The most important branding decision you will ever make is what to name your product or service. Because in the long run a brand is nothing more than a name.
Don’t confuse what makes a brand successful in the short term with what makes a brand successful in the long term.
In the short term, a brand needs a unique idea or concept to survive. It needs to be first in a new category. It needs to own a word in the mind.
But in the long term, the unique idea or concept disappears. All that is left is the difference between your brand name and the brand names of your competitors.
Xerox was the first plain-paper copier. This unique idea built the powerful Xerox brand in the mind. But today all copiers are plain-paper copiers. The difference between brands is not in the products, but in the product names. Or rather the perception of the names.
In the beginning it was easy to sell a Xerox 914 copier. All you had to do was show the difference between a Xerox copy and an ordinary copy. The Xerox copy was cleaner, sharper, and easier to read. The paper lay flat, felt better, and was much easier to handle and sort.
Today those differences are gone, but Xerox is still the best brand by far in the copier field. One reason is the name itself.
It’s short, unique, and connotes high technology. The most valuable asset of the Xerox Corporation is the Xerox name itself.
Yet marketers often disparage the importance of the name. “What really counts is the product itself and the benefits the product provides to our customers and prospects.”
So they come up with generic names like Paper Master. “What does a name like Xerox mean anyhow? Nothing. A name like Paper Master, on the other hand, helps us communicate the benefits of a better copier.”
Even worse, they introduce the new brand as a line extension. “Nobody has ever heard of Xerox, a name that somebody just invented. On the other hand our firm, the Haloid Company, was founded in 1906. We have thousands of customers and a good reputation. Let’s call our new plain-paper copier the Haloid Paper Master.”
“Well,” you might be thinking, “I would never make a mistake like that. I would never call a new product with as much potential as the 914 copier the ‘Haloid Paper Master.’ “
In retrospect, no. In futurespect, maybe you would. At least the vast majority of the companies we have worked with almost always prefer line-extended generic names to unique new brand names.
On a global scale, this is the biggest issue in the business community. Companies are divided into two camps: those who believe that the essence of business success is in the continuing development of superior products and services, and those who believe in branding. The product versus the brand.
The product camp dominates the marketing scene. “The brand name doesn’t matter. What counts is how the product performs.”
As proof of this principle, product campers are quick to reduce the argument to absurdity. “If the product is no good, the product will fail regardless of whether the product has a good brand name or not.”
Is a Xerox copier better than a Canon copier? How does a Ricoh copier compare with a Sharp copier?
Have you ever bought a copier? Which brand of copier is no good? Forget copiers. Which brands of any products are no good?
Sure, some people will dump on some brands. They might even say things like “I’d never buy a Jaguar.” But these opinions are seldom universal.
The no-good product is the red herring of marketing. It is constantly being used to justify the no-brand strategies of most companies.
We don’t mean literally a no-brand strategy. A company might own brands that might be called brands from a legal point of view in the sense that their names are registered trademarks. But the company’s strategies are based on building the better product or service, and the brand names it uses to accompany these products have little power in the prospect’s mind.
Product campers dominate the East Asia economy. Virtually every Asian company uses a megabrand, master-brand, or line-extension strategy.
What’s a Mitsubishi? Sixteen of the one hundred largest Japanese companies market products and services under the Mitsubishi name. Everything from automobiles to semiconductors to consumer electronics. From space equipment to transport systems.
What’s a Matsushita? Same problem as Mitsubishi. Eight of the one hundred largest Japanese companies market products and services under the Matsushita name. Everything from electric equipment to electronic products and components. From batteries to refrigeration equipment.
What’s a Mitsui? Same problem as Matsushita. Eight of the one hundred largest Japanese companies market products and services under the Mitsui name.
Compare Japan with the United States. In a recent year, the top hundred companies in the United States had sales of $3.2 trillion. In the same year, the top hundred companies in Japan had sales of $2.6 trillion. Not that much difference.
The real difference is in profits. The one hundred American companies had profits on average of 6.2 percent of sales. The one hundred Japanese companies had profits on average of just 0.8 percent of sales.
That 0.8 percent is the average net profit in Japan. With so many companies close to the break-even point, you can be sure that many are losing money on a regular basis.
The Asian practice of fielding a wide variety of products under the same brand name has drawn favorable comments from many business writers who don’t always look under the financial covers to find the real story.
Korea is in even worse shape. In a recent year, the sixty-three largest Korean companies had sales of $409 billion, but had a combined net loss of 0.4 percent of sales.
Take Hyundai, for example. This $71 billion Korean chaebol brags about a “chips to ships” strategy. Hyundai makes microprocessors, telecommunications satellites, passenger cars, commercial vehicles, subways, high-speed trains, turnkey engineering and construction projects, supertankers, and LNG carriers, among other products. All under the Hyundai name.
Hyundai makes everything except money.
Throughout Asia you see the same pattern. Rampant line extensions that are destroying brands. (When you expand a brand, you reduce its power. When you contract a brand, you increase its power.)
Brands are not just something to think about at marketing meetings. Brands are the essence of the company itself. A company’s very existence depends on building brands in the mind. And so does a country’s.
East Asia does not have a banking problem, a financial problem, a monetary problem, or a political problem.