Brands are often some of the most valuable assets a company possesses. A brand is a unique marketing identity created for a product, product line, company, or even industry. Brands are associated with trademarks, trade names, service marks, and the like; however, many marketing experts insist that the concept of branding encompasses much more than a unique name or logo. Rather, they argue, a brand conveys an image of the values, qualities, and experiences that the underlying product or service is supposed to embody for its customers.
Brands serve their owners by allowing them to cultivate customer loyalty for, and recognition of, their offerings. Brands also serve the consumer; they supply information pertaining to factors such as the quality, origin, and value of goods and services. Without brands to guide buying decisions, the free market would become a confusing, faceless crowd of consumables. Among other detriments, the efficiencies of a self-service economy would be nixed.
Brands have been used since ancient times. For example, to mark livestock, singular designs were burned into animals' skin to identify the owner. Egyptian brick makers used brands to identify their own bricks, and brands were later utilized to identify craftsmen's wares. A potter, for example, would mark his pots by putting his thumbprint or some other personal tag on the wet clay at the bottom of a vase or pot. Likewise, silversmiths would brand their pieces with marks or initials. The value of craftsmen's wares soon became associated with their brands, as consumers quickly learned to associate varying degrees of quality with the marked goods. At least one source traces the roots of present branding techniques to 16th century whiskey distillers, who burned their names into the tops of their whiskey barrels.
It is only since the second half of the 19th century that has branding evolved into an advanced marketing tool. The industrial revolution and new communications systems made it easier for companies to advertise brands over larger regions. Most importantly, improved modes of transporting goods emerged. Manufacturers transported merchandise primarily by ship prior to the late 19th century. As a result, large scale commercial branding was generally limited to regions served by particular ports and companies near to those shipping points. The development of the railroad system during the late 19th century, both in the United States and in other parts of the industrialized world, gradually diminished the transportation constraint.
As manufacturers gained access to national markets, numerous brand names were born that would achieve legendary U.S. and global status. Procter & Gamble, Kraft, Heinz, Coca-Cola, Kodak, and Sears were a few of the initial brands that would become common household names by the mid-20th century. At least four important evolutionary changes occurred to cast those brands, and the entire branding concept for that matter, into the forefront of modern advertising strategy: (I) the internal combustion engine made possible the distribution of products into more remote areas; (2) branding became a tool used to distinguish nearly homogenous goods, such as eggs or bananas; (3) legal systems were devised to recognize and protect brand names; and (4) branding strategies were extended to encompass services, such as car repair.
An exemplary illustration of the evolution of branding is Guinness, an English beer. Started in 1750 by Arthur Guinness (1725-1803), the beer gained only local favor in a small region of the United Kingdom before the 20th century. Improved shipping and distribution technologies allowed Guinness to become one of the most recognized and successful brands in the world by the 1980s, with distribution and manufacturing operations throughout the globe. A more popular early example of branding in the United States is Coca-Cola, which dates back to the 1880s. As a result of the technological factors discussed above, Coke achieved unsurpassed brand recognition through its name and the (legally protected) shape of its soft drink bottle.
A brand is backed by an intangible agreement between a consumer and the company selling the products or services under the brand name. A consumer who prefers a particular brand basically agrees to select that brand over others based primarily on the brand's reputation. He or she may stray from the brand occasionally because of price, accessibility, or other determinants, but some degree of allegiance will exist until a different brand is acceptance and then preferred by the buyer. Until that time, however, he will reward the brand owner with dollars, almost assuring future cash flows to the company. The buyer may even pay a higher price for, or seek out, the goods or services because of his commitment, or passive agreement, to buy the brand.
In return for his brand loyalty, the company essentially assures the buyer that the product he purchases will confer benefits associated with, and expected from, the brand. Those numerous benefits may be both explicit and subtle. For example, the buyer of a Mercedes-Benz automobile may expect extremely high quality, durability, and performance. But he will also likely expect to receive emotional benefits related to public perception of his wealth or social status. If Mercedes licenses its nameplate to a manufacturer of cheap economy cars or supplies an automobile that begins deteriorating after only a few years, the buyer will probably assume that the agreement has been breached. The expectations, and therefore the value, of the brand, Mercedes-Benz, will be reduced in the mind of that buyer and possibly others who become aware of the breach.
Two major categories of brands are manufacturer and dealer. Manufacturer brands, such as Ford, are owned by the producer or service provider. Those brands typically are held by large corporations that sell multiple products or services affiliated with the brand. Dealer brands, like Die-Hard batteries, are usually owned by a middleman, such as a wholesaler or retailer. They often are applied to the products of smaller manufacturers. In summary, manufacturers or service providers may sell their offerings under their own brands, a dealer brand, or as a combination of the two types, which is called a "mixed brand." Under the latter arrangement, part of the goods are sold under the manufacturer's brand and another portion is sold under the dealer brand.
A company that wants to benefit from the consumer relationship allowed by branding must painstakingly strive to achieve even a small degree of brand loyalty. First, the company must gain name recognition for its product, get the consumer to actually try its brand, and then convince him that the brand is acceptable. Only after those triumphs can the company hope to secure some degree of preference for its brand. Indeed, name awareness is the most critical factor in achieving success. Companies may spend vast sums of money and effort just to attain recognition of a new brand. To penetrate a market with established brands, moreover, they may resort to giving a branded product away for free just to get people to try it. Even if the product outperforms its competitors, however, consumers may adhere to their traditional buying patterns for intangible or emotional reasons.
An easier way to quickly establish a brand is to be the first company to offer a product or service. But there are simpler methods of penetrating existing niches, namely product-line extension and brand-franchise extension. Product-line extension entails the use of an established brand name on a new, related product. For example, the Wonder Bread name could be applied to a line of bagels to penetrate that market. Similarly, brand-franchise extension refers to the application of an old brand to a completely new product line, such as, for example, if Coca-Cola elected to apply its name to a line of candy products. One of the risks of brand and product extensions is that the name will be diluted or damaged by the new product. One noteworthy less-than-successful extension was that of Cadbury (chocolate), which was extended to include several food items. The diversified goods were eventually jettisoned in an effort to revive Cadbury's strength in the chocolate industry.
Besides offering ways to enter new markets, product-line and brand-franchise extension are two ways in which a company can capitalize on a brand's "equity," or its intangible value. Three major uses of brand equity include family branding, individual branding, and combination branding. Family branding entails using a brand for an entire product mix. The Kraft brand, for example, is used on a large number of dairy products and other food items. Individual branding occurs when the name is applied to a single product, such as Crest toothpaste or Budweiser beer. Combination branding means that individual brand names are associated with a company name; General Motors (GM), for example, markets a variety of brands associated with the GM name.
Once a company establishes brand loyalty, it must constantly work to maintain its presence with consistent quality and through competitive responses to new market entrants and existing competitors. This art and science of sustaining and increasing brand loyalty and maximizing brand equity is called "brand management." Companies often hire brand managers whose sole purpose is to foster and promote the name. During the 1980s and early 1990s, advanced research and statistical analysis techniques were developed to assist brand managers and their staffs in their goal.
Another important brand strategy is deciding when or if to license the brand name to other companies. Walt Disney Company, for instance, does not manufacture all of the merchandise depicting its animated characters. Instead, a great deal of the Disney merchandise is manufactured and marketed by third parties, such as Timex with its Mickey Mouse watch, that have reached licensing agreements with the trade-mark owner. Usually these agreements involve paying the owner a royalty on sales and using the brand in defined, restricted ways. While such arrangements can provide lucrative supplemental business for trade-mark holders, brand managers must always be wary of authorizing licenses that will diminish or contradict their brand image. Within large conglomerates with multiple subsidiaries, some brand licenses may actually be internal agreements between different operating units of a larger enterprise.
Large companies frequently invest a great deal of time and money into choosing the name for a major new product, often hiring the services of an outside firm that specializes in naming. The naming process considers such factors as
Some naming experts deliberately avoid descriptive names that restate what the product or service is. Instead, they advise crafting a highly original name. An example would be naming an Internet access service National Internet Networks (descriptive) versus GeoNetworking (individualistic). Proponents of unique brand names note that they are less susceptible to imitation by competitors and may provide a more expansive umbrella for future extensions. In the hypothetical Internet service example, National Internet Networks not only sounds generic, but the name also may not lend itself well to international expansion or to branching into non-Internet data services.
Using an interesting or unique name doesn't guarantee, however, that a brand will have a strong identity and resonate with its target customers. To achieve these goals, the marketer must patiently and consistently employ the brand name in advertising and other marketing endeavors to further the image or concept behind the product, not just as a label for it. Thus, if the image behind GeoNetworking is one of an expert service to assist small to medium businesses with breaking into international electronic commerce, then the notion of GeoNetworking as a dependable, knowledgeable, and worldwide resource must be emphasized in the company's communications with its customers. Advertising should showcase these traits and avoid presenting contradictory messages that are convenient for the current ad campaign (e.g., a humorous animated commercial) but do nothing to provide identity to the GeoNetworking brand.
Of the world's top ten brands in 1996, as ranked by Interbrand Group, plc. of London, a leading brand consultancy and a unit of the advertising agency Omnicom Group, eight heralded from the United States—Sony and Mercedes-Benz (now under the DaimlerChrysler umbrella) being the two exceptions. These partly subjective rankings were based on such considerations as market share, ability to extend to new product lines, global demographic appeal, and brand loyalty. Interbrand's top ten were rated as follows: (1) McDonald's, (2) Coca-Cola, (3) Disney, (4) Kodak, (5) Sony, (6) Gillette, (7) Mercedes-Benz, (8) Levi's, (9) Microsoft, and (10) Marlboro (Philip Morris). Of the top 50 brands, in fact, the large majority were American. They included renowned names such as American Express, Wrigley's, Apple Computer, IBM, Intel, Nike, AT&T, and Pepsi-Cola. The most popular non-U.S. brands included Heineken, Porsche, and Rolls-Royce.
Although a brand is much more than a name, the name itself (and its visual rendering) is usually one of the following:
Trademarks and other marks may be protected by virtue of their original use. Most U.S. trademarks are registered with the federal government through the Patent and Trademark Office of the U.S. Department of Commerce; these registered trademarks are often signified with the circle-R (®) symbol. Unregistered trademarks are still subject to protection and are designated with the ™ symbol. Federal trademark registration helps to secure protection related to exclusive use of a logo and, to a lesser extent, the actual name. Common words used as trademarks (for example, "Acme") usually enjoy only protection of the logo design and the use of the word for a specific class of products; however, a registered trademark of such a term usually can't prevent an unlike product or service from using the same name. For example, Acme aluminum foil and Acme fertilizer are both valid registered trademarks. Unregistered trademarks may still be protected under common law, which in a dispute gives priority to the party that first used the mark.
Additional measures beyond registration may be necessary to protect a trademark. The Lanham Trademark Act of 1946 established U.S. regulations for registering brand names and marks, which are protected for 20 years from the date of registration. Companies must actively guard their trademarks against misuse or generic use (such as using "styrofoam," a one-time trademark, to refer generically to a class of materials). Companies use the trademark symbols and special wording on their products and in literature to warn others that they regard their names as trade-marks. Trademark holders who fail to actively police the use of their marks may over time lose the ability to do so legally.
Various international agreements protect trade-marks from abuse in foreign countries; however, registration in the United States does not guarantee legal standing in another country. Consequently, multinational companies typically register their trademarks in every country they do business in.
Trademarks have suffered from infringement and counterfeiting since their inception. The U.S. government, in fact, does not police trademark infringement, but leaves that task to registrants. Worldwide, approximately 5 percent of all branded merchandise is believed to be counterfeited or diverted through the gray market, amounting to lost sales estimated in the hundreds of billions of dollars for U.S. companies alone. Such illicit activities not only cut into manufacturers' revenues, but can also lead to product safety and reliability concerns. A famous 1989 case involved a Norwegian plane crash that was allegedly due to sub-standard counterfeit parts. To some, this and other incidents only underscore the value of branded merchandise—the ability to say "made with genuine Brand X parts." A rising tide of more recent infringement cases have been brought on by the use of Internet domain names that resemble trademarks by parties that have no rights to the underlying trademark.
[ Dave Mote ]
Cyrlin, Alan 1. "Reducing a Company's Risk Over Domain Name Disputes." Journal of the Patent and Trademark Office Society, January 1999.
Kapferer, Jean-Noe. Strategic Brand Management. New York: Free Press, 1994.
Kochan, Nicholas, ed. The World's Greatest Brands. Rev. ed. Washington, NY: New York University Press, 1997.
Schmitt, Bernd, and Alex Simonson. Marketing Aesthetics. New York: Free Press, 1997.
U.S. Department of Commerce. Patent and Trademark Office. Patent and Trademark Office Home Page. Washington, 1999. Available from www.uspto.gov .