A brand is the set of attributes—positive or negative—that people associate with a company. These attributes can be positive, such as trustworthy, innova- tive, dependable, or easy to deal with. Or they can be negative, such as cheap, unreliable, arrogant, or difficult to deal with. The customer loyalty a company creates through its brand is one of its most valuable assets. Lending support to this sentiment, Russell Hanlin, the CEO of Sunkist Growers, said, “An orange is an orange … is an orange. Unless … that orange happens to be a Sunkist, a name 80 percent of consumers know and trust.”11 By putting its name on an orange, Sunkist is making a promise to its customers that the orange will be wholesome and fresh. It is important that Sunkist not break this promise. Some companies monitor the integrity of their brands through brand management, which is a program used to protect the image and value of an organization’s brand in consumers’ minds. This means that if Sunkist discovered that some of its oranges weren’t fresh, it would take immediate steps to correct the problem.
Table 11.2 lists the different ways people think about the meaning of a brand. All the sentiments expressed in the table are similar, but they illustrate the multifaceted nature of a company’s brand.
Start-ups must build a brand from scratch; this process begins with se- lecting the company’s name, as described in Chapter 7’s appendix. One of the keys to effective branding is to create a strong personality for a firm, designed to appeal to the chosen target market.12 Southwest Airlines, for example, has created a brand that denotes fun. This is a good fit for its historical and cur- rent primary target market: people traveling for pleasure rather than busi- ness. Similarly, Starbucks and Panera Bread have each created a brand that denotes an experience framed around warmth and hospitality, encouraging people to linger and buy additional products. A company ultimately wants its customers to strongly identify with it—to see themselves as “Southwest Airlines flyers” or as “Panera Bread diners.” People won’t do this, however, unless they see a company as being different from competitors in ways that create value for them.
So how does a new firm develop a brand? On a philosophical level, a firm must have meaning in its customers’ lives. It must create value—something for which customers are willing to pay. Imagine a father shopping for airline tickets so that he can take his three children to see their grandparents for Christmas. If Southwest Airlines can get his family to their destination for $75 per ticket cheaper than its competitors, Southwest has real meaning in the father’s life. Similarly, if a young couple invites neighbors to play Cranium, a group board game, and playing the game results in lasting friendships, Cranium will have a special place in their hearts.
On a more practical level, brands are built through a number of techniques, including advertising, public relations, sponsorships, support of social causes, social media, and good performance. A firm’s name, logo, website design, Facebook page, and even its letterhead are part of its brand. It’s important for start-ups, particularly if they plan to sell to other businesses, to have a pol- ished image immediately so that they have credibility when they approach their potential customers.
Most experts warn against placing an overreliance on advertising to build a firm’s brand. A more affordable approach is to rely on word of mouth, the media, and ingenuity to create positive buzz about a company. Creating buzz means creating awareness and a sense of anticipation about a company and its offerings.13 This process can start during feasibility analysis, when a com-pany shows its concept statement or product prototype to prospective buyers or industry experts. Unless a company wants what it is doing to be kept secret (to preserve its proprietary technology or its first-mover advantage), it hopes that people start talking about it and its exciting new product or service. This is certainly the case for movie production studios, as they hope that people talking about a movie they enjoyed watching will encourage others to visit their local theaters.14 In addition, newspapers, magazines, blogs, and trade journals are always looking for stories about interesting companies. In fact, receiving a favorable review of its products or services in a magazine, trade journal, or highly respected blog lends a sense of legitimacy to a firm that would be hard to duplicate through advertisements.
Focusing too much on the features and benefits of their products is a com- mon mistake entrepreneurs make when trying to gain attention from the media. Journalists are typically skeptical when entrepreneurs start talking about how great their products are relative to those of their competitors. What journalists usually prefer is a human interest story about why a firm was started or a story focused on something that’s distinctly unique about the start-up.
Ultimately, a strong brand can be a very powerful asset for a firm. Over 50 percent of consumers say that a known and trusted brand is a reason to buy a product.15 As a result, a brand allows a company to charge a price for its products that is consistent with its image. A successful brand can also in- crease the market value of a company by 50 to 75 percent.16 This increased valuation can be very important to a firm if it is acquired, merges with another firm, or launches an initial public offering (IPO). Brand equity is the term that denotes the set of assets and liabilities that are linked to a brand and enable it to raise a firm’s valuation.17 It is important for firms to understand brand equity and how to use it to create value.
Although the assets and liabilities that make up a firm’s brand equity will vary from context to context, they usually are grouped into the following five categories:
■ Brand loyalty
■ Name recognition
■ Perceived quality (of a firm’s products and services)
■ Brand associations in addition to quality (e.g., good service)
■ Other proprietary assets, such as patents, trademarks, and high-quality partnerships
One aspect of branding that start-ups should be alert to is the possibility of forming co-branding relationships. Co-branding is when two companies form a partnership to combine their brands. The objective is to combine the strengths of the brands. A co-branding relationship can be short term, to promote a spe- cific event or product launch, or can be long term, such as opening co-branded stores. An example of a co-branding alliance is provided in the “Partnering for Success” feature. In this example two companies, Bruegger’s Bagels and Caribou Coffee, are testing a fairly involved co-branding relationship where they’re opening new restaurants that will be jointly operated and branded by the two companies.
Source: Barringer Bruce R, Ireland R Duane (2015), Entrepreneurship: successfully launching new ventures, Pearson; 5th edition.