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Brand Management

Category First. Brand Second.

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A brand is the tip of an iceberg. How big and how deep the iceberg is will determine how powerful the brand is.

The iceberg is the category. If it melts, the brand will melt too.

Take Kodak, for example. Just eight years ago, Interbrand ranked Kodak as the 16th most valuable brand in the world, worth $14.8 billion.

Every year since, the Kodak brand has fallen in both rank and value. In 2008 it fell off Interbrand's Top 100 list worth less than $3.3 billion.

What’s a Kodak? It’s the world’s best film-photography brand. Unfortunately for Kodak, the film-photography iceberg is melting as the world turns digital.

Years ago I was discussing the situation with a Kodak marketing manager. It was no secret then that digital photography was starting to replace film. You’re going to have to launch a second brand, I said.

Not so, the marketing manager replied. The Kodak brand stands for more than just film. It stands for ‘trust’.

Trust Kodak for film photography. Trust Kodak for digital photography. That seems to make sense. Furthermore, Kodak invented the digital camera and introduced the first model, the Kodak DCS, in 1991.

Sense doesn’t matter in marketing. The Kodak name was the tip of the film-photography iceberg. And so far no brand, including Kodak, has managed to climb to the top of the digital-photography iceberg.

As a matter of fact, all the digital camera products (Sony, Nikon, Olympus, Pentax, Casio, Samsung, Panasonic, etc.) are line extensions from other icebergs.

(There’s something wrong when a company called Fujifilm Holdings introduces Fujifilm digital cameras.)

Nobody is thinking category. Everybody is thinking brand. How do we take advantage of our well-known brand to carve out a piece of this new iceberg?

The Eastman Kodak Company has been devastated by its brand-oriented approach. Compare the past with the present.

In the last six years of the 20th century (1995 to 2000) the company had sales of $87.3 billion and net profits after taxes of $6.7 billion, or a 7.7 percent net profit margin.

In the first six years of the 21st century (2001 to 2006), Eastman Kodak had sales of $80.4 billion and managed to lose $296 million. (No wonder the stock market has lost its trust in the Kodak brand.)

The objective of a marketing program is not to build a brand, but to dominate a category. Red Bull dominates the energy-drink category. Starbucks dominates the high-end coffee category. Google dominates the search category. The Body Shop dominates the natural-cosmetics category. Whole Foods dominates the organic-food category. BlackBerry dominates the wireless-email category.

Does it surprise you that all of these relatively recent brand successes (Red Bull, Starbucks, Google, The Body Shop, Whole Foods and BlackBerry) were started by entrepreneurs, not by established companies?

It shouldn’t. Big companies are busy burnishing their brands while entrepreneurs are looking for ways to dominate new categories. Big companies think brands. Entrepreneurs think categories.

Brands are important, but they have value only to the extent they stand for categories. Take Coca-Cola, once the world’s most valuable brand, according to Interbrand. But the value of the Coca-Cola brand has been steadily falling. It was worth $83.8 billion in 1999. Today it’s worth only $67.5 billion. Why is the value of the Coke brand falling?

It’s not because Coca-Cola doesn’t support its keystone brand with advertising. In the U.S. market alone, the company spent $334 million on its Coke brand last year.

The Coke brand is dropping in value because the cola category is losing its share of the soft-drink market. A brand is only valuable to the extent it stands for a category.

The Marlboro brand, according to Interbrand, is worth $21.3 billion. As smoking continues to decline, someday the brand is going to be essentially worthless. (Maybe the nicotine-flavored chewing gum category will make the Marlboro brand worth a few dollars.)

As a category iceberg melts, so does its brand(s). As the minicomputer disappeared, so did the value of the Digital Equipment brand. As the word processor disappeared, so did the value of the Wang brand. As instant photography slowly disappears, so does the value of the Polaroid brand.

Most companies are so brand-oriented their first thought is, ‘How do I save my brand?’ So Digital Equipment launched a line of personal computers with the Digital name, as did Wang with the Wang name. And Polaroid launched a raft of new products including conventional cameras and film, printers, scanners, medical imaging systems, security systems, videotapes, etc. With the Polaroid name, of course.

All for naught. Polaroid went bankrupt in 2001 and through a series of transactions wound up in the hands of the Petters Group in 2005.

That year, when the new chairman was asked what would Polaroid be like in the year 2010, he replied, ‘a consumer electronics leader known for really cool products that offer quality and value.’

There’s no iceberg out there in the consumer ocean named cool products that offer quality and value in consumer electronics. So expect Polaroid’s second reincarnation to be no more successful than its first one.

There are two types of icebergs. The first type is narrow and deep. The second type is broad and shallow. While the second type might offer greater sales potential, the first type offers greater profit potential and greater brand stability.

(Just like a boat with a deep keel is more stable than a boat with a shallow keel.)

Brands that are narrow and deep are almost invulnerable to competitive attacks. Furthermore, they usually are incredibly profitable. Think Rolex in expensive watches, for example. But there are many other brands that fit this description.

•    Hellmann’s in mayonnaise.
•    Campbell’s in canned soup.
•    Heinz in ketchup.
•    Orville Redenbacher in popcorn.
•    Tabasco in pepper sauce.
•    Gatorade in sports drinks.
•    Kleenex in tissue.
•    WD-40 in slippery.
•    Clorox in bleach.
•    Ikea in unassembled furniture.
•    Visa in credit cards.

Someday your brand’s iceberg might start to melt. So what. You can always look around for a new iceberg to dominate.

With a new brand name, of course.

Sponsored By: The Brand Positioning Workshop

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7 Comments

Luis G de la Fuente on September 03rd, 2009 said

I think your ‘iceberg’ metaphor between category and brand is very accurate. I wonder then what´s the most suitable name for a brand in a new category…

1) should the entrepreneur choose the name of the category itself?
2) or should we look just for some ‘easy to remember’ word?

Pam on September 03rd, 2009 said

It will be interesting to see if Polaroid can deliver with the head of the Petters Group. Tom Petters is under federal investigation for fraud in Minnesota.

Derrick Daye on September 03rd, 2009 said

Thanks Pam.

If Polaroid does deliver they’ll being doing so without the help of Tom Petters as he has resigned.

link to minnesota.publicradio.org

Best,

Derrick

Brad VanAuken on September 03rd, 2009 said

It is problematic for brands when they become synonymous with a product category, which most do. If the category evaporates, this type of brand usually follows closely behind the category. I always try to move brands beyond categories to the fulfillment of a distinctive set of customer benefits. Disney delivers “fun family entertainment” in multiple product categories, from theme parks and movies to cruises and more. Starbucks was created based on the insight that people long for a place in between the responsibilities of work and home where they can relax and be pampered. The degree to which Starbucks has taken its coffee out to places where this promise cannot be fulfilled (such as airplanes and rest stop kiosks) more closely links the brand to coffee instead of “rewarding everyday moments.”

When I was at Hallmark, I tried mightily to move the brand from “greeting cards” to “caring shared,” not only to avoid the demise of the brand with the demise of the category but also to provide it with numerous growth opportunities (as long as they supported the brand promise). I was pressing the company to add chocolates, flowers and other “just a little something” gift categories to Hallmark’s offering to expand its meaning. I still think Hallmark could offer romantic cruises under its name one day. Here is the problem. Most organizations are primarily operations focused and they are tied to specific product formats, manufacturing capabilities and distributions channels. The carefully thought out brand extensions that would expand the brand’s meaning are usually outside of management’s comfort zone.

Extending brands to encompass broader customer meanings can and should lead to life immortal for those brands if carefully managed. The trick is to enter other categories that fulfill the same customer promise as the brand’s core categories in a way that the brand can excel in those categories too, and here is the tricky part – before the core categories begin to decline. It is very difficult to expand the meaning of a brand whose category has already significantly declined.

So, here is what I think Kodak should have done. It should have tried to aggressively own digital photography and cameras (as a way to own a broader customer benefit) before the film business began to decline. It needed these additional product proof points. This is easy to recommend, but largely unpalatable to actually do. What company is willing to accelerate the demise of its core business before it absolutely has to?

So, what was Kodak to do once traditional (non-digital) photography began its freefall? Quickly switch to digital photography? But doesn’t that require owning quality cameras in people’s minds? And, isn’t this space already owned by a few major competitors? Could owning the printing technology help them in this regard? But, HP is a formidable competitor in this space. Should they have taken their core competencies – emulsion coatings and other chemistry based processes/solutions and sold them in other categories on a B2B basis under the Kodak or other brand names?

The brand is owned in the mind of the customer – period. Your brand is either synonymous with a product category or something else. If something else, it would be your good fortune (and perhaps, the result of your hard work) for it to be linked with a compelling customer benefit, one that allowed your brand to enter new product categories over time. This is what brands should strive for. You will know if you have gotten there, if through research you are able to verify that your customers are now linking your brand with a benefit rather than a product category. Good luck. This endeavor is well worth it in the long run – if you can pull it off.

Craig on September 03rd, 2009 said

Petters no longer owns Polaroid. It was bought by the brand related group at Gordon Brothers with the help of a few other brand players. Its been a fully licensed out brand for a while, and they are looking at reigning it in to relaunch it.

link to dealbook.blogs.nytimes.com

Polaroid isn’t a great example for this as the company has been run for a while based on extracting profits based almost purely on name recognition, not really brand positioning. GB and Hilco might change that. We looked at it during Petter’s acquisition, and we thought about it again as a potential acquisition when it was being sold from Petter’s. Its an interesting story, but probably a great one for Al’s point.

While I agree with some of Al’s post here, it feels a little strange. Plenty of brands have plenty of value when they don’t stand for a category. Otherwise, there would only be about 15 valuable brands in the apparel space. Instead, that space has many brands that “stand for” lots of sub-categories and have plenty of value because they own differentiated positions that allow them to collect (i) higher profit margins (because they can charge a little more, or don’t incur as much customer acquisition costs) or (ii) more volume shelf space because of consumer preference for the brand. Even Rolex as he’s sited, doesn’t stand for watches. It does dominate luxury watches , but given that its ranked at about $5.5b of value and Cartier, which competes with Rolex in the space, but doesn’t dominate the space has $4.9 billion of value, hard to see such a clear cut difference. (#s are from 2009 Brandz100.)

I think “Brands are important, but they have value only to the extent they stand for categories” is a bit of an oversimplification. While a brand may be falling, $67 bilion of value is still quite a bit of value. Certainly what to do to maintain that value in light the of industry changes is a massive challenge for all brands of that size. However, dominating a category isn’t necessarily the right answer. Dominating a category that has no profits often leads to BK, not value, so it seems there’s a bit of a counterbalance needed here.

While I agree that brands can get lost if their categories decline, brands can also survive if they pay attention. I’m 100% sure that if Coca Cola was trying to still sell only fountain based soda from soda shops, it would be out of business or a tiny little brand. That category is now minuscule, but Coke survived the change in spite of the demise of the category.

Looking at the BrandZ100 list:

IBM: Much heralded, much documented changes in its business from international business machines to servers, to PCs to service, to, well, not even sure what it is today, but its brand value is 4th on top 100 at $66 billion.

GE: A company that has owned and dominated many products and brands in its history, many of whom have died and gone away. General Electric products – was it on this blog that it was referenced that people still have opinions about GE blenders, but there hasn’t been a GE blender made in well over 7 years? brand value $59 billion.

I think dominance of a discreet differentiation is absolutely key to a brand having value. I also think that dominating a category can increase that value. Icebergs as a metaphor work nicely to describe the deep vs wide knowledge concept, especially since they change over time. But even an iceberg has to float, and that requires a bit more balance than I think this post brought to my mind.

-Craig

Craig on September 03rd, 2009 said

Brad:
Your response makes sense to me. Many a thought in there I could have just inserted into what-I-see-is-a-diatribe that I wrote this morning…

Adalberto Oliveira on September 09th, 2009 said

Craig,

Google has transcended it’s category (Internet search) a long time ago. And I think that it has contributed to the enormous Google Brand value increase.

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