Brand

A brand is a mark, symbol, logo, design, or other form of distinguishing feature that identifies a manufacturer’s product from other brands or generic versions of the same. However, although product brands are perhaps still the most recognizable branded offerings, brands can also be services, people, or places. A product and a brand are not the same thing. A brand is a combination of functional and psychological values. The product may satisfy the functional values necessary for the customer (i.e., a car that transports someone from A to B). The psychological benefits, such as a feeling of success or prestige, may make a consumer choose to drive a Mercedes, for example, despite the additional expense. One of the purposes of branding is to gain a sustainable competitive advantage for the organization. The brand is a crucial element in the study of corporate reputation as it is the brand that is the repository of the reputation of the organization.

This entry will now discuss the elements that help us recognize a brand, before giving a brief history of brands. It will then go on to discuss the benefits of brands from both the consumers’ and the organization’s perspective (brand equity), the importance of brand personality, and ideas on different approaches to managing brands. The increasing importance of the corporate brand will be detailed before this entry concludes with considerations of brand valuation.

Brand Elements

A brand consists of some or all of the following factors and can be used to differentiate, assist with consumer recognition, and be a focal point for marketing communications. A brand may have a name to identify the product or service; some visual symbol or logo; other, often trademarked colors, such as the bright red of Coca-Cola; sounds, such as an advertising jingle; a smell, which often has great emotional resonance for the customer (e.g., Langham Hotels has a recognizable scent, and a bottle of the scent may be purchased in its hotel shops); architecture, such as the clearly recognizable McDonald’s restaurants; tactile qualities, such as the distinctive leather finish in a luxury car; a shape, such as the distinctive contours of the Orangina bottle; fonts, such as the distinctive lettering of the Heineken brand; movement, such as the Oyster perpetual movement of a Rolex watch; or a taste, such as the individual recipe of Heinz HP sauce.

The brand elements should help position the brand in the mind of the consumer, and a strong brand will hold a distinctive place in the consumer’s cognizance. The use of branding can help differentiate even generic or commodity products or services (e.g., Eddie Stobart’s distinctive logistics brand in the United Kingdom).

A Brief History

Brands have been around for a long time. Ancient Egyptian and then Roman societies have examples of manufacturers displaying their “brand” names as a guarantee of a particular quality. Following this, the origins of hallmarking—the stamping of a mark of purity on precious metals such as gold, silver, and platinum—are believed to date from the 4th century. Originally, it was the guardians of the craft who provided the hallmark, before this duty moved to particular bodies of authority. The word brand originates from the Norse word brandr, literally meaning “to burn,” and farmers used the practice of burning a mark onto their cattle to signify ownership.

Identifying signs continued to be used, including tavern or inn signs in England, from the Middle Ages onward. The real point of takeoff for brands, however, was the Industrial Revolution. In the late 18th century, handmade products and cottage industries were replaced by the era of mechanization and mass production of products in purpose-built factories. With the Industrial Revolution came two related and supporting industries. The development and expansion of the railways allowed transportation of goods to a much wider and remote audience. When selling to customers less familiar with the reputation of the seller, the use of a brand name facilitated easier recognition and, therefore, reinforcement of guaranteed quality, time and again. With the expansion of the newspaper industry came the advertising industry, which, just as it does now, largely subsidized the price of newspapers. Advertising therefore became a legitimate way to inform potential customers about brands and to help them gain awareness of and positive associations for one’s brands.

Legal protection offered by patents and, later, trademarks afforded brand owners greater legal defense of their intellectual property, and this protection provided them with the confidence to further invest in and build their brands. The move toward self-selection by customers in the 20th century (e.g., in supermarkets) changed the dynamics of the shopping experience dramatically and in a way that would favor those manufacturers who invested in their brands. Previous to this change, products were selected for customers by the grocer on one side of the counter, with the customer on the other. The rapid growth of supermarkets meant that it was the customer who now chose the products, and therefore, it was in the interests of brands to appeal to consumers directly, usually through advertising messages. Grocery products were often individually weighed and then packed; self-selection led to the use of packaging as a legitimate part of the marketing mix, designed not just to protect the product but now to attract customers directly to the brand as well.

In terms of the importance of brands to companies, a key moment came in 1989 when the Rank Hovis McDougal Corporation placed the value of its brands on its balance sheet. To protect itself from a hostile takeover, Rank Hovis McDougal Corporation valued its own, internally created brand portfolio. This valuation was independently assessed, and then the valuation of intangible assets was endorsed by the London Stock Exchange in 1989. The intangible value of brands had been endorsed by the accounting industry.

Benefits of Brands

Developing a brand has advantages for both the brand owner and the customer/consumer. A brand identifies the maker and should be a guarantee of consistency. When buying a brand, the customer should be assured of the same experience time after time. Thus the brand should simplify the buying experience for the customer. Familiarity with a brand means that the customer progresses from need recognition to purchase without having to go through all the stages of the consumer decision-making process. The brand is there to signify quality to the consumer. To the consumer, therefore, the brand is able to reduce the risk of making a poor purchase decision. The brand should be trusted by the consumer, and unlike a mere product, a brand signifies a relationship between the consumer and the company.

There are also significant benefits for the organization. Branding offers legal protection of intellectual property for a company and can also provide strong barriers to entry in a market. A brand is a legal entity. Competitors may well be put off entering a market due to the strong market position of an existing brand that has a high emotional resonance for customers. Brand owners seek brand loyalty from customers, whereby customers repeatedly purchase the same brand, often habitually, rather than choosing an alternative. When this condition exists among a significant number of consumers, the brand is generating a sustainable competitive advantage for the company. As it inspires loyalty in customers, the brand can also create beliefs and bonds with the employees of the organization. The brand can be a flag for employees to rally around, and a good brand will make the organization a desirable and sought-after place to work in. The brand therefore can help with the recruitment and retention of good-quality staff.

One of the biggest benefits of a brand to an organization is the price premium that the brand is able charge over the benchmark price of a generic version of the same product or service. The psychological benefits that the brand gives to its customers means that they are willing to pay the premium because they perceive the brand to be a higher-quality offering. A well-recognized brand name creates confidence in different stakeholder groups, including suppliers and partners and financial markets, as well as customers and employees.

Brand Equity

The added value that consumers perceive to exist in the branded entity is often described as brand equity. This is the additional revenue that is generated by the power of the brand name and its superiority in the minds of customers. Put simply, brand equity is the goodwill that the brand provides for the organization. Originally proposed by David Aaker, brand equity comprises brand awareness, brand associations, perceived quality, and brand loyalty. Awareness will be at the 100% level for the strongest brands, such as Coca-Cola. This awareness keeps the brand at the top of the minds of consumers. Prompted and unprompted recall tests can measure brand awareness among consumers: So what do you think of when asked to name a carbonated soft drink? The packaging of the brand will similarly be easily and instantly recognized. Associations are the words or phrases that come to mind when a brand name is mentioned. These associations are memory based and have particular implications for how positively the brand image and brand personality are perceived. When customers think of the Apple brand, they may mention words like user-friendly, well designed, or innovative. These are positive associations that lead directly to the next element of brand equity, perceived quality. This constitutes the overall experience of the brand. The customers feel that they can trust and rely on the brand and that they will be well treated if they have problems with their purchase. The positivity of these three stages of brand equity leads to the fourth stage, brand loyalty. The strong brand is able to link its products and services directly to the consumers’ lives. Many customers would feel unable to function properly without their Apple products. They may have several products all linked to one another and may need to carry one or more of these products with them at all times. Their loyalty means that it is very difficult for other brands to attract these customers.

Brand equity also makes it easier to introduce new products or services under the same name, and these are called brand extensions. The equity of the existing brand passes to the extension, allowing easier recognition and adoption by customers. For example, Mars has used the equity from the Mars Bar to extend the brand to ice creams, cakes, and Mars chocolate drinks, among others.

Brand Personality

The management of brands has developed from using brands as a reference point for customers—for example, having a recognizable quality, consistency, and packaging—to the development and management of a brand’s personality. This happens when the traits of a human personality are applied to brands. We are encouraged to think of the brand as if it were a person, and therefore possessing a personality. So a brand can encourage both employees and customers to think of certain traits when they think of the brand. The brand may be innovative and creative, such as Bose, or dependable and secure, such as IBM. Thinking of the brand in human terms makes it appear more approachable and friendly to customers and helps build a relationship between the customer and the brand.

Brand Management

A key area of management is to consider the brand architecture. Most brands do not just consist of one product or one offer, so the relationship between the differing offerings of the brand must be considered. The architecture must consider the relationship between the corporate name and the individual brand names. An individual or multibranding approach is taken when each product offered by the organization is branded independently of the others. Major branding corporations such as Unilever (brands include Bovril, Timotei, Dove, Vaseline, Domestos, and Persil) and Proctor & Gamble (brands include Arial, Gillette, Lenor, Fairy Liquid, and Duracell) utilize this approach. This is also known as a “house of brands” approach.

A family branding strategy requires that all products within a portfolio use the organization’s name, either entirely or in part. Microsoft, Heinz, and Kellogg’s all incorporate the company name, as it is hoped that customer trust will develop across all of their products and the brand equity of the entire portfolio will be maximized. An umbrella brand strategy is one in which the organization’s name is used to identify the brand and provide the necessary differentiation (e.g., Tesco). Over recent years, this strategy has developed into a much more important strategic thrust and has been referred to as corporate branding.

The Corporate Brand

Brands in recent years have seen the advantage of differentiating themselves based on the entire company culture and the values that the organization espouses. Reasons for this include the rise of the service industry, whereby most people in the Western world work in services rather than in manufacturing. In this case, it is the brand name itself that is recognized by consumers as the mark of quality that differentiates one offering from another, rather than the more traditional differentiator of product quality. Even for product brands, increasing product parity has meant that many consumers often see little difference between one manufacturer’s offering and another’s. So corporate branding has increased in importance with organizations’ desire to stress the quality of their workforce, values, company culture, and processes and to seek their competitive advantage through such facets.

As with services, the corporate brand is often intangible and is a complex entity as it may incorporate many different departments or divisions and have operations in many different countries. The corporate brand is expected to show a measure of responsibility by consumer groups and may well emphasize its ethical credentials. This, for example, would entail the brand taking responsibility for its entire supply chain, and in this way, the value system of the brands extends beyond making profits for shareholders; instead, it relates to many different stakeholder groups. The values that the brand displays and the assumptions that stakeholders have of the brand are the glue that holds the corporate brand together. For example, Adidas describes its brand values as innovative, inspirational, committed, passionate, honest, and authentic. As a brand with a great heritage, including making the first spiked running shoes, the first soccer shoes with molded studs, as well as the soccer balls for almost every World Cup, these values ring true.

Corporate brands differ from product brands in several ways. Their brand identity is likely to come from the heritage of the company (as with Adidas) rather than from its advertising agencies’ imagination (which is often the case with product brands). The scale of the corporate brand is much larger, and its target audience will be the multiple stakeholders of the organization rather than just customers. The responsibility for the corporate brand will come from the chief executive officer rather than from a brand manager, and the planning horizon will be related to the life of the company rather than an individual product. This emphasizes another important difference between products and brands; that is, whereas most products have a defined life cycle, a brand that is well managed can live indefinitely.

Brand Valuation

Measurement is at the core of science, and as the management of brands has become a subject of study for both professionals and academics, the importance of measuring the value of brands has increased. Lists are produced each year detailing the top 100 brands globally. The two main lists are produced by the global branding consultancies Interbrand and Millward Brown’s Brand Z. The top five brands in the Brand Z list published in 2014 are Google, Apple, IBM, Microsoft, and McDonald’s. The Interbrand list for 2013 featured four out of five of these brands, but Coca-Cola replaced McDonald’s. Although there are clear relationships between the lists, the difficulty with brand valuation is shown by the financial values attributed by the two agencies to the same brands. Whereas Interbrand values Google at $98.3 billion, Millward Brown attributes the same brand with a value of $158.8 billion—a huge difference of more than 61%. The Interbrand methodology looks at three key areas: (1) financial performance, (2) the role of the brand, and (3) brand strength. Financial performance considers the balance sheets of the brands and their financial return to the investors. The role of the brand is an estimate of the proportion of the purchase decision that is based on the brand name alone. This facet is a genuine attempt to consider what the brand is worth when compared with an unbranded or generic version. Finally, brand strength measures the ability of the brand to generate future earnings—a mark of its sustainable competitive advantage. Perhaps the large gap in the estimates of Google’s value between the two consultancies is explained by the brand multiple calculation in the Brand Z scale, this being the growth potential of the brand-driven earnings. Millward Brown estimates that the brand name is responsible for one third of the earnings of the company.

Another measure that can be used to demonstrate the value of a brand is the revenue that the corporation earns by licensing its brand name to other organizations to use on unrelated products and services. The Disney Corporation is a great exponent of this approach and is estimated to have generated almost $40 billion in licensing fees during 2013.