Brands in business markets
Brands are often thought to be the preserve of consumer markets, but even for commodity products where products are apparently purchased on price, brands have a value in business markets too. In business markets purchasers are often buying the quality of supply rather than just the product itself and often pass on the quality of component brands as evidence of quality to their own customers. Establishing a brand and reputation for quality of delivery is an essential part of successful business to business marketing.
Brands are occasionally thought of as the exclusive preserve of consumer and FMCG (fast moving consumer goods) markets. The brand through it's imagery and emotional association becomes a defining reason for the purchase of the product. Business markets, so the theory went, are based on rational purchasing focusing on functional benefits and technical specifications. Brands were not seen as important in business contexts.
But when a company is signing a large contract with a supplier, it has to take it on trust that the supplier can deliver on its promises, it has to believe that the supplier will be someone you can work with, it has to believe that the supplier will be able to provide service and support in the event of problems - the focus moves beyond raw price and the overall quality of supply/quality of delivery becomes the crucial part of the purchase. And at an individual level, no purchaser wants to find they have made the wrong decision about a supplier on a large contract. As IBM salesmen used to say in the 70s "No one ever got fired for buying IBM".
Consequently brands can be and are used very successfully in business markets. They offer both the opportunity for reassurance and they can provide prestige and visibility to the purchaser.
Leica microscopes provide an example of where excellent products are backed up by a high quality brand with a reputation for both innovation, flexibility and service and where the consequent value of the brand is more than just the component parts. For instance, it means that if a customer has an unusual requirement or needs to update to the latest process methods or techniques, it can rely on the quality of solution and advice from the supplier.
Another area where business branding plays a part is in the branding of components through the supply chain. The best known companies for component brands are Intel and Du Pont (Lycra and Corian), but there are many other examples such as Shimano on bicycle gears, Dolby on sound systems or Nutrasweet in food, Bosch engine parts for instance. Component brands offer opportunities to manufacturers to reinforce the quality of the finished product to their customer's customer, while also provide leverage for the component manufacturer to support higher margins. To make effective use of this supply chain branding, component manufacturers need to be able to demonstrate to their direct customers that customer recognise and will value the component brand. This means that the component brand supplier needs to advertise and promote themselves not just to their direct customers but also to the wider audience of downstream buyers. This then has a secondary effect of building an aftermarket for parts and ensures that the company becomes a contact point for new businesses, because there is awareness in the market.
In service and software markets is partnership branding where two separate companies use the combined strengths of their brands to allow them to enter or control a particular market segment. For example Intel and Microsoft for computers where the combination of brands is stronger and more effective than individual brands, despite the fact that Intel provides chips for computers that don't have Microsoft software and Microsoft produce software which runs on chips other than Intel. (In consumer markets this works with Hotpoint recommends ... or similar). In the longer term this stretches into consortia and joint ventures. However, even small businesses will also use partnership-branding with larger companies and suppliers as a mechanism for enhancing the value of their own offer to a marketplace and this is one area where working with strong component brands can influence downstream sales.
In practical terms, brands in business markets are often connected to reassurance about reliability or service and the potential for innovation ('solutions' is an overused word in this area). For many purchases going into a supply chain where the products are components of some finished product, service can be as important as price in decision making and so establishing a reputation for service can be vital. The 'quality of supply' is particularly important in industries with lean manufacture or distribution channels.
The second element of a brand is to support intellectual property or to simplify complex products - for instance in software the brand simplifies the selection of a complex set of elements under a single name - Excel instead of spreadsheet for instance, or brand names in pharmaceutical markets where the brand name stands above the generic name in the minds of customers. In addition, the legal value of the trademark in such situations may be more effective at preventing copies from competitors than copyright.
In all these cases, planning a brand strategy, including the level of investment needed, means of reaching the right market and then monitoring, protecting and building value through the brand require careful attention to customers and the delivery of service. Do you have a brand plan for your business? Do you know or control how your brand is used by suppliers or resellers? Do you have key brand values defined and do you live up to these in the eyes of your customer? Do you understand how your brand is valued in comparison to your competitors, not just by direct customers but also by your customers' customers.
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