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Competition and the Birth (and Death) of Branding

By Tac Anderson ⋅ October 5, 2010 ⋅ Post a comment
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This post is part of a virtual book club series dedicated to The Lords of Strategy

I warned you that The Lords of Strategy inspired several posts and will likely inspire several more. This post is about competition and the birth of Branding.

Competing on Cost

Chapter 3 is dedicated to the discovery/creation of The Experience Curve by the Boston Consulting Group (BCG). The Experience Curve is a theory that the more experience a company has (at making a product) the cheaper the production of that product will be. Therefore the company that makes the most widgets will be the cheapest manufacturer not just because they can buy their raw materials in larger quantities but because their experience allows them to produce more for less at an ever decreasing value.

The brilliance behind the experience curve was that it forced companies to look at their competitors and benchmark themselves against their competition using price (where cost wasn’t available) as an indicator of production experience.

Something interesting that Kiechel points out is that before The Experience Curve companies rarely if ever looked at their competitors and factored that into their business planning (at this point in the early 1960′s companies didn’t develop business strategies they just did business plans, which were iterations of last years plans (sadly this is the way I see too many marketers build their plans: sans strategy, just versions of last years plan).

Let’s pause there. Two things about that statement are mind blowing to me:

  1. Companies didn’t look at what their competitors were doing
  2. Companies didn’t have strategies.

Wow. Could you imagine not watching your competition or having a business strategy? I can’t. Moving on.

The Birth of Branding

In today’s market though most companies I work with are very conscious of their competitors but price isn’t what it used to be. Especially in technology. Few companies make anything themselves anymore and most companies differentiate against their competitors using services and other intangibles that purposefully make it harder to do a direct comparison.

This is also the point that “Branding” became important. If I could create value in my brand then that became something my competitor couldn’t replicate, they could only create their own brand value. No one else is Coca Cola, No one else is Nike. The only thing their competitors can do is be Pepsi and be Adidas.

Branding as a marketing concept had been around for a long time and is closely tide to the rise in trademarks. But it was about this time in the 1960′s that branding really took off (think Mad Men).

The only way a smaller competitor could compete with a larger company that could beat them on price and volume was to focus on quality and that requires that you have the brand equity to justify the perceived value. Even if you aren’t competing on price (Nike vs Adidas) brand becomes a very valuable asset.

The Death of Branding?

It seems like Branding has fallen out of favor lately and I’m not sure why. I think it’s because there was so much focus on branding for branding sake during the last 30+ years that the pendulum has swung the other way for a while. Will we see a rebirth of branding soon? I don’t know, what do you think?

Photo credit By Dunechaser (Bonus points to whoever gets the picture movie reference)

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About Tac

Social media anthropologist. Communications strategist. Business model junkie. Chief blogger here at New Comm Biz.

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  • http://www.aediscreative.com Christopher

    I believe that branding is still going strong, it’s just that the focus has evolved. More than ever the marketplace demands that companies deliver on their promises and actually offer something that is different in some relevant way. Branding has become the process of understanding who you really are as an organization and creating a strategy to communicate that.

    Unfortunately branding is still lassoed to the tactics of major corporations and time has built up a great deal of mistrust for big business. It’s a matter of education. Branding is still essential, and organization with a long term vision are listening. The fact is, as things get more crowded, branding efforts are going to become more and more important.

  • http://SELECTPersonalFitness.com/ Nicholas Swanson

    First off, great points as usual. To respond to your question about the possible return of branding, I don’t believe it ever left. Marketers / brand managers simply got caught up in other brands trying to promote their brands, by using these other platforms for spreading their message (e.g. FB, Tw). But they realized the drawbacks to this and have started to reevaluate how they share their message. They are changing how they engage, with more thought on whether it is responsible for their brand, and not simply having a multitude of accounts in order to have ‘branding for the sake of branding’, as you (or Kiechel) put it. Agree / disagree?

  • http://www.newcommbiz.com tacanderson

    Branding happens whether companies plan for it or not. I agree that it ends up being the result of a lot of various tactics rather than the accumulation of a strategic plan. Which is unfortunate. At the same time I think that companies have swung too far the other way were branding was done for the sake of branding - as an end not a means to an end.

  • http://www.newcommbiz.com tacanderson

    I think there’s something to the shift in branding and the rise of social media. I think before companies could project any type of brand message that they wanted to and if you slapped the right creative on it that was good enough. But now in this *more* transparent world of social media companies can’t hide behind their creative, their brand becomes the projection of their internal culture through social media.

  • Taralyng

    I agree. I’m seeing social media reflect both the internal strengths and weaknesses within larger orgs.

  • http://www.newcommbiz.com/the-fear-of-the-unknown-competitor/ The Fear of the Unknown Competitor | New Comm Biz

    [...] Yesterday I wrote about competition and how companies used to not benchmark themselves against their competition. Today this is common practice. I’ve never met a business that doesn’t do this to some degree. [...]

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