Branding for Commodities

Brand in Ancient Time

• Around 8,000 years ago in ancient Mesopotamia, villagers used to trade within their villages or the next village. The relationships were personal. The manufacturer and seller were the same person.
• Over the next several thousand years, Mesopotamian villages grew into cities. Around 5,000 years ago 20,000 people lived in the city of Uruk, located in present day Iraq. With that many people the personal trust relationships were broken. Products may not have been made by the seller. No one knew what kind of quality was being purchased. The Mesopotamians came to rely on the stone seals impressed in the caps and stoppers of oil and wine.
• This means branding is at least 5,000 years old. Branding gave order to a confused world. It simplified communication. It indicated quality. It was a promise.

From Commodity to Brand

• Branding helps people buy, identifies differences in products and services, gives buyers safety, offers the potential to build relationships with emotional connections, and enhances company value.
• Commodities exist in the mind of buyers when a buyer does not perceive a difference between products. Important differences may exist, but if a buyer do not perceive them they do not exist for him/her. Whatever a buyer perceive is his/her reality.
• When buyers perceive no differences between two products, price becomes the determining factor.
• When buyers are unfamiliar with a product category and receive conflicting information about products with no means to separate the truth, buyers act like the products are commodities.
• Consider the example of the air conditioning industry. To replace an air conditioner today we are confronted with an array of choices, such as efficiency levels etc. In this environment, two different sales people from two different companies often provide conflicting advice and recommendations.
• This product and feature confusion leads to the one objective piece of information available, which is price. In short, product and feature confusion leads to the commoditization of a category.
• Confusion = Commodity

Strategy for commodity branding

• The first step in developing a commodity brand is to segment the market from all possible perspectives, be it demographic, psychographics, needs, wants or benefit etc.
• In the second step marketer should offer a value proposition through differentiation and then communicate that brand consistently and powerfully. Differentiation could be created at various stages of product development and delivery. It may include the quality of the product, the price, packaging and its availability in the retail outlets. For instance Tata salt highlights attributes like iodized, free flowing, non sticky etc, to the consumers to differentiate from other brands.
• Third step is to deliver the value in terms of service and after sales services and maintaining long term relationship with customers.
• In case of commodities, branding can take place at two levels:
• Category Level – The entire category is promoted by a association of producers to mutually garner the benefits of branding. Such products are usually produced by a huge number of producers and their product is jointly marketed by a central processing authority (e.g. milk and eggs).
• Individual Organization Level – An organization aims to gain by branding and differentiating factor (e.g. salt, flour, diamond). For instance the branded jewellery Gitanjali group is the front runner. It is one of the largest branded jewellery retailers in the world and enjoys a market share of over 50 % of the overall organized jewellery market in India. Prominent brands housed by the group are Nakshatra, D\’damas, Gili, Asmi, Sangini, Maya, Giantti, World of Solitaire, Shuddhi, Diya to name a few. Gitanjali is engaged in the cutting and polishing diamonds as well as in jewellery manufacturing, branding and retailing.

Case Study: Ambuja Cements

• Ambuja Cements is one of India\’s largest cement brands. Ambuja Cements is one of the companies that realized the potential of brand as a differentiator. It is a classic example of a successful commodity branding and one of the first cement brand to start advertising in television.
• Ambuja Cements also used the outdoors extensively to reinforce the brand image and enhance brand recall.
• Ambuja Cements also focused on influencing the other players in the business like the contractors/masons and engineers through regular meet.
• While branding the cement commodity, Ambuja Cements concentrated on its core brand promise of strength. In its campaigns, the brand was very consistent on reinforcing its positioning as the strongest cement.
• Commodity branding influence the consumers to change their commodity mindset towards  a certain category. As in case of cement, many home owners started to buy Ambuja for their home construction because they do not trust the contractors.

Case Study: Parachute Hair Oil

• Hair oils and its use are deeply ingrained in to the Indian customs and tradition. This is a industry which is dominated by unbranded oils due to very low entry barrier. The majority of the hair oil segment is occupied by Coconut oil. Parachute is a major player in the branded hair oil market with a good market share.
• Marico has positioned Parachute in the platform of purity. This strategy clearly differentiated the product from the rest of the unbranded oils. In case where the product differences are virtually non-existent it is imperative to differentiate the commodity on non-product related measures.
• The purity was reinforced by careful packaging and communication. The brand was established emphasizing the caring relationship.
• Keeping in mind the urban market Parachute highlighted that the oil is non greasy and prompted the target group to experience the brand.

Conclusion

• Creating, developing, implementing and maintaining successful commodity brands is at the heart of marketing strategy.
• Branding of commodities offers additional value both to the consumers and the producers. Branding leads to commodity differentiation and hence enables consumer preference. This translates into greater choice and quality for the consumers. To the producers branding provides the opportunity to increase gross margins by increasing the value perception of their product.
• The most successful brands will always be those that deliver not only the tangible functional value but also the intangible value that is the implied guarantee of a branded product. The promise of the brand will always be seen as the most valuable benefit because when confronted with two choices of apparently equal benefit, the consumer will always choose the one that feels right.