Why Brands Are King – Brands Trump Commodities


TBA.02.18.16Like Kleenex, Xerox, and Coke, some consumer brands are so strong that their very names have replaced the commodities they represent in the lexicon. But they are commodities none the less. What has elevated these brand names to this level is their history, popularity, or virtual monopoly of their category. Every brand builder would love their brand to become the name for the commodity they are selling. But there’s another crucial reason brand building is desirable and essential. It’s price protection.

Without a brand, generic products would become commodities and the race for the lowest price would be on. What adds value, positioning, and distinction to consumer products is branding. It’s simply worth more with a good story, snappy catch phrase and compelling logo delivered by a company consumers trust.

This is why we continually warn new brand builders to be wary of large purchase offers from big chain and box stores. Once you become dependent on them, they can demand lower prices or threaten you with being discontinued. “There’s another brand that will provide the same thing for a few dollars less,” they’ll say. “You’ll have to match it.”

It’s tempting to go with the big guy who offers large purchase orders especially when you are new. But let’s go back to the reasons for a brand in the first place. If your brand is a household word, the big guys must have it and on reasonable terms. Everybody knows the brand. Not just the customers they have attracted. Their competition has it and if they don’t carry it they will lose money and customers.

But if you try to make that deal prematurely, when your brand is still unknown and still struggling for recognition, you won’t have enough “household word” strength to prevent price erosion, or down right price coercion.  This is why careful and ultimately successful brand builders start in a small market and grow their brands slowly. They are always aware of what each expansive move means: Is it too much growth too soon? Will their price get compromised? Will they have the resources to support their increased sales? Can they control merchandising, oversight, and customer service?

We have seen many brand builders take the bait offered by a big box store, and once the hook is set, get reeled in. One who came to us was surprised that a recent meeting with his biggest buyer, a major national chain, did not go well. Our client had scheduled a business meeting to explore plans for expanding his brand within their chain. “We have no plans to expand your brand,” the buyer said, and added, “We think it’s big enough as is!” This was after he had become financially dependent on sales from that one chain for years. Now he had to build his brand with the general public, not just the customers of that one chain. Oh, and yes, the buyer took advantage of the meeting to ask him to come down on his price!

So we say again, the Brand is King! But only when you build it carefully on a very broad and varied base so you can protect it. Always endeavor to build your base, even in a small region, so that in that region it will be widely known. So when you go to the big guys in that region, they will feel compelled to carry your brand. Keep this in mind as you expand – carefully – region by region – or you may find yourself reaching for a Kleenex!