The value proposition glut. At a time when consumer choices are growing rapidly (at least in the developed world), brand appeal is an increasingly important criterion for consumers to apply. How else should one distinguish among 200 brands of salsa? (For further perspectives on the value of brands in this context, see the latest
issue of the Mercer Management Journal — No. 12, 2000 — at www.mercermc.com.)

Brand consolidation. As a response to the value proposition glut, many companies have pruned the number of brands they will support. In February 2000, the Anglo-Dutch consumer goods company Unilever announced plans to “focus on fewer, stronger brands to promote faster growth.” The company will focus its marketing efforts on just 400 of its 1600 brands.

Growing price competition. Strong brand values — particularly emotional values — can protect a brand from intensifying price competition. Brand can thus serve as a bulwark against the substitution and commoditization risks presented by web-based “bargain hunting engines,” which present consumers with lowest price options.

“Brand stretching” into new products or services. An extreme example is the Virgin brand (strongly supported by the personality of Richard Branson), which has been stretched, at different times, to encompass music production and retailing, airline and rail travel, and soft and hard drinks (Virgin Cola and Virgin Vodka).

Channel switching. Brand equity built through one sales channel can sometimes be transferred to another. It was partly for this reason that Sotheby's share price responded so strongly last year to the company's decision to conduct auctions on line. The combination of the Sotheby's name and web technology excited investors.

Outsourcing. One widely observed effect of the Internet is the opportunity it gives companies to unbundle their activities, refocusing their efforts and their assets on whatever they determine to be their core competence—and outsourcing everything else. In many cases this will concentrate the value of a firm into intangible assets, such as intellectual capital or brand.

Relationship-building. New technologies, particularly the Internet, enable companies
to build brands faster than ever before by providing customers with highly customized information and services. The meteoric rise of Amazon.com is a good example of such relationship-building.

Brand alliances. By teaming up with other well-respected companies, a company can sometimes enhance its brand equity in the eyes of customers. An example is the OneWorld airline alliance, currently comprising six major airlines.

close window