Branding in the Third Millennium
William D. Neal
"Marko's Wheels - The Best Iron Rimmed Wheels West of the Tiberius." One can imagine a sign similar to this hanging outside Marko's wheel shop - circa 243 BC. Branding, initially in the form of trademarks, has been with us since man formed villages and learned to specialize in making things. And, as we enter the Third Millennium, many marketing managers are still trying to figure out how to manage their brands and improve brand equity.
Despite the many prognoses that branding will become obsolete in the age of the Internet, I believe the opposite is true. Indeed, I believe the Internet will drive out regional pricing differences, information access inequalities, and inequalities due to variations in availability - putting the end user back in direct contact with the producer and making brand equity the main arbitrator between products and services that are only marginally differentiated. That's been the norm since the beginning of time. Intermediaries and channels that do survive in the Internet age will have to add true value beyond that provided by the manufacturer - not just access convenience.
In the Third Millennium there will be new and expanded opportunities to create brand value. Just think of the great brands that have been created in the last 10 to 20 years - Microsoft, Intel, America On Line, Gateway, Cisco, and so many others. I think this is just the beginning. The opposite is also true; many of our old familiar brands will die, as many already have in the last 20 years through over extension, poor management, or lack of investment in building brand value.
Brand value can be created through real product differentiation, including re-bundling and de-bundling. The key to creating value through product differentiation is value pricing - showing buyers how to trade off specific performance levels against product or service price. The ability to customize production and service delivery to meet the needs of individual customers is re-emerging as one of the major business trends of the 21st Century under the labels of mass customization and one-on-one marketing. Isn't it strange how we are reversing the mass marketing thinking of the late 20th century, reverting to the norm of the previous 2000 years?
Brand value can also be created by channels. But, for traditional channels to meet the challenge of the Internet, a channel's value-added services must be made obvious to the end-user, not just the producer. The Internet will overwhelm location and availability convenience for many product and service categories, supplanting them with electronic channels and innovative delivery systems.
I believe brand equity will be the key to building brand value in the new millennium - it is the glue that makes any value proposition believable and relevant. Brand equity currently offers the best opportunity to improve overall brand value in many product and service categories. In industrial and B-to-B categories, where branding is often weakest, branding initiatives represent a huge opportunity for sustainable competitive advantage. There are still many unfulfilled opportunities to successfully brand components and ingredients. But ultimately, let us not forget that positive brand equity must be backed up with strong and consistent product and service performance.
Brand equity can be viewed as the set of intangible attributes surrounding a brand name that has value. If products are not greatly differentiated, and channels are not unique, only price and brand equity remain left to differentiate products or services in a category. In the absence of strong brands, the only marketing lever remaining is price. Strong brand equity can prevent or reverse product and service commoditization.
Finally, I believe that building brand value will become, and should become, the yardstick for measuring marketing success and evaluating marketing management. Brand value, and it's components - price (dis)utility, product attribute utility, channel attribute utility, and brand equity - can be measured and tracked, and therefore can be used to quantitatively evaluate marketing success or failure. Return on Marketing Investment (ROMI) then becomes a real number. We only need to get the financial community to buy into it.
Although there is no methodological consensus at this time, brand value and brand equity are being measured and quantified, primarily using marketing research methods. Some methods rely on attitudinal questions; others rely on more sophisticated research procedures - conjoint and discrete choice experiments. At SDR Consulting we use a combination of conjoint and discrete choice experiments to measure both total brand value and brand equity.