Nestlé paid millions for Rowntree to get its hands on the brand names, Kit-Kat among others. Kit-Kat is one of the oldest UK chocolate biscuits and goes back to 1935. Cadbury's Dairy Milk was the first chocolate bar. Not many small firms can go back that far, but it illustrates the point that a strong brand image is important to retain customers, develop the range of products and add value to the balance sheet. I am often disappointed how few small firms actually put their name on the product or on the side of the van. It is as simple as that. Branding includes names on shop overalls, sweaters at a show, stationery and graphics. It is your corporate image. Start with a good name, memorable and preferably illustrative of what you do. My own trading style is Merry Marketing. It invariably brings a smile to whomever I am addressing and people remember it. As I try to run my business with a little quirk of humour it seems an apt title. If your father was called Smith, then try to tag on a descriptive phrase.
The image and identity of the product or service should be carried through the range of whatever you do. We are talking about the personality of what you do. If you are a happy, outgoing person, the image and service of your staff should be in the same vein. Branding is very much tied to the position where you place your business. Upmarket goods will demand elaborate presentation and premises to match. Market traders pile it high, sell it cheap. Everyone strives to be brand leader in their field. This is obviously difficult for small firms, but it may happen in a niche market. Brand leaders set the pace, not just with price but with innovation, product development, profits and calibre of staff. All the bright people want to work for them. Staff training and commitment, customer care policies, solid reputations and no-quibble guarantees are invariably the hallmarks of brand leaders. Price levels are invariably set by the brand leader. Where they go, others follow.
Establishing a strong brand identity will take years, but you have to start somewhere. As your reputation becomes recognised you can add more products or services to capitalise on your good name. Some lines can be bought in and rebadged, bearing in mind that the new additions must equal or exceed the quality you already offer. Such brand extension, as the pundits call it, could damage the whole enterprise if there is a failure, and some would argue that, if overdone, it could weaken the brand impact and credibility. Virgin, Tesco and Marks & Spencer have gone into financial services: a far cry from what they were set up to do.
How do you set your price? Copy what Charlie does down the road minus 5 per cent, add X per cent on to your bought-in price or run a continuous sale? Setting the correct price is one of the most vital aspects of staying in business. In my experience small firms tend to underprice rather than overcharge. New firms in particular both underestimate the costs of running a business and undervalue their own worth. Back to basics. Never forget the old saw 'turnover is vanity, profit is sanity'. Avoid products that require huge volumes to generate a profit. A high turnover may look good on the profit and loss account, but your banker is more interested in the bottom line. Many firms in the 1980s found turnover shooting up but lost money on bad debts, high borrowing and expansion costs.
Golden rule: price what the market will bear. Easier said than achieved, but that should be your yardstick. The costs of production are almost irrelevant, it is what the customer is prepared to pay that is important. I can remember Which? doing a study on face cream, and the cost of ingredients of one of the elaborately packaged brand leaders was pence. The price to the Christmas shopper was measured in pounds.
Genuinely new products in particular need careful calculation and market testing to arrive at the right price. As a generality, a new line with no comparison and many benefits should be launched dear and reduced as competition intrudes. It is easier to reduce a price - and be able to give a discount on quantity - than to put the price up. Naturally, you must know what your product or service costs you to provide, but that need bear little relation to what you charge. You must have the figures to ensure you are at least ahead of break-even to be able to form a pricing policy, unless some lines are sold as a loss-leader.
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07152010
1. Product positioning is an important business marketing aspect
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