Brands and badges

Teaching Business & Economics, Summer 2003 by Reed, Alec

In his book 'Capitalism is Dead: Peoplism Rules', Alec Reed argues that capitalism has now given way to a new era, which he calls peoplism. He says 'In our creative economy land and capital are of limited importance, their ease of accessibility negating any competitive advantage they may offer. The most important driver of value creation is the enterprise and creativity of individuals, qualities that only they themselves can own. Peoplism defines the overwhelming importance of (some) people in modern society. Peoplism has succeeded capitalism. The implications for nations and individuals are considerable'.

In the following extract from Chapter 3 of the book, the author shows how this is happening in the context of marketing and brand development.

This chapter advocates the redirection of the current business obsession with branding into badge development. Despite the lazy rhetoric that brands wield unrivalled power, a narrow focus on brand values is unwise. Pouring money into brand development is dysfunctional, as they are being attacked on four fronts; from extremely well informed consumers, from increasingly powerful competitors, from ceaseless technology and from omnipresent creativity. This in turn has serious implications for the future of marketing.

THE DEATH AND DESTRUCTION OF BRANDS

Brands are one of the hot topics in business. Interestingly, some of the most established and heavily endorsed brands are attached to obvious commodities such as beer, soap and tobacco. Companies have spent billions lifting their brands out of these commodity markets in order to charge a premium for a product that is virtually identical to that of a competitor.

Whilst innovation and new product development permit short-term benefit, a powerful brand image can, in theory, lead to a long-term competitive advantage by inspiring customer loyalty. However, in reality, brands are under attack, and are no longer able to provide sustainable advantage. So begins the rise of the badge; in essence a brand that spans multiple products and services.

Brands emphasise the evolving distinction of the product, while badges emphasise the distinction of the producer or the supplier. Badges encompass the rise of the branded workplace where targeting internal customers (co-members) is as important as targeting external customers. Each product or service produced or provided by the company is clearly labelled as being produced or provided by that company. The ultimate badge is Stelios's 'easy' emblem, which is involved in a range of sectors including transport, internet cafes, hospitality, hire cars and now finance. The 'easy' badge was built up from air travel and is now exploited expertly in other highly competitive markets.

There is a continuum between brands and badges. Very few of either fall wholly into one camp or the other, and most occupy a point somewhere in-between. As the impact of peoplism takes greater hold in the economy there will be a more concerted move from the former towards the latter. This can be evidenced by Unilever, which has embarked upon a stated policy to re-focus its strategy away from the brands it owns, and onto itself as a badged producer.

THERE ARE THREE TYPES OF BADGE:

* The point of delivery badge, such as Tesco, is a very wide badge. Tesco can add any number of unconnected products under that badge, from milk to rat poison to whisky to stockings to banking to insurance. In this type of badge, the consumer trusts the badge-owner to be a purchaser on their behalf. For example, I know that the own-label product or produce I purchase at Sainsbury's is not made in-house, but I trust the values and the standards of the badge-owner to make a good choice on my behalf. The badge-owner becomes the buyer of choice for the consumer.

* The point of origin badge, such as Cadbury, involves products being badged by the manufacturer. Cadbury could bring out a chocolate bar every week and it would stand a better chance of success than a new narrow brand because consumers would trust the quality of the badged manufacturer. This is not as wide as the point of sale badge, as they can only manufacture products of a similar nature. Cadbury's detergent or vodka would not be an option.

* The service badge, for example the 'easy' badge, gives an indication of the drivers of the service provision. In this particular case those drivers would be efficiency, low cost and no frills. There is a very wide opportunity to provide services. One could imagine the 'easy' badge being opened up to a number of alternatives.

Narrow brands have to spend an increasingly disproportionate amount of money on marketing, in an effort to retain a half-decent market share from new competitors. Big brands are unable to repel the threat of the nimble new players who are making an impact in competitive markets at pace, with the speed of Absolut Vodka, Starbucks and easyjet indicative of the success of new faces taking on established brands. Coca-Cola's exorbitant $150 million paid for the global marketing rights to the Harry Potter films is indicative of the huge amounts of money needed to buoy up the big brands.