The significance of brands has increased enormously over the past 30 years or so, at least in the consumer goods sector. In many sub-markets (e.g. in services), brands have expanded and taken on a dominant position; in numerous markets for fast-moving or durable consumer goods (e.g. consumer electronics, cars), unbranded products play only a minor role or no longer any role at all. The relevance of strong brands is becoming increasingly apparent in business-to-business marketing, too (e.g. Hilti). According to the central idea of marketing – orientation towards markets – this development has had an effect on the marketing practice of numerous companies and has also attracted attention in marketing research.
What is a brand?
Generally a brand is understood to be a name, a shape or design, a logo or another feature of a product or service, usually a combination of several of these elements, which, as a protected trademark, is uniquely attributable to a certain provider and is clearly distinguishable.
Beyond this rather functional and legal definition of a brand, an impact-related perspective of brands is crucial for brand management.
Besides setting a product apart from comparable competing products (ideally putting it in a unique position), there are further important functions of (successful or “strong”) brands that make the growing importance of brands easy to understand.
- Strong brands help to achieve brand loyalty and customer retention and thus they open up price flexibility for the provider.
- Established brands can be expanded by additional variants of the same product line
(line extensions) or transferred to another product group (brand extensions)
- Sufficiently well-known brands have communication effects, both on the supply side
with a view to developing a brand image, and regarding the communication among
customers (word of mouth).
- With the help of different brands, a company can configure its strategies in various
sub-markets or market segments relatively independently (e.g. Volkswagen AG with
the brands VW, Audi, Skoda, Bentley etc.), as the customers tend to perceive the brands
rather than the company behind them.
Differentiation between brands
So the individual brand as well as the entire brand portfolio has an essential function in differentiating a company from other providers in the market and thus has major relevance for all aspects of marketing planning. With regard to the market-oriented planning process, brand management has major implications for the development of growth strategies or competitive advantages. The long-term definition of the key characteristics of a brand and its differentiation from other brands is the subject of “positioning”. The target parameter which is occasionally used as a yardstick for the success of a brand strategy is called the “brand value”. These help to determine the significance of brands.
Increasing brand value
It is apparent that some aspects of brand management overlap with
several of the phases of marketing planning. At the same time, brands and brand management affect a second dimension of marketing planning, that of the coordinated planning of the deployment of the different instruments of the marketing mix. In this sense, the different marketing measures have to be in line with the overall brand positioning and also have to show a certain continuity over the course of time to achieve stability and to increase brand value.