Successful Strategies for Global Umbrella Branding and Marketing - Centrica - Case Study Example

Table of Contents Table of Contents Successful Strategies for Global Umbrella Branding and Marketing: Centrica, A Case Study 2 Introduction 2 2 Importance of Topic 3 3 Company Background 4 4 Literature Review 5 4.1 Umbrella Branding 5 4.2 Global Branding 7 5 Research Framework 9 5.1 Hypotheses 9 5.2 Research Questions 9 5.3 Research Objectives 10 5.4 Research Method 10 5.5 Limitations 11 6 Research Plan 12 7 Bibliography 13 Successful Strategies for Global Umbrella Branding and Marketing: Centrica, A Case Study 1 Introduction It is generally assumed that a company's image is an outcome, or is determined by, its practices. Theories of consumer resistance to umbrella brands maintain that resistance is a consequence of a company's labour relations, its disregard of fair practices, its failure to project itself as socially responsible corporate entity and, importantly, market perceptions of it as a monopolistic entity. In such instances, theory maintains that marketing strategies and promotion campaigns are virtually ineffectual in the face of consumer resistance. Indeed, there is an abundance of theoretical and empirical research which indicates that a poorly performing product could cause spillover costs to other products that share the same brand name. Centrica Plc. effectively disputes the above stated theoretical propositions on consumer resistance to umbrella brands as an outcome of corporate practices or the poor performance of other products sharing the same brand name. While it publicly engages in philanthropic activities, the corporation has a poor labour relations record, has consistently proven itself a socially irresponsible company, and has fuelled claims that it is, in essence, a monopolistic, exploitative entity. Yet, this has not resulted in the above theorised consumer resistance and, indeed, has not halted Centrica Plc's expansion or stemmed its ever-spiralling success. While it can be argued that this is partially because there are no substitutes to Centrica's products and services, it is the position of this study that the aforementioned evidences the fact that the marketing and brand management of umbrella brands have the potential to overcome the challenges posed by corporate practices. 2 Importance of Topic The study proposes to examine umbrella brand management within the context of a global company. In so doing, the dissertation will argue that effective marketing strategies have the potential to negate the forces which incite consumer resistance. The aforementioned shall be argued and established through reference to Centrica Plc. As presented in the preceding paragraph, the importance of the topic stems from its theoretical and practical implications. While not arguing against the validity of consumer resistance theories, the research will dispute the proposition that it cannot be offset by marketing strategies. Indeed, brand management, such as which Centrica Plc has proven itself proficient at, can negate the forces which incite consumer resistance to umbrella brands. Insofar as it will focus upon the validation of the aforementioned, the study's theoretical value derives from the fact that it will highlight the potential of the marketing of umbrella brands to offset consumer resistance. Furthermore, to the extent that it will highlight how Centrica managed to do so, the study has practical value. 3 Company Background Centrica Plc was formed in 1997 in the wake of the demerger of British Gas. Over the past decade, the corporation has experienced significant growth levels, largely due to its expansion both beyond Britain and beyond the energy market. With operations in all of North America, Germany, Norway, Spain and Belgium, Centrica is a testament to effective and successful strategic global brand management. Controlling 76% of the UK's domestic energy market and sourcing and supplying energy across the world, Centrica also owns the Automobile Association (AA), Goldfish (a credit card company), and has interests in the residential phone market, to name but a few of its business activities. Functioning as a brand which signifies excellence, as evidenced in the various best business practice awards it has accumulated over the past decade, Centrica has largely been able to overcome the public relations challenges which it has confronted over the past decade for two reasons. The first of these is that Centrica embraces several brands, all of which are managed separately, thereby maintaining a distinction and separation between its various brands. This is important insofar as it aids in the negation of accusations pertaining to market monopoly and consumer market exploitation. The second is that through the strategic management of the Centrica brand, the corporation has been able to offset accusations pertaining to poor labour relations, consumer exploitation, negative environmental practices and market monopoly, by highlighting the philanthropic and social responsible practices and activities which its various divisions are involved in. On the basis of the foregoing overview of the dissertation's focus company, two observations can be made. The first is that Centrica is a case study in successful, result-oriented, strategic global brand management. The second is that strategic global brand management has the potential to negate a corporation's socially irresponsible and exploitative practices. In other words, even though Centrica's activities could have very well incited consumer resistance to the brand, its brand management strategy has largely functioned to ensure against this possibility. 4 Literature Review The study, as indicated in the foregoing, will focus on the extent to which marketing strategies can negate the factors which incite consumer resistance to global umbrella brands. As such, umbrella and global brands are our primary concepts and, accordingly, will be explored in this section of the proposal. 4.1 Umbrella Branding Klein and Leffler's (1981) theory describes the use of a brand name as a quality assurance mechanism for a single product. Many manufacturers produce multiple products and use the same brand name for products in different categories. One reason for this is that firms draw on the reputation of a previously established product in order to market a new product (Wernerfelt 1992). This assumes that the new product is an experience good. Since consumers are uncertain about product quality, they value a reduction in this uncertainty. Utilizing Hotelling's (1929) model of spatial competition, Wernerfelt (1988) shows that umbrella branding encourages consumers to draw on previous experience with an established, similar product in order to reduce the uncertainty of a new product. The theoretical implications of umbrella branding are further explored where branding signals product quality of a new, experience product by posting a firm's future sales of the established product as a bond (Wernerfelt 1988) or future sales of the new product as a bond (Choi 1998). Umbrella branding has also been defined as risk-reducing rather than quality-guaranteeing (Montgomery and Wernerfelt 1992). A firm still seeks to reduce a consumer's product quality uncertainty by branding it with the name of an established product. However, instead of increasing the expected quality level of the new product, or guaranteeing a higher expected quality level, umbrella branding reduces the quality variance of the new product, or reduces the risk of the new product (Montgomery and Wernerfelt 1992). Erdem (1998) explored both the quality guaranteeing and the risk-reducing effects of umbrella branding. Her approach utilized a quadratic utility function of quality. Given prior distributions for the true product quality and the associated errors, she used a Bayesian updating technique in order to estimate a consumer's dynamic brand choice decision. Although her study was the first to investigate the critical consumer assumption behind the theory of umbrella branding, she did not explicitly link this assumption to the information of consumer search. Instead, she viewed the updated risk-reduction of the umbrella branding theory as proof that consumers did correlate the product quality of the primary product to that of the secondary product, but she did not investigate why. The literature on umbrella branding, as indicated in the preceding paragraphs, tends towards the assumption that a brand name acts as a vehicle for firm reputation. The implication here is not just that consumers may be attracted to a new product consequent to its brand name but that they may resist new products, irrespective of their quality and utility, consequent to market perceptions of the brand and the company's reputation. 4.2 Global Branding The global branding literature is fragmented. Divergent topics have been investigated by researchers in this field. Main research streams can be summarised as standardisation/adaptation of global brands, country of origin and brand origin studies, global brand management strategy and organisational coordination issues, global brand personality studies, cultural influences of global brands, global brand associations, global brand image and positioning strategies, global brand equity measurement issues, corporate social responsibility of global brands, and many case studies investigating individual global branding cases. Global brands are among the most important intangible assets a company can have. According to the Interbrand Business Week Study (2004), the financial value of the top 100 global brands exceeds $1 trillion. In line with its importance, many researchers have investigated different aspects of global branding. Of these, the standardisation/adaptation research is probably the oldest. The majority of the studies in this stream investigated promotion strategies of global brands, e.g., international advertising. While Agrawal (1995) traced the beginning of this debate to the 1920s, only in the late 1950s did the first academic engagement on the issue emerge. Since then, international marketing strategy has been the central focus of both academics and practitioners (Agrawal 1995). There are different conceptualizations of what "global brands" means. Although there is a shortage of formal definitions of "global brands" in the literature (Steenkamp et al. 2003), global brands can be defined as brands that consumers can find under the same name in multiple countries, with generally similar and centrally coordinated marketing strategies (Steenkamp et al. 2003). Insofar as multinationals are concerned, global umbrella brands are invaluable corporate assets. If the global consumer has positive perceptions of a particular global brand, associated new products can be successfully launched with comparatively little marketing expenditure. The global market's positive reception of the product will be, in such instances, largely guaranteed by the reputation of the brand itself (Johansson and Ronkainen, 2005). The opposite, however, is also true. In other words, negative global market perceptions of a particular brand will induce consumer resistance to a similarly bra nnded product, irrespective of its utility or quality. 5 Research Framework 5.1 Hypotheses Positive global and domestic market perceptions of a particular brand can positively influence the market performance of its product family. Negative global and domestic market perceptions of a particular brand/company can negatively impact the market performance of its product family. Consumer resistance to umbrella brands can be overcome by effective brand management and the establishment of brand equity. 5.2 Research Questions With respect to the articulated hypotheses, the following research questions have been selected to frame the study. What is global umbrella brand What is the importance of umbrella branding What are the proven success strategies for umbrella branding and marketing Has Centrica Plc implemented successful umbrella branding and marketing strategies 5.3 Research Objectives The study's main objectives may be clarified as follows: To explore the importance of branding; To investigate the impact of umbrella branding; To uncover the complications of global umbrella branding; To determine what types of consumer groups umbrella branding and marketing reach; To analyse the forces which may give rise to consumer resistance to umbrella brands; To determine whether or not umbrella branding and successful marketing can confront consumer resistance to global umbrella brands. To evaluate the importance of brand equity to the success of umbrella brands. 5.4 Research Method The research will utilise both primary and secondary data, drawing on a large array of resources for the collection of research data. Primary data will be collected through surveys and semi structured interviews, while secondary data will be derived from journal articles, books and the internet. The data collected will be analysed using both qualitative and quantitative methods. 5.5 Limitations The conclusions reached by the study were limited by the information and data discovered in the books, reports, studies, and other related materials that comprised the literature review and analysis. The findings were further limited by the primary data collected. 6 Research Plan Research Plan Research Plan - Master schedule expressed in weeks Dates are Mondays August September October November Event 1 8 15 22 29 5 12 19 26 3 10 17 24 31 7 14 21 28 Literature search and review Developing a Measuring System Preparing Questions for Interviews Contacting Respondents Interviewing Processing the Data Conclusion 7 Bibliography Agrawal, M. (1995) Review of a 40-year debate in international advertising.' International Marketing Review, 12 (1), 26-48. Choi, J.P (1998). Brand extension as informational leverage.' Review of Economic Studies, 65, 655-669. Erdem, T. (1998) An empirical analysis of umbrella branding.' Marketing Science 35, 339-351. Interbrand/BusinessWeek (2004), The Global Brand Scoreboard: The 100 Top Brands,' Businessweek. Johansson, J. K. and Ronkainen, I.A. (2005) The esteem of global brands.' Journal of Brand Management, 12 (5), 339-55. Klein, B. and Leffler, K. B. (1981) The role of market forces in assuring contractual performance.' Journal of Political Economy, 89(4), 615-641. Montgomery, C.A. and Wernerfelt, B. (1992) Risk reduction and umbrella branding.' The Journal of Business, 65(1), 31-50. Steenkamp, J. et al. (2003) How perceived brand globalness creates brand value.' Journal of International Business Studies, 34 (1), 53-65. Wernerfelt, B. (1988) Umbrella branding as a signal of new product quality: an example of signaling by posting a bond.' Rand Journal of Economics, 19(3), 458-466. Read More