What is a brand actually worth on the price?
Many years ago I was running a business that traded under the rather august DUNLOP brand name. It is a brand that has been around for over 130 years and at the time was one of the top twenty most recognised brands in the world.
Some of you will know that Dunlop as a business was broken up in the late eighties and the bit that came under my stewardship many years later enjoyed the rights to use the Dunlop name in perpetuity.
I was out travelling with one of our sales guys and we went to visit the maintenance manager at a factory that bought hydraulic hoses from us. He was friendly but to the point, as often guys in operations can be.
The sales guy introduced me and the customer immediately said “Don’t worry, I am always going to buy your hoses.”
I smiled, thanked him and feeling brave asked him why.
He replied “I know you are about 20% more expensive than the competition. I have had your Italian competitors in here and their hoses are every bit as good as yours” (I knew this, as we had sold them the technology several years prior to me joining the business).
At this point I gulped.
He continued… “…But if one of your hoses fails and the line stops, I can tell the Production Director ‘at least I bought Dunlop’. If an unknown Italian hose fails on the line, the Production Director would hoof my door down and bollock me for buying some unknown brand just to save money”
All I could do was thank him, retreat and make a mental note that the brand was worth about 20% on the price.
Although all the heavy lifting in terms of brand awareness had been done by generations of tyre and tennis racquet advertising for getting on for a hundred years, we were able to capitalise on it and charge a premium.
Brands tend to add a greater percentage premium if the product itself is inexpensive but the cost of failure is high. The premium this guy paid for his hose probably equated to about five minutes of down-time cost for one of his production lines.
I also spend some time in marketing at Sellotape and the guys selling the technical products to industry often told me that it was the brand that got them seen by the buyer when someone, perhaps with a perfectly good product but unknown company name would never get past the receptionist.
Whilst good B2B salespeople can enhance a brand, the kind of reputation that creates a premium has to arrive in the customer’s mind by osmosis. It is not sufficient to tell the person you are good, or even demonstrate you are good. The buyer needs to have heard of you elsewhere before they will assume that you are good…. even if it is about tennis racquets and tyres.