What drives branding decisions?

In the light of the recent statement made by Rahul Bajaj regarding using the mother/master brand “Bajaj”, it is indeed interesting to explore what, in organisations guides branding decisions and strategies. Rajiv Bajaj had said the ‘Bajaj' name will be done away with from the motorcycles as the brand has been diluted, as it has a presence in different fields ranging from electricals to insurance to automobiles. He had also stressed that products like the Pulsar, Boxer and Discover have become brands by themselves, as a result of which the Bajaj brand has become “more like a garage”. The father, however, had ruled out dropping the ‘Bajaj' brand, as opposed to an idea toyed by Rajiv. Rahul Bajaj was also quite vocal in expressing unhappiness when his son, in a statement in December last year, decided to bring down the curtains on its scooters, thus ending the story of ‘Hamara Bajaj'.

But, recently Rahul lauded Rajiv (MD of the firm), while addressing shareholders in the annual report for 2009-10: “Your Managing Director often says that while products may generate market share, brands provide pricing power and create higher profits. I am increasingly tending to agree with him.”

Where some companies, like P&G which does not club its hair care products under a brand name, such as a P&G shampoo, there are others like Virgin, Nike, Samsung, Dabur and Godrej which use the mother brand name for their entire range of products. As for the Tata Group, group companies actually pay brand royalty to Tata Sons for using the Tata brand.

Those that use the name directly pay 0.25 per cent of the turnover or 5 per cent of profit before tax, whichever is lower; those that use the Tata brand name indirectly (like The Indian Hotels, for example) pay 0.15 per cent of the turnover.

So what really drives these branding decisions? Branding is one of the most significant aspects of business strategy. It is central to creating customer value and competitive advantage. It is not something that can be isolated from the main business and given as a task to the advertising team /communication manager as a set of activities. Marketers believe customer value is more perceptual than real and that it depends on subjective understanding of customers and less about objective facts. Consider Dettol, for instance; some images that come to mind perhaps would be: a doctor in a white coat, a strong protector with a sword, a caring and protective mother and so on.

As Douglas Holt had written, branding is a perspective that focuses on shaping perceptions. Brands are cultures that circulate in society as conventional stories. Cultures are shared, taken for granted stories, images and associations and these get authored by companies themselves, customers and influencers. Sometimes, we experience that even if we forget the product, we attribute stories and images to a brand. As these stories interact with other similar stories daily, a common view point/ a common story emerges, which is in a sense a consensus view about a brand,” says Holt. At this point a brand becomes what Holt calls a “cultural artefact”.

Psychological research demonstrates brand cultures are durable because people are so overloaded with information they rely upon a few heuristics to simplify the world. Brand cultures work as one such heuristic. Aaker and Joachimaster compare and contrast between a branded house strategy (a Samsung, for example) and a house of brands strategy (like P&G) as two extremes of alternative brand architectures. While a branded house uses a single master brand to span a set of offerings, the other involves an independent set of standalone brands, each maximising the impact on the market.

Take Croma, for instance. Croma is a 100 per cent subsidiary of Tata Sons. “When Croma first came to India, the grey market for electronics was dominant and hence we had to depend on the strength of our mother brand for credibility. Even the ‘touch, feel and try' retailing was new to India. People would not know what Croma meant but they would associate strongly with the Tata brand,” recalls Ajit Joshi, Managing Director, Croma. “The success of our brand is also strongly because of our private labels. Today we have 49 per cent penetration in vacuum cleaners and 18 per cent penetration in microwave ovens. While we started as an electronics megastore, we soon developed new categories of products like jewellery cleaners, foot spas and car seat massagers to cater to well-researched customer needs in areas where we had no competition. As we grew the “Tata” name always stood by us to provide assurance and credibility,” explains Joshi. Croma uses this interesting brand strategy called the token endorser strategy.

There are multiple reasons for companies to adopt a house of brands strategy.

Targeting niche markets and focusing on functional benefits (Head & Shoulders for dandruff control and Pantene for enhancing hair vitality), signalling breakthrough advantages of new offerings or even to value chain elements like minimising channel conflict or even avoiding a brand association that would be incompatible in an offering. While usually, sub-brands in the portfolio inherit the values of the mother brand, the opposite also holds true. Sometimes, it's a flagship brand that imbues values to the mother brand, which then gets passed on to other sub-brands. Fiat too, for instance, has associated brands like the Ferrari, Maserati and Lancia that cater to unique market segments. While the company could explore interesting ways of leveraging these brand associations for international markets, the fact is that these brands have a distinct identity in terms of the niche they cater to, their functional benefit and customer value.

There are reasons why companies would use the branded house strategy as well. Particularly in emerging markets like India, a branded house strategy would in some sense help fill “institutional voids”. An excerpt from Tarun Khanna and Krishna Palepu's paper on emerging markets gives an interesting perspective on this. As emerging markets are hardly uniform, they fall short to varying degrees in providing the institutions necessary to support basic business operations. As regards product markets, first, the communications infrastructure in emerging markets is often underdeveloped; second, even when information about products does get around, there are no mechanisms to corroborate the claims made by sellers; consumers have no redress mechanisms if a product does not deliver on its promise. As a result of this lack of information, companies in emerging markets face much higher costs in building credible brands. In turn, established brands wield tremendous power.

A conglomerate with a reputation for quality products and services can use its group name to enter new businesses, even if those businesses are completely unrelated to its current lines. Groups also have an advantage when they do try to build up a brand because they can spread the cost of maintaining it across multiple lines of businesses.

“There is an interplay between the mother brand and the sub-brand that is important to understand,” says P. M. Telang, MD, India Operations, Tata Motors. “The Tata brand stands for concern, integrity, ethics, corporate social responsibility, reliability and trust and Tata Motors has derived strength from it. For example, in spite of the initial problems we had when we launched the Indica, we eventually sailed out of it. People knew that the Tatas won't let them down and gave us time till we launched the V2. Having said that, Tata Motors too has contributed to its mother brand by producing reliable products, be it commercial vehicles or passenger cars. “Given that we stand for values and integrity, we have easier access to international markets and world-renowned players like Bosch prefer to work with us,” says Telang.

Brand architecture decisions are complex and should be taken based on responses to critical questions like - does the mother brand contribute to the offering by adding associations; enhancing the value proposition or credibility with organisational associations or visibility or communication efficiencies? Will the mother brand be strengthened with the new offering? Will the new offering be able to leverage the strength of its mother brand? Is there a need for a separate brand because it will create its own associations, represent a new different offering, avoid an association or retain/capture customer/brand bond? Will the business support a new brand name?

The options on the branding spectrum are distinct and interesting in terms of frameworks and options like nested sub-brands, endorsed brands. The challenge really lies in creating a family / a brand team where all these fit in and are productive.

(Dr Mukta Kamplikar is Head, Strategy, for Fiat India Automobiles Ltd. These are her personal views and do not represent those of the company/group.)

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