Which is the best branding strategy? Procter & Gamble are firm supporters of product brands; are they right and l’Oréal, their more flexible competitor, wrong?
Each type of brand strategy has its own advantages and disadvantages, as has been described. However, a simple list of the pros and cons does not provide a procedure for making a choice in a given company in a given market.
The choice of brand policy is not a stylistic exercise, but more a strategic decision aimed at promoting individual products and ranges as well as capitalising the brand in the long term. It should be considered in the light of three factors: the product or service, consumer behaviour, and the firm’s competitive position. Brand policy is a reflection of the strategy chosen by a particular company in a specific context.
What parameters should be taken into account when choosing a branding strategy?
The first is corporate strategy, of which branding strategy is in fact the symbol. For example, in 2003, Schneider Electric, one of the leaders in the field of electrical distribution and industrial control, decided to revitalize its Merlin Gerin and Telemecanique brands, which were well known to research departments and electrical integrators and installers throughout the world.
In so doing, Schneider ended an initiative launched some 10 years previously with a different aim in mind, namely to replace individual brands with a single, group brand. The company’s new director, who had come from Steelcase, outlined the strategic positioning of Schneider Electric against GE, ABB and Siemens.
Compared with these general electrical and electronic giants, Schneider Electric is not a small general electrical company but rather likes to see itself as a multi-specialist company. In fact, because it sells intermediate products, its customers are looking for a specialist company. On the other hand, when compared with its many single-specialist competitors, Schneider Electric is more of a general electrical company.
So if it wants to position itself as a multi-specialist company, the specialities must be offered by specialist brands, united by a group brand, a single entity, which facilitates customer relations.This is why it was decided not to follow the single-brand path, but to bring the range of 50 product brands together under three integrated international brands – Merlin Gerin, Telemecanique and the US company Square D, in 130 countries. There is therefore a Schneider Electric front office and a Schneider Electric sales force organised by type of customer, and these customers are able to purchase products under different product brands.
Another consequence is that distributors will once again become the official distributors of Merlin Gerin or Telemecanique without there being any obligation, as in the past, to automatically reference both brands.
Similarly, Groupe SEB, world leader in small household appliances, decided to form itself into a multi-brand group, with four international brands – Moulinex, Tefal, Krups and Rowenta. Why not follow the tempting single-brand path, like Philips? Precisely because of Philips. The strategy lies in the art of being different.
The single brand is an advantage if you are already a single brand like Philips, one of the few international brands whose reputation is based on the fact that it is distributed throughout the world – even, via its light bulbs, in the depths of the Amazon basin. It is basically too late to try to emulate Philips. In today’s fragmented markets, with their aggressive distribution networks and consumer segments, it is far better to exploit the targeted reputation (in terms of product and values) of the brands that people have bought precisely because they were brands.
The second parameter is the business model. In this respect it is interesting to compare companies within the same sector, since their brand policy is often a reflection of their business model, the driving force of their competitive edge and their profitability. This can be illustrated by comparing three giants of the European cheese industry – Bel, Bongrain and Lactalis.
Bel develops range brands around a central innovative product, thereby giving rise to an entire range of products with The Laughing Cow, Kiri or Mini Babybel signature. Bongrain develops product brands – Chaumes, Vieux Pané, Caprices des Dieux, Haut Ségur – while Lactalis uses a single brand (Président) as an umbrella for all its cheeses and butter, and even milk in Russia and Spain. So why the different brand policies?
In fact, the business models of these companies are not the same, hence the different brand strategies. Bel likes to see itself as the inventor of modernity, anti-traditionalism, accessibility and everyday values. It does not deal in those speciality cheeses bought as a weekend treat. As the inventor of modernity, it must therefore create brands, with their own particular shapes and characteristics, that can subsequently be offered in a variety of forms to capitalise on the investment in promotion.
Bongrain decided to develop processed AOC (appellations d’origine contrôlées) cheeses to make them more accessible in terms of taste, price, preservability and usage. Vieux Pané is a processed version of the AOC cheese category called ‘Pont l’Evêque’ but, as such, does not have the right to use the name of the appellation. Bongrain therefore has to give each of the specialities it creates a new name – hence the product-brand policy. The disadvantage of this is that it has to promote each new brand, meanwhile supporting through advertising many small volume brands.
The business model of Lactalis is to segment generic categories in order to bring them up to date and into line with everyday life and the modern life-style. This model gives rise to an umbrella-brand policy – under a single brand (Président), there are descriptive names for each of the varieties, each of the various forms, with low-fat butter remaining a quality butter, Emmental a real Emmental, and Brie a real Brie.
The third parameter for choosing a brand architecture is cultural. The United States has developed the culture of the product brand – a brand that produces a single product. Ivory, the founder brand of Procter & Gamble, is and continues to remain a soap, which explains the company’s reluctance to extend the brand and even the ideological opposition of such authors as Trout and Ries who have berated it in their work for the past 20 years.
But the US domestic market favoured this product-brand policy. On the other hand, it also explains why Europe and Japan have been the main exponents of the umbrella-brand policy. Nivea and Nestlé are just two of the many European examples. In Japan, apart from the size of the domestic market, the concept of the company has also counted for a lot in the sense that, the more products and sectors a company covers, the greater its reputation. It would simply not occur to the director of a Japanese company not to use the corporate name to promote all kinds of brand extensions. Yamaha is a typical example, putting its name to such widely diverse products as motorcycles and pianos.
The fourth parameter is the pace of innovation. How do you develop product brands in a sector that updates its offer on an annual basis? In this instance, a single-brand policy covering the entire range is preferable, as in the case of Nokia, Sony-Ericsson, Alcatel, Samsung and even Whirlpool and GE.
A fifth parameter is the added-value lever on which a product is based. When the added value in a particular market is linked to reassurance, reputation and scale, a singlebrand umbrella strategy is recommended (in the world of industry, this is often the corporate brand), although a source-branding strategy with two levels – a real ‘branded house’ like Garnier or l’Oréal Paris – can work equally well. However, the more segmented the market, with top-quality, personalized products, the more one has to favour either a portfolio of l’Oréal product brands or an endorsing brand strategy that sanctions the sub-brands (the logic of Danone or Nestlé in dairy products).
Next there is the problem of resources. In the absence of sufficient funding, a company should concentrate its efforts on a single brand, especially if it is international. The need to achieve a visibility threshold comes before all other considerations. However, in case of co-branding, it is impossible to do so: this is why Philips and Douwe Egberts (a leading coffee company) created a separate name (Senseo) to designate their joint innovation in coffee machines.
Finally the brand vision impacts the choice of architecture. In the cosmetic market there are thousands of products and many scientific terms, and innovations are essential. This is what leads to an opacity in the market. Brands serve as milestones and a question that is frequently asked is which naming strategy should be used? There is no single answer to such a general question: it depends a lot on the brand’s conception of itself.
Lancôme prefers a mono-product policy with only a small range derived from the leading product (Progress for the face, eyeliner, anti-wrinkle cream, etc). Thus, recently the brand chose to launch mono-products for body care, each with its own brand instead of a line under one name. There was Cadence for the body (moisturiser), Exfoliance (scrub) and Sculptural (slimmer). Lancôme is not an endorsing brand. It wants to be a source brand and therefore the creator of a precise vision, that of French elegance. The brand wants to serve as a vehicle to express:
Lancôme expresses itself through its products and the services that surround them (the dialogue and the advice of salespeople). They want a brand policy that is coherent and easily understandable on two levels: the consumer and the seller. But, consumers actually respond badly to brand policy in this sector: they do not usually memorise brand names and may simply ask for the ‘moisturising cream from Lancôme’ when they enter the shop.
The sales assistant then explains that there are two: Hydrix and Transhydrix. The two names help the assistant explain the existence of multiple products. Through these different product names, the customer under- stands the different products and the assistant can subsequently promote each one by stressing their individual functions, use and specific characteristics.
Thus, at Lancôme, they try to give each product a different name to reflect a function (Nutrix nurtures the skin, Hydrix moisturises it and Forte-Vital makes it firmer) or the main ingredient if it is something new or revolutionary (eg Niosome contains niosomes, Oligo-Majors has oligo elements). This naming policy makes the sales pitch clearer because it explains the differences between the products and other closely positioned products and therefore avoids the confusion that could have occurred had they been in the same line and under a single common name.
This would appear to close the argument clearly between product brands and line brands in favour of the former as far as cosmetics are concerned. But, at Clarins, as a general rule, there are no mono-products and their 70 products are all grouped into lines. Since Clarins is not Lancôme, it does not have the same image, the same identity or the same conception of itself. It projects itself as a Beauty Institute and the profession of beautician is very important to them.
This concept implies the use of many products belonging to the same line, just as in a prescription. A mono-product cannot do everything and from this arises the preference for product lines that act in synergy. Clarins wants to create stable lines that can last for years and are in conformity with its identity, personality and brand culture.
Finally, it prefers objective product promises rather than a plethora of slogans for mono-products that all play on one factor, presently ‘victory over ageing’. From this arises the names for their products, which are always in the beauty sector. The names are always descriptive of the product’s actions and do not play upon dreams and fantasies as did Christian Dior when he launched ‘Capture’. At Clarins, names are constituted of two or three words, for example, ‘Multi-Repair Restructuring Lotion’.
In the past, the creation of any new product was usually also accompanied by the creation of a new name. In christening the new product, the product manager gave it life. Without a name, the product had no real existence. Once branded, it had a life. In 1981, at 3M, 244 new brands were created and registered. In 1991, only four new brands were created. The same thing happened at Nestlé: in 1991, the company created 101 new products but only five new brands. The age of brand multiplication is over. What has led to this change in practice?
The realisation that brands are the true capital of the company has led to this revolution. By capitalising on fewer brands, companies had to sustain their equity by nurturing them through constant innovations and line or range extensions. Therefore, the question ‘what name do we choose?’ becomes ‘which new product should we put under which already existing brand?’
Companies with decentralised management are particularly susceptible to brand proliferation. Thus, 3M, in spite of its high rank in the Fortune 500 companies and its 60,000 products, remained relatively unknown. One part of the explanation for this was the excessive number of trademarks with which it was burdened: over 1,500.
In order to solve this problem, 3M decided to take the cat by the tail and created a branding committee at the highest level (Corporate Branding Policy Committee) whose mission was to establish a precise doctrine regarding brand policy. Its approval was necessary before the creation of any new brand.
To make 3M become a real corporate brand, it was decided that from then on 3M would be used to sign or guarantee all products (except the cosmetic line). The second decision was the banning of the use of more than two names on one product (as was the case with Scotch Magic) in order to abolish brand pileups, as is shown in Figure below.
In order to facilitate the integration of the new brand policy that capitalised on a few mega-brands (also called primary or power brands), 3M distribute to all its subsidiaries a guide explaining the policy to be followed in case of branding when faced with a new product. The creation of this guide led to a drastic fall in the requests for new brand creation: be it parent brands (like Scotch) or daughter brand (like Magic).
The decision tree shown in Figure below puts each innovation through four questions which serve as filters to limit the creation of a new brand to certain very specific circumstances (like Post-it). The first filter question asks if the innovation satisfies one of the following four criteria: Is it a top priority innovation? Does it create a new kind of price/quality relationship?
Does it create a new product category that did not exist until then? Is it the outcome of an acquisition? The second filter question asks whether the brand could not be used to nurture an already existing parent brand in 3M’s primary brands portfolio. The third filter question seeks to discover whether the new product can provide the occasion for the creation of a new parent brand.
The last filter question evaluates the capacity of the new product to justify the creation of a new secondary brand (daughter brand). From the decision tree emerge six exhaustive branding possibilities that are based on measurable market parameters. They go from the extremely simple (slides for overhead projectors from 3M) to multiple level branding (Scotch Magic, the sellotape from 3M).
As expected, the creation of a new brand (primary or secondary) became the exception rather than the rule. A number of restrictive conditions had to be fulfilled first:mainly, that the innovation creates new primary demand and that none of the existing primary brands are suited.
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