Pepe Jeans London, Custo Barcelona and Evian water (based on the town of Evian-les-Bains) are just some examples of how corporate brands based on place names can make those brands more competitive. The relationship goes in both directions, according to Gildo Seisdedos, professor at the Instituto de Empresa, and Cristina Mateo, a consultant at Madrid City Council, who recently studied the contribution that location-based brands make to successful management in the global marketplace.
Their study, “Commercial and Place Brands, a Two-way Road,” looked at the 3,000 brands from more than 50 countries that appear in the reports of Interbrand, a leading international consultant. Their report studied almost 100 cases. In this initial phase of the research, the authors explained to Universia-Knowledge at Wharton, they have developed a matrix that relates “the intensity to which a place-name is used – on the horizontal axis of the matrix – and the reach that the brand has in the marketplace, on the vertical axis of the matrix.” That way, they noted, “we created four quadrants in which we can effectively place each global brand.”
The Essence of a Brand
They authors delve into the origin of commercial brands and those geographical locations that have become brand names. Their study illustrates how that two-way relationship has worked throughout history. Seisdedos and Mateo explain that the passage of time has not had any fundamental impact on the essential nature of branding. The historic goal of branding has been to identify the person or location where a product has its origins. From antiquity, the authors assure us, “the value of a brand has been recognized by consumers, who reward the best producers with their loyalty, and by producers themselves, who are aware that their brands symbolize good practices.”
According to the experts, a powerful brand provides a meaningful competitive advantage and it is extremely hard for competitors to duplicate. However, it is increasingly hard to find products and services that are genuinely unique. These days, most innovation comes from small variations in a product’s formula, price and quality. To succeed, you have to emphasize the emotional appeal of your brand, which means making a significant investment in marketing.
The economic relevance of brands has multiplied exponentially, nevertheless. Brands are considered assets truly comparable with other corporate assets. For example, the authors point to the power of Coca Cola. The value of that brand is estimated at more than $65 billion, or more than half the company’s market capitalization. That’s because a powerful brand can generate a more predictable cash flow by boosting consumer loyalty.
Experts say that good brands are built on the confidence of consumers that they will not be disappointed. Those organizations, companies and locations that hope to develop their own successful brand need to learn how to build a brand that constantly attracts buyers by meeting their expectations, say the authors.
The Role of Location in Business Brands
On the other hand, locations have also become important attributes for some commercial brands, largely because industrial development in a particular sector is often focused entirely in a single city or region. The wine industry provides perhaps the most obvious example of how a place-name can play an important role in branding. We buy a Rioja (a location brand) but not a Ramon Bilbao (a commercial brand.) Some call this quality of a geographic name a “collective brand.” The Mediterranean model for doing this also applies in France, Italy and Spain. In English-speaking countries, such as the U.S. and Australia, the branding system works the other way around. The commercial brand and the name of the country are derived from the region. For example, “It is an Australian wine with the Cloudy Bray brand.”
Because of globalization, changes in the production processes have also altered the way commercial brands employ the concept of territory. Legends of technological innovation are pervasive in Silicon Valley, California, strengthening such brands as Google, Cisco and Apple. But these products and services are generated within a global network of financing, technology and human resources. To illustrate the new relationship between brands and place, you only have to look at the back of an iPod, which reads: Designed by Apple in California, made in China. In this case, say the authors, “the brand is supported by a location and vice versa. They feed off each other, and there is another factor that provides greater complexity: [the reference to] ‘made in China.’”
The traditional relationship between brands and place-names has changed, along with the attributes given to locations. “Clearly, until now, ‘made in China’ was not perceived in a positive way but in the future ‘owned by China’ could become increasingly relevant [for marketers] given a scenario where there might be 50 Chinese companies on the Fortune Global 500 list. That’s something the Chinese government is eager to accomplish,” they write.
The Origin of Location-based Brands
According to the study, using locations for branding purposes is as old as history itself. Even ancient civilizations such as the Roman Empire acted as brands, along with their cultural values, identities and power. On occasion, an artificial image of a location can build a consensus throughout history. Locations act as brands because people want to be proud of their place of origin. “As a result, manipulating the image of cities, cultures and experiences has become the most important component of the entire branding process,” the authors say.
During the nineteenth century, newly created nation states used all of their powers to unify their languages and religions, and to create a sense of national identity through such means as standardized national education. In this context, the creation of a country-of-origin product became very important, and it remains so today, the authors say.
After the Berlin Wall fell, a new global order emerged and new competitors appeared on the scene. “It became clear that the world was going to be dominated by several countries that had a competitive advantage not just because of their [superior] natural resources. Since not every country could be competitive in every industry and sector, they would each compete by focusing on specific industries and market segments.” In fact, note the authors, “Apparently, some of the companies that innovated the most came from specific countries and not necessarily from other countries. That’s why we’re so interested in studying the role of place-names in building commercial brands.”
The authors developed a model that relates the degree to which a place-name brand is used as a commercial brand with the breadth of its target market. One example involves France. That country has become a brand through association with what it usually produced – perfumes. As a result, France is perceived as glamorous and “aspirational.”
The Relationship between Territory and Brand
In their matrix, the authors identified four types of relationships between commercial brands, on the one hand, and the way those brands employ place-names to strengthen themselves. First, there are the “emerging” brands, which compete in most of the marketplace and do not rely on any place-name to strengthen their brand. These brands are located in the upper left quadrant of the matrix. “One example is Zara, the only Spanish brand that appears in Interbrand reports. That brand never refers to its ‘Spanishness.’ If you ask people outside of Spain where Zara is from, in many cases they could not answer that question,” the authors write.
Why is that so? At this point in their research, the authors can only guess. Just possibly, they say, this attitude has geopolitical roots. “The land of Spain, until now, have referred to some stereotypical Spanish images (such as sun and beaches). On a design level and in certain sectors, perhaps it was not very appropriate to depend on that image [of Spain].” Currently, brands such as Custo Barcelona in the textile sector are already beginning to make use of specific locations to strengthen their brands, whether those locations are a specific country, city or a region.
In contrast to Zara, there is another category of brands known as the “ambassadors.” These brands compete in a broad market where they use the location brand with a greater intensity, and they can be found in the upper right quadrant of the authors’ matrix. One such example is IKEA, which competes on a global level but always refers to its Swedish origins; its corporate logo even uses the colors of the Swedish flag. Another sort of brands is called the “aristocrats.” These brands are equally supported by the values associated with a particular place-name, but they have a niche strategy; the breadth of their market is much narrower than that of the “ambassadors.” The “aristocrats” are in the right lower quadrant of the matrix. Their branding strategy is based on references to “visual graphic elements such as the logo, the corporate name, and on how this brand is presented to the public in advertising, on the Web site, and so forth.”
Two Spanish companies that belong in that category are Osborne, [a Spanish producer of wines and brandy, which represents everything Andalusian, and Lladro. In some cases, the authors add, “the ‘aristocratic’ branding strategy can be a good way to compete, and you may not want to move from there into a strategy that has a greater market reach. In other cases, however, if you want your brand to have a presence in a broader market, you can leverage its association with a particular location to capture a broader market.”
Another category of brands are called the “imposters.” They also have a narrow scope of activity but they do not make use of their native territory. They are in the lower left quadrant of the matrix. “One example is an Andalusian brand of fashions known as Vittorio y Lucchino, which looks like it is an Italian brand if you merely look at its [Italian] brand-name. The company does that because Italy has been associated with certain values, and Italy itself almost stands for style.” Up until now, neither “Spain” nor “Andalucia” has evoked style among consumers, so Spanish fashion retailers have used another approach to branding. Nevertheless, the authors note, “We have arrived at a point where in order for these brands to enter the U.S., it might pay off for them if they create a brand based, at least to some extent, on a [Spanish] place-name. In the case of Vittorio y Lucchino -a brand so gypsy-, it could be used ‘Seville,’ ‘Andalusia’ or ‘Spain.’”
A Landscape in Flux
With regard to “emerging” nations, the authors write that “they are very aware that they will have to rely on commercial branding because that approach will give their products a sort of seal of approval.” One example is South Korea, the last country invited to ARCO, the modern art fair in Madrid. South Korea launched an advertising campaign in which the president of Samsung, a South Korean company, invited Spaniards to go to ARCO to learn more about South Korea. The executive’s wife also appeared in those ads. “We are seeing some very interesting initiatives aimed at attracting investments and interest in emerging nations [such as South Korea]. Another example is Turkey, which is trying to attract investment in companies that are in Turkey but are not necessarily Turkish in origin. In this case, the advertising is done with global brands that change according to the market from which Turkey wants to attract investment. In Spain, the slogan was ‘Mango Loves Turkey.’”
When a company doesn’t do a good job of managing the relationships between its business brands and its locations, “it can wind up being a negative experience for that country,” warn the authors. The more that trademarks and territory refashion themselves into brands, the more they have to be aware of the implications of using their territorial brands poorly. “Like the Real Madrid [soccer team], which became an ‘ambassadorial’ brand, or Air Madrid [built its brand around the Spanish capital city.] However, Air Madrid went bankrupt in 2006, and the airline should have considered that when a company registers a name [such as Madrid], the results can turn out to be negative [not only for the company but] for that location.
“The emerging outlook provides us with a snapshot of activity,” the authors note. “Our little study looks at the implications of commercial branding and place-name brands up until today. We have made a snapshot in which commercial brands are categorized by the relationship between their place-of-origin and their activities in the marketplace. However, this is a market in flux, especially in this highly competitive global environment where new place-names and brands are constantly appearing. In such an environment, the relationship between marketplaces and the strategic use of place-names provides us with some interesting strategic options.”