Last year HSM Management published a stimulating, even somewhat provocative dossier entitled “Branding is the New Marketing.” Since reading it, I have been reflecting on some of the issues raised. Two in particular: the first, “the activity of building a brand ceases to be contained by marketing and begins to contain it” and the second, “branding is at the heart of corporate strategy; it is key to communicating value to consumers.”
Initially, I would like to make it clear that I believe that branding is important; indeed, I published here the article “Branding: Managing Your Brand,” in which I talked about branding as the set of strategic initiatives that, when implemented properly, contribute to the construction of a favorable perception of the company by the customer. I stated that it is of crucial importance for brands to properly manage the building of this perception of the company, products and services through customers’ experiences with the brand. Branding, therefore, contributes to reputation and recognition and consequently improves the results of strategy and business.
Thus, though I agree that brand building and management are important, I feel that the statement that branding must contain marketing exaggerates the point.
To substantiate my view, I call on none other than Neil Borden, Jerome McCarthy and Philip Kotler, as they teach us about marketing mix and marketing strategy.
The marketing mix is the combination of elements that make up marketing activities. The concept is based on studies developed by Borden. Since then, the expression marketing mix has become the most well-known model making explicit the aspects and the scope of marketing strategies. McCarthy later refined Borden’s theory and defined the four major groups of activities that would represent the ingredients in the mix, namely Product, Price, Promotion and Place (the last term I translate in my classes as distribuição, or “distribution”).
In talking about Product, Kotler mentions that this ‘P’ is anything that can be offered and that satisfies the needs and wants of the market. According to him, this ‘P’ includes not only goods and services, but also brands, packaging, customer services, and other features. In other words, Product in the 4P approach includes the brand and, consequently, the construction of the brand and its management, i.e. branding.
The marketing strategy, according to Kotler (1998), is the logic by which the business unit hopes to achieve its marketing objectives. That is, the marketing strategy is an extension of the strategy of the business unit and the business itself, which in turn is an extension of the corporate strategy.
The dossier mentions branding as “a more effective management tool.” If branding is a management tool, how could it contain marketing, which, according to Levitt, involves winning over and retaining customers?
I propose, then, that it is specious to imagine that “the activity of building a brand ceases to be contained by marketing and begins to contain it.” Branding, however important, is contained in the ‘P’ of Product; therefore, the activity of building a brand is contained in one of the elements of the mix and, therefore, by marketing.
As for Stanford Professor Levav’s thesis that branding is at the heart of corporate strategy and key to communicating value to consumers, I agree in part. Of course, branding is key to communicating value to the customer, but I disagree that branding is at the heart of corporate strategy. For me competitive advantage lies at the heart of corporate strategy. Branding is just another element, one more link, to gaining competitive advantage.
To corroborate my statement let us recall the concept of corporate strategy according to some of the most important authors on the subject.
Hitt, Ireland and Hoskisson (2002) and Porter (1987) define corporate strategy as an action to gain a competitive advantage.
For Henderson (1998), the strategy should increase the scope of the competitive advantage of the organization through the analysis of competitors.
Wright, Kroll and Parnell (2000) define corporate strategy as the central coordinating unit, developed for the whole company. So, if corporate strategy emanates from the central unit, from the top, it precedes business strategy, which in turn precedes marketing strategy.
According to Fahey (1999), corporate strategy informs how the company will use its resources, capabilities and limitations to build competitive advantage.
For Porter (1999) the notion behind the concept of generic strategies is that competitive advantage lies at the heart of any strategy. Being “everything for everybody” is strategic mediocrity and will underperform, since it usually means that a company has no competitive advantage whatsoever (Porter, 1991).
In turn, Hart (1995) understands that competitive advantages and the strategies of an organization are closely related to its ability to handle economic activities of an environmental and sustainable character.
For Heizer and Render (2001), whatever the strategy, it should provide a competitive advantage, since it implies the creation of systems or skills that represent unique advantages over competitors. These unique advantages are, according to Prahalad and Hamel (1990), essential skills. Competitive advantage can also be obtained by strategy development, such that competitors cannot imitate the company (Barney, 1991). Therefore, we can deduce from these definitions that what is at the center of corporate strategy is competitive advantage and not branding, however important and relevant its contribution to the achievement of competitive advantage.
Figure 1 illustrates the dynamics and hierarchy of strategies in the company.
Thus, the heart of corporate strategy is competitive advantage, as the heart of business strategy is the business model, and the heart of marketing strategy is positioning, of which branding is the fundamental link.
And you, dear reader, what you think about this? What is your point of view?