Building Strong Brands: Why Is It Hard?
It is not easy to build brands in today's environment. The brand builder who attempts to develop a strong brand is like a golfer playing on a course with heavy roughs, deep sand traps, sharp doglegs, and vast water barriers. It is difficult to score well in such conditions. Substantial pressures and barriers, both internal and external, can inhibit the brand builder. To be able to develop effective brand strategies, it is useful to understand these pressures and barriers
Different factors that make it difficult to build brands are shown in the figure above. The first, pressure to compete on price, directly affects the motivation to build brands. The second reason, the proliferation of competitors, reduces the positioning options available and makes implementation less effective. The third and fourth reasons, the fragmentation in media and markets and the involvement of multiple brands and products, describe the context of building brands today, a context that involves a growing level of complexity.
The remaining reasons reflect internal pressures that inhibit brand building. The fifth reason, the temptation to change a sound brand strategy, is particularly insidious because it is the management equivalent of shooting yourself in the foot. The sixth and seventh reasons, the organizational bias against innovation and the pressure to invest elsewhere, are special problems facing strong brands. They can be caused by arrogance but are more often caused by complacency coupled with pride and/or greed. The final reason is the pressure for short-term results that pervades organizations. The irony is that internal forces and biases, which are under the control of the organization, cause many of the formidable problems facing brand builders today.
1. Pressure To Compete On Price
There are enormous pressures on nearly all firms to engage in price competition. In all industries from computers to cars to frozen dinners to airlines to soft drinks, price competition is at center stage, driven by the power of strong retailers, value-sensitive customers, reduced category growth, and overcapacity (often caused by new entrants and by old competitors hanging on, sometimes via bankruptcy). Retailers have become stronger year by year, and they have used that strength to put pressure on prices. Whereas a decade ago, the manufacturer largely controlled information, retailers are now collecting vast amounts of information and developing models to use it. As a result, there is an increasing focus on margins and efficient use of space. Suppliers, particularly those in the third or fourth market-share position with only modest loyalty levels, are exposed to harsh pressure to provide price concessions.
A decade ago, private-label brands were largely limited to low-quality, low-price products unsupported by effective packaging or marketing. Given these characteristics, they enjoyed only temporary sales spurts during recessionary times. No more. While still offering so-called price brands, retailers are also increasingly offering private label brands at the high end of the business. Such brands are competitive with national brands in quality and marketing support but have substantial cost advantages - in part because the cost of the brand management team, sales force, and advertising is lower and can be spread over hundreds of product classes and in part because of logistical advantages. The result is more price pressure.
Sales promotion is both a driver and an indicator of the price focus. In the 1950s, about 10 percent of the communication mix was devoted to price promotions. Those were the days when distribution was simple, retailers were concerned with building new stores rather than squeezing margins, and markets were growing. Today, more than 75 percent of the advertising / promotion spends are going to promotion.
These market realities imply that the key...