Nick Moon, director of strategic consulting at FutureBrand said, “[T]he market needs to be at a level of maturity where consumerism is such that the nature of purchase lends itself to choice and convenience. Only in this environment does the brand model truly work for commodity products. The Middle East is reaching this point and manufacturers can successfully brand commodity items currently sold in bulk.”

Craton argues that it’s always easier to justify a “me-too” than an innovation. “The novelty may be supported by market research evidence whereas you can’t argue with marketplace sales. This is an argument that has to be won if branding is to be effective. It is all too easy to permit the urgent pressures of today’s business, which will secure this year’s sales targets, to block out the thinking-through activity upon which effective brand design depends,” he says.

Moving a product from commodity to branded one is a long-term process, according to Al Haddad. It involves changing the consumers’ attitude and understanding toward the category as a whole first, while attempting to sell your brand in that category. “You will often hear rice consumers saying ‘a rice is a rice.’ If they do not know that rice comes in different grades and qualities or that good quality rice must be aged for at least six to eight months before being sold to them, they will not appreciate these values when offered by your brand,” he explains.

To Al Haddad, commodity consumers have little or limited awareness of product values and benefits. “When we asked consumers to state the most important attributes influencing their selection of rice brands, we found that the top three attributes mentioned were applicable to almost 75 percent of the brands in the market. This means that no brand has a real competitive advantage or any USP (unique selling proposition) over its competitors,” he revealed.

The challenge therefore is to create that competitive advantage or added value for the brand, with this advantage being as tangible and specific to consumers as possible. It’s easier said than done in a low-profile category such as commodities and involves strong marketing communications in order to educate the market.

“Branding a commodity product does not necessarily mean seeking a different target audience, although the audience might be affected as a result of the likely change in the pricing policy to meet the expenses of branding,” says Al Haddad. “In fact, we apply the branding approach to highlight our brand values and establish brand equity, while our brand positioning is the factor determining our target audience.”

The successful brand will be one created by a combined task force, driven by a singular perception of the overall objective. Product, presentation, packaging, promotion, distribution, merchandising and advertising will all contribute toward an essentially simple, unified purpose. Craton believes that without the direction given by a visionary project leader, such an exercise can degenerate into a committee, dedicated to producing the lowest common denominator, which will be unexceptional and mediocre.

Al Haddad commented that branding a commodity product requires being perceived as unique and different to standout among the crowd. “To achieve this you must be innovative in every aspect of your marketing mix, including positioning, packaging, distribution and communication. This, no doubt, is a costly exercise and has an impact on our margin and pricing strategy. But this is definitely the right investment in the longer term,” he says.

Commodity producers have also learned that branding is essential, if anything, for their retail customers. Many actually have developed products that are retailer-branded. The growth of regional retail chains can only emphasize that trend and push manufacturers further into the branding arena.

Thus successful branding demands a particular understanding, requires a particular organizational structure and, above all, must involve intense meticulous attention to detail in the “thinking-through” process.

But what is the best way to implement this?

FutureBrand’s Moon and D’Angelo have identified two possible routes for commodity manufacturers. The first strategy would be to market branded goods to be in line with consumer trends and generate higher margins. The target will be the consumer who is more inclined to purchase quality and trusted products. The goods will be offered in small size packages and the purchase process may be frequent.

The second strategy would be to market unbranded bulk items to capture the consumers who only buy the product with the lowest price on a fairly infrequent basis. It is important to maintain two separate marketing strategies to avoid damaging one or the other part of the business. This is particularly relevant for a market in transition such as the Middle East, as there is an increased interest in consumer products but high proportion of the population is still looking for the cheapest price.

Moon and D’Angelo argue that a branding decision can and should be made in the light of hard cold data. In a business where margins are tight and volumes crucial, companies should carry out a thorough cost/benefit analysis. They need to measure the investment costs involved in building a brand and adapting their infrastructure to be able to respond to the desired brand proposition. These costs should then be compared with the gain to be obtained via price premium and market share.

A typical example is a company that needs to adapt internally to increase quality control throughout the manufacturing and marketing processes. For instance Evian reportedly carries out 300 microbiological controls a day to ensure perfect quality.

In parallel, marketers need to create a compelling brand proposition. “Successful brands understand how to communicate and deliver their brand promise in a way that is unique, compelling and consistent. Aligning the brand with the business strategy and defining a unique promise that is related to a competitive advantage are key success factors,” Moon says.

Another critical point is to deliver on the brand promise to build credibility and trust. If your internal structures are not adapted to fulfill your brand promise, then your reputation will be damaged. “If you launch and advertise a new product, but its availability is limited, then retailers and consumers will quickly lose interest, as no products are available to support the promise,” D’Angelo said.

In conclusion, trusted brands are not established overnight but are built up as a result of long-term investment in delivering on the brand promise. If you can manage this, branding provides an escape from commoditization as it moves the buying decision away from solely price factors and therefore can generate a strong return on investment and long-term sustainable advantage.

As Savola, Almarai, P&G and Unilever have demonstrated, it’s worth it.    

[26-Aug-2002]