BRANDS ARE BACK; SATURN'S EXAMPLE; CYBERBRANDS LIVE. PAGES 40 AND 41.

By Published on .

Two years after Marlboro Friday, a watershed event widely viewed as an omen of doom for many national brands, corporate America has a new mantra:

Stand by your brands.

In boardrooms across the country-from Unilever's Elizabeth Arden Co. to Eastman Kodak Co. and Johnson & Johnson-there's a reborn reverence for brands as the matters of brand building and brand loyalty are increasingly seen as sound business policy, not just the province of package-goods marketing departments.

"Brands are getting more interest at the very top levels of management. The CEOs are seeing that developing a brand strategy is intertwined with developing a business strategy," believes University of California at Berkeley Professor David Aaker, author of "Building Better Brands," due out in November from The Free Press.

From General Motors Corp.'s adoption of a package-goods brand management system to Conde Nast Publications' corporate branding effort and Newspaper Association of America President-CEO Cathleen Black's call for her industry "to think brands," brand-driven marketing is everywhere.

That's a turnabout from April 3, 1993, when to beat back low-price rivals, Philip Morris Cos. slashed the price of its flagship Marlboro cigarettes, sending stock prices of many national brand marketers south. Package-goods marketers were doomed, said many experts who predicted private label would soon gobble up as much as a half of all U.S. supermarket volume.

That hasn't happened. Not that brand champions like Procter & Gamble Co. and Colgate-Palmolive Co. ever thought it would.

"Now companies are recognizing that P&G is a paradigm for what the future will look like," said Andrew Shore, analyst at PaineWebber, New York.

"They're recognizing that private label today is more fiction than fact. And at the end of the day, private label is not nearly as profitable as people were led to believe."

Still, even if private label hasn't yet taken over the world, it is growing. Last year, according to Information Resources Inc., private label generated $30.2 billion of the total $204.2 billion in food store sales, up 3.1% from 1993 for a 14.8% share. In mass merchandisers, the gain was more dramatic, up 17.2% to $2.5 billion for an 8.8% share of total sales of $28.4 billion. And in drugstores, with total sales of $25.7 billion, private label advanced 9.1% to $2.4 billion for a 9.3% share.

In all three cases, private label's rate of growth either equaled or exceeded total sales growth.

As a result, Donald Stuart, a partner at Wilton, Conn., sales and marketing consultancy Cannondale Associates, sees the "Darwinian rebirth" of brands where only the most successful brands-perhaps the top four or so in any category-and private label will survive.

The concept, more commonly called SKU/brand consolidation, extends beyond package-goods to other industries, said Mr. Shore and others. With more than 500 computer models on the market last Christmas, competition for shelf space and the consumer was as fierce in high tech aisles as in those of any supermarket. And already in the retail PC market, consolidation is setting in. In the first quarter of 1995, the top four marketers-Packard Bell Electronics, Compaq Computer Corp., Apple Computer and IBM Corp.-accounted for 80% of sales, according to Audits & Surveys, New York.

Marketing consultant Larry Light holds out some hope that there will be room for more brands but not much. Though hard to imagine-given that there were more than 23,000 new products introduced last year-he believes the need for brands will increase as markets "fractionate" and consumer "wants" also fractionate. The bad news is there will be "fewer brands per want. For every want, there can only be three profitable brands."

It's for this reason brand loyalty is ascending to the top of the brand-building pyramid, right alongside technology. Professor Aaker explained: "If a brand has technology that's not easy to duplicate, private labels won't be a factor. The same is true if there is strong loyalty for a brand."

Companies, Mr. Light said, "have evolved their thinking about brand equity. We realize that without loyalty there is no equity."

Mr. Light successfully argued that point in a brief to the Supreme Court last year in the case of Qualitex's right to own a color. He believes trademark law will soon include the concept of brand loyalty.

Trust must be intrinsic to brand loyalty.

While a brand's value is defined in part by pricing, harried consumers also equate value with the time spent on a purchase decision, said Barbara Hines, manager of consumer marketing practices at Porter/Novelli, New York. An improving economy has spurred a return to branding as consumers have more economic flexibility. But less elastic schedules mean they don't want to agonize over a purchase.

It's crucial that a brand be perceived as minimizing "one's exposure to risk," said Watts Wacker, managing partner at Yankelovich Partners, Westport, Conn. "In 1994, 67% of consumers said it was too risky to go with brands they are unfamiliar with. In 1993, that figure was 58%. People are more likely to have a relationship with a brand they can trust."

In some cases, the corporate brand name enhances that confidence. P&G does not do corporate branding at home, though in the Asia-Pacific, it's introducing new products with the line "Another fine product from Procter & Gamble."

And Johnson & Johnson is about to begin airing an estimated $40 million corporate image campaign. The ads mark the return of Young & Rubicam, New York, to the J&J stable and will initially include only those products branded with the Johnson's name. But, said one executive close to J&J: "That is only the beginning of something larger. J&J is looking at a megabrand strategy, and products such as those from Ortho could be included."

Unilever's Elizabeth Arden, the No. 4 cosmetics marketer in department stores, is abandoning co-op newspaper advertising in national ad campaigns. With creative consultant Neil Kraft, the uber-marketer behind the branding of Calvin Klein, Arden is turning to a corporate image campaign and new brand campaigns that include more intangibles.

The first salvo is a new campaign for the True Love fragrance that implies "we're interested in what the consumer has to say ....both men and women," Mr. Kraft said.

Trust becomes ever more critical as tangible advantages are reduced to parity and marketers have to imbue brands with more intangibles.

"A 1955 Ford and a 1955 Chevy were really different," said Michael Lucas, a principal partner at identity company Gerstman & Meyers. "Today they are not ....It becomes harder and harder to tell these brands apart."

Differentials are also muddied when services start to overlap, as in the the financial industry where "banks want to sell insurance and everyone wants to sell stocks and bonds," he said.

While the insurance business and Wall Street constantly talk asset management, they're both really in the business of managing anxiety. This is how Prudential Insurance Co. of America will supposedly differentiate itself through a new branding campaign from Fallon McElligott, Minneapolis. Maintaining the powerful rock icon, the campaign will make it more relevant, urging consumers to take control of their lives and futures.

Whether brand leadership can be maintained is a vexing issue in technology, where the assumption is any given company-Microsoft Corp. in the '90s and IBM before it-can have only a limited run before a new rival takes the lead. Intel has been one of the fastest growing computer brands, thanks to both branding and price cutting.

Bob Herbold, who joined Microsoft as exec VP-chief operating officer last fall after 26 years at P&G, said careful branding could make it possible for one company to stay on top in technology just as some consumer brands maintain their leadership for decades.

"All you've got to do is look way back to some of the products that are 80, 90, 100 years old that have been able to withstand changes in their category," Mr. Herbold said.

One area where brand marketing is heating up is overseas telecommunications. AT&T, out of a need to make itself more visible in Europe where state-owned telecommunications monopolies are scheduled for European Union-mandated regulation by 1988, is one of many that has turned to consumer goods professionals for marketing leadership just as media and sports marketers like the National Basketball Association have in the U.S.

Indeed, globalization along with more centralized brand management structures and a need for closer consumer relationships are behind the intensified brand efforts of many marketers, including Kodak, which is working on a global branding campaign review and is also in the midst of global retailing review. The global retail assignment stems from a joint venture with Hallmark Cards, whose cards will be personalized with Kodak photos in stores.

Dick Bartlett, Kodak VP-worldwide marketing communications, wouldn't comment on the reviews. But he acknowledged the company is continuing a brand equity study that began last fall in the U.S., U.K., Germany and Japan.

The global study, to be expanded to eight more countries, "is shaping the way we develop brand strategy. It's a way to find out opportunities our brands have worldwide ....There is a greater awareness of what consumers are feeling and what they think of a brand."

In this article:
Most Popular