Nobody can escape the power of brands, as the “Coca Cola test” by Chernatony & McDonald in 1992 clearly demonstrated. In this test, participants were served two sorts of cola – initially without seeing the product name. 51 percent of testers preferred drink A, 44 percent preferred drink B, and five percent could not taste any difference. Repeating the test with the product name visible produced a surprising turnaround: once drink A had been “unmasked” as Pepsi, only 23 percent liked it, while 65 percent preferred drink B when it displayed the Coca Cola brand. The example shows how strong the psychological factor is in establishing a positive or negative relationship to products and companies.
Brand loyalty pays off from an economic perspective, above all. With the right strategy, a company can increase sales while also demanding a higher price for practically identical products. Various studies have shown that customers are prepared to pay around 40 percent more for brand items than for alternative products. In an age in which the boundaries between product quality are becoming blurred – in highly-specialized areas such as the IT or chemical industry just as much as anywhere else – the importance of achieving a high profile through a brand is increasing correspondingly. However, the other side of the coin could be cause for concern for customers: if a brand name allows the profit margin to be increased to such an extent, a company might be tempted to try to add artificial value to cheaply made goods using the psychological trick of branding, in order to achieve higher prices.
Market experts refute this, however. Brands do not just shoot up out of the ground – they are long-term phenomena, as Heribert Meffert and Christoph Burmann found, for example, in a study on well-known retail brands. According to the information collected by these two market researchers at the University of Münster, Germany, brands have an average lifetime of 80 years. To retain customer trust over the long term, brands must be revitalized and harmonized in line with customer expectations. A company can only expect to win a customer’s lasting acclaim and trust if it keeps its promise of quality over the long term.
Despite objective prerequisites such as this, the effectiveness of a brand cannot be measured using any rational methods, according to market strategist Peter Zernisch. In Zernisch’s opinion, brands have a mythical, religious character, and therefore draw on age-old, familiar, and basic human principles. In the complex, modern consumer world, which is making rational decisions more and more difficult, a brand stands for a concentration of positive characteristics that have been corroborated over many years of consumer experience.
What is the value of a brand?
Market researchers have long been concerned with determining the value of a brand. Many studies have been conducted on this, but doubts have regularly been raised over the significance of the results. However, the ranking list of the “Top 100 Brands”, which is published each year by the US magazine BusinessWeek together with the Interbrand agency and renowned financial analysts, is widely respected in the industry. Unlike conventional brand rankings, this survey of brand value does not derive its information from questionnaires or advertising budgets, but instead is drawn up using established analytical methods. It is based on the expected sales for a brand in the coming year. The recently published ranking for 2003 is once again headed by Coca Cola – with a calculated economic value of $ 70.4 billion. One interesting thing about this ranking is the strength of the technology brands. Places two to six are occupied by Microsoft, IBM, GE, Intel and Nokia. The “climbers” of the year were also dominated by the IT industry: SAP came in third, after Samsung and HP. In the past year, the SAP brand increased by 14 percent, has an estimated value of $ 7.7 billion, and therefore moved up to 35th place in the ranking list.
But what is the secret of a brand – what factors contribute to its success? According to most definitions, “branding” refers to the process by which a company, product name, or image becomes synonymous with positive characteristics such as trust, a high level of quality, or a certain degree of performance or service. The value of a brand develops over a long period of time, whereby communication through advertising or public relations plays an important role.
Technology brands are also penetrating the public awareness
However, a great rift separates the world of consumer brands and the brands in the business-to-business sector. Many experts even go so far as to question the purpose of business brands, and undoubtedly many corporate groups in industry are unknown to the general public because even though they sell brand products, they are not visible as companies. Which ice-cream lover has ever noticed that Unilever is the brand owner of Magnum? Despite this, the branding of products that do not have a high public profile is increasing in importance. This fact is also borne out by the presence of IBM in the Top 100.
The secret behind a brand policy targeted at the general public such as that pursued by IBM, SAP or Intel is known as the “ingredient brand”. Intel is a good example of this approach: with its brand “Intel inside”, the company has managed to create an omnipresent and world-famous brand out of a component – the processor – which is invisible to the PC user, and the brand often outshines the brand of the PC itself. For several years, IBM has also been pursuing a brand strategy that is geared towards gaining widespread public attention. The branding activities include support for the Hermitage Museum in St. Petersburg with a budget of two million US dollars. In addition to the digital, online picture gallery, multi-media systems have also been installed on site. The message IBM is sending out to the visitors, most of whom have nothing to do with IBM themselves, is that the company has a sense of community, showing the public that it can be trusted, even if people do not know what the company does.
The product is the company – and vice versa
However, the rules and conventions for B-to-B branding differ from those for the consumer product sector, as Owen John from the marketing agency MicroArts explains. A typical example of this is the linking of the company name with the product names, a practice adopted by many companies in the business IT sector. Therefore “Oracle” also stands for the database, and at IBM, SAP or Microsoft, the name of the company appears in practically every product name. According to John, this means that the name of the company is at the forefront of the customer’s mind. Buying the product is the same as buying the company, and vice versa.
However, B-to-B branding is not just directed at the customer. It is just as important to send out positive messages to the employees and shareholders of a company. The right brand strategy increases both the motivation of employees and their identification with the company and its products. The positive influence of successful branding campaigns on the share price is also proven.
The user interface transmits the brand message
Branding in the software sector is relatively new. In the past, the pioneers in this area were the manufacturers of operating systems such as Microsoft, Apple or IBM, who gave their graphical user interfaces an unmistakable and distinct image. Now also the developers of business applications discovered the GUI of their software as a branding tool. Consequently the end user is the recipient of a marketing message promoting the simplicity and ease of use of the functions, and underlining this with the corresponding design.
Mark Rolston of frog design expects the software sector to develop in a similar way to other market segments. Emotive factors and brand loyalty will dominate over functional criteria in the decision to buy software, just as the sound of the motor or shape and form are becoming more important than pragmatic concerns when buying a car. “In future, the behavior of controlling elements can be configured in an objective or playful way, and thus become part of the brand experience,” explains Rolston. Operating elements such as zooming or scrolling menus may ultimately determine whether a product is accepted or rejected.