UNIVERSITY OF ECONOMICS, PRAGUE
Faculty of Business Administration
International Management
The Importance of Brand on B2B Markets: Case
Study of Hilti
Master thesis
Supervisor:
Ing. Miroslav Karlíček, PhD.
Author: Bc. Martin Konečný
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Declaration of Authorship
I hereby declare that I have written the thesis “ The Importance of Brand on B2B Markets: Case Study of Hilti” without any help of others. I have mentioned all resources used and have cited them correctly. Any other documents and materials relevant for the thesis are attached in the appendix.
Prague, Czech Republic, 2013 ………
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Title of the Master Thesis:
The Importance of Brand on B2B Markets: Case Study of Hilti
Abstract
The brand is mostly associated with business-to-customer markets and environment. People would first think of such a brand, because we see marketing and advertising of those brands every day. But business-to-business brands are for companies also very important. The overall goal of my thesis would be to find out how the managers of a pure B2B company perceive the importance of brand in the B2B environment where the company operates. Theoretical part will, in the first chapter, characterize B2B environment as well as the specifics of brand building on this market. Second chapter focuses directly on the factors influencing brand success on B2B market and how brand influences and helps the company to succeed. Then, practical part is going to be focused on a company Hilti AG - a global premium provider of building construction tools and consumables in B2B, where the qualitative expert interviews with managers across different business units and departments – marketing, sales and brand management – will be conducted and will provide a base for my research.
Key words:
brand importance in B2B, B2B brand building, B2B market, B2B brand, Hilti, qualitative research, expert interviews
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Acknowledgements
Firstly, I would like to express big thanks to my supervisor, Ing. Miroslav Karlíček, PhD., for his support, valuable advice and personal coaching during the writing of my thesis. Secondly, I would like to thank to all Hilti managers who participated in the expert interviews, sacrificed their time and provided me with their insights. Thirdly, I would like to stress the willingness of Mr. Risberg, the CEO of Hilti, to arrange a personal interview with me. Lastly, I thank to my girlfriend and family for their support.
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Table of Contents
Introduction ... 7
Theoretical Part ... 10
1. Specifics of brand building on B2B market ... 10
1.1. What is a brand ... 10
1.2. B2B market specifics ... 13
1.3. Brand building characteristics in B2B environment ... 18
2. Brand importance on B2B markets ... 23
2.1. Which factors influence brand equity and brand success ... 23
2.2. How brand influences the company and its success ... 26
2.3. Importance of brand on B2B market ... 27
2.4. Soft, financial and market aspects influenced by the brand ... 30
Practical Part ... 35
3. Hilti profile ... 35
4. Methodology... 40
4.1. Qualitative method – expert interviews ... 41
4.2. Intention and goals ... 45
4.3. Hypotheses for expert interview research ... 47
4.4. Sample characteristics ... 49
5. Research findings... 51
5.1. Evaluation of the hypotheses and discussion ... 51
5.2. Perception of brand importance on B2B market ... 64
5.3. Main findings... 70
5.4. Recommendations ... 71
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Conclusion ... 74
Bibliography... 76
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Introduction
Brand, its build-up, development, and valuation together with general brand management are topics which companies all over the world across most of the industries are dealing with on a daily basis. In today´s world especially, the importance of the brand is undeniable factor, which the companies must take into account and put that among top priorities in order to survive and succeed on the market. Brand is driving, as one of the factors, the success of the company. This applies to both business-to-customer (B2C) and business-to-business (B2B) markets and environments.
There are countless differences between both types of the market environments, but also many similarities. Consumer brands and B2C markets are being discussed and studied very often and represent the majority of attention because they concern the majority of population and draw the attention and public interest. On the other hand, B2B brands are mostly not even known publicly. They might not be important to all people, but they influence their lives indirectly and should receive more attention too, especially from business point of view.
Two strains led me to write my thesis on the topic of the importance of brand on B2B markets. First incentive was when I got in touch with B2B company and its branding. I have worked on CEMS business project with Hilti Czech Republic, a provider of professional products and services for construction business, and later on I have done my CEMS internship also for Hilti AG, this time at their global headquarters in Schaan, Liechtenstein. Due to this working experience I have understood and became interested in what it takes to operate on business markets and what are the differences in terms of brand, brand awareness, marketing and its channels. Second incentive was the lack of studies and general interest which had been leaning more towards B2C brands. Therefore I have decided that my thesis could be interesting content-wise not only for Hilti, but for other B2B companies as well, and that I have enough resources for the practical part and my own research.
The overall goal of my thesis would be to find out how the managers of a pure B2B company perceive the importance of brand in the B2B environment where the company operates. Managers come from general and top management of the company, mostly from the global
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headquarters. However, the managers from local hub would be interviewed too. They would be all coming from 4 major areas and positions, which are the most influential in the company from marketing point of view – CEO, brand and marketing management, business unit management and sales. The topic which I would be interested in, will cover the different in perception across departments, positions, background and HQ and local market organization. The aim is to find out which areas of the company´s business are influenced, according to the managers, by the brand the most and the most significantly and the level of significance and the role which brand plays in it. The outcome should be a analysis of the environment of the company, evaluation of hypotheses set up based on the professional and academic literature and recommendations for B2B companies from brand perspective which will be derived from the expert interviews conducted with the managers of the company.
The first part of my thesis will be mostly based on academic and business research papers and studies, conducted mostly in the United States, India and Western Europe in B2B industries and with a variety of topics and conclusions. The common denominators are brand and business-to-business markets. I will collect, review and evaluate researches with both positive and negative outputs towards my thesis topic. I will structure them into several main areas which I consider relevant for my research and final output. First of all, I would define the most important terms such as brand and B2B market. The definitions, explanations and examples will be given to illustrate the essence of brand on business markets. I will pay separate attention to B2B market specifics from my own experience and academic papers. The most important elements of brand building in B2B environment will be characterized and further explained, among others, delivering brand promise, relationships, marketing specifics and other resources needed. Secondly the key elements and factors of brand importance on B2B markets, divided into three main categories, will be determined and the influence the brand has on them illustrated.
Second part is my own research which I will conduct in Hilti on the basis of expert interviews, which are one of the most used methods of qualitative research for business markets. I would like to sit down with Hilti managers across departments and also HQ and local market organization in the Czech Republic, who have a variety of experience from both Hilti and other B2B career. The expert interviews should reveal the real and most problematic issues and address them in detail by digging deep and asking follow-up questions during the interviews. The objective is to get
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personalized and sophisticated opinions on the topic, evaluate the overall significance of brand for Hilti and B2B companies in general, and make recommendations to such companies in terms of brand building and brand importance. The final evaluation of hypotheses will be described in detail with direct opinions, thoughts and quotations from Hilti managers. The main recommendation should tackle the issue of which factors are influenced by brand the most and to which issues the company should the most attention.
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Theoretical Part
Theoretical part will provide a framework and basis for my qualitative research in the practical part. In the first chapter, the basics and relevant terms will be defined, described, analysed and explained in a correspondent depth with several illustrative examples. The thesis combines two key terms: a brand and business-to-business market, which will be covered as well as the specifics of brand building on this market. Second chapter focuses directly on the factors influencing brand success and equity on business markets and how brand influences and helps the company to succeed. Questions, opinions and hypotheses about the importance of brand on business-to-business market will be raised and analyzed based on academic and other research papers.
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Specifics of brand building on B2B market
1.1. What is a brand
There are many definitions what a brand does actually mean. Everyone could find and even make up his or her own brand definition. For sure, brand is not just a logo, a picture or symbol. It is much more. Miletsky & Smith (2009, p. 8) define the brand as the following: “A brand is the sum
total of all user experiences with a particular product or service, building both reputation and future expectations of benefit.” Another classical definition offers Kotler: “Brand is a name,
term, sign, symbol, or design, or a combination of these that identifies the products or services of one seller or group of sellers and differentiates them from those of competitors” (Kotler, 2008, p. G1).
In order to make this definition more clear, let’s use the following example. When a person is about to purchase a running shoes for long distance running, he or she would not go for No Name
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pair. It is well-known brands which had been used by many both amateur and professional sportsmen that are a guarantee of expected performance and create further value. But brand consists of both intangible and tangible parts. The intangible part as emotions, experience, reputation and benefit expectations create the value. Then logo together with all kinds of fonts, colors, formats, music, symbols, writing represents the tangible part of the brand of a company. It provides customer expectations about the product quality, price and image (Davis & Baldwin, 2005, pp. 26-30). Brands are assets and represent great value for the company (Emarald Insight Staff, 2004, p. 1041).
Modern branding has a history starting at the end of 18th century when products started to be distributed in extensive areas. Putting a brand on a product helped to identify the producer and differentiate the product from the others. Later on, it represented a certain quality of the product (Fisher-Buttinger & Vallaster, 2010, pp. 4-5). Bottom line, brand represents the perceptions that target customer audience makes in their minds about a product, service or company. Moreover, it conveys and company should deliver the brand promise.
After brief brand definitions, it is also necessary to clarify and size up the differences between, firstly a brand and a company, secondly a brand and a product and lastly branding and marketing. For some it might be clear, but in certain cases we tend to confuse these terms with each other as they might not be obvious.
Substituting brand and company is very common mistake. To explain the difference, an example from fast moving consumer goods (FMCG) industry can be used. Many people would consider Schwarzkopf or Nivea as companies. But in fact, they are just well-known global brands of Henkel and Beiersdorf respectively. Company has a legal set up, stock shares, infrastructure and employees. It is a legal entity. Sometimes it can be very confusing and even brand and company can be the same or very similar as in the case of Pepsi (brand) and PepsiCo. (company) or Hilti. The same implies for the difference between product and those mentioned above. Product is a set a features and distinguishing characteristics, which provide benefits to customers and satisfy their needs. They might be branded, but also no name products. To simplify the main differentiating elements, a product is something which can be ordered by description, a locator in product range, an item which can be changed, modified or replaced without any significant loss of customer
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loyalty. Brand is by similar comparison, however, something which has a personality beyond the product, something people would pay price premium than for no name.
To sum up all the dissimilarities, we can use CocaCola as an example. CocaCola refers to all three terms. It is the company – the legal entity which produces, markets and sells the product to customers, the product – the soft drink with specific flavor which buy people from all over the world, and the brand – the reputation of tasty, refreshing, cold beverage which resembles certain young lifestyle (Miletsky & Smith, 2009, pp. 8-9). Therefore some argue that a brand and a company are practically the same or at least they represent the same values and create certain perception among customers. I would disagree as the companies may have full house of brands, where each brand reflects different lifestyle, focuses on different target group of varied age, income, education, culture and geographic location.
A difference between branding and marketing lies mainly in the order of these two terms. Marketing is an umbrella which tries to bring and advertise to the markets all kinds of products, services, brands and even the company itself. Therefore branding is just one part the overall purpose of marketing department besides strategy, product management and process management. Brand is, as said before, basically a reputation, the total sum of past customer experiences with the company and its products and services. Branding therefore is in charge of managing this experience on a constant and continuous basis with the objective to enhance and improve this experience in the most positive way possible. Its task is to set the expectations of customers on the right level so that they are met by the brand itself and create customer satisfaction (Miletsky & Smith, 2009, pp. 8-12).
What´s more, marketing is used to shed the brand message to target audience, enhance brand recognition and awareness, and build certain expectations in the minds of customers. All this even before customers are exposed to the brand in person. The communication must be done at each possible touch point between company and customer resembling the brand and keeping its integrity. Marketing, if done correctly, creates brand awareness and turns it into active purchase behavior.
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1.2. B2B market specifics
There are two major types of markets for products and services – Business-to-Business (B2B) and Business-to-Customer (B2C). On B2B market, firms are offering and selling their products or services to other companies which are their customers in this case. On the other hand, on B2C market, firms are doing the same, but with the difference that their customers are people, individuals (Fill & McKee, 2011, pp. 1-8). Both markets bring numerous similarities in basic business principles, value chains, strategy and organization. However, there are several key characteristic which distinguish consumer market and business market.
Companies operating on B2B market have in common two most important characteristics. Firstly, these companies have to start with identifying and full-understanding of the needs of their potential customers and move from this point on. Secondly, it is unexceptionable for them to collect, analyze and take advantage of the information about customers and competitors so they can reach their business goals (Fill & McKee, 2011, pp. 5-8). Overall, B2B markets possess several unique characteristics such as demand specifics, selling and buying procedures, its global scope and quite specific exchange and relationship between companies (Fill & McKee, 2011, pp. 6-8). The difference lies in the activity of both sides - the buying and the selling one. In contrast, on B2C market, companies are the ones who must be and are active in marketing their products or services and customers are more passive and waiting for the supply to find them in most cases. On the other hand, on B2B market, companies are active on the same level. They are trying to get the best suppliers and find their own company customers. This feature brings certain balance on the market. Another diverse aspect of B2B market is the complexity and length of a buying process and decision making and its risk. On B2C market, the decisions are made in general quickly with a relatively low risk of waste. The purchases of daily products or services for small amounts of money and low risk for individuals are most typical. The decisions are also made individually without many advisory talks. However, on B2B market, the decision making process in the company is quite complex and a group of people is involved in the final decision. This is set by the nature of the purchase which represents much bigger risk for the company than it is in the case of an individual on B2C market. Because of these facts, the processes are also longer and thoroughly investigated before buying is done (Fill & McKee, 2011, pp. 68-72).
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But the most crucial and focal characteristic of this environment is the importance of relationships between companies. In contrast to B2C market where the relationship between company and customers is considered relatively weak and not that significant, B2B companies built their success on long-term and stable relationship with their customers which are other companies. Before conducting a business on repetitive bases, companies must develop and invest certain time and resources into building such a relationship. The cornerstone of successful business influences the whole value chain and therefore cooperation is highly demanded from product development, supply chain and manufacturing to marketing and selling of the product (Fill & McKee, 2011, pp. 7-12).
Furthermore, business market is strongly dependent on information systems and in contrast to consumer market is more volatile to market setting changes (Aggerstam & Söderström). Companies operating on business market in information systems and technology count to the most used ones, regardless of who they customers serve to. The bigger and more complex the company is, the more sophisticated and individually customized systems needs.
As we described the main differences of B2B market from B2C market, naturally the marketing and marketing mix varies too. Marketing of B2B companies differentiates mostly because of two key reasons: the customer of a company is another company and the product or service is sold to serve the goal of another company to satisfy the need of their customers whoever they are. The traditional and basic marketing mix concept of 4Ps was developed by McCarthy (1960) and Borden (1964) in the middle of last century. Thorough the years the concept was challenged and developed further (Knox, 2004) with adding of another 3P elements. The idea is applicable for both B2C and B2B companies. However, it must be adapted for both of them.
Companies operating on business markets dispose of significantly less customers than companies on consumer markets. The result of this fact is that they are able to customize and adjust their offered products or services. Organizations manage portfolios which often demand specific product or service. The order value is also bigger that in case of consumer markets. So the companies are willing to accept it and such customizations pay off (Fill & McKee, 2011, pp. 120-128). Product contains benefits for the customer, quality of the product, design of the product,
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specific features, branding, packaging of the product and finally after sales services. All those elements are important and distinguish the product from the one from competitors (Davis & Baldwin, 2005, pp. 158-162). As mentioned, the quality and benefits of the product are fundamental. Customers on business-to-business markets are usually more driven by performance and outcome of the product rather than price. This together with offering highly customized products serving individual customer´s needs and thus developing the relationship further (Bhattacharya & Datta, 2010).
Pricing of the products is completely unlike between business and consumer markets. On one hand, the consumer companies have standardized price lists with little space for price to move and discounts. It is simply not possible to adjust the price for every single customer and the companies lack the motivation. On the other hand, negotiations and bargaining is a daily activity in business environment. Companies are willing, based on the relationship length and quantity (value) of order, to adjust the price for single order (Fill & McKee, 2011, pp. 120-128). Price flexibility and adjustment is therefore very typical for B2B markets and companies. It includes a great variety of discounts, add-ons, free giveaway merchandise and rebates. Loyalty schemes, agreements and contracts are of a common use (Davis & Baldwin, 2005, pp. 158-166). However, complicated situations may arise for companies on business markets as the suppliers always do not care that much about the price offered, but the quantity of the order play an important role, which in rare cases may lead to the withhold of the order. Last issue of pricing on business markets is the price premium. If company offers a brand on price premium, it must be sure to keep the promise of perceived value. To make sure it will happen, brand management also have to check the prices of competition, market dynamics and changes, and price premium components such as quality premium, service premium and relationship premium (Bhattacharya & Datta, 2010).
The placement of products or services is similar in principle for both market environments. The main difference in this case is the length and nature of sales channels. On business markets the separate attention is paid to customers in their need of time and type of a delivery (Fill & McKee, 2011, pp. 120-128). Customers may raise their own wants for product or service placement. It varies by types of the store and types of access to the store. Other elements which are included and looked over in the decision about the placement are website service, direct sales through
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phone, sales force or catalogue, customer service and relationship with the retailer (Davis & Baldwin, 2005, pp. 150-160). As well as on B2C market, B2B companies used multiple placement channels to meet the demands of the customers and provide the most convenient way.
Promotion and advertising is the key element of marketing communication mix for companies operating on consumer markets. It is subject to huge amount of people who need to be reached, simplicity of conveyed message with minimal feedback required and weak unimportant relationship between the company and customers. In absolute contrast, advertising and promotion is done in completely different way on business markets. Message involves technical information and is quite complex, potential customers to reach represent smaller amount of entities, feedback is demanded and emphasis on relationships is supported by direct marketing and direct sales (Fill & McKee, 2011, pp. 242-250). It is all about relationships, especially in relatively closed industries with only a few big and strong players. Promotion on business markets includes aspects as advertising, direct marketing through sales force, email, newsletters, telephone and direct mail, then trade exhibitions and fairs play a very necessary role, plus PR, merchandise and last but not least branding (Davis & Baldwin, 2005, pp. 154-160).
The last 3Ps added to the original marketing mix are people, physical evidence and processes. People play important role in business environment because they help the company build good, long-lasting and quality relationships which result in cooperation and partnership between both organizations. Physical evidence rests in showing the tangible proof for intangible service or product feature. Processes can vary greatly, from such a simple tasks as getting some merchandise to complex ones as buying a solar energy plates. Indifferently both include processes of similar nature (Fill & McKee, 2011, pp. 18-25).
Marketing communication and marketing channels companies use on business markets distinguish in most of the elements. Communication as it is includes three dimensions. We recognize communication on management level (both external and internal), company communication with public and marketing communication with partners and customers of the company (Fill & McKee, 2011, pp. 242-252). Preferred communication is direct marketing
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communication. The main goal is to transmit technically complex and individualized message and to build long-term lasting relationship based on the feedback from the customer. The ideal type of direct marketing is one-to-one marketing, where the communication is even more personalized. Direct marketing is perceived as the second most important aspect of promotion after direct sales (Fill & McKee, 2011, pp. 281-282). On business markets we can observe four most important marketing communication tools – email communication, direct mail, telephone interaction and direct sales. Others are PR communication, website and event marketing.
One of the hardest and most important things for future success of email communication with the customer is to develop valid and relevant contact list, and to keep this list updated. It is valid for both direct mail and email communication that the most notable point is targeting and segmentation. After development of relevant list of customer, brand management together with other department with marketing in lead needs to decide about the message and target groups (Bhattacharya & Datta, 2010). Telephone interactions took on the significance in recent years with the expansion of smart phone and other technologies designed for it. This trend will continues in the future and e-commerce and communication via mobile apps and internet functions will drive the whole focus of marketing communication strategy and campaign of B2B companies. Direct sales and sales persons for distributors, dealers and customers are highly considered and have many major responsibilities. They are not only accountable for a large portion of company´s sales (depending on the company model and direct sales focus), but they represent the company itself in terms of company image, brand awareness, brand perception, brand culture and brand values. Direct sales model is at the same time the most important and most expensive way of offering and selling the products or services of the company. It constitutes an irreplaceable instrument to establish, develop and keep what the company needs the most – quality relationship with its customers. Especially on business markets where many technical details and features needs to be properly explained and showed in order to fully demonstrate the value proposition and major benefits (Fill & McKee, 2011, pp. 281-282).
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1.3. Brand building characteristics in B2B environment
Business-to-business branding has received more attention from both managers and researchers in recent time and it offers unexploited growing opportunities with the rise of internet using (Jensen, 2009). The reasons to brand building and differentiating factors between B2B and B2C markets sums up Kotler & Pfoertsch (2006, pp. 15-34) and McKee (2010). Successful branding sets the company apart from the competitors and enables customer to make a decision based on the differentiation provided by branding, no matter the type of the market.
There are several characteristics for building a brand which are applicable to both business and consumer markets. Such as delivering a brand promise to customers (Fisher-Buttinger & Vallaster, 2010, p. 126), creating distinguishing value proposition, which has to be aligned with the rational and emotional needs, images and fit the conceptions of target customers (Bhattacharya & Datta, 2010).
However, some characteristics are unique and typical just for business markets. Brand building, also on business markets, includes 4 major dimensions (Chunawalla, 2009, pp. 240-255): attributes, values, benefits and relationships.
Probably the most important one lies in developing strong long-term relationships (Fisher-Buttinger & Vallaster, 2010, p. 126). Building a brand through engagement includes two groups. One group are employees who need to be engaged in the first place in order to build a quality base for building a strong brand and for engaging the second group which are obviously the customers. Brand needs to engage employees so that they become committed and motivated to deliver the expected brand promise and participate on its further development. With engaged customers it is easier to transmit the main brand message and calculated brand promise (Fisher-Buttinger & Vallaster, 2010, pp. 130-135). Another part, which falls under building strong long-term relationships along with building a strong brand, is building a brand through alignment of brand promise with key stakeholders mentioned above to constantly enhance the processes and infrastructure that enclose the brand itself. B2B brands are most likely to be corporate brands (Dimitrov, 2008), so it is also necessary to understand company´s point of view from this perspective in order to create these long-lasting relationships. Also according to main findings of
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Jensen (2009), B2B branding strategies should be fully aligned with the overall business strategy of the company.
With considerable marketing limitations, there are, however, other ways how to market a brand in B2B environment. In addition to traditional B2B marketing communication instruments such as email, direct mail, telephone and direct sales, which have great influence on brand building, exists also trade-show marketing. Well designed and organized booth is a necessary condition, but then the attraction of relevant and targeted customers is increased (Miletsky & Smith, 2009, pp. 190-192). The goal is not to reach large audience but the right targeted one. Thus, print advertising is cheaper and affordable because the number of print to put the advertisement in is by far smaller than in case of consumer market advertising. Therefore trade-show marketing can enhance the brand building as one of the factors, if done properly. If it is the other way around, it can spread negative emotions and perceptions towards the brand and company for a long time. Therefore, every marketer of the company should be able to tell the story of the brand and company in a very short time. It is called elevator speech. The purpose is, especially in today´s world which is very dynamic, fast-moving, time demanding with daily pressure, to transmit a short, clear, memorable, interesting message pertinently describing the fundamental essence of the brand and company, including understandable value proposition. The objective is not to sell anything, but to engage and draw attention of potential customer.
The focus of brand campaigns and the overall goal of the brand management is to create awareness and get the brand name into minds of customers, which need to be pre-selected and targeted, otherwise is the company wasting resources such as time and money (Miletsky & Smith, 2009, pp. 155-157). Targeting the customer (Dimitrov, 2008) and complete understanding of its needs is fundamental to a great extent on business markets (Sadhna, 2009).
Fisher-Buttinger & Vallaster (2010, pp. 124-125) identify two most important factors in order to build a strong, sustainable and successful brand: Alignment and incorporation of company´s actions with the actual brand promise is one of them. Delivering the brand promise has immense influence on mutual trust and credibility of the company. The basic prerequisite before the actual
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alignment is focus on brand relevance to customer and palpable distinction of a brand from the competition. Just after that, the main objective of brand management of B2B companies to create manageable expectations in the eyes of the customer, which can be firstly fulfilled and possibly exceed in some cases. The specific brand promise and its establishment differ across industries of business markets. To deliver brand promise set up by the company has a major impact brand image and brand credibility which is directly linked to the credibility of the company in most cases, especially in cases of corporate branding. First of all, primary company actions must be based on well-defined brand. From that point, the company can move forward to establishing brand culture, brand image and finally brand promise. It is impossible to get commitment from the marketing and sales teams departments and convey the right brand message when there is not a clear picture and defined strategy with objective that brand should fulfill and represent. On the next level after the brand is well-defined, alignment of company actions with brand promise concerns customers. There must be no confusion of brand meaning, its image and message it is transmitting. Trust as one of the outcomes of successful incorporation of actions with brand promise, plays a role in brand recognition. People trust what they are familiar with. Therefore if brand promise is fulfilled and at least meets or even exceeds the customer expectations, it enhances the reputation and general positive recognition of a brand. Companies have to support the alignment of their actions at every single touch-point they generate between them and customer.
The second factor is a development of a strong relationship with all key stakeholders, especially with customers. At the same time, building strong and long-term lasting relationships on every level of company´s communication with both internal and external stakeholders is driver of future sustainability of the brand and generates strong loyalty in customers, suppliers and employees. Companies should pay attention to their employees. They are part of the company integrity and should be well selected, trained and motivated to represent their company (Sadhna, 2009). The objective of not only brand and general management is to build up strong commitment and motivation. I have already mentioned the significance of employee and customer engagement. Another level to relationship development brings feedback. Feedback of the customers helps to build the brand continuously. Among B2B companies, feedback is demanded through all channels on daily basis. It is the most effective way of market research and incentive for further successful satisfaction of the needs of customers. Enabling customers to participate in brand
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building and to make them feel integrated and included in the whole process is perceived as a modern way of customer involvement and one of the factors of building a strong and sustainable brand.
With the statement that brand promise is the most important element of successful brand building agree also Miletsky & Smith (2009, p. 53). A strong interconnection of a brand and customer is irreplaceable with money or time invested in building the brand. Relationship building is much more personalized on business markets rather than on consumer markets. With the raising amount of competition in every industry and technological system evolution, it is even more difficult for a company to establish and maintain personalized relationship with customers. The strong brand identity supports and evokes recognition and realization of customers so that they are ready to begin a two-way dialogue. Moreover it has a considerable potential for a long lasting life of cooperation and mutual exchange of information which leads to win-win business situations on B2B market.
In addition to these two brand-building factors according to Fisher-Buttinger & Vallaster (2010, pp. 124-127), there are B2B marketing specifics of building a strong brand left. One of the main marketing tasks in terms of building a brand is to provide the right association between brand and value proposition in the eyes of the customer. Transmitting value proposition in a coherent and distinguishing way helps the brand to stick with customer mind. Companies should actively ask their customers if they understood the brand message and its value proposition. This is extremely valid on business markets. And even if company built a strong brand message and associations which are coherent and clear, it would not necessarily mean that customer would remember the brand. Then it is a task for effective B2B communication. As pointed out before, the targeted customers are the basis for further effective communication. After the target group of customers is defined, the most desirable way of communication is the frequent one. But frequent communication cannot be used easily without making a negative impression. To ensure frequent and positive communication to customer is through permission-based communication.
At present market conditions, marketing cannot be done just by marketing department. Sales team grows even more on the importance for the whole process of bringing desirable product and brand to the customer. Sales person must notice clients in a deeper way in order to understand
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them not only for the purpose of sale, but for the sake of marketing information about brand and product as well. Then the interaction and proper communication between sales and marketing teams is crucial so that sales can provide relevant and detailed feedback about the brand and product from the target customers. The outcome is ideally optimization and adjustment of the brand offering and right value proposition to meet the expectations and needs of every single customer.
Building a brand is a process which requires large amount of resources and will not happen overnight. It takes three most important things to have, according to Miletsky & Smith (2009, pp. 51-53), which has a different perspective than Fisher-Buttinger & Vallaster (2010, pp. 124-126):
Time is the first thing because the process of building a brand, regardless of if on business or consumer market, takes time and depends on coordination of many activities, management and operational decisions, negotiations, analyses, feedback from customer and its implementation. The whole procedure cannot be limited by time and changes in the course of time. Therefore attention of company and managers is necessary thorough the whole process. Money is second because brand creation is usually passed to external agency which has experts to develop a brand in alignment with company´s values, image, personality and products or services. Complete understanding of core business of the company is the most important condition in such a task. Last possession is reason which applies in special case situation when brand is going to process of rebuilding. It is not an easy task and company must have a concrete reasoning for such a move. However, the reason can be just simple as the refreshment of the brand and company. Once in a time, it is even healthy to undertake the process of rebranding. It gives the brand a fresh look, draws the attention of all key stakeholders, including investors, which enhances the brand itself. Rebranding also creates the space for talks and curiosity about the brand which generates increased publicity and interest of the potential customers.
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2.
Brand importance on B2B markets
2.1. Which factors influence brand equity and brand success
Anyone can observe the brand big success stories as in Apple, Nike, Amazon etc. cases, but there are not just thousands but millions of brands which fail and die out without anyone noticing there were on the market in the first place. Behind the brand success lie many wildcard reasons (Emarald Insight Staff, 2004, pp. 1041-1045). Aaker (1996) identifies key factors which lead to and influence a brand equity:
Brand awareness is the initial factor. It means that a brand name is set in our minds (Harkestad & Roeine, 2012). Companies notice it in the first place, which is the basic incentive for further relationship development and conducting a business. Awareness is created by marketing activities such as event management, advertising, PR, direct marketing and sponsorship (Chunawalla, 2009). Building brand awareness is a long-term process which involved a multifactor mixture of marketing activities together with proper communication in every touch point between the company and its suppliers and customers. On B2B markets, companies are well aware of brands (Dimitrov, 2008), simply because they are specialized and operate in a specific industry where only limited number of companies and brands are active.
Brand loyalty provides the company customers who are making repetitive sales because they have built trust and relationship with the company. Company creates loyal customers by delivering brand promise including certain expected quality, experience and price. Loyalty is especially useful for preventing the customer from buying from competitors (Chunawalla, 2009). However, overall, brand equity does not have to result into brand loyalty in the first place. It rather reflects brand image (Juntunen & Juga, 2011).
Perceived quality is main element for positioning a product. It expects full understanding of targeted segment and binds brand´s financial results (Emarald Insight Staff, 2004). Pricing process is the key to determination of desired financial results. Branded products with high
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quality should be priced accordingly at price premium, otherwise if sold at discount or low price, it is a sign of lower quality which cannot be turn around easily.
Brand associations can be linked to both tangible and intangible properties such as actual product features and characteristics on one hand and experience, image and style on the other hand (Chunawalla, 2009) & (Harkestad & Roeine, 2012). B2B companies pay more attention to actual features and qualitative attributes of the brand rather than style and image it brings along. The significant success factor of brand association is past experience if there was any.
They are all intangible factors of the brand equity (Juntunen & Juga, 2011). The definition of brand equity according to (Aaker, 1996, p. 216) is “a set of brand assets and liabilities linked to a brand’s name and symbol that add to or subtract from the value provided by a product or service to a firm and/or that firm’s customers”. It is a general agreement among researchers that a set of associations connected with brand and brand name creates value added for the brand (Lambkin & Muzellec, 2010).
The other view, according to a research conducted by (Gray, 2000), brand success is influenced by products and services themselves that the company offers, followed by strong management team, internal communication processes and the overall reputation of an organization. Undoubtedly, there is a link between the brand and the actual products and services offered under this brand. Hence, the mutual interconnection and alignment of overall image and actions is desirable. Brand success relies also on superior management. However, not only brand management is responsible for brand success. There are all departments which need to be at the same footing, in terms of brand perception, brand image and brand culture. What´s more, these departments must be able to communicate effectively and ensure smooth data and information exchange.
Davis & Baldwin (2005, pp. 138-140) describe service offered as key element for selling, hence brand success. Services after sale and ongoing support from the company help further to build relationships and brand promise (Knox, 2004). Standards and client expectations and demands have increased in comparison with the past. Customers expect absolutely professional, preferably one-to-one relationship with the company, especially more on business markets. Extra
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customized products or services are a must, professional and informative website and other online services without exception. Services, not only during the purchasing process, but after sale maintaining service grew on the importance. Moreover, transparency, not only on financial and organizational level, is expected and appreciated. With this change have many companies across various industries difficulties, with the example of law firms (Davis & Baldwin, 2005, pp. 30-34). So now it is up to the companies to adjust to these high but nowadays standard requirements so that they build the brand equity and have success on the market.
Bottom line, the most mentioned advice or reason why brands are successful is the focus on delivering the brand promise (Sadhna, 2009) integrated with brand personality and image of the company. Successful delivery of brand promise demands involvement, motivation and preparation of key stakeholders (Aggerstam & Söderström). This applies to both external and internal ones. Employees are after all responsible for brand promise delivery because they represent the company and brand themselves (Jensen, 2009). This applies to employees on every single level of the organization as they all account for company success, hence the brand success. Delivering brand promise starts with defining the right audience and their needs, continuing with brand image and culture definition, selection of fight suppliers, ending with actual experience of the customer with the brand.
Research performed by Saraniemi (2010) takes into account seven internal elements which have influence on brand equity and brand success. These are: name, actions of the company, managers, employees, corporate core values, organizational values and product or service offered. The majority is in accordance with topics already mentioned and described such as management, employees, products and services offered and both company and brand values. It illustrates and supports the consistency of the research outcomes and B2B brand factors from both perspectives – brand building and brand success.
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2.2. How brand influences the company and its success
Brand or a portfolio of brands which a company is using stands behind the success of the company as one of the drivers (McKee, 2010). Indeed, there are many possible motives and branding is just one piece, but very valid one for both consumer and business markets. In general terms, branding is used to create value for products and services of the company to build competitive advantage, differentiate and help in positioning of the product or service (Fill & McKee, 2011, pp. 252-256). Competitive advantage is even more valuable when it is sustainable for future growth (Bhattacharya & Datta, 2010). Brands are always looking to thrive, but this is transient if the competitive advantage is not looked at from the long-term perspective. Along with that, brand can emphasize product customization and therefore meeting customer needs in a better and more convenient way (Bhattacharya & Datta, 2010).
Kotler & Pfoertsch (2006) offer simple statement regarding competitive advantage with regard to brand management influence: “brand management for industrial goods and services represent a unique and effective opportunity for establishing enduring, competitive advantages”.
However, company can survive and run a business without branding, brands are used for several reasons. Brands drive more the success and growth, rather than hedge the survival. Thanks to the use of brands, company can implement and take advantage of premium pricing, invoke emotional connections with customers through which it can generate loyal customers (Miletsky & Smith, 2009, pp. 54-55).
Strong brands are a powerful tool which influences many aspects, not only a company and its success, but market environment as well. Brands have the ability to command market share (Bhattacharya & Datta, 2010), create barriers to entry for competitors, help to launch new products, enter new markets easier, attract and retain talent, establish premium pricing, have more loyal customers, build and preserve trust (Miller & Muir, 2005, pp. 21-90).
Brands, of course, help companies financially. They provide source for two things: revenue and market capitalization (Gregory & Sexton, 2007). Brand supports and encourages revenues,
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profits, cash flows and increases market capitalization of the company if managed well. According to one study, brand accounts up to 20% of stock performance of the company, 7% on average (Gregory & Sexton, 2007).
2.3. Importance of brand on B2B market
Brand building in B2B environment is still regarded as underdeveloped and underestimated area (Mudambi, 2002). Most attention is paid to the B2C brands as they are more visible to the broad public and influence our lives on a daily basis. It does not necessarily mean that industrial brands does not, but still most of the top valuable brands in the world are consumer brands and only several exceptions exist, e.g. IBM, Cisco, Boeing, Fedex, Siemens etc. (Kotler & Pfoertsch, 2006, p. 2). But the perception of brand importance and purpose on business markets is changing and companies and brand management is starting to focus on brand as well (Fill & McKee, 2011, pp. 252-256).
The basic question is whether it is equally relevant for B2B companies to build a strong brand just as for companies operating on B2C market. There have been several studies conducted on this topic with various findings. One group suggests that the brand is just one of the drivers of customer purchase decision (Sadhna, 2009) or that organizations during their purchase decisions pay more attention to company and products or services offered than brand name (Kuhn & Alpert, 2008), but more papers and conclusions claim exactly the opposite that brand is vastly important for B2B companies and it does matter a lot as it states for example Mudambi (2002), Fill & McKee (2011, pp. 252-256) and Kotler & Pfoertsch (2006). Except from that, there is one more compromising alternative, such as dividing the purchasing situation between high-risk and low-risk. According to Brown (2010), in high-risk purchasing situations, brand will matter most and in contrast, in low-risk purchasing situations attributes such as price will prevail over the importance of brand.
First group, which claims that branding plays a small, not significant role in the B2B setting, if any, typically use the following arguments. First one is that buyers on business markets are
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rational decision makers or a cluster of decision makers whose decisions are based on rational decision making process and not on emotional factors such as branding. Secondly, majority of purchases on business market are conducted between sales representative and the buyer and the purchase is all about this relationship. So if brand has any meaning and importance on B2B market, it has been developed by sales representative of the company anyway. Third argument of the denier of brand importance on B2B markets is that buyers on B2B pay attention to price and product attributes as the only things that matters. B2B products or services are not influenced by such characteristics to make you “cool” or “sexy” as it is frequently seen on B2C market. Another statement concerns the complexity of the products offered. They are very often too complex to be captured by a simple advertisement or tagline. Lastly, companies operating on business markets sell their products or services to a very specific and narrow industry, where it is a prominent interest of the customers themselves to orientate on their market of suppliers, so the advertising and promotion of the brand does not play a role and even does not make sense at all.
Second group supporting the relevance of brands on B2B markets disclaims, however, the above statements and arguments. Brands, especially strong brands have the focal influence on the following matters. Firstly, customers are more likely willing to experiment and try the new product or service if the brand is known, because it decreases the risk of wasting money and other resources. Secondly, for the purchase of branded product or service, there is less time needed to close the sale and there is bigger likelihood for the branded product to be purchased. Undoubtedly, customers are willing to spend more money on branded products or services and pay the price premium in return. With a strong brand which is delivering the brand promise, customers tend to stick with the brand and are less likely to switch to competitors products to avoid all the risk of wasting money, resources, time, effort and mostly relationship with the current brand and company (Anderson, 2009).
The compromising alternative of B2B brand importance, where the importance is variable based on the risk level of purchasing situation, time horizon represents the second dimension. Decisions are not only low-risk and high-risk, but they are also divided into short-term and long-term purchase decisions. Long-term purchase decisions are more high-risk decisions, because they influence the state of the company for a longer time and bind the company to commitment regardless of the fact if it is advantageous or not. Prior to these high-risk, long-term decisions,
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extensive research and analyzes of all possible choices is conducted and multiple factors influence the decision which is made in a group. These purchase decisions are less influenced by the brand. On the other hand, short-term decisions bear relatively lower risk and are more frequently made by an individual person of the company. In this case, in contrast, brand plays more significant role, as an emotional factor and as the lack of deep review of alternatives.
Assuming that if you have two products with very similar features and pretty much same price on B2C market you would then decide based on the brand strength and reputation (Lambkin & Muzellec, 2010). Firms find themselves in the same situation on B2B market too, so the selection and decision-making process remains unchanged. Therefore the brand is equally important on both B2C and B2B markets (Miletsky & Smith, 2009, pp. 86-88). Brands refer to exactly same purpose on B2B markets as on B2C markets. In their essence, they provide the customer with a guarantee of attributes, value, origin, quality and performance, making the decisions faster and easier (Blackett, 1998).
Another thing is why it is so important and how the managers of different B2B companies see and perceive its relevance (Aaker, 2010, pp. 47-68). Furthermore, a brand of the company represents what the company is in its essence. In the context of business markets, corporate brands are often focused on (Aspara & Tikkanen, 2008) and take up for most of brand strategies on B2B markets (Dimitrov, 2008). Nowadays in the majority of B2B markets, B2B brand is usually the name of the company itself. And it is the brand that has the value.
After the assessment in the previous chapters, which included most important characteristics and element of brand building on B2B markets, the factors influencing brand success and equity and the other way around what kind of influence has brand on the company and its survival and success on the B2B market, I will structure and describe in detail why brand is important on B2B markets:
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2.4. Soft, financial and market aspects influenced by the brand
Loyalty and relationships is the first soft aspect which is somehow influenced by the brand. However, it does not have to be necessary true (Juntunen & Juga, 2011), brand has a strong potential to generate loyalty (Miletsky & Smith, 2009, p. 72). This is especially the case for business markets because the significance of developing and actively maintaining long-term quality relationships (Knox, 2004). Loyalty and relationships can be built after accepting and aligning feedback from customers with organizational actions (McQuiston, 2004). Relationships and concretely personal selling contacts prove competence, reliability and likeability (Aspara & Tikkanen, 2008). Trustworthiness and convenience appeared as notable merits in TATA Steel case (Bhattacharya & Datta, 2010) because that was what smaller customers wanted most, no waste of time and money on looking for new suppliers or solving problems with current ones on a daily basis. In addition to generating loyalty, brand serves as a strong barrier for competition and competitors products. If company is delivering the brand promise, buyers will probably not switch to competition easily. Only a negligible portion of B2B buyers would change their supplier which they have strong and long lasting relationship with for a new one who offers them practically the same product or service for 10% less. The effect works also the other way around, so that companies building a brand have to overcome this factor in order to get to the targeted market in the first place. Brand also effects on certain level the emotions which are consequently influencing purchase decisions. This is second soft aspect of the brand influence. The argument that there are no emotions involved because companies do not have emotions as consumers, is not valid simply just because the buying decisions are made by certain people in the company (Brown, 2010). And people have emotions regardless in which situation they find themselves. Hence, brands are important because decisions are influenced by emotions which are influenced by brand perception (Davis & Baldwin, 2005, pp. 130-138). Purchase decisions are made not only on the basis of product functional attributes, but on the perception of the sales people of the company (Dimitrov, 2008). The perception of the brand and its reputation is extremely important especially for the small businesses and as they make up for the most of the companies on the market, it is a topic for them. Good or bad word goes around very quickly in the closed specific industry area they are active in. Having good strong brand with stable dynamic reputation can be the decisive factor when a person from the purchasing company is about to make a decision for which brand and company they would go for (Miletsky & Smith, 2009, pp. 86-88).
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The other differentiating fact between purchase in consumer and business-to-business market is that the person purchasing products or services is not spending own money, but the money of the company. This has two implications. They have potentially at stake their employment by that company as they are responsible for the most suitable decision and solution which will bring the expected outcome for the company. So it means they will not be looking for the lowest price on the market, but for the best deal fulfilling all criteria and needs of their company. In that case, brand, bearing certain expectations and guaranteed results, plays one of the most important roles in the decision making process of the person responsible for the final purchase of the product or service. Customers usually consider among others several elements before making the decision. These are availability, cost, customer service, value proposition, company image, product authenticity, brand culture and brand values (Bhattacharya & Datta, 2010). And the assessment is not completely objective process just because behind the decision is a physical person. As Mr Randall of Movéo Integrated Branding once wrote, B2B buyers are in this dynamic, technological innovative environment with strong competition overwhelmed with options, attributes and features, benefits and most of all data and information overflow. Therefore, the buyer – individual person or a group of people – who stand behind the decision-making and purchasing process, still use heuristics to simplify the whole process.
As the third aspect of brand impact is talent attraction. Brand is considered as one of the major points when attracting committed and talented employees (Wise, 2008). In this case it is not a differentiating factor between consumer markets and business markets, but it is still valid as one of the factors why brand matters on B2B markets. This internal benefit of having a strong, sustainable and well-known brand attracts more talent for the company and thus enhances the overall performance and long-term results. People are obviously dragged to big brand companies as they sense several advantages it brings along. The first one is apparently higher salary along with large benefits offered by the company. Secondly, the organizational structure is greater and considerable, so it brings a couple of advantages. The employees have more opportunities to be promoted and thus make even more money and get more benefits. Then the promotion provides better social status and level of satisfaction. Also, big brand companies are global international players so the movement within the company to different countries and continents is feasible as
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well as business travelling. Lastly, the employees benefit from working in big brand company in the future career as the fluctuation is more common occurrence at present. So a strong brand constitutes for the company a better chance to attract the most talented people with excellent academic as well as professional background and potential to further growth and development. And since people need to grow and have the opportunity to grow, strong brand is one of the prerequisites of it, so that they can move within the company up and still stay loyal and committed.
Price premium is the first financial aspect. With the help of strong brand, companies are able to sell their products on price premium (Miller & Muir, 2005), which is enabled by trust, guarantee of quality and delivered brand promise. Here are we again back to importance of relationships where the trust is being built (Miletsky & Smith, 2009, pp. 71-73). Offering a price premium as one of the component of the brand importance has also the similar weight on both consumer and business markets. However, on business markets, strong brands are perceived and valued even more based on the performance, features of the product or service and promise delivery. The factors such as being “cool” and brand image play a considerably smaller role than it is on consumer markets. Often only in such conditions, brand is sold at price premium which is backed by the actual performance of the branded products. B2B companies selling their products at price premium do not have to sell at low prices or offer discounts. On the other hand, discounts and price variability is very common and used among B2B companies. Highly customized offers and deals are based on the size of the order and relationship quality between both companies. Within these offers and deals, discounts from the price premium are widely applied and company with a strong brand can afford to take such an action.
Secondly, brand has impact on the company value to a certain extent too. Brands, especially the strong ones, add value to the company markedly. For some big global companies it is true that their brand stands for up to 90% of intellectual (intangible) assets (Sadhna, 2009). In many cases, the brand is the company´s most valuable asset (Davis & Baldwin, 2005, pp. 190-196). Companies operating on business markets that took advantage of their strong brand and invested appropriate resources had been rewarded in terms of shareholder value. The example of four biggest industrial brands outperformed S&P 500 index by 9% on average (Gregory & Sexton,
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2007). Additionally, as it was mentioned in the previous chapter, brands enhance the performance of company´s shares by up to one fifth of the overall result (Gregory & Sexton, 2007).
Thirdly, profit margins and cash flow are influenced by the brand as well. Financial aspects also count when brand importance is considered. Brand has influence on profit margins. The stronger the brand, the higher are the profit margins. Plus strong brand generates more cash flow (Chunawalla, 2009). Quantitative study (Gregory & Sexton, 2007), which has been carried out for 16 years and includes 450 companies shows that there are billions of dollars of potential in B2B brands. There are two major reasons why B2B brands are important for the company in terms of profit margin and cash flow. Branded products have a better performance in the higher revenues, margins and profitability sense. In addition to that, company using active branding is perceived higher in the eyes of investors and shareholders. Brand creates interesting story and thus becomes more attractive for potential investments with a certain degree of guarantee.
Lastly two market aspects of brand influence and foreign expansion is listed as the first one. Today, most companies find themselves in global economy whether they want to or not. Even if they play only on local market, other global players have impact on the conditions and market environment. And just during the expansion to other markets, brand resembles focal factor and helps the company to settle in there and get market share (Wise, 2008). As the company grows and exceeds the size suitable for the local market, it is not a matter of decision but it has no choice than to expand and go abroad to other markets. As it expands geographically, having a strong and well-establish brand can be of the key denominators of success or set-back of the company. The brand forces an authoritative entry in the new market and drives the recognition followed in those foreign markets. Under further expansion could be also counted the product launches. It makes no difference if the product launch is made on local, domestic market or a foreign one. Brand is important to support the product launch and make it successful in terms of providing the initial trust of well established name, image, expectations and promise.
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The second market aspect is that brand plays a role of a differentiator because of B2B marketing limitations. In certain view, brands are even more important on B2B market that B2C. One case is the limitation on marketing activities of B2B companies. Marketing plays substantially smaller role on business markets than on consumer markets (Miletsky & Smith, 2009, pp. 86-87). Branding becomes even more and more relevant because it is harder for companies to distinguish themselves only on product quality or price (Mudambi, 1997). Thus, strong brand management is considered as key differentiator from competitors (Wise, 2008). When having a branded product or service, customers will even actively seek what is best for them and what has the highest brand reputation and brand image.