A brand is a name, symbol, or other feature that distinguishes a seller's goods or services in the marketplace. More than 500,000 brands are registered globally with pertinent regulatory bodies in different countries. Brands serve their owners by allowing them to cultivate customer recognition of, and loyalty toward, their offerings. Brands also serve the consumer by supplying information about 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. An established and respected brand can be the most valuable asset a company possesses.
Brands have been used since ancient times. For example, people burned singular designs into the skin of their livestock to prove ownership, while potters and silversmiths marked their wares with initials or other personal tags. But it is only since the second half of the nineteenth century that branding evolved into an advanced marketing tool. The industrial revolution, new communication systems, and improved modes of transporting goods made it both easier and more necessary for companies to advertise brands over larger regions. As manufacturers gained access to national markets, numerous brand names were born that would achieve legendary U.S. and global status. Procter and Gamble, Kraft, Heinz, Coca-Cola, Kodak, and Sears were a few of the initial brands that would become common household names by the mid-1900s. Before long, legal systems were devised to recognize and protect brand names, and branding was extended to services—such as car repair—as well as products. Thus the brand concept moved into the forefront of modern advertising strategy.
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. The consumer may stray from the brand occasionally because of price, accessibility, or other factors, but some degree of allegiance will exist until a different brand gains acceptance by, and then preference with, the buyer. Until that time, however, the consumer will reward the brand owner with dollars, almost assuring future cash flows to the company. The buyer may even pay a higher price for 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 will confer the 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 feel that the agreement has been breached. 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.
There are two major categories of brands: manufacturer and dealer. Manufacturer brands, such as Ford, are owned by the producer or service provider. The best-known of these brands 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. These brand names often are applied to the products of smaller manufacturers that make a distribution arrangement with the middleman rather than trying to establish a brand of their own. 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 part are sold under the dealer brand.
Brand names are very important for small businesses, as they provide potential customers with information about the product and help them form an immediate impression about the company. A well-chosen brand name can set a small business's product apart from those of competitors and communicate a message regarding the firm's marketing position or corporate personality. When preparing to enter a market with a product or service, an entrepreneur must decide whether to establish a brand and, if so, what name to use.
Experts claim that successful branding is most likely when the product is easy to identify, provides the best value for the price, is widely available, and has strong enough demand to make the branding effort profitable. Branding is also recommended in situations where obtaining favorable display space or locations on store shelves will significantly influence sales of the product. Finally, a successful branding effort requires economies of scale, meaning that costs should decrease and profits should increase as more units of the product are made.
After deciding to establish a brand, a small business faces the task of selecting a brand name. An entrepreneur might decide to consult an advertising agency, design house, or marketing firm that specializes in naming, or to come up with a name on their own. A good brand name should be short and simple; easy to spell, pronounce, and remember; pronounceable in only one way; suggestive of the product's benefits; adaptable to packaging and labeling needs or to any advertising medium; not offensive or negative; not likely to become dated; and legally available for use.
In order to create a brand name for a product without the help of experts, a small business owner should begin by examining names already in use in the market and evaluating their effectiveness. The next step is to identify three to five attributes that make the product special and should help influence buyers to choose it over the competition. It may also be helpful to identify three to five company personality traits—such as friendly, innovative, or economical—that customers might appreciate in relation to the product. Then the small business owner should make a list of all the words and phrases that come to mind for each attribute or personality trait that has been identified. If the brand name is to include the type of product or service being offered, it is important to consider whether the phrases on the list fit well with these terms. The next step is to think about how the phrases on the list would look on a sign or on a product package, including possible visual images and typefaces that could be used to enhance their appearance.
Next, the entrepreneur should narrow down the list with the help of a few friends. It may be helpful to say the possible names aloud, thinking about how they would sound if they were used by a receptionist answering a telephone or by a customer requesting a product from a store. It is also important to consider whether the names will stand the test of time as the business grows, or whether they include an in-joke that may become dated. Once the list has been narrowed down to between ten and fifteen candidates, then the possibilities should be tested for impact on at least thirty strangers, perhaps through a focus group or survey. The opinions of people who may be potential customers should be given the most weight.
Finally, once the top few choices have been identified, the entrepreneur can find out whether they are available for use—or are already being used by another business—by conducting a trademark search. This search can be performed by advertising or marketing firms, or by some attorneys, for a fee. Alternatively, the small business owner can simply send in a formal request for a trademark and wait to see whether it is approved. The request must be sent to the state patent and trademark office, and also to the federal office if the business will be conducting interstate commerce. In order for a trademark to be approved, it must be available and distinctive, and it must depart from a mere description of the product.
In order to benefit from the consumer relationship allowed by branding, a company must painstakingly strive to earn brand loyalty. 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 simply because of their comfort with those competitive products.
An easier way to quickly establish a brand is to be the first company to offer a product or service. But there are also 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 whole-wheat bread to penetrate that market. Brand franchise extension refers to the application of an old brand to a completely new product line. For example, Coca-Cola could elect 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.
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 Budweiser beer. Combination branding means that individual brand names are associated with a company name. For example, General Motors markets a variety of brands associated with the GM name.
Brand extension enjoyed a great deal of popularity during the late 1990s. As product development and advertising costs increased, many companies sought to leverage the equity in their existing brands rather than attempting to launch new brands. In fact, a 1998 Ernst and Young study showed that 78 percent of product launches in that year were line extensions. But businesses must be careful not to go too far with line extensions, at the risk of damaging their brand name or diluting its meaning in the eyes of customers. "The corporate landscape is littered with examples of companies that have tried to extend their brand franchise too far," Jane Simms wrote in Marketing. "At the same time, other unlikely sounding brand extensions are proving very successful." Just because extending an existing brand involved lower costs, it was no guarantee of success. The Ernst and Young study showed that 47 percent of new brand launches were successful, compared with only 28 percent of line extensions. Simms noted that a brand extension is more likely to be successful when the mother brand is strong, the extension supports and adds value to mother brand, and the extension is valuable to consumers. She recommended that companies considering a launch gauge consumer response by developing new ideas in three ways: as a brand extension; as a new brand; and as a halfway measure, using such language as "from the makers of…."
Once a company establishes brand loyalty, it must constantly work to maintain its presence with consistent quality and competitive responses to new market entrants and existing competitors. The science of sustaining and increasing brand loyalty and maximizing brand equity is called "brand management." Large companies often hire brand managers whose sole purpose is to foster and promote an individual brand. In many ways, the job of a brand manager in a large company is similar to that of an entrepreneur who seeks to enter and maintain a presence in a market with a branded product or service.
By legal definition, a brand is a trademark (or service mark for brands associated with services). Trademarks 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. Federal trademark registration helps to secure protection related to exclusive use, although additional measures may be necessary to achieve complete exclusivity. The Lanham Act of 1946 established U.S. regulations for registering brand names and marks, which are protected for 20 years from the date of registration. Various international agreements protect trademarks from abuse in foreign countries.
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. In the late 1980s approximately $7 billion worth of "gray market" goods, or imported branded goods that bypass the brand owner, were shipped into the United States annually. The trade of brand-counterfeited goods, such as falsely branded automobile parts, is a major hurdle for many brand owners. Besides depriving the brand owner of potential sales and profits, counterfeiters can destroy consumer confidence in a brand by selling inferior-quality products under its name.
Buzzell, Robert D. and John A. Quelch. Multinational Marketing Management . Addison-Wesley, 1988.
Schoell, William F., and Joseph P. Guiltinan. Marketing: Contemporary Concepts and Practices, 5th ed. Allyn and Bacon, 1992.
Simms, Jane. "Stretching Core Value." Marketing. October 19,2000.
SEE ALSO: Private Labels