BRANDS Introduction to Branding 1262022 hdpintroduction to brands

BRANDS Introduction to Branding 1/26/2022 hdp-introduction to brands 1

The super-ordinal business objective Increase shareholder value 1/26/2022 hdp-introduction to brands 2

How Creating brand value 1/26/2022 hdp-introduction to brands 3

The Power of Brands Rank 1 2 3 4 5 Brand Coca Cola Microsoft IBM GE Intel bn. $ 2005 67. 52 59. 94 53. 38 47. 00 33. 59 Source: Interbrand 1/26/2022 hdp-introduction to brands 4

Put it in perspective • Greater than the 2003 GDP of Czech Republic ($60. 15 bn), Algeria ($62. 67 bn), New Zealand ($57. 52 bn. ). • Gross value of Coca Cola company’s Dec. 2004 net fixed assets – $6. 09 bn. • Personal Income for 2003, for Charlotte-Gastonia. Concord MSA - $47. 85 bn – 1. 439 mill. people (BEA – US Dept. of Commerce) 1/26/2022 hdp-introduction to brands 5

What does this value indicate • The amount you would have to pay if you wanted to buy the brand (Bills Gates: $46. 5 bn. in 2005) • The power to command future sales (Coke’s 2004 sales – $21. 96 bn. ) • The incredible skew in value placed on an intangible asset (6 bn. Vs. 67 bn. ) • Lastly, the strength and favorable attitude towards the name in your minds (1985 – Coke’s misadventure) 1/26/2022 hdp-introduction to brands 6

Origins of branding • Derived from old Norse word ‘brandr’ meaning ‘to burn’ • Marks on Chinese porcelain, pottery jars from Grecian, Roman and Indian artifacts dating from 1300 BC • Cattle Ranchers • Bakers to mark their bread - English law in 1266 • The Moon & the Stars (1851) – P&G brand • Uneeda biscuits – 1898 – first nationally branded biscuit 1/26/2022 hdp-introduction to brands 7

Once upon a time (in a land far, far away!) there were commodities… • • Undifferentiable by seller/manufacturer Often sold loose Quality highly variable In competitive markets we have many mfrs. / sellers for the same commodity. • QUESTION: How do I get a buyer to prefer and buy my ‘commodity’? 1/26/2022 hdp-introduction to brands 8

How do you differentiate • ANSWER: Differentiate it from competition • HOW: By branding your ‘commodity’. 1/26/2022 hdp-introduction to brands 9

What is a brand • A differentiated product is a brand. e. g. Adidas, Gap, Abercrombie & Fitch, I-Pod, Motorola Razr, Panthers, Coca Cola, etc. • A brand must satisfy two conditions – Distinctive identity (name, symbol, logo, slogan, etc. ) – A distinctive image (e. g. Nano vs. Zen) 1/26/2022 hdp-introduction to brands 10

Some advantages of branding • Can be sold prepackaged hence specific quality levels can be assured • Opportunity to communicate specific brand benefits • Opportunity to appeal to specific market segments • Ready value in M&A transactions 1/26/2022 hdp-introduction to brands 11

Why is branding important • Push vs. Pull • Financial value of brands in the context of mergers and acquisitions (KKR paid $30 bn. for RJR Nabisco (Oreos, Newtons, Teddy Grahams, Chips Ahoy, etc. ) in 1989 – first M&A transaction to recognize value of the brand name) 1/26/2022 hdp-introduction to brands 12

Why is branding important • Jump start sales across product categories e. g. Hooters Airlines, Reebok bottled water, Ralph Lauren paints. • Ability to operate highly profitably on minimal fixed investment (e. g. Sara Lee Corp. – Hanes, Ball Park, Kiwi, Coach, etc. – is an “assetless” company – no manufacturing operations. Also Baskin Robbins, Sam Adams beer, Calvin Klein jeans and Motorola cellphones) • Separate manufacturing from production 1/26/2022 hdp-introduction to brands 13

Critical features of brands • Intangible • Exist at a perceptual level – Whether a brand has been created or not is determined by the consumer. – (manufacturers may invent the brand – name, advertising and positioning, but if the consumer does not perceive the brand as such (i. e. a differentiated product), a brand HAS NOT been created) 1/26/2022 hdp-introduction to brands 14

Types of brands • Consumer brands (most fall in this category) e. g. Nike, Gatorade, Maytag, Pantene, Tyson chicken, Mercedes, etc. • Industrial brands e. g. Xerox, Caterpillar, Komatsu, Boeing, Airbus, etc. • Service Brands e. g. British Airways, Fedex, UPS, State Farm Insurance, Citibank, etc. 1/26/2022 hdp-introduction to brands 15

Types of brands • Corporate Brands e. g. GE, Disney, Honeywell, etc. • Retail brands e. g. Gap, A&F, JC Penney, Albertsons, etc. • Person brands e. g. Cindy Crawford, Heidi Klum, Michael Jordan, Jennifer Lopez, etc. 1/26/2022 hdp-introduction to brands 16

What are the brand’s benefits? • Functional level – does the product perform as it is supposed to perform – primary benefits e. g. • Crest – clean teeth, whitening, fresh breath, protect against gum disease, etc. 1/26/2022 hdp-introduction to brands 17

Brand benefits • Emotional level – does using this brand give me emotional satisfaction – secondary benefits. • Do I feel self-confident after using Crest ? • Do I feel desirable in my A&F jeans? 1/26/2022 hdp-introduction to brands 18

Brand benefits • Self-expressive level – does using this brand say something about me to my peers – tertiary benefits. • If I drive a Corvette, what does it say about me to my peers? • If I wear a Brooks Brothers suit, what does it say about me to my peers? 1/26/2022 hdp-introduction to brands 19

In Conclusion • Today almost everything is branded • Brands cannot be seen, heard or felt – intangible and exist in your mind – Logo, symbol and brand name attempt to give the brand a physical identity • Manufacturers / sellers do not create brands • Consumers create brands 1/26/2022 hdp-introduction to brands 20