190 CHAPTER10 MANAGINGPRODUCTLINES ANDBRANDS
including salt, oranges, nuts and bolts, and a growing number of fresh food products
such as chicken and turkey.
In some cases, there has been a return to “no branding” of certain staple con-
sumer goods and pharmaceuticals. Genericsare unbranded, plainly packaged, less
expensive versions of common products such as spaghetti or paper towels. They offer
standard or lower quality at a price that may be as much as 20 percent to 40 percent
lower than nationally advertised brands and 10 percent to 20 percent lower than
retailer private-label brands. The lower price is made possible by lower-quality ingredi-
ents, lower-cost labeling and packaging, and minimal advertising.
Sellers brand their products, despite the costs, because they gain a number of
advantages: The brand makes it easier for the seller to process orders; the seller’s
brand name and trademark legally protect unique product features; branding allows
sellers to attract loyal, profitable customers and offers some protection from competi-
tion; branding helps the seller segment markets by offering different brands with dif-
ferent features for different benefit-seeking segments; and strong brands help build
the corporate image, easing the way for new brands and wider acceptance by distribu-
tors and customers.
Distributors and retailers want brands because they make the product easier to
handle, indicate certain quality standards, strengthen buyer preferences, and make it
easier to identify suppliers. For their part, customers find that brand names help them
distinguish quality differences and shop more efficiently.Brand-Sponsor Decision
A manufacturer has several options with respect to brand sponsorship. The product
may be launched as a manufacturer brand(sometimes called a national brand), a dis-
tributor brand(also called reseller, store, house, or private brand), or a licensed brand
name.Another alternative is for the manufacturer to produce some output under its
own name and some under reseller labels. Kellogg, John Deere, and IBM sell virtually
all of their output under their own brand names, whereas Whirlpool produces both
under its own name and under distributors’ names (Sears Kenmore appliances).
Although manufacturers’ brands dominate, large retailers and wholesalers have
been developing their own brands by contracting production from willing manufactur-
ers. Sears has created several names—Diehard batteries, Craftsman tools, Kenmore
appliances—that command brand preference and even brand loyalty. Retailers such as
The Body Shop and Gap sell mostly own-brand merchandise. Sainsbury, Britain’s largest
food chain, sells 50 percent store-label goods, and its operating margins are six times
those of U.S. retailers (U.S. supermarkets average 19.7 percent private-brand sales).Figure 4-3 An Overview of Branding Decisions