To brand…or NOT to brand B2B Products

The conventional wisdom concerning the positives of branding business-to-business products is most compelling, as articulated by Hard University Prof. John Quelch.

Quelch points out, in B2B Branding: Does it Work in the November 28, 2007, issue of Working Knowledge, the Harvard Business School’s on-line weekly newsletter, that among Interbrand’s 10 most valuable brands include Microsoft, Intel, IBM and General Electric.  “All generate far more B2B revenues than sales to end users,” he writes.

Characteristics of Leading B2B Bands

A HBS research team, according to Quelch, recently conducted a study of top B2B brands, and that study showed the following characteristics of successful B2B brands:

• The CEO acts as the brand cheerleader.
• The CEO understands the building the brand’s reputation reduces commercial risk, insulates the company in a crisis and creates a common purpose that bonds the company’s stakeholders.
• Efforts focus on a single global brand rather than individual product brands.
• The payback on marketing expenditures is measured rigorously by engineers and the finance staff running the typical B2B enterprise.
• Tight coordination of the company’s Websites allows the company to provide a single face to stakeholders.

Quelch considers Intel the “ultimate ingredient brand.”  Though it makes no sales to consumers, Intel builds consumer demand through its “Intel Inside” campaign.  He points to GE and Microsoft as “hybrid brands” with a brand relationship with both consumer and B2B markets.  He sees Accenture as a brand that means nothing to consumers, but its Tiger Woods-endorsed “Performance Delivered” campaign has created positive awareness to the hundreds of thousands of Accenture’s client people and has created penache for the brand.

He asks:  “Would Dupont’s shareholder value be the same today if it had not made consumers aware of nylon, Lycra and Stainmaster and linked these innovations to the Dupont name?  Definitely not.”

Double-Edge Sword

However, branding of B2B products can also be a double-edged sword.    In at least two recent instances, branding and hype have created expectations that accelerated the negative effects of bad news.

Boeing and Apple both were hurt in major ways when the marketplace discovered unrealized expectations from products given high-profile branding and publicity.

In the case of Boeing it was the 787 “Dreamliner.”  The company had booked some 700 orders from more than 50 airlines based on the display of a prototype of the plan sitting in a hanger on July 8, 2007.  Boeing’s marketers positioned the Dreamliner as a new generation of plane.  But Boeing’s stock took a substantial hit when it was revealed that both test flights and initial deliveries would be delayed.

Apple’s unrealized expectations focused on its iPhone.  Heavily promoted after its late June, 2007, launch, the product sold for $500.  Initial demand was so high that EBay offered the iPhone for a $100 surcharge and there were news reports of shortages and lines of customers trying to buy the new phone.

But problems soon surfaced.  The reviews were mixed.  Also there were problems with delayed activation and slow e-mail.  Suddenly the marketplace was a little less enthusiastic.  So, the company announced a $200 price cut only eight weeks into the product launch.

Quelch writes: “The hype brought forward demand from the Apple afficionistas who love all things Apple.  But these loyal customers were the ones caught short when Apple announced a $200 iPhone price decrease 8 weeks after launch.  This suggested iPhone sales had slowed considerably below post-launch expectations and might not meet holiday season targets.  The stock price was punished immediately.”

The lessons from unrealized expectations, according to Quelch:  “CEOs., often dismissive of marketing, are discovered a dangerous reality:  aggressive marketing and brand-building can boost stock prices by raising customer and investor expectations.  But the penalties for not delivering on marketing promises are fast becoming as significant as not meeting quarterly earnings targets.”