generic brand of cream-filled sandwich cookies may look like Oreo cookies, but they won’t be called Oreo cookies or bear the Nabisco brand name, even if Nabisco produced them. However, because they are not advertised, generic products are typically priced lower than branded products.

By producing both types of products, a manufacturer can capture both cost-conscious and brand-loyal customers. Often consumers will buy generic brands of products they use routinely and do not have a brand preference for, such as generic drugs.

How does packaging help promote a product? Because it is the first thing consumers see when looking for a product, packaging often is the first criteria used to make a purchasing decision. Getting the consumer to notice a product and choose it from competing products on crowded shelves is extremely important. The package design, shape, color, and texture all influence buyers’ perceptions and buying behavior. Packaging also sends a message about a product and brand. The makers of luxury items, such as jewelry or high-end cosmetics, typically package their products in such a way to create an impression of extravagance, sophistication, and exclusiveness.

Coca-Cola has an iconic package that defines the brand, the shape of which is distinctive and immediately recognizable. That contoured shape was initially created in 1915 to differentiate Coke from its competitors. It was such a success that the bottle design was trademarked in 1977. The little blue box from Tiffany & Co. is another example of an iconic package that promotes both a brand and a lifestyle. The robin’s-egg-blue box has been a symbol of elegance and excitement since it was introduced in 1837. The packaging is so desirable that some consumers simply want to buy the box. However, it is an ironclad rule that no Tiffany & Co. blue box can leave the store unless it contains a purchased item.9

How does packaging protect a product? Packaging is intended to preserve and protect a product. This is the most obvious purpose of packaging. Most products are handled several times as they are distributed from the manufacturing site to the final consumer. Some products also need to be protected from adverse conditions. Additionally, packaging must protect a product from tampering. Products, such as medicines or infant formula, need to be tamperproof and must meet the minimum requirements set by the U.S. Food and Drug Administration (FDA).

Why is convenient packaging so important? Packaging should facilitate use and convenience. Sellers want packages that are easy to ship, store, and stock on shelves. More importantly, consumers want products that handle easily, open, reseal, and store conveniently and that, for perishable items, have a long shelf life.

Packages that are convenient to use and that are also physically attractive sell better. Heinz ketchup experienced a significant increase in sales when it began offering ketchup in a squeezable bottle. Campbell’s soup has responded to changing consumer tastes and preferences for greater convenience by offering pull-top lids and sippable soups, microwave soup lines, and ready-to-serve soups. Many sellers also offer different-sized packages depending on the serving size. For example, salt, sugar, and breakfast cereal packages come in many different sizes for added convenience.

How does packaging affect the environment? A growing concern among many consumers is whether a product and its package are environmentally sound. Some packaging, especially the single-serve packages, can be considered wasteful and environmentally unfriendly. Consequently, many companies are going green and developing new products that are eco-friendly, which can increase their sales. Puma developed an eco-friendly packaging concept for its shoes. Instead of the traditional cardboard shoebox, Puma packages its shoes in cardboard frames wrapped in reusable shoe bags. This repackaging saves nearly 8,500 tons of paper and reduces the resources required for production and transportation.10

Why is labeling important to establishing a brand image? Labeling serves two functions: to persuade and to inform. Attractive and eye-catching labels are used to promote and persuade customers to buy a product. Labels also can contain information to educate consumers of the features and other benefits of a product. Many companies label their products with their brand logos to distinguish their products. If a label comes to represent consistent quality and dependability, then the label can perpetuate a positive brand-name image.

What does the government have to say about product labels? Labels should inform consumers about a product, its uses and benefits, and any safety concerns. The government has initiated several acts that regulate what must go on a product’s label. The Fair Packaging and Labeling Act of 1966 requires that companies communicate specific information about their products to consumers. The act requires that all labels include the name and place of business of the manufacturer, the packer or the distributor, and the net quantity of the contents. The Consumer Product Safety Commission (CPSC) has also established guidelines to ensure that manufacturers warn consumers about the hazards of various products, for example, if they are flammable, and the adverse consequences of using them improperly. The CSPC also requires that products have tracking labels. The tracking labels include batch and run numbers that identify the exact source of the product and its components. That way, if the product is defective or contaminated, the manufacturer can trace the source of the problem to more quickly to correct it.

Other government attempts to make labels more useful for consumers to evaluate products include the Nutrition Labeling and Education Act of 1990. This legislation requires that all nutrient content and health claims, such as high fiber or low fat, are consistent with agency regulations. However, labels can be confusing or misleading. For example, the FDA criticized General Food’s claims that “You can lower your cholesterol 4 percent in six weeks” by eating Cheerios.11 Now, the box carries a more general statement that the cereal helps to lower cholesterol. Businesses that wish to foster good customer relationships must be careful to label their products ethically.

How are digital media and the Internet affecting branding strategies? More companies than ever are incorporating digital media into their branding strategies by advertising online, creating blogs, providing online customer chats, and using social networking. Zagat, the restaurant-ratings guide publisher, uses Facebook, Twitter, and YouTube and places tips and recommendations into Foursquare. This new set of technologies has caused some companies to rethink and reformulate their previous branding practices.