"What's in a Brand Name?"
ABCNEWS.com, October, 1999
Bill Brewster
Brand name building, brand name equity, and brand name dominance.
These days, the central focus of many businesses, especially e-businesses, seems to be not their products and services, but their branding strategies. And while this may sound like the ultimate triumph of style over substance, many experts look ahead to the next millennium and predict that name brands will become even more important to businesses, especially as more of the economy moves to the Internet.
Brands, Tried and True
Throughout the last century, branding has been a crucial part of many of the world’s largest businesses. U.S. corporations like Procter & Gamble and Kraft have been able to build consumer goods empires on the strength of their many valuable healthcare and consumer brand names.
But more recently, companies started to realize that their good brand
names represented valuable assets — the phrase “brand equity”
was coined in the mid-1980s.
That meant analysts were able to quantify the value of name brands, which
enabled them to be bought and sold. As a result, the concept of “branding”
took off.
Now, analysts recognize brands to be not just names but large-scale representations
of companies. Brands have inherent meanings and characteristics; they
accumulate customer goodwill and discontent. “Brands are a shortcut
to a summation of many attributes,” … a professor of marketing
and international business at Tufts University’s Fletcher School
of Law & Diplomacy.
[He] says these “shortcuts” have taken on a new importance
in the information age, as people are now bombarded with more information
than they can process from an ever-expanding universe of media channels.
New Company Name
All a Blur
Brand architecture, he says, represents “an evoked set of choices," and if the brand name evokes good things, then consumers will often buy simply because it’s “closest, easiest, and people don’t always want to think.”
As companies globalize in the future, those “evoked" choices
may become companies’ real stock-in-trade. …[A] Professor
at Berkeley’s Haas School of Business…points out that there
are so many brand names nowadays that “technology is failing to
differentiate competitors.”
[He] cites the auto industry as an example of this phenomenon. “Ten
years ago, there were substantial quality differences between brand names,
but no longer.” If every car company’s shock absorbers come
from one company's worldwide factories, then eventually brand names may
be the only thing that pushes consumers to choose one make over another,
he explains.
More and more, says …[Tufts professor], companies value the “lifetime
value” of a relationship between a customer and a name brand more
than they value individual sales.
And if you’re trying to establish brand name loyalty, why not start
on consumers while they’re still very young?
He points to Sony, which has already achieved “brand dominance”
in many areas of consumer electronics. Over a decade ago, the company
unveiled a branded product called “My First Sony,” and rolled
out a special line of products customized for child users.
While this may sound like the craziest kind of commercialism …[he]
feels that such branding strategies can actually serve to benefit both
kids and their parents.
Web Pushes the Pace
As long as companies like Sony don’t flex undue muscle to eliminate competition or prey on the unsophisticated judgment of children, he says there’s nothing wrong with trying to build brand name relationships early.
Building good brand relationships early means something different in the fast-moving world of e-commerce. Up until now, the Web’s relatively low barriers to entry (the costs of building a Web site where you can sell your products and getting your brand name out to a large number of potential customers) have enabled companies to become billion-dollar businesses in record time.
The secret to success, according to Jim Dettore, president and CEO of the Brand Institute, a consumer branding, biotechnology branding and pharmaceutical branding consultancy firm, is having a great brand.
He points to one of his own clients, Priceline.com (a “name-your-own-price” reverse auction system for buying airline tickets and a quickly growing list of other products), as an example of how key a good Internet brand strategy is.
In the early part of the 20th century, he notes, brand names like P&G’s
Ivory soap or Campbell’s soup took about 25 years to reach “megabrand
status,” (in today's consumers goods terms, that means that the
brand sells over $1 billion annually.)
New Company Name
Massive Marketing Budget Helps
Even 25 years ago, it still took a good 10 years to build to megabrand status.
But Priceline.com reached megabrand status — in their case, measured
by brand name recall by over 25 million American adults — just six
months after the business debuted last April. Following its 1999 IPO,
the company has a market capitalization of over $9.3 billion.
Of course, Priceline.com’s megabrand status probably has more to
do with a massive marketing budget than with an international daisy chain
of word-of-mouth recommendations, but with so much cash at stake, how
can a company not afford to break the bank on their initial advertising
campaign?
Says Dettore, “Brand names are more important than ever on the Web because consumers don’t have a tangible asset to kick the tires of.”
When he consults with Internet startups, he helps them divine the personality of their initial business idea. From that, they brainstorm the perfect brand name, then focus on brand design and brand communication strategies.
What Lies Ahead?
Looking ahead to the business world of the next century, these analysts zero in on the Web as the reason why name brands are going to become even more important in the future. Currently, it’s the only worldwide distribution channel and anyone can “advertise” on it.
Dettore notes that many e-commerce companies are following Dell’s lead and using a successful brand name to bring on a paradigm shift in the way they distribute their products. Dell and others are betting on direct-to-user sales over the Web, and that’s not a good sign for retailers.
Several Internet companies are developing online “malls” where people can shop for similar products made by several competing companies. “They won’t pay the chain stores for placement on the floor anymore … they'll use the money to get a prime spot in the Web world.”
‘We’re Skeptical Shoppers’
Some experts argue that “buying engines” will actually decrease the sway of name brands on the Web, because these engines will be able to go look through a bunch of Web sites offering similar products and return the cheapest deal to the user. But …[Tufts professor] isn’t buying.
“In our hearts, we’re skeptical shoppers,” he says. Every consumer has bad product experiences, which will lead to “relationships only with certain brands,” especially when consumers can’t take anything for a test-drive until after they’ve paid and waited several days for delivery.
In the end, then, companies may become more “virtual” in
the next millennium than you ever thought possible. As getting, building
and maintaining the right brands assumes even greater importance for 21st
century businesses, the answer to “What’s in a name?”
may become, simply, “everything.”
New Company Name
