The 'brand' wagon - Hardlines Retailing report from Paine Webber Equity Research

Discount Store News, May 3, 1999 by Jennifer Negley

The notion that a company can become a brand in and of itself has become the Holy Grail for a host of leading U.S. companies, especially those with dreams of international expansion.

A fresh take on how companies need to organize themselves to pull off such a coup appears in the most recent Hardlines Retailing report from Paine Webber Equity Research, which is devoted entirely to the subject.

The report, subtitled "Why Branding Matters," identifies five key characteristics of a solid brand:

* Defines a category: A concept that serves as the penultimate example of the breed. It's what Starbucks is to coffee and Kinko's is to photocopying.

* Emotion: The ability to tap into the aspirational aspect of consumers' lives or address their core needs in a unique way.

* Leverage: The creation of an identity that serves as a leverage point for other products. Victoria's Secret, for example, started with lingerie, expanded into catalog clothing sales, and now encompasses fragrance and music CDs.

* Trust: An assurance to consumers that the company ultimately has their best interests at heart. Paine Webber points to Tylenol as an example. Alter the news broke in the '80s that batches of pills had been deliberately contaminated with cyanide, Tylenol quickly created a new type of tamper-proof packaging. Within six months it was able to regain 95% of its market share.

* Control: A strict adherence to quality control and strategic development of the brand. An example from the report: The Gap's decision several years ago to boot Levi's from its assortment in favor of house-branded denims. Another example: Tiffany's restriction of non-Tiffany merchandise to 10% of its mix.

Companies that have already developed strong brand images include Tiffany ("the packaging alone can make someone feel special"); The Gap ("it defines a customer, some say even a generation"); and Starbucks ("coffee is coffee, but Starbucks is Starbucks").

However, the report also identifies five other companies that are on their way to becoming brands and describes the elements of their positioning that make them strong contenders for brand status.

* Costco: PaineWebber is most interested in Costco's efforts to act as a broader agent for its members through its insurance benefits, travel club membership packages, automotive sales and the like. The upshot: "We believe that over time Costco can emerge as a 'procurer of discounted goods' for its customers."

* Staples: Its evolution from a product-driven to a customer-driven retail format could propel the nation's leading office supplies superstore company from a category killer into a "customer-killer," according to the report. Such solution-oriented thinking has lead to Staples' ability to offer customers telecommunications through Bell Atlantic and MCI, computer networking in Connecticut stores and health insurance initiatives for customers in Florida.

* Kinko's: Another example of a company that focuses on addressing customers' needs rather than merely peddling products or services, Kinko's is a prime example of a concept that consumers have a strong emotional tie with. Whether it's a matter of a complicated business report or a relatively simple resume, Kinko's is there 24 hours a day, every day of the week to put the finishing touches on projects that often relate to critical turning points in its customer's careers.

* Amazon.com and AOL: Both get the nod for doing a good job of defining their category and creating an operating environment that consumers trust. But Amazon still hasn't demonstrated that it understands how to control the full customer experience, the report noted.

In sum, the important thing to remember is that a brand is more than a product. It's something that arouses a specific set of expectations in the customer's mind--and more importantly, consistently exceeds them.