Re: Branding?

From: James Santagata <jms_at_tribalnoise.com>
Date: Tue 14 Mar 2000 14:27:15 +0000

JAMES SANTAGATA WROTE:
> I also would not agrees with the premise that eBay is
> "brandless", let alone an example of Brand "X"
> vanquishing its foes. Rather eBay is the leading brand
> in its category, that of web-based auctions (if they
> wanted to be a little broader perhaps they could be
> categorized as internet or online auctions, but in my
> mind they still on exist soley on the web).

TO WHICH ROB FRANKEL REPLIED:
> Actually, your points about EBay and Yahoo serve to
> illustrate the illusion of first movers being
> well-branded. They're not. They were simply the
> first to achieve awareness.

A couple of points here.

It is true that both eBay and Yahoo have enjoyed first
mover advantages, but it doesn't follow that these
companies are, therefore, brandless.

It is also true that both eBay and Yahoo haven't done
as good of a job of branding as they could, but again,
it doesn't follow that these companies are brandless.
To understand why this is the case we must look at what
how a brand is defined and what a "first-mover
advantage" is and also realize that there are implicit
"first-mover disadvantages" as well.

Branding Defined:
=================
In an earlier post, I postulated that a brand was
strongest if it were associated with a key word or
category. A brand may exist without this discrete
keyword association, but it is not the optimal state.
Much of a brand's strength will also be related to the
law of relativity. That is, you can have a weak brand
and be successful if your competition is even weaker or
more inept then you are. This is very common when a the
competition's branding capability is relatively weak
because of line extension (i.e., dilution) and through
mixed or inconsistent messages.

This is what Mercedes Benz is doing to themselves with
their "Perception is not always reality" ads. I used to
think that anyone who had a Mercedes was pretty well
off. Mercedes = expensive car, expensive car =
Mercedes. Now I find out I was wrong, you can get a
Mercedes for as low as $39,000 the announcer says. Who
woulda thunk that? And further, he tells me I _need_ to
realize that "perception isn't reality." I guess I was
pretty dumb to think Mercedes was an expensive car. He
dispelled my illusion. I guess I'll opt for the Lexus
then.

When a brand is tied into the key word, such as
"mouthwash", it becomes very powerful. If I ask you to
list a "mouthwash", most likely you would say
listerine. If I asked you what listerine is, you would
say "mouthwash".

If I were at a friend's house, I might ask for a Q-tip
or Listerine, when any cotton swab or mouthwash may do.
But in my mind, Q-tip = cotton swab = Q-tip and
Listerine = Mouthwash = Listerine. They each own their
own category. I frequently catch myself asking for
"Scotch tape" when I mean transparent tape.

A famous brand name is Quaker State, as in motor oil
but I would imagine if a person had a choice between
Quaker State shampoo and say, Pert shampoo, Pert would
be chosen, since the Quaker State brand has a heavy
association with automotive fluid products, primarily
motor oil.

And the same is true with eBay and Yahoo. Honestly ask
yourself. What is an eBay? An online auction site. Want
an online auction site? Sure, go to eBay.

eBay = online auction site, online auction site = eBay.

What is a Yahoo? A search engine. Want a search engine?
Sure, go to Yahoo.

Yahoo = search engine, search engine = Yahoo.

Both of these companies _own_ their respective
category. They are interchangeable terms for the
categories they represent. Could they do a better job
of communicating this? Sure they could, as could most
companies. Does this mean they are brandless or a
"Brand X", absolutely not.

First Mover Advantage Defined:
==============================
A "first mover", is simply a company that makes the
first move in an industry/product/service. Thus, there
are first mover advantages such as locking up
distribution channels and first mover disadvantages
such as experiencing technological discontinuities
(like the jump in underdeveloped countries
telecommunications infrastructure from land-lines to
wireless).


The positive effects of first mover advantages include:
=======================================================
- locking up suppliers
- securing distribution channels & the best locations
  (in cyberspace or physical space)
- securing intellectual property like trademarks,
  patents
- enjoying a higher company valuation from the financial
  markets
- various Branding issues (more about this below)

And too many other to list here.

Now, it is true that first mover advantage can allow a
company to develop brand awareness much easier and
cheaper than the follow-up competition can. However, if
the company acts properly it can and should do more
than simply create awareness. What it should do is
communicate the category it is in, associate itself
with that category and _own_ that category. This is the
true value first mover advantage offers in regards to
brand creation. It's the definition and outright
ownership of a category. Of course, all of the company
efforts, products, services, messages and interaction
with its customers must support this, but that category
ownership is the key.

eBay has done this with online auctions. They can do
much better and be clearer about it, but they are now
interchangeable with online auctions.

If they aren't proactive and careful, they may lose
their position. This happened with Lotus = spreadsheet,
which gave way to Excel = spreadsheet.

As the market grows and customers develop varying needs
and desires, new opportunities open up.

For instance, Volvo was not the first car by any means.
But it was the first that was able to clearly
articulate that it was the "safest car". Volvo owns
that category for safe cars.

> When you dig deep enough, EBay does have a brand,
> it's just that they're terribly inept at
> articulating it.

That was my original point. eBay does have a brand and
it is extremely strong. eBay is THE online auction
space. What other auction spaces exist. Yeah, Amazon
has one and Yahoo has one. But Amazon is an online book
seller, Yahoo is a search engine and eBay is an online
auction house. And the dearth of aggregate auction
transactions amongst eBay's competitors make this very
clear.

> The further into the community you go, the more
> apparent EBay's brand really is. I could say the same
> about Yahoo. Unfortuantely, both of these companies
> are still the gorillas in their markets and will find
> out too late that investing in brand promotion would
> have paid off big. But while the market is treating
> them nicely, they'll ignore it, or substitute awareness
> for true brand cultivation.

But for the forseeable future, both of these companies
own and will continue to own their respective
categories. eBay for online auctions, Yahoo for search
engines.

Additionally, this ownership of a category, especially
in eBay's case has now lead to the development of
positive "network effects" which continues to draw more
buyers and sellers into the fold.

At some point, these groups will splinter off and can
be served by a separate brand owned by eBay, or by some
other wise competitor that will serve a specific market
category and come to be associated with that category.

JAMES SANTAGATA WROTE:
> But how is Coke able to get this market power? I don't
> understand this. Can Coke actually force the end-user
> to drink Coke?

TO WHICH ROB FRANKEL REPLIED:
> No but they come pretty close. Coke and Pepsi control
> close to 90% of the bottling facilities in the USA.

Yes, but these bottling facilities do not only produce
Coke and Pepsi. They produce numerous other fluid
products produced by these companies, and together Coke
brand Cola and Pepsi brand Cola do not own 90% of the
entire beverage market.

There are many, many beverage choices outside of Coke
and Pepsi. I still contend that Coke owns the category
of cola, and I would even take it as far as saying Coke
owns the soft drink category.

Ask for a Cola or a softdrink, and 9 out of 10 times,
the answer will be: "Will a Coke, do?" Coke is
synonymous with cola and in many places Coke is
synonymous with softdrink.

> Which means even getting your product into bottles is
> a huge task, let alone trucking them out to store
> shelves. Coke has managed to prevent competition from
> getting to market, instead of competing with them at
> the consumer level.

Yes, this is true today, and these tactics are very
effectively in helping Coke maintain it's market share.

But we also must realize that Coke was _not_ just born
today, and they surely weren't born the Giant they are
today. They grew themselves to this state over a 100
year period.

How exactly did Coke get to be where they are today? It
wasn't just money, it was just brand awareness. It was
branding. It was when Coke created and owned the Cola
category. Remember when Coke was "the Real Thing". All
other colas were just blatant ripoffs according to
Coke.

> They do that by buying their way into markets --
> payin slot fees to retailers for better shelf space,
> crowding out shelf space with other Coke products,
> giving away fountain machinery and signage to
> restaurants.

But all of this would be meaningless if customers
didn't choose these products. There is no doubt that
Coke's tactics help it maintain a position, but the
product must still be accepted, palatable and even
chosen by the consumer in the end.

> It's war out there, friend.

Absolutely. That's why I advise all to keep your powder
dry...and this before all else... be armed.


James Santagata




Received on Tue Mar 14 2000 - 08:27:15 CST