A brand is the tip of an iceberg. How big and how deep the
iceberg is will determine how powerful the brand is. The iceberg is the category.
If it melts, the brand will melt too.
Take Kodak, for example. Just eight years ago, Interbrand ranked Kodak as the
16th most valuable brand in the world, worth $14.8 billion.
Every year since, the Kodak brand has fallen in both rank and
value. This year, Interbrand ranked Kodak No. 82, worth just $3.9 billion.
What's a Kodak? It's the world's best film-photography brand.
Unfortunately for Kodak, the film-photography iceberg is melting as the world
Brand stands for 'trust'
Years ago I was discussing the situation with a Kodak marketing manager. It
was no secret then that digital photography was starting to replace film. You're
going to have to launch a second brand, I said. Not so, the marketing manager
replied. The Kodak brand stands for more than just film. It stands for "trust."
Trust Kodak for film photography. Trust Kodak for digital photography.
That seems to make sense. Furthermore, Kodak invented the digital camera and
introduced the first model, the Kodak DCS, in 1991.
Sense doesn't matter in marketing. The Kodak name was the tip
of the film-photography iceberg. And so far no brand, including Kodak, has managed
to climb to the top of the digital-photography iceberg. As a matter of fact,
all the digital camera products (Sony, Nikon, Olympus, Pentax, Casio, Samsung,
Panasonic, etc.) are line extensions from other icebergs.
Nobody is thinking category. Everybody is thinking brand. "How
do we take advantage of our well-known brand to carve out a piece of this new
The Eastman Kodak Co. has been devastated by its brand-oriented
approach. Compare the past with the present. In the last six years of the 20th
century (1995 to 2000) the company had sales of $87.3 billion and net profits
after taxes of $6.7 billion, or a 7.7% net profit margin. In the first six years
of the 21st century (2001 to 2006), Eastman Kodak had sales of $80.4 billion
and managed to lose $296 million. (No wonder the stock market has lost its trust
in the Kodak brand.)
Dominate a category
The objective of a marketing program is not to build a brand, but to dominate
a category. Red Bull dominates the energy-drink category. Starbucks dominates
the high-end coffee category. Google dominates the search category. Does it
surprise you that these relatively recent brand successes were started by entrepreneurs,
not by established companies?
It shouldn't. Big companies are busy burnishing their brands
while entrepreneurs are looking for ways to dominate new categories.
Brands are important, but they have value only to the extent
they stand for categories.
Take Coca-Cola, the world's most valuable brand, according
to Interbrand. But the value of the Coca-Cola brand has been steadily falling.
It was worth $83.8 billion in 1999. Today it's worth only $65.3 billion. Why
is the value of the Coke brand falling? Because the cola category is losing
its share of the soft-drink market. A brand is only valuable to the extent it
stands for a category.
The Marlboro brand, according to Interbrand, is worth $21.3
billion. As smoking continues to decline, someday the brand is going to be essentially
worthless. (Maybe the nicotine-flavored chewing gum category will make the Marlboro
brand worth a few dollars.)
As a category iceberg melts, so does its brand melt too. As
the minicomputer disappeared, so did the value of the Digital Equipment brand.
As the word processor disappeared, so did the value of the Wang brand. As instant
photography slowly disappears, so does the value of the Polaroid brand.
Most companies are so brand-oriented their first thought is,
"How do I save my brand?" So Digital Equipment launched a line of
personal computers with the Digital name, as did Wang with the Wang name. And
Polaroid launched a raft of new products including conventional cameras and
film, printers, scanners, medical imaging systems, security systems, videotapes,
etc. With the Polaroid name, of course.
All for naught
All for naught. Polaroid went bankrupt in 2001 and through a series of transactions
wound up in the hands of the Petters Group in 2005. That year, when the new
chairman was asked what would Polaroid be like in the year 2010, he replied,
"It's a consumer electronics leader known for really cool products that
offer quality and value."
There's no iceberg out there in the consumer ocean named "cool
products that offer quality and value." So expect Polaroid's second reincarnation
to be no more successful than its first one.
There are two types of icebergs. The first type is narrow and deep. The second
type is broad and shallow. While the second type might offer greater sales potential,
the first type offers greater profit potential and greater brand stability.
Brands that are narrow and deep are almost invulnerable to competitive attacks.
Furthermore, they usually are incredibly profitable. Think Rolex in expensive
watches, for example. But there are many other brands that fit this description:
- Hellmann's in mayonnaise
- Campbell's in canned soup
- Heinz in ketchup
- Orville Redenbacher in popcorn
- Tabasco in pepper sauce
- Gatorade in sports drinks.
Visa in credit cards
Someday your brand's iceberg might start to melt. So what. You can always look
around for a new iceberg to dominate.