If you’re a marketer, commodity status is a bad thing for your brands. It indicates that your product or service is undifferentiated, that it rises and falls with the market and that it carries no inherent value beyond that. That’s fine when things are going well, and supply cannot keep pace with demand – it’s not so good when the dynamics are reversed. Here I explain how and why perceived brand value degrades to commodity status.
The reason why companies build brands of course is that they’re looking to rise above the market’s natural asking price. They want what they sell to have a value beyond what the market would otherwise set for the materials used. They want their value equation to be about more than just cost plus margin. The price of a smartphone for example bears little resemblance to, and is seemingly unaffected by, changes in the costs of the parts. Price sensitivities for brands are between competitors and are much more likely to be based on emotive drivers such as desirability, popularity and recency.
August 19th, 2015
By Mark Ritson
The story of marketing communications is a cat and mouse game between two opposing forces.
On the one hand we have the various advertising media that, at any one time, carry the persuasive messages of brands. On the other, the concerted attempts of consumers to screen out these messages as much as possible. On the marketing side we call this evasive activity ‘ad avoidance’. On the consumer side they call it ‘having a life’.
There is no prescribed moment when ad avoidance actually began but we can probably assume it started about 20 minutes after the invention of advertising. The methods used to avoid ads can vary from high tech to the very basic. During the late 20th century, for example, the National Grid actively monitored the so-called ‘TV pickup’ that occurred when millions of British households encountered the first TV ad at the end of their scheduled program and headed, en masse, to the kitchen for a brew.
With the advent of the digital diaspora the likelihood of two million kettles being turned on simultaneously has lessened. But we are no more immune to the effects of ad avoidance today than we were 30 years ago. Both advertisers and avoiders have evolved in parallel. Specifically, it’s the new breed of ad blocking software that will surely become the big issue for marketers over the next few years.
Ad avoidance software – offered as a free download under brand names such as AdBlock Plus and Adguard – can systematically turn off unwanted auto-playing videos, on-screen ads and pop-ups. That’s attractive to consumers not only because it cleans up and optimizes browsing but it also speeds the surfing experience too.
Trademarks, like brands, build strength over time. The test for trademark infringement is “confusing similarity.” Put another way, if the average consumer believes both products to have come from the same source, there is infringement. Obviously, the more a consumer is familiar with a particular brand, the more defendable its mark. That’s why it behooves a company to do the following:
- Choose a distinctive mark, including a “coined” name. Brand names range from generic and descriptive to suggestive and arbitrary or fanciful (“coined”). Obviously it takes longer to build meaning for coined names, but they are also more distinctive and easiest to protect legally. Kodak, Xerox, and Exxon fall in that category. Suggestive marks are the next most protectable. Examples include Coppertone, Duracell, and Lestoil. Even common words can be used as trademarks as long as they are not used descriptively. These common words/phrases are also suggestive marks: Amazon (big), Twitter (brief and chatty), and Apple (different, offbeat). Descriptive marks are not protectable unless the brand creates a secondary meaning for the word, such as Weight Watchers, Rollerblade, or Wite-out. Generic marks, such as Shredded Wheat and Super Glue, are not protectable at all.
- Avoid geographic names as a part of your mark—they can be the basis of trademark refusal.
- Register the mark.
- Be consistent in the use of the mark.
- Create strong trade dress (as discussed later in this chapter).
- Widely advertise and distribute its trademarked products.
- Do all of this over a long period of time.
Because the strength of a mark is dependent upon consumers’ familiarity with it, it is much easier for a competitor to neutralize your mark soon after it has been introduced than after it has been in use for a long period of time.
Every brand strives to win, but what happens when you compete in a market where you are, and can never be more than, number two? If you’re Pepsi, for example, or Bing, how do you find the energy to continue to build out a business that will stay where it is, behind a massive incumbent? How do you do that without becoming uninspired, distracted or stuck?
The temptation that so many succumb to is simply to pursue the brand they see as the market leader, and their greatest rival, at all costs. To go all in. The burger wars, the cola wars, the airline wars, the smartphone wars…many a campaign has been generated through the wish of one brand to dominate and overpower another. For the most part, such struggles, while all consuming for those involved, do little or nothing to sway the sentiment of consumers. And while market positions may shuffle, once the dust settles, things are usually not that different (at least as far as buyers are concerned).
So what should you do? The best strategy if you’re the number 2 brand, I believe, is a combination of inclusion and distinction. That’s because being one of the top three ranked brands in a sector places your brand among the ‘establishment’. You are one of the brands that defines the sector and therefore you need to use enough of the predominant industry structures and technologies to leverage that mass while at the same time finding ways to separate what you believe in, offer and mean from the offering and ethos of the market dominator.
“If you can’t measure it, you can’t manage it.” Peter Drucker
This wisdom of Peter Drucker holds true for brand equity. But to measure or manage it, you must first understand it. Executives and marketers alike are often confused about what brand equity actually is. Is it the asset value of the brand? Is it the price premium that the brand is able to command? Is it the reduced price sensitivity that it can create? Is it the emotional connection that the brand makes with people? Is it the loyalty that customers demonstrate toward the brand? Is it the brand’s personality? Is it the brand’s positive associations? Is it the unique identity that it brings to its products and services? Is it the degree to which the brand personifies those products and services? Is it the way the brand is able to share values with its customers and serve as a self-expression vehicle for them? Is it the goodwill that the brand generates? Is it the memory triggers that the brand creates in people’s minds? Is it the ability of the brand to create meaning that extends beyond one product category allowing for brand extension? Is it the brand’s promise? Is it the brand’s unique value proposition? Yes, it is all of these.
If a brand has equity it implies that the brand is an asset that has value. In fact, many studies over time have demonstrated that brand equity is a significant contributor to stock price, company valuation and shareholder value.
So what should the purpose of brand equity measurement be?
- To measure the brand’s health and vitality
- To understand how well the brand is positioned against its competitors
- To serve as a diagnostic tool
- To uncover any underlying weaknesses that require intervention
- To identify opportunities to further strengthen the brand
- To provide the information from which a brand scorecard can be built
That is, a brand equity measurement system’s output should be diagnostic and actionable.