A manufacturer has four sponsorship options. The product may be launched as a manufacturer's brand, as when Lever Brothers, Nestle and IBM sell their output under their own manufacturer's brand names. Or the manufacturer may sell to intermediaries that give it a private brand (also called retailer brand, distributor brand or afore brand). For example, Jaka Foods, a Danish company, manufactures tinned food products (notably ham) for sale to own-label retailers like Marks & Spencer. Cott, a Canadian company, makes store-branded foods and drinks, and supplies to retailers worldwide - in the United Kingdom, it sells cola to the supermarket chain Sainsbury's. Although most manufacturers create their own brand names, others market licensed brands. For example, some apparel and accessories sellers pay large fees to put the names or initials of fashion innovators such as Calvin Klein. Pierre Cardin and Gucci on their products. Manufacturers can also consider co-branding: that is, joining forces with another company whose brand name is used in combination with its own.
MANUFACTURERS1 BRANDS VERSUS PRIVATE BRANDS. Manufacturers' brands have long dominated the retail scene. In recent times, however, an increasing number of supermarkets, department and discount stores, and appliance dealers have developed their own private brands. These private brands are often hard to establish and costly to stock and promote. However, intermediaries develop private labels because they can be profitable. They can often locate manufacturers with excess capacity that will produce the private label at a low cost, resulting in a higher profit margin for the intermediary. Private brands also give intermediaries exclusive products that cannot be bought from competitors, resulting in higher store traffic and loyalty. A good example of a retailer that has created and maintained a successful private brand is Marks & Spencer, with its St Michael label. In Sainsbury's supermarkets, the store's own brand of laundry detergents, called Novon, is marketed alongside products produced by P & G and Lever Brothers.
The competition between manufacturers' and private brands is called the battle of the brands. In this battle, intermediaries have many advantages. They control what products they stock, where they go on the shelf and which ones they Mil feature in local circulars. They even charge manufacturers slotting fees -payments demanded by retailers before they will accept new products and find 'slots' for them on the shelves. Intermediaries can give their own store brands better display space and make certain they are better stocked. They price store brands lower than comparable manufacturers' brands, thereby appealing to budget-conscious shoppers, especially in difficult economic times. As store brands improve in quality and as consumers gain confidence in their store chains, store brands are posing a strong challenge to manufacturers' brands (see Marketing Highlight 13.3).
LICENSING. Most manufacturers take years and spend millions to create their own brand names. However, some companies license names or symbols previously created by other manufacturers, names of celebrities, and characters from popular movies and books, for a fee. Any of these can provide an instant and proven brand name.
manufacturer's brand (national brand) A brand created and oivned by the producer of a product or service.
private brand (middleman, distributor or store brand) A brand created and owned by a reseller of a product or service.
licensed brand A product or service using a brand name offered by the brand owner to the licensee for an agreed fee or royalty.
The practice of using cite established brand names of two different companies on the same product.
The Battle for the Brands
Marketing Highlight \ 3.3
The Battle for the Brands
Own brands t-ersws marmfacturers'brands: witness here the essence o/ die 'product lookalike' threat confronting brand owners in the UK grocery and packaged goods market.
There appears to be some respite though. In May 1994, Sainsbury's changed the can design of its.'lookalike' Classic Cola, after pressure from Goea-Cola. This was soon followed by another concession, this time to Nestle, resulting in the redesign of its private-label Full Roast Coffee. Manufacturers continue to apply pressure on look-alike over the years. In Mareh 1996, for example, United Biscuits won a court battle against supermarket chain Asda, which was censured for trade mark infringement, when it used colour, typography and a Puffin character too similar to that of the manufacturer's Penguin chocolate biscuits.
Critics believe that the main reason behind brand owners' plight against own labels is manufacturers' complacency and failure to invest in their brands through advertisements and promotions during the 1980s. While many manufacturers reduced advertising spend during the recession, retailers increased this expenditure to increase their profile and to communicate their company 'brand' values to the consumer. They used innovative forms of communication, such as direct marketing and sales promotion methods that enabled them to collect customers' names and build databases, so that they could understand their customers more fully.
Some marketing analysts predict that intermediaries' brands wil! eventually knock out all but the strongest manufacturers' brands. To retain their power relative to the trade, leading brand marketers must, therefore, invest in innovation to create new brands, new features and continuous quality improvements. They must design strong advertising programmes to differen tiate their brands, and maintain high brand awareness and preference. Furthermore, just as the retailers' close involvement with suppliers of own-label goods has given them first-hand experience of production methods, so branded-product owners must learn to deepen their knowledge of modern sales, distribution and retailing techniques, and how these can help them add real value for consumers. But most importantly, they must work as partners with key distributors to pursue distribution economies and strategies that improve their joint cost and competitive performance.
Of late, the supermarkets appear to be wary of going too far with own-label products. Consumers are still keen to buy well-known brands, and can be put off going to a store where all they see are own labels. Retailers recognizing this have begun to draw the line on 'copy eat branding7. In 1996 Sainsbury's, in a landmark alliance with P & G, signalled a major U-turn on its own-label strategy. It teamed up with P & G to investigate how the household goods giant can help reduce its dependence on own labels. Others, like Tesco, are also shifting the relationship with manufacturers, from adversarialism to collaboration in joint marketing programmes.
Brand manufacturers should not relax, however, as this is not a retailers' truce. Rather, they should do what market leaders have always done -stay ahead through innovation, advanced production and delivery technologies and single-minded marketing. For them, the secret of success lies not in the product's name, but in delivering superior value to target customers. Ultimately, consumer franchise is the name of the game!
SOURCES: Laura Mazur, 'Brands', Marketing/Justness (June 1997), p. 31; Alan Mitchell, 'Suppliers face tricky new remit'. Marketing Week (8 May 1997). pp. 34-5; David Bcnatly, 'Sainsbury's call in P&O', Marketing Week (5 July 1996), p. 5; Stephanie Bentley and David Benady, "Shelving old differences', Marketing Week (16 August 19961, pp. 28-31; Sharon Marshall, Taste of things to come'. Marketing Week (14 July 1995), pp. 26-7; Gyndee .Miller, 'Big brands fight bauk against private labels'. Marketing jVetes (16 January 1995), pp. 8-9; Richard Tomkins, 'Cola warriors identify new enemy'. Financial Times (11-12 June 1994), p. 11; Claire Murphy. 'Brand owners plot fresh assault", Marketing Week (3 June 1994). p. 7; Ihiari LaaUsonen, 'Own brands in food retailing across Europe* (Oxford' Oxford Institute of Retail Management, 1994); Tim O'Sullivan, 'Minister says no to brand owners', Marketing Week (20 May 1994), pp. 36-8.
corporate licensing A form of licensing whereby a firm rents a corporate trademark or logo wade famous in one product or service category and uses it in a related category.
line extension Using a successful brand name to introduce additional items in a given product category under the same brand name, such as nem flavours, forms, colours, added ingredients or package sizes.
Sellers of children's products attach an almost endless list of character names to clothing, toys, school supplies, linens, dolls, lunch boxes, cereals and other items. The character names include such classics as Mickey and Minnie Mouse, Peanuts, Barbie, the Flincstones, the Muppets, Garfield, Batman and the Simpsons. The newest form of licensing is corporate licensing - renting a corporate trademark or logo made famous in one category and using it in a related category. Some examples include Old Spice shaving mugs and razors, Faberge costume jewellery, Porsche sunglasses and accessories and Copper tone swim wear.
Name and character licensing has become a big business in recent years. Many companies have mastered the art of peddling" their established brands and characters. For example, through savvy marketing, Warner Brothers has turned Bugs Bunny, Daffy Duck, Foggy Leghorn and its more than 100 other Looney Tunes characters into the world's favourite cartoon brand. The Looney Tunes licence, arguably the most sought-after non-sports licence in the industry, generated >S1 billion in annual retail sales by more than 225 licensees.16
GO-BRANDING. Although companies have been co-branding products for many years, there has been a recent resurgence in co-branded products. Co-branding occurs when two established brand names of different companies are used on the same product. For example, Kellogg's joined forces with ConAgra to co-brand Kellogg's Healthy Choice cereals. In most co-branding situations, one company licenses another company's well-known brand to use in combination with its own.
Co-branding offers many advantages. Because each brand dominates in & different category, the combined brands create broader consumer appeal and greater brand equity. Co-branding also allows companies to enter new markets with minimal risk or investment. For example, by co-branding with Kcllojjg, Con Agra entered the breakfast segment with a solid product that was backed by Kellogg's substantial marketing support.
Co-branding also has its limitations. Such relationships usually involve complex legal contracts and licences. Co-branding partners must carefully co-ordinate their advertising, sales promotion arid other marketing efforts. Finally, when co-branding, each partner must trust that the other will take good care of its brand.
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