BRAND ARCHITECTURE:Source brand strategy, Endorsing brand strategy, What strategy to choose?

<< BRAND ARCHITECTURE:Branding strategies, Drawbacks of the product brand strategy, The umbrella brand strategy

CHANNELS OF DISTRIBUTION:Components of channel performance, Value thru product benefits >>

Brand Management (MKT624)

Lesson 28

BRAND ARCHITECTURE

Introduction

Discussion on brand architecture from the standpoint of managing brands continues from the

previous lecture. We shall learn two more strategies relating brand-product relationship before

we summarize the concept as it applies to brand management.

5. Source brand strategy

This is very close to umbrella brand strategy with one exception every product has a

different brand name

Figure 36

under the source name.

This is a two-tiered

structure with double

branding1. Most of the

Japanese cars are

examples of the source

brand strategy.

One product starts and

gets sub-divided into

sub-species

giving

them different names.

As is already learnt,

different names are

given to different

products to fulfill

different

promises.

Each product with a

different name carries

one specific contract.

The power of the

source supports the

offspring until they

become

established

brands in their own

right.

The sub-brands or the

offspring become so strong owing basically to strength of the source that a point comes

when the source takes the back seat and offspring emerge as the main brands because of

their own promise.

If you look at the source brand on Japanese cars, you may not find that. The brand

expression is limited only to the logo of the source, because the offspring have

developed a strong identity of their own.

It is a unique situation in which the brand strategy offers a two-level sense of difference

and depth2. The family spirit dominates! Toyota and Honda are excellent examples of

this strategy. And, there are many more.

6. Endorsing brand strategy

The endorsing brand is generally the company name, which takes on the overtones of a

brand name. It covers groups of diverse products in the shape of product brands, line

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Brand Management (MKT624)

brands and range brands. Strong company names support different brands that

demonstrate their originality - LU in the category of biscuits on the Pakistani market is

an example of this strategy. Cars by GM (General Motors) are another example on the

side of consumer durables.

The endorsing brand strategy is one of the least expensive ways of giving substance to a

company name as a brand name. The company name in return gives strength to the

product brand name.

What strategy to choose?

The six models discussed are the typical cases of branding policies adopted by different

companies as brand architecture. Different strategies have different advantages and

disadvantages to offer. There is no prescribed list of "dos" and "don'ts". In reality, there is no

fixed model for a certain situation. Companies use one or a combination of the models

discussed.

It is not a matter of style. It is very strategic in nature aimed at promoting company's products

with a long term view. The nature of arrangements used by the companies is developed in

response to the strategic situations of those companies, their markets, competition, and

company resources.

The choice of brand architecture of a company, therefore, is a reflection of the strategy it

chooses under a certain set of circumstances. It must be considered in the light of three factors:

the product; consumer behavior, the firm's competitive position.

Summary

Brand architecture is creation and management of different brands as an arrangement

compatible with the strategic situation of a company. The strategic situation demands a certain

action on part of the company as a response to fulfilling the market needs. Given the

circumstances of the moment, companies decide on strategic issues of whether to go for a

stand-alone brand, an extension, or a combination of both. As part of the architecture, brands

then are managed as a portfolio or a set of portfolios.

What is important is to formulate the right strategy for managing brands. There are six types of

different strategies companies generally employ for this purpose. It is the job of the business

managers to determine which one suits their purposes the most.

Bibliography:

1. Jean-Noel Kapferer: "Strategic Brand Management Creating and Sustaining Brand

Equity Long Term"; Kogan Page (200)

2. Jean-Noel Kapferer: "Strategic Brand Management Creating and Sustaining Brand

Equity Long Term"; Kogan Page (200)

Suggested readings:

1. Jean-Noel Kapferer: "Strategic Brand Management Creating and Sustaining Brand

Equity Long Term"; Kogan Page (187-210)

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Brand Management (MKT624)

CHANNELS OF DISTRIBUTION

Introduction

Moving on to channels of distribution, the thrust is going to be on creating channels that

optimize availability of your brands to customers with highest possible cost efficiencies.

Depending on the nature of brand architecture, managers have to decide on the channel partners

that offer a high level of compatibility with the goal of achieving operation and cost benefits.

Why Channels?

With brand architecture in place, we are now ready to optimally develop the brand-consumer

relationship in terms of making the brand available to him. Unless we have means to ascertain

that the brand is available at the place of our target market's choice, we cannot ensure

marketing success in any field of the marketing area. To make our brand available we need

help of different businesses that form channels.

Not one firm can master all the channel functions and, therefore different channel members get

into arrangements to help each other achieve their respective goals. Channel members are

distributors, wholesalers, retailers who form a vital chain of supply for transfer of our brand

from one hand to another.

The strategic question here is how many hands do we need to ensure efficient and cost effective

transfer of our brand to the consumer? There are quite a few functions that are performed

between the point of production and the point where the brand finally gets into the hands of the

ultimate consumer.

The final touch is given, in many cases, by retailers, especially when you are dealing with

consumer products. Why is it that some companies choose the conventional channels, while

others seem to be a little adventurous by putting up their own retail stores, and yet a few others

who may prefer direct marketing are a few questions that need to be answered through

discussion here!

With the basic objective of making our brand valuable and powerful, we must consider a few

strategic options that lay the foundation for the nature of channels that leverage our brand and

give it power. Those considerations could be the following:

Strategic Options

1. The nature of the product-market relationship

We must firstly be clear about the nature of our product - whether it is a consumer

product, a specialized product, or an industrial product along with its application.

Consumer consumables will have a channel more elaborate than durables. Specialized

products may have a different set-up of specialized dealers or company's own outlets.

Industrial products may yet be sold in another way or through a combination of both.

Customer relationship management (CRM) takes on an added dimension if company

sells directly and applications are technical requiring company's guidance1.

2. The make-up of the segment in terms of volume constituents

We must be sensitive to how much what category of customers constitute toward the

total volume of business. That understanding will shed light on the channel make-up.

As an example, if the market is divided by 80-20 rule, that is, 20% of customers

constitute 80% of business; we may have two different channels of distribution,

meaning a combination. We may cover the 80% market through our own sales force,

while use dealers for the remaining 20% of the market that may be sparse.

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Brand Management (MKT624)

3. The level of growth of the segment

If the segment is growing fast, we may like to follow the conventional methods in

vogue; if it is well established, old and growing slowly, we may like to think of

something new and different to gain power.

4. The amount of power that your brand and your company enjoy in the market place

An important determinant, power becomes the basis of negotiations. The one who has

more power negotiates from a position of strength, as a traditional rule in all walks of

life. If you are a new brand and a new company, you may like to resort to the strength

of regionally strong distributors; conversely, if your brand is strong it may attract those

distributors to you thus adding to your power.

It is, however, difficult for one party to monopolize power within the distribution

channels system or the supply chain. It boils down to the positive part played by each

member of the channel that enhances overall power of all and hence lead to profitability

for all. This highlights the fact that it basically is a partnership in which all have to play

positive regardless of the amount of power he handles.

Three strategic areas channels impact

Having considered the factors that should lay the foundation for the right channels; we must

also be concerned about the strategic areas that are impacted by our choice of channels2. The

choice of channels therefore becomes very strategic in itself.

1. Customer value

The nature of channels either enhances or reduces customer value based on service

quality and the efficiency with which the channels make products available. Customer

value means real performance, delivering what was promised so that the customer

gets the right combination of product quality, fair price, and good service.

If the quality of service is poor and customers cannot enjoy that product's benefits due

to non-availability, customers will switch to a competitive brand. High quality of

product is not a guarantee of high customer value if the product is delivered

inefficiently. Anything that is promised to be delivered direct and fast will lose its very

purpose if it is not delivered the way it is promised.

2. Sales revenues

With the prime objective of developing an effective distribution outreach, marketing

channels determine the number of existing and potential customers. The total number of

customers is the basis of revenue. This relates the reality that customers want to buy at

locations of their choice. If a company cannot identify the potential locations (meaning

if the company is lacking on one account of customer value), it is bound to lose its

customers and hence potential revenues.

3. Profitability

The structure of marketing channels has a direct bearing on margins and profitability.

Effective outreach has a cost. The cost is paid for logistics, warehousing, inventory

management and as margins to all members of the channel. How much does it affect

profitability is an important question!

Keeping in view the impact of all the three factors, coupled with historical background,

a company decides on what channels it should choose and how it will manage those to

attain its goals.

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Brand Management (MKT624)

Two companies dealing in the same product can have different marketing channels

designed to reach the same customers in the same market. A graphic illustration in the

next lecture explains this phenomenon.

Summary

Strategic considerations must be taken in their proper perspective to decide the right channels

for our business. We must carefully study the product-market relationship, the level of business

enjoyed by different segments and their size as constituents of the overall market, the growth of

segments, and the amount of power enjoyed by different members.

With that in mind, we should move on to the next step that lets us study the impact of the

under-study nature of channels on the areas of customer value, sales revenue, and profitability.

Bibliography:

1. Roger J. Best: "Market-Based Management Strategies for Growing Customer Value

and Profitability"; Prentice Hall (273)

2. Roger J. Best: "Market-Based Management Strategies for Growing Customer Value

and Profitability"; Prentice Hall (272)

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