21 Sep’18

Burberry Extinguishes Flames on Unsold Goods

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In a recent post I explored the luxury fashion industry practice of burning unsold goods. Proponents would argue that this is necessary to protect the brand equity these companies have spent billions building by preventing theft, discounted sale, etc. However, when this topic became mainstream, Burberry and its high-end competitors faced massive backlash from the general public and environmentalists specifically. Ironically, the measures taken to prevent damage to these brands is threatening to diminish their value in a very real way. As public perceptions shift, it is imperative that marketers and brand managers navigate these changes (ideally proactively) to ensure that their brand messages align with what consumers want. A representative example of a failure to do so can be seen with brands such as Marlboro. Once one of the world’s most valuable brands – ranked #9 by Interbrand and valued at over $24 billion in the year 2002 – Marlboro has since fallen out of the Interbrand top 100 global brands as the medical community’s and general public’s perception of tobacco products has shifted 180-degrees.

Undoubtedly, some high fashion companies will continue to burn millions of dollars in unsold goods, as this practice has proven itself “successful” to this point. Others, however, have chosen to tackle this problem head-on. According to a recent BBC article, Burberry has announced its intention to eliminate the practice entirely. In fact, the company has gone a step further and pledged to eliminate the use of animal furs in all of its products – a move that undeniably aims to better align Burberry’s brand image with an increasingly environmentally and socially conscious public mindset. In a recent post on Brand Extendibility, I looked at In-N-Out Burger’s efforts to mitigate a potential negative impact on its brand, which may have actually served to increase the company’s brand equity. Similarly in the case of Burberry, management has internalized the negative press surrounding its inventory furnace and taken the opportunity to shift the message in a way that may actually increase the value of the brand – currently ranked #86 and valued at just over $5 billion by Interbrand. In an industry where products don’t “[cover] the true cost of their manufacture in terms of the environmental costs and human rights costs,” Burberry is taking the initiative to build a brand that is associated with positive change and progressive thinking.

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13 Sep’18

Should Your Toothpaste Company Launch a Frozen Food Line? A Closer Look at Brand Extendibility

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Brand equity (often equated with brand value) is an all-encompassing measure of the benefits that a company receives from its brand as a result of its cumulative marketing and brand maintenance efforts. There are various valuation methodologies that attempt to assign a specific monetary value to a given brand which range from simple cash flow models to complex combinations of various rankings and analyses (such as the methodology used by Interbrand). In an article titled Brand Equity: An Overview published out of the University of Virginia, brand equity is said to encompass the following measures:

Brand Association: What triggers consumers to think of the brand and what comes to mind when they see the brand

Brand Vision: The way the brand presents itself and reflects the overall business strategy

Brand Positioning: How to brand positions itself in the target market relative to competitors

Brand Image: How consumers view the brand and what target personas the company wants to associate with the brand

Brand Awareness: A measure of how well consumers recognize the brand; on a scale from “Unaware” to “Top of Mind Awareness”

Brand Loyalty: How likely consumers are to switch between brands within the same product category

 Brand Extendibility: Potential to leverage the positive perceptions associated with the brand to new customers

Each one of these components of brand equity deserves to be explored at length; however, this piece will focus on exploring Brand Extendibility in further detail. As mentioned in a previous post, the direct monetary benefits that a well-constructed brand offers the company are traditionally boiled down to 2 main categories; the ability to charge premium prices, and diminishing marginal marketing costs as a company expands. Brand Extendibility is the main value driver of the second category. A company can introduce its brand to new customers in 1 of 2 ways. First, a company can launch a new product in a new product category. Modern tech companies are a great example of utilizing Brand Extendibility in this way. For example, Amazon has successfully launched products in the e-reader, virtual assistant, tablet, and smart TV product categories (among many others) all under the Amazon name which has become known for its highly efficient and customer centric image. The second method of brand introduction to new customers is extending to a different target market within the same product category. Proctor & Gamble has done an excellent job of this over the years. For example, P&G has extended the Tide brand to many different subcategories within the broader detergent category, and has extended its Crest brand to many different subcategories of the broader oral care category. Under both of these brand extension methodologies, a strong brand relieves the parent company of a great deal of marketing and other brand building expenses. Similar to the concept of economies of scale, where a company’s fixed costs become less significant as production of a product increases, Brand Extendibility reduces the significance of marketing costs as the brand extends to new products and customers.

It is important to remember, however, that a brand can be over extended. When this happens, the value of the brand can actually take a hit, as the intended messages and associations begin to get diluted (appropriately called “Brand Dilution”). Think Harley-Davidson Perfume, or Colgate Beef Lasagna. You can imagine the rugged image of Harley taking a hit as bottled fragrances hit the shelves, and Colgate’s association with freshness and cleanliness beginning to fade when depicted next to layers of marinara sauce in the frozen foods section. The lesson is not only to intelligently manage the brand internally, but also to develop restrictions on who licenses your brand and under what terms. Unfortunately, there are times when a brand extension is attempted without the company’s permission.

Such was the case with In-N-Out Burger, when a micro-brewery launched a new beer called the “Neapolitan Milkshake Stout” back in July. The Neapolitan Milkshake may be ubiquitous with the burger chain for some west coast residents, but the real problem was the proposed can design for the beer, which mimicked the In-N-Out soda cup design almost exactly and used a clear copy of the company’s logo bearing the text “In-N-Stout.” You can imagine the In-N-Out executives’ reaction to seeing their clean-cut brand being used to market what some would consider a vice. If this were a deliberate move made by In-N-Out burger to try and extend their brand to the adult beverage market, we would have to question the thought process behind the decision and wonder whether or not this would actually serve to damage the family-friendly brand. In this case, however, the release of the product was out of the company’s control, and thus, swift action was the only way to mitigate such potential damage to brand equity. Fortunately, In-N-Out’s legal team crafted arguably the perfect response; issuing a pun-filled cease and desist notice which has received a great deal of publicity to date. One could argue that this response and the press coverage that followed may have actually resulted in increased brand equity.

Surprisingly, this is not the sole case of a questionable brand extension into the beer arena. Back in 2015, breakfast cereal brand Wheaties teamed up with a micro-brewery in Minnesota to launch the “HefeWheaties” beer in an intentional brand extension effort. Whether or not this extension positively or negatively affected the Wheaties brand equity can be debated; however, the value-add of Brand Extendibility is clear. When a recognizable and respected brand is used in the marketing of a new product, the marketing team benefits from all past branding efforts and is relieved to a certain degree of expenses that they would normally have to incur in launching an entirely new brand. Imagine the relative expenses that Apple (the world’s most valuable brand) will undertake when it finally launches its rumored Apple Car, compared to the expenses that will arise when Wheaties inevitably launches its own electric vehicle.

Full article here