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|CHAPTER 8 Products, Services, and Brands: Building Customer Value 279

resellers exclusive products that cannot be bought from competitors, resulting in greater
store traffic and loyalty. Fast-growing retailer Trader Joe’s, which carries 85 percent store
brands, largely controls its own brand destiny, rather than relying on producers to make
and manage the brands it needs to serve its customers best.38

To compete with store brands, national brands must sharpen their value propositions,
especially when appealing to today’s more frugal consumers. Many national brands are
fighting back by rolling out more discounts and coupons to defend their market share. In the
long run, however, leading brand marketers must compete by investing in new brands, new
features, and quality improvements that set them apart. They must design strong advertis-
ing programs to maintain high awareness and preference. And they must find ways to part-
ner with major distributors to find distribution economies and improve joint performance.

For example, in response to the recent surge in private-label sales, consumer product giant
Procter & Gamble has redoubled its efforts to develop and promote new and better products,
particularly at lower price points. “We invest $2 billion a year in research and development,
$400 million on consumer knowledge, and about 10 percent of sales on advertising,” says P&G’s
CEO. “Store brands don’t have that capacity.” As a result, P&G brands still dominate in their
categories. For example, its Tide, Gain, Cheer, and other premium laundry detergent brands
capture a combined 50-percent share of the $8.6 billion North American detergent market.39

Co-branding Licensing. Most manufacturers take years and spend millions to create their own brand
The practice of using the established names. However, some companies license names or symbols previously created by other
brand names of two different companies manufacturers, names of well-known celebrities, or characters from popular movies and
on the same product. books. For a fee, any of these can provide an instant and proven brand name.

Apparel and accessories sellers pay large royalties to adorn their products—from blouses
to ties and linens to luggage—with the names or initials of well-known fashion innovators
such as Calvin Klein, Tommy Hilfiger, Gucci, or Armani. Sellers of children’s products at-
tach an almost endless list of character names to clothing, toys, school supplies, linens, dolls,
lunch boxes, cereals, and other items. Licensed character names range from classics such as
Sesame Street, Disney, Barbie, Star Wars, Scooby Doo, Hello Kitty, and Dr. Seuss characters
to the more recent Doc McStuffins, Monster High, Angry Birds, and Ben 10. And currently,
numerous top-selling retail toys are products based on television shows and movies.

Name and character licensing has grown rapidly in recent years. Annual retail sales of
licensed products worldwide have grown from only $4 billion in 1977 to $55 billion in 1987
and more than $230 billion today. Licensing can be a highly profitable business for many
companies. For example, Disney is the world’s biggest licensor with a studio full of hugely
popular characters, from the Disney Princesses and Disney Fairies to heroes from Toy Story
and Cars, to classic characters such as Mickey and Minnie Mouse. Disney characters reaped
a reported $39.3 billion in worldwide merchandise sales last year. By themselves, the Dis-
ney Princesses made $1.5 billion in North American retail sales.40

Co-branding: KitKat and Google teamed up to name the latest version of Google’s Co-branding. Co-branding occurs when
Android operating system—Android KitKat. Co-branding added a touch of fun, two established brand names of different
familiarity, and exposure to both brands. companies are used on the same product. Co-
branding offers many advantages. Because
ASSOCIATED PRESS each brand operates in a different category,
the combined brands create broader con-
sumer appeal and greater brand equity. For
example, Benjamin Moore and Pottery Barn
joined forces to create a special collection
of Benjamin Moore paint colors designed
to perfectly coordinate with Pottery Barn’s
unique furnishings and accents. Taco Bell
and Doritos teamed up to create the Doritos
Locos Taco. Taco Bell sold more than
100 million of the tacos in just the first
10 weeks and quickly added Cool Ranch
and Fiery versions.41

Seemingly unlikely partners KitKat
and Google co-branded the latest An-
droid KitKat operating system. Google has