From Commodity to Brand and Back Again

When I teach a class on brand management I always begin with a continuum.

It's a continuum that starts with the most generic of generic forms - the commodity - and ends with that most unique and specific of things - a brand.

It's a great way to generate a strategic understanding of brand management for two reasons. First, it underlines the fact that brands are not born as brands, they are born as commodities. For example, more than a century ago, John Pemberton set out to create a tonic, not a global brand named Coca-Cola. And in 1962, when Bill Bowerman and Phil Knight each chipped in $550 to set up Nike, their goal was to make running shoes for athletes, not create a global leisure brand empire.

Historians and publicists try to rewrite brand history to show that a founder had a brand vision and foolproof marketing foresight. The reality is usually much less strategic or visionary. Over extended periods of time, a new commodity becomes associated with certain positive thoughts.

These associations are often unintended but they come to define the product and move it gradually toward branded status.

Associations can come from the product's performance, its originator, famous consumers, a single moment in history, or a century's worth of varied cultural associations. Anthropologist Grant McCracken called branding a 'diecasting mechanism', where a product was painted with the colours of particular cultural associations.

The second reason why brand continuum is so important is that it helps managers and MBA students realise that brands can also be damaged or destroyed. Established brands can migrate back to whence they came, returning across the continuum to commodity status. Brands can become commoditised.

Take General Motors (GM). Four years ago the world's biggest auto-maker at the time had the world's biggest surplus inventory of cars, which needed to be offloaded before it could introduce its 2005 models. GM's solution was to announce rebates of $6000 (£3250) on most US models.

It was and is difficult to watch a once-great brand erode itself through commoditisation.

Sure, GM sold more cars in the short term, but in the long term it destroyed its brand equity. Any form of price-based promotion is anathema to anyone who understands brand. Rather than ask the consumer to enter into a relationship based on trust and belief, a price promotion offers a tawdry, transitory proposition to the consumer. Buy me because I am cheap! Because you get more of me this week! Sales promotions make the commodity argument, and as such contradict, drown out and undo brand-building efforts.

While it can take decades to move across the continuum from commodity to brand, the return journey can begin in a matter of weeks.

Sometimes - rarely - price-based promotions are an unfortunate necessity.

But no brand manager should sleep soundly at night knowing that their brand is being discounted under their stewardship.

Promotions are the cocaine of the marketing world. On an occasional basis they are easy to initiate and monumentally useful, but long-term dependence results in declining health and eventual oblivion.

The more a brand manager depends on promotions, the weaker the brand becomes, and the more dependent on promotions they become. Beware.

30 SECONDS ON ... BRANDS THAT WEREN'T

- John Pemberton sold his company to Asa Candler in 1889, and Candler, a strict Methodist, marketed Coca-Cola as a temperance drink that warded off the desire for alcohol.

- Nike manufactures each pair of its running shoes with the iconic image of Bill Bowerman in his trademark hat to honour the athletics coach who co-founded the company and who died in 1999.

- The Duracell company was first formed in the 20s to make batteries for commercial and industrial use. There was no consumer demand for small batteries until the advent of cameras with built-in flash in the 50s. The Duracell brand itself was born in 1964.

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Comments

[Brandmaster]

Though I full agree with your thesis that brands started as commodities and grew into brands (c.f. Coca Cola), I might suggest that today the value of brands is far more understood and the aspiration to create a major brand often occurs right at the start of the process even as the commodity is being created. Often this brand aspiration is at the expense of getting the product right in the early stages.

[Wes Ball]

You basic premise is right: you start from "nothing" and create a brand.

The same process can also work in reviving a brand that has slipped into the role of commodity. In the research for my book, The Alpha Factor, I proved that almost any company can go from commodity to category leader by understanding how to innovate to satisfy core customer emotional needs: self-satisfaction and significance. These are the core factors driving every great brand.