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Brand Value & Pricing

Strong Brands And Corporate Growth

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In what ways does developing a strong brand increase a company’s growth potential?

A strong brand helps a company grow in three specific ways. First, companies can charge a higher price — which hopefully leads to higher profits, thereby resulting in more cash to expand the business further. For instance, since Caterpillar has a very strong name in the construction equipment category, it can charge more—because buyers know of Caterpillar’s great product and service quality. In earning more, it can grow faster.

Secondly, a company with a strong name has an easier time getting into distribution channels. You can find Coca-Cola in supermarkets, vending machines, gas stations, restaurants, and many other venues. Imagine, however, whether a new drink with an unknown name would have much of a chance to be carried in most venues. A brand name’s strength determines how quickly and successfully a company can expand its business.

Third, once the brand gains trust and respect, companies can put that same brand name on—and then launch—more new items. This is why Campbell Soup Company doesn’t need to invent a new brand name for each new soup that it launches. The fact that the distinct, recognizable Campbell’s name is on the soup gives both the buyer and the distribution channels confidence in the product. Not needing to develop a new brand name saves the company a considerable amount of money. And because it is easier to launch new products under the same name, the company can achieve much faster market penetration.

Contributed to Branding Strategy Insider by: Philip and Milton Kotler, excerpted from their book, Market Your Way To Growth with permission from Wiley Publishing.

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