The Jeffrey And Tracey Info Emporium

Are Product Margins Merely Margins of Error?

Packaged goods companies continue to fight for every drop of margin they can
squeeze out of a crowded category. Traditionally, the brand was powered forward
through product innovation, research and development. New advertising campaigns
rolled out when product improvements warranted them.

Preference and margins cannot be found in product enhancements and efficacy —
these two improvements are simply the cost of doing business. In today’s crowded
market space your preference and margins stem directly from your brand. In reality
most brand marketers and managers are actually product managers and are hard
pressed to describe their own brand in any terms other than banal category
benefits.

This pit-fall is not to be unexpected. Universities and colleges fail to understand the
intricacies of a brand and thus do not prepare future brand executives accordingly.
Furthermore, it is nearly impossible to mend a brand from the inside out due to the
Herculean task of dispassionate brand evaluation and analysis.

It is important to note that your brand is not the identity of your product. For
example, Pampers is not the brand, it is the name by which consumers know the
brand. Pampers is not about dryness and efficacy as it once was some years ago in
a time when the brand was new and the category was immature and uncrowded.
Those were the days when brand marketers looked for the unique selling
proposition (USP) that identified a differentiating product benefit. “How the product
is different and better” became the marketing mantra and R&D became the means to
an improvement. As a result, the “brand” became product development driven, and
the brand strategy fell out of those attributes.

Inevitably, the market changes over time. The “brand” is now the supermarket or
retailer where the product is sold. The consumer sensibly believes that everything
within the retail category will deliver product performance. There is no mystification
among consumers that all brands of disposable diapers keep their baby dry and
comfortable. Most diapers fit well, stay in place and eventually end up in landfills.
Therefore, when the diaper shopper goes to her local retailer, she believes that
there is little difference between Pampers, Huggies, Luvs or “store brand.”
Sometimes she will choose based on the experience of “right fit” because different
brands of diapers will fit her child better as her loved one grows and changes.
Frequently she will decide based on price or an emotional connection that she
neither examines nor understands. Marketers think she will be influenced by the
latest cartoon character or color scheme because they are still caught in the times of
the stale USP paradigm.

If it is so difficult to justify the margins based on product efficacy, what is left? The
essence of brand, the value the consumer invests in the brand itself, remains potent
regardless of category or product. Brand preference is not an investment in product
benefits but rather an investment in self-description and often hidden precepts.
What consumers buy today, beyond commodity category benefits, is a reflection of
themselves and their lives. When they choose a brand — a REAL brand — what they
are in fact reinforcing is their identity, who they believe they are at that very
moment in time. This extension of identity is called a brandface and your consumer
shows many.

Due to the ample excavation required to bring the customer’s perceptive personality
to the surface, brand development is more akin to anthropology than marketing. If
the customer sees their reflection within a brand and affirms, “yes, I want to be
that,” you will keep them for life. Any brand that understands that clearly will win
easily in the crowded market place of similar products, similar claims and similar
price points.

Recognizing and evoking the most acute and important brandface with regard to
your brand is a difficult process, but in that germinal seed of self-description you
will find preference, margins and loyalty.

There is no disagreement that effective branding through ‘use of a name, term, symbol or design, or a combination of these’ (Quester et al, 2001) can create brand awareness and recognition in the quickest manner. Companies use different kinds of ‘Brand Name’, that is, a word, letter or a group of words such as AOL, Intel Pentium III etc to project their companies. Sometimes such words, symbols or marks are legally registered and copy righted to a single company known as trademarks ( for product oriented companies) and service marks ( for service offering companies) (Perreault & McCarthy, 2000).

However in any form, branding can be used to create brand familiarity among consumers in terms of brand recognition and brand preference (Papers4you.com, 2006). The advantage of using branding effectively is both for consumers as well as marketers. For instance it becomes easy for a customer to choose preferred brand among 1000s of other items just because of famous well recognized symbol, word or trade mark that can not be possible with out effective branding (Quester et al, 2001). For instance imagine you are driving down the road with hunger and suddenly you see a symbol ‘M’ on a sign board with red background and yellow font. It is not difficult to realize that McDonalds is waiting for you, easily manifest effective projection of McDonalds’ through brand symbol ‘M’. Similarly imagine buying a computer accessory and among thousands of unknown brands, suddenly you observe ‘Intel ®’ sign. A quick reminder will prompt that it’s a well known brand symbol that you observe common everywhere in media and at your own computer.

Now keeping these examples in mind, it is obvious that marketers can cash in such advantages as well (Papers4you.com, 2006). One best way to use word and symbols is while launching new products under same brand names (Quester et al, 2001). For instance, as every one is aware of ‘Coca Cola ™’ , any new soft drink introduced under this brand name has highly probable chance to achieve awareness and attention of coca cola lovers. Similarly it is quite often that no matter ‘ IBM’ entered in so many IT related services after initially famous for IBM computers but whenever you observe its trade mark of ‘IBM’ written in horizontal lines, consumer is not bothered about checking the background of the company. So as a result it also saves huge promotion costs that a company with less famous brand names and symbols needs to incur.

To conclude discussion, the outcome of effective branding can be seen in terms of ‘brand equity’ that is the value of a brand in terms of its perceived brand awareness, recognition, loyalty and associations from customers. To give the advantage of effective branding, the brand equity of the Coca Cola brand is valued $ 43 Billion, IBM brand at $ 18 billion and Kodak’s at $ 12 billion (Kotler & Armstrong, 1999).

References

Kotler, P & Armstrong, G, (1999), ‘Principles of Marketing’, Eight Edition, New Jersey: Prentice- Hall Inc

Quester, P, G, McGuiggan, R, L, McCarthy, E, J & Perreault, W, D (2001), Basic Marketing- A Managerial Perspective’, Australia: McGraw Hill Book Company Australia Pty Limited

Papers For You (2006) “P/M/457. What is successful branding?”, Available from http://www.coursework4you.co.uk/sprtmrk31.htm [19/06/2006]

Papers For You (2006) “P/M/270. A consistent brand identity can only exist as a result of a well planned advertising strategy, which has clearly stated communication effects and one which considers exposure to appropriate target audiences and positioning strategies. Discuss”, Available from Papers4you.com [19/06/2006]

Perreault, W, D & McCarthy, E, J, (2000), ‘Essentials of Marketing- A Global Management Approach’ International Edition, USA: McGraw Hill Companies Inc