Basic branding decisions

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To brand or not to brand: There really is no question. Virtually every product is associated with some type of branding. So-called “generic” products generally don’t exist today, except in some grocery items and perhaps commodities like sugar, wheat, and corn. The advantages of branding are so compelling that the real question is not “why?” but “how?”  Some of the many advantages of branding include:

• Product Identification. Brands make identifying and locating products easier for customers.
• Comparison Shopping. Brands assist customers in evaluating competing products
•  Shopping Efficiency. Brands speed up the buying process and make repeat purchases easier by reducing search time and effort.
•  Risk Reduction. Brands allow customers to buy known products, thereby reducing the risk of purchase
•  Product Acceptance. New products released under a known brand name are accepted and adopted more quickly
•  Enhanced Self-Image. Brands can convey status, image, and prestige
•  Enhanced Product Loyalty. Branding increases psychosocial identification with a product.

In addition to these general benefits of branding, specific branding decisions can also create other benefits. For example, one key branding decision involves the distinction between manufacturer brands and private-label brands (brands owned by the merchants that sell them). Private-label brands, sometimes called store brands (but never generic brands), range from well-known products like Gap clothing and Craftsman tools, to other products such as Walmart’s Ol’ Roy dog food, Equate aspirin, or Sam’s Choice soft drinks. Strategically, the choice to sell manufacturer brands or private-label brands is not an either-or decision. As Exhibit 7.3 illustrates, both types of brands have important advantages. For that reason, many distributors, wholesalers, and retailers carry both types of brands. For example, department stores carry manufacturer brands such as Nike, Polo, and Hilfiger because customers expect to find them. Hence, manufacturer brands are important in driving customer traffic. They also give customers confidence that they are buying a widely known brand from a respected company. Department stores also carry a number of private label brands because of the increased profit margins associated with them. JCPenney, for example, is well-known for its popular private label

brands. Over 40 percent of Penney’s sales come from private-label brands; seven of which including Arizona, Worthington, and St. John’s Bay individually sell over $1 billion each year. Penney’s has also added a private brand of clothing and home furnishings called American Living, which is manufactured by Polo Ralph Lauren. Further, JCPenney acquired the Liz Claiborne brand (a former manufacturer brand) in late 2011. The move was part of Penney’s full brand makeover to emphasize “Fair and Square Pricing” instead of frequent sales.

A second important branding decision involves individual versus family branding. A firm uses individual branding when it gives each of its product offerings a different brand name. A number of well-known firms use individual branding, including Sara Lee (Hanes, L’eggs, Jimmy Dean, Ball Park), Reckitt Benckiser (Air Wick, Clearasil, French’s, and Woolite), and Procter & Gamble (Tide, Duracell, Cover Girl, Scope). The key advantage of individual branding is that the potential poor performance of one product does not tarnish the brand image of other products in the firm’s portfolio. It is also useful in market segmentation when the firm wants to enter many segments of the same market. Procter & Gamble uses this strategy in the laundry detergent market (Tide, Cheer, Bold, Gain, Ariel).

Conversely, family branding occurs when a firm uses the same name or part of the brand name on every product. For example, every cereal in the Kellogg’s portfolio uses the Kellogg’s name (Kellogg’s Frosted Flakes, Kellogg’s Rice Krispies, etc.). Campbell’s uses the same strategy in its soup portfolio (Campbell’s Tomato Soup, Campbell’s Chunky, etc.) and with many of its other brands such as Pepperidge Farm, Pace, Swanson, and V8. The key advantage of family branding is that the promotion (and brand image) of one product reflects on other products under the same family brand. However, in addition to the obvious risk of releasing a poor product under a family brand, family branding also runs the risk of overextension. Too many brand extensions, especially into   unrelated areas, can confuse customers and promote brand switching. Examples include Bic perfume (the company is known for pens and lighters), Bayer Aspirin Free Pain Reliever (Bayer is the dominant aspirin maker), and Miller Chill (not exactly the “High Life”).

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