Have you ever tried to compare a t-shirt you bought from Sarojini Nagar with a t-shirt from Nike? Try it! You will not find much difference in them except of course the price. One will probably be a hundred rupees and the other around fifteen hundred. Then why do people buy it? What is so great in a brand?
A brand is a name, term, design, symbol, or other feature that distinguishes products and services from competitive offerings, as defined by the American Marketing Association. However, according to The Chartered Institute of Marketing, a brand represents the consumers’ experience with an organization, product, or service.
Brands came about in the nineteenth century with the advent of packaged goods. According to Unilever records, Pears Soap was the world’s first registered commercial brand. Industrialization moved the production of household items, such as soap, from local communities to centralized factories. When shipping their items, the factories would brand their logotype insignia on the shipping barrels. These factories, generating mass-produced goods, needed to sell their products to a wider range of customers, to a customer base familiar only with local goods, and it turned out that a generic package of soap had difficulty competing with familiar, local products.
Around 1900, James Walter Thompson published a house advert explaining trademark advertising, in an early commercial description of what now is known as ‘branding’. Soon, companies adopted slogans, mascots, and jingles that were heard on radio and seen in early television. Manufacturers quickly learned to associate other kinds of brand values, such as youthfulness, fun, and luxury, with their products. Thus began the practice of ‘branding’, wherein the customer buys the brand rather than the product. This trend arose in the 1980s ‘brand equity mania’. In 1988, when Phillip Morris bought Kraft for six times its paper worth, because the Phillip Morris company was actually buying the Kraft brand rather than the company and its products.
A widely known brand obtains brand recognition. When brand recognition builds up to a point where a brand enjoys a critical mass of positive sentiment in the marketplace, it is said to have achieved brand franchise. One goal in brand recognition is the identification of a brand without the name of the company present. For example, Disney has been successful at branding with their particular script font (originally created for Walt Disney’s “signature” logo), which it used in the logo for go.com.
The production of any commodity say clothes happens as follows. A buying house has branded clients like Nike, Reebok, and Espririt etc. these clients send in the basic theme of their clothes to the buying house. The buying house in turn thinks of designs and styles to match their themes. These designs are then sent to the factory for samples to be made which are shown to the clients for their approval. Once it is approved the buying house places an order with the factories. The shipments of these manufactured goods are then prepared and the buying house sends it to the clients.
It seems like a fairly easy system right? But it is not so. The clients are very specific in their choices and even if there is a slight difference of colour or anything of that sort the whole shipment is rejected. Then the buying house has to request their clients for some extra time and they have to get the factories to prepare another shipment. If the factories delay too much in sending the shipment, then they have to send it by air at their own cost. This is how clothes reach the branded showrooms.
What happens to the lot of clothes which is slightly defected? These are the clothes that we see in export markets like Sarojini Nagar, Karol Bagh etc. These are called ‘export rejects’.
So therefore, just by a minor defect like colour etc you can get the same t -shirt for almost fifteen times less the price you get it at branded shops. Enough to establish that the profit margins for a branded enterprise, is many times its production cost!