Sunday, February 16, 2014

Products, Brands and the Firm: Five Immutable Laws of Branding

The relationship between products and brands has been an exciting and fascinating area of research in marketing strategy. Products represent performance and functionality while brands represent experience and assurance. Typically, products build brands but once built, brands outlast products. Marketing strategy, oftentimes, has to face the intriguing dilemma of new products riding on the existing brands or steering off to develop new brands. The more interesting question is also whether the firm itself represents a brand, and in some cases the product as well. In the recent years of technological innovation and marketing acceleration, the relationship between products, brands and the firm has demonstrated multiple facets. The relationships could vary across firms and industries but certain generic principles represent the essence of such relationships.

There could be a view that products, brands and firms are not standalone phenomena but are dependent on certain other critical foundational factors. For example, products may be seen to be embodiments of technology while advertising may be seen to build brands. Firms may be expected to be built not merely by products but also by a variety of tangible resources like assets and finance and intangible resources like culture and values. While this reality need not be denied, products and brands represent the final outcomes of all efforts of a firm, and represent respectively the tangible and intangible assets that together drive the competitive advantage of a firm. This blog post proposes certain simple laws of product and brand performance as influencers of firm performance. Like Newton’s laws of motion, these laws are simple but universal, and immutable.
The first law: Distinctive products make sustainable brands
Products help consumers fulfill their needs. Products offered by several firms may have similar characteristics but only certain products end up building themselves into real brands. Products get transformed into powerful brands when they offer functionality, reliability, durability, maintainability, affordability and differentiability on a consistent basis to the customers. From an organizational process point of view, these product features are an outcome of quality and competitiveness in design, manufacture and service. Firms should direct their efforts to develop products that offer the six-feature bundle through requisite organizational processes.
Firms with global leadership or national leadership, in any product category, reflect the above theorem. They master the organizational processes to provide the six superior product features, consistently product after product. Brand building is a phenomenon that clearly goes beyond advertising. It is a total organizational paradigm. Toyota, Nissan, Honda, Sony, Panasonic, Apple, GE, and any of the  top firms with strong brands have organizational processes that enable exceptional products. There exist no shortcuts for building brands but there exist well proven multiple methodologies to achieve functional excellence and integration. Each of the firms listed above has relied on functional excellence within organizational integration to reach its respective pole position.   
The second law: Differentiated products make discrete brands
Brands are expressions of product differentiation. However, overuse of singular brands on multiple products leads to monotony while underuse of a successful brand for product extensions wastes valuable resources. Samsung, it appears, has overused its successful Galaxy smart-phone brand on multiple products. LG, on the other hand, has underused any of its brands to better represent its smart phones. Companies struggle with the right balance in brand-product nexus. Product differentiation is the key to discrete brand recognition. It would appear that weaving a unique brand around each unique design theme is a helpful approach.
 In an automobile lineup, hatchbacks, sedans, crossovers, utility vehicles and off-roaders qualify for discrete brands. Each of these product segments may be known by integrated brands but each product segment can house further differentiated products, each with a discrete brand. Titan’s Raga brand represents an ethnic uniqueness for ladies watches and the Edge watch brand represents slim design form factor. Both have been highly successful, as they continue to preserve their unique propositions. However, Titan’s sub-brand Fastrack which started as a youthful brand known for its funky designs has got lost in multiple themes. At times, sequential simplicity makes the brand-product bonding perpetual and continuously expanding.
The third law: A pioneering product brands the firm
Most companies have multiple products but just a few brands. However, it is left to a few pioneering firms to develop singular products with which respective brands, and even the firms, are completely identified. This is true in highly developed markets as well as naïve emerging markets. Typically, this happens when the product provides a unique need fulfillment and/or user functionality and experience like never before. Once this phenomenon happens the world starts referring to products and use of products by the pioneering product itself. For a firm to be in such an unassailable position, it needs market-savvy innovative technologies.
Several examples, from the distant past as well as contemporary present, come to mind. Coca Cola representing sweetened beverage as a product, brand and the firm, first in America and later globally, is a classic example. So does Xerox, the pioneering developer of photocopying machines, representing the process of photocopying as Xeroxing. Philips is still remembered as a company of bulbs. Even in contemporary times, people call searching the Internet as ‘googling ‘rather than by any other name; with Google getting identified with its pioneering search engine product, in the triple formats of the product, brand and firm. Clearly, product pioneering needs to be the goal of firms that enter sunrise industries with leading edge technologies.
The fourth law: Great brands are forever
The deep, and inseparable, bond between the consumer and the product as well as the brand has one downside. When the product becomes irrelevant the brand too becomes irrelevant. That said, great brands that are made by great products have a truly mystique effect. Within reasonable generations of mankind, they never wither away; they just remain frozen in a grateful and appreciative consumer memory to be thawed into life just at the right time. Firms that are engaged in divestments or acquisitions and firms that are phasing out technologically obsolete products must keep in mind that brands have lives far beyond the products that made them.
Sony’s Walkman was synonymous with a music device running on taped music. With the obsolescence of that technology and the related product, Sony had to jettison the Walkman brand. That did not mean the demise of the Walkman brand, however; the brand came back to brand Sony music cellular phones as Walkman phones. Nissan phased out Datsun line of cars, and the Datsun brand itself, as Nissan’s other automobile products became the mainstay cars for the company. However, when Nissan set out to launch a global low cost car series, Datsun reemerged as the ideal brand that brought back its mystique. It is no wonder that Nokia has only licensed, and not sold, its Lumia smart phone brand to Microsoft; who knows what Nokia could do with Lumia brand a decade hence!
The fifth law: With branding, strategy follows structure
One of the cardinal principles of the theory of the firm, as postulated by Alfred Chandler(1962), is that structure follows strategy. However, in respect of branding, strategy must follow structure, more specifically business-product structure. Firms, depending on the industry setting and their own strategy, require diverse business and organizational structures to deliver. This leads to a brand hierarchy that cascades down from the firm as an apex brand into multiple business brands, each of which will cascade down into further product-line brands. On the face of it, such a brand hierarchy makes branding complex but with logical definition of business and product lineage, simplicity can be achieved. It would also provide for future business optimization.
The ‘strategy follows structure’ branding theory is particularly relevant when different products cater to different markets. There exist certain businesses that run on discrete brands, for example, branded generics pharmaceutical businesses in emerging markets such as India which cater to different healthcare specialties; such businesses validate the theory of branding strategy following business-product structure. Conglomerates and diversified firms benefit from the structure-driven strategy route.  One of the well established ways to retain thematic simplicity in such structural complexity is to prefix the Group’s name or the Firm’s name to all the new businesses and product lines. The examples that come to mind readily are the Tata business structures (Tata Steel, Tata Motors, Tata Chemicals, Tata Power, Tata Consulting Services, and so on) and the Google product lines (Google Plus, Google Play, Google Drive, Gmail, Google Glass, and so on).
Lessons from laws
Not many Indian companies appreciate the theory and practice of strategic branding. Either the firms  see the brand as a target rather than as an outcome or they dissipate the potential power of branding in a crisscross maze of brands. The perfect brands are those which score a 10-10 on the dimensions of revenue and profits. Most firms, however, fail to appreciate that such a perfect branding is built on the product or service scoring a 10-10 on user experience and user trust. Apple, in several ways, comes closest to the concept of perfect brand in the above perspective. The organizational competencies and processes must blend into an optimal mix to achieve perfect brands.
Even more fundamentally, Indian companies should start cleaning up the brand clutter (for example, companies getting known by multiple and complex names, and product-brand overlaps confusing customers). Firms also need to identify areas in their business-product canvas where and how the five laws of branding postulated herein can be applied. Business leaders must see branding beyond advertising or even customer recall, essentially in terms of products and services that ride on technology, quality and competitiveness to deliver on need fulfillment with the six imperatives that were mentioned in the preamble. It is worth recalling these six product or service attributes as being functionality, reliability, durability, maintainability, affordability and differentiability.
Posted by Dr CB Rao on February 16, 2014     


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