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If I say "soft drink," what's the first thing you imagine? (Student) Coke.

Yes, Coke, or officially, Coca-Cola. OK, if I say café or coffee, what do you think? (Student) Starbucks.

Yes, Starbucks, as I expected. How about computer software?

(Student) Microsoft.

Yes, again, as I thought. Now how did I know what you were going to say? Well, Microsoft, Starbucks, and

Coke are all famous brand names, which is what I'm going to talk about today. Specifically, what is a brand and why is having a strong brand name important. T

First, let's start with the definition of a brand. According to the prestigious Kellogg School of Management, a brand is defined as a name or a symbol that has a specific set of associations. Think about that a name or a symbol that has a specific set of associations. So basically, if you hear a certain name, you associate a certain meaning with that name. For example, the name Starbucks is synonymous with things like gourmet coffee in a relaxed atmosphere. McDonald's is synonymous with cheap food and convenience. A brand could also be a specific product's name. For example, if you're hungry, want something filling, and don't have a lot of money, a lot of people will think of a Big Mac, perhaps McDonald's most famous product.

(PAUSE)

So, why is branding so important in business? Well, several reasons. One, if you establish your product as a

brand and if your brand has a good reputation, you can charge more for the product. This is known as "brand

equity." How much extra consumers are willing to pay for a product is a measure of brand equity, Consider this interesting experiment a marketing professor conducted with his students. He took a survey on how much they were willing to pay for a pair of earrings. He presented a pair of 18-karat gold diamond earrings to one group of students and said that they were from Tiffany. Well, the average price these students were willing to pay was $873. OK? Eight-hundred and seventy three dollars for earrings they thought were from Tiffany. The professor then asked another group about the earrings, this time saying they were from Wal-Mart, a store famous for low-cost items. It turned out that the students in this group were willing to pay an average of just $81 for the earrings. $81! 91% less than the Tiffany group! So you can see, then, that Tiffany has very

strong brand equity. The name Tiffany is synonymous with being expensive and luxurious. Wal-Mart, on the other hand, is synonymous with low cost, which is what made the second group of students think the earrings were only worth $81.

So what does this illustrate? Well, how people judge value is not based on the product itself as much as the brand name attached to it. Many consumers are willing to pay a higher price for a brand they perceive as superior or which has a certain status.

(PAUSE)

Now, the second reason why branding is important is something referred to in the marketing world as "Product Life-Cycle." Product Life-Cycle. Let me explain that. You know that all living things go through a

life-cycle. They're born, grow, mature, grow weaker, and eventually die. Well, consumer products are not that different. Philip Kotler, a famous marketing professor, outlined four steps in a product's life-cycle. Here you can see a graph of a typical product life-cycle.

OK, step number one is the Introduction. A product is introduced into the market. However, it takes a while for consumers to hear about the product and decide if they actually want to buy it, so sales are limited. This introductory period is pretty challenging för companies because they spend large amounts of money on marketing for this new product. So spending on marketing and limited sales means that a company is likely to lose money during this introductory period. Even when Coca-cola was first introduced over a hundred years ago, it took some time for consumers to accept this new beverage because it was so different than any other drink that was on the market at that time. They knew about lemonade and ginger ale, but they didn't know what a "cola" was. OK, so that's Introduction.

Step number two is Growth. Here, sales increase because more consumers now know about the product and more are giving it a try. For example, when Coca-Cola started popping up on restaurant menus and store shelves, and as people told their family and friends about this tasty new drink, sales increased dramatically.

The third step in a product's life-cycle is Maturity. Here, sales reach a steady point - not really increasing or decreasing dramatically - because consumers have already decided whether or not they want to buy this product. So, those who like Coke will continue to buy it, while those who don't will simply buy another drink.

(PAUSE)

The fourth step in a product's life cycle is Decline. This is when a product grows weaker as sales decrease. Now just generally, what are some of the reasons for a product's decline?

(Student) Competition!

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Yup, competition. For example, Coke always has to worry about its main competitor, Pepsi. Now you may think that in the cola wars, Coke will always be number one and Pepsi will always be number two. After all, Coca-Cola is not only the top selling soft drink in the world overall, it's also perhaps the most famous brand. Well in many countries, Pepsi, not Coke, is the market leader. Pepsi is the top cola in China and India, for example, and as their economies grow, Pepsi expects their brand to grow with them. Coke also has to fight off more recent competitors, like Hansen's Natural Soda, which claims to be a healthy soda, and Red Bull, which claims to give you more energy.

Now in addition to competition, another thing that might lead to decline is politics. Well, here's an example

of what I mean by politics. We know that there are many places in the world where anti-American sentiment

exists. Well according to the New York Times, in some countries in the Middle East for example, more people

drink Pepsi instead of Coke. The Coke brand equals American culture, and so they refuse to drink it. Pepsi,

though it's also American, is just seen as a soft drink company. Coke's being associated with American culture

is one of those cases where a brand association is not always good for business. Basically, what I want to say

is that mega-companies like Coca-Cola and Starbucks and Microsoft may seem invincible, but factors like

competition, changing consumer tastes, and even politics show that in business, the future's never certain.

So again, the four steps in a product's life-cycle: Introduction, Growth, Maturity, Decline. Every product or

company goes through this, so it's important to create and maintain a strong brand name and be able to fight

off competition and remain profitable; basically, to have a long life in business.

Moving on, let's look at strategies corporations use to maintain and strengthen their brand...

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