Are leading brands the best products or the best value?

To create a brand is much more than simply marking a product or service, the necessary first step of brand differentiation. It is about owning a value.

It is often held to be a paradox that the number one brands are not the best products. Was the original IBM PC the best PC available at the time? No. Is Pentium the best chip? Who knows? Are Dell computers the best computers?

The paradox stems from the word ‘best’: best for whom, and at what? Let’s take the analogy of a school class. Academic gradings are determined according to well-understood criteria: students who do well display qualities such as excellent memory, the ability to solve problems fast, to work accurately and to present their work well. These are the values of the schoolroom; and similarly, each market has values. To become number one in any market it is necessary to understand what the market values are. Of course, one cannot succeed without a good product or service.

Those who try the product must like it enough to make repeat purchases, to refer others to it; the product must build brand loyalty. In the truck tyre market, Michelin is certainly the number one: it holds 66 per cent of the original tyre market (that is, the tyres the manufacturer supplies with the truck). But in the replacement market, the so-called ‘aftermarket’, although Michelin is still the market leader, its share falls to 29 per cent. It looks as if Michelin is not as well oriented to the values of the buyers in this aftermarket, fleet owners and those who maintain their trucks.

In the spirits market, Bacardi is world number one; is it the best spirit? One could certainly argue that it is nothing of the kind: it has no taste, and in all blind testings it fares very poorly. So why does it sell in such volume? The source of its business is not experts deliberating over its taste, but casual drinkers and partygoers. They generally want a spirit that will blend well in a cocktail, and an ideal mixer should have a very neutral taste. This is exactly what Carta Blanca delivers; it provides 90 per cent of Bacardi’s sales.

Branding starts from the customer, and asks, what does he or she value? Bacardi is certainly not the ‘better’, but it could be called the ‘batter’. One of its key intangible added values is its personality, epitomised by its symbol: a bat. The first Bacardi factory in Cuba was full of bats. This became the brand’s symbol, adding an enduring halo of mystery to it.

Another example can be found in the educational market. The Master’s degree in Business Administration (MBA) is a passport to success. It was first introduced in US universities. To get their MBA, students at US universities need two years of intense work: one year to learn the fundamentals, and one year to specialise in a major field.

Insead is now a respected brand in the MBA market, and Europe’s best-known MBA. However its MBA course lasts less than a year. This is the power of branding: a strong brand awareness acts as a quality cue. Because it created the MBA category in Europe, Insead soon benefited from the pioneer advantage: its name effectively became the local standard, because of the lack of competition.

The French management school HEC created its MBA in 1969, while Insead had started in 1957. HEC and some other late entrants made another mistake: they delivered a genuine American-type MBA. The HEC MBA, which lasted two years, was arguably of too high quality for European corporate recruiters, and too long for European students.

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Strategic Brand Management Related Practice Tests

Strategic Management Practice Tests
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