11 New Strategic Brand Management by Philip Kotler   4th Edition
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11 New Strategic Brand Management by Philip Kotler 4th Edition


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for example,
involves objective know-how, using a certain
kind of milk mixed with selected bacteria, etc.
Quality seals create a vertical segmentation,
consisting of different levels of objective
quality. The issue here is not so much to
present typical characteristics as to satisfy a
stringent set of objective criteria.
The legal guarantee of typicality brought by
a \u2018certified origin\u2019 seal means more than a
simple designation of origin, a mere label
indicating where a product comes from, in
that the latter implies no natural or social
specificity \u2013 although it may mislead the
buyer into thinking that there is one.
Moreover, several modern cheese-makers
deliberately mix up what is genuine and what
is not, inventing foreign names for their new
products that are reminiscent of places or
villages in an effort to build their own rustic,
parochial imagery.
It is interesting to see how European coun-
tries tried to reassure consumers during the
\u2018mad cow crisis\u2019 in order to redress the 40 per
cent drop in beef consumption:
l Although it is not legal under EU regula-
tions, they reinstated designations of origin
referring to a country (ie French beef). This
did not prove fully reassuring since it was
soon heard that French cattle could have
eaten not only local grass but also contami-
nated organic extracts imported from the
UK.
l Certifications of origin (ie Charolais beef)
add typicality but cannot guarantee a 100
per cent safe meat.
l Seals of quality did not exist and had to be
created but it would take years to promote
them: however, unless full control of the
entire cattle raising process is guaranteed,
the output itself cannot be guaranteed.
l The crisis highlighted the need for meat
brands. Since 1989, alerted by early
warnings, McDonald\u2019s had indeed sought
new suppliers in Europe, scrutinising the
way in which each and every one raised
and fed their cattle.
44 WHY IS BRANDING SO STRATEGIC?
l Retailers like Carrefour have promoted
their own signed contract with farmers.
Whether or not official indications of quality
in Europe should still exist in 2010 is a bitter
issue that is still being discussed among
northern countries (United Kingdom,
Denmark, etc) who believe that only brands
should prevail, and southern countries
(France, Spain, Italy) who support the idea of
having official collective signs of quality co-
existing with brands (Feral, 1989).
The northern European countries claim
that brands alone should be allowed to
segment the market and thus build a repu-
tation for excellence around their names,
thanks to their products and to their distri-
bution and marketing efforts. These coun-
tries tend to favour an objective concept of
quality: it does not matter that the feta
cheese that the Greeks prefer is made in
Holland or that Smirnoff vodka is neither
Russian nor Polish. The southern European
countries believe for their part that collective
signs enable small companies to use their
ranking and/or their typical characteristics as
promotional tools, since they do not have
their own brands. As their products do not
speak for themselves, their market posi-
tioning is ensured by quality or certified
origin seals. Clearly, behind the European
debate on whether or not brands that have
built their reputation on their own should
coexist with official collective signs of
quality lies another more fundamental
debate between the proponents of a liberal
economy on the one hand, and the partisans
of government intervention to regulate it on
the other.
From the corporate point of view, choosing
between brand policy and collective signs is a
matter of strategy and of available resource
allocation.
Often, quality certificates reduce perceived
difference. Distributors\u2019 brands can also
receive them. Brands define their own stan-
dards: legally, they guarantee nothing, but
empirically they convey clusters of attributes
and values. In doing so, they seek to become
a reference in themselves, if not the one and
only reference (as is the case with Bacardi,
the epitome of rum). Thus, in essence,
brands differentiate and share very little.
Brands distinguish their products. Strong
brands are those that diffuse values and
manage to segment the market with their
own means.
In handling the \u2018mad cow\u2019 crisis,
McDonald\u2019s wondered whether they should
rely on their own brand only or also on the
collective signs and certificates of origin.
On an operational level, let us once again
underline the fact that brands do not boil
down to a mere act of advertising. They
contain recommendations regarding the
long-term specificities of the products bearing
their name, such as attractive prices, efficient
distribution and merchandising, as well as
identity building through advertising. It is
easier for a small company to earn a quality
seal for one of its products through strict
efforts on quality, than it is to undertake the
gruelling task of creating a brand, which
requires so many financial, human, technical
and commercial resources. Even without an
identity, the small company\u2019s product can
thus step out of the ordinary, thanks in part to
the legal indicators of quality.
Obstacles to the implications of
branding
Within the same company, brand policy often
conflicts with other policies. As these are
unwritten and implicit, they may seem
innocuous, when in fact they are a hindrance
to a true brand policy.
Current corporate accounting, as such, is
unfavourable towards brands. Accounting is
ruled by the prudence principle: conse-
quently, any outlay for which payback is
uncertain is counted as an expense rather
STRATEGIC IMPL ICAT IONS OF BRANDING 45
than valued as an asset. This is the case of
investments made in communications in
order to inform the general public about the
brand\u2019s identity. Because it is impossible to
measure exactly what share of the annual
communications budget generates returns
immediately, or within a specified number of
years, the whole sum is taken as an operating
expense which is subtracted from the
financial year\u2019s profits. Yet advertising, like
investments in machinery, talented staff and
R&D, also helps build brand capital.
Accounting thus creates a bias that handicaps
brand companies because it projects an under-
valued image of them. Take the case of
company A, which invests heavily to develop
the awareness and renown of its brand name.
Having to write off this investment as an
expense results in low annual profits and a
small asset value on the balance sheet. This
usually occurs during a critical period in the
company\u2019s growth, when it could actually use
some help from outside investors and
bankers. Now compare A to company B,
which invests the same amounts in machines
and production and nothing whatsoever in
either name, image or renown. As it is allowed
to value these tangible investments as fixed
assets and to depreciate them gradually over
several years, B can announce higher profits
and its balance sheet, displaying bigger assets,
will project a more flattering image. B will
thus look better in terms of accounting, when,
in fact, A is in a better position to differentiate
its products.
The principle of annual accounting also
hinders brand policy. Every product manager
is judged on his yearly results and on the net
contribution generated by his product. This
leads to \u2018short-termism\u2019 in decision making:
those decisions which produce fast, meas-
urable results are favoured over those that
build up brand capital, slowly no doubt, but
more reliably in the long term. Moreover,
product-based accounting discourages
product managers from putting out any addi-
tional advertising effort that would serve
essentially to bolster the brand as a whole,
when the latter serves as an umbrella and sign
for other products. Managers thus only focus
on one thing: any new expenditure