Sometimes Branding Is A Waste Of Time
By Jacky Tai
Anything Can Be Branded
I think you will agree that petrol is far more difficult and expensive to produce than water. All the geological surveys, sophisticated oil rigs and complex refineries cost a lot of money. For bottled water companies like Evian, the process is a bit easier. According to Evian, it lets the Alps do all the filtering. Evian then pumps the water from the ground and bottle it for sale. At the time of writing, a 1-litre bottle of Evian costs S$2.45. The Esso Synergy 8000 petrol that I use costs less than that.
Why is a litre of Evian more expensive than a litre of premium 98 octane petrol? After all, water is a commodity. As 80% of the world is covered with water, it is probably the most common commodity around. Evian is so expensive because it has managed to differentiate a commodity. When is water not water? When it takes 15 years to travel from the peaks of the French Alps through a vast layer of mineral aquifers that is protected by a thick geological structure. Evian has a differentiating idea. Evian dramatised the idea. Evian communicated the idea very clearly. This is how you turn a commodity into a brand.
Branding is all about differentiation. The idea probably came about 4,000 years with the branding of cows to differentiate each cattle owner's cows from the rest of the cows. Today, branding is still used to differentiate cows but the cows come in other forms these days - companies, products and services.
When Is Branding Not Needed?
There are situations where you don’t need – or perhaps don’t want – to brand. It depends where you fall on The Commodities Continuum. In the book Killer Differentiators, I talked about this rather interesting scale, which can be used to determine what kind of company you are and help make the decision as to whether you need branding or not.
The left hand side of the scale represents highly-commoditised products or services that are bought mainly on price. These products and services are undifferentiated and buyers have very little loyalty to the suppliers. They buy from whoever can give the lowest prices. The right hand side of the scale represents products or services that are highly-branded. These products or services enjoy a high degree of differentiation, even if the differentiation is only perceived differentiation and nothing else. These products and services can usually be sold at a premium and they engender more customer loyalty.
If your products and services fall into the Pure Commodities quarter there is no need for branding. Pure Commodities are things such as coffee beans, tea leaves, crude oil, wheat, lead, gold, platinum, cement, sand and so on. They are extremely price sensitive.
However, you can still brand the company selling the commodities. One of our clients is Intraco Limited, a trading company listed on the Singapore Exchange. Intraco trades in commodities. We set out to differentiate not the coffee beans sold by Intraco but Intraco itself because Intraco doesn’t own any of the farms that produce the coffee beans. Any attempts to differentiate the coffee beans would have been mission impossible. If you are a company like Intraco, maybe you can’t brand what you sell but you can brand the company so buying a commodity from you is not the same as buying a commodity from your competitors. In other words, you develop a Corporate Brand, and not a Product Brand.
There are many products in the world that have brands but they exhibit all the characteristics of commodities. And they are not necessarily low-tech products. Some of the most technologically advanced products in the world are Semi Commodities. What do you do if your products or services fall into the Semi Commodities quarter? There are two things that you can do. One, do nothing. If you do nothing, you better make sure that you are prepared to battle it out based on price because market forces and competitive pressures will gradually force you into the Pure Commodities quarter. That’s the way it works.
As you move further to the right, you see Weak Brands. These products and services have brands and these brands do stand for something in the minds of their customers and they have some level of customer loyalty. However, these brands are not properly differentiated. That is why they are Weak Brands.
There are again two things you can do with a weak brand. One, do nothing except try to milk your brand for as long as you can before competition forces it to the commoditised end of the scale. Two, try to differentiate the brand more effectively so that it can gradually move to the right side of the scale.
If you are fortunate enough to fall into the Strong Brands category – meaning you are highly differentiated and own a great idea in the minds of your customers – then there is only one thing that you can do and that is: Work hard to protect and communicate clearly your differentiating idea.
If You Remember Nothing Else...
Remember that anything can be branded but you may not need to. Whether you focus on branding or not depends on what you can bring to the table. Price is not a big consideration unless the customers (whether they are consumers or companies) perceive that there is parity between the different brands being offered to them. Brand is not a consideration unless there is parity in terms of price. In other words, if all your key competitors are perceived to be at least as good as you, then price becomes important; and if all your competitors can match you on price, then you need a better brand to get ahead. What you do next is your call.
About the writer:
Jacky Tai is the Principal Consultant of StrategiCom – The B2B Branding Specialist, since 2007. He is also the author of 6 branding books including “B2B: 10 Rules To Transform Your Business Into A Brand”, “Killer Differentiators: 13 Strategies To Grow Your Brand”, and “Get A Name! 10 Rules To Create A Great Brand Name”. At StrategiCom, he advises clients on how to position and differentiate their brands better in a hypercompetitive market place to gain an advantage. He believes that the difference between a successful brand and an also-ran is The Right Strategy. Jacky can reached at firstname.lastname@example.org.