Critical Analysis Report for Denn's Biomarkt Marlies Adler BSNS7454

18 Pages·2013·0.43 MB·English

Critical Analysis Report for Denn’s Biomarkt

Marlies Adler BSNS7454
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EXECUTIVE SUMMARY
This paper was written on request of Denn’s Biomarkt CEO Thomas Greim to give an
overview of the discussion between anti-brand and pro-brand activists. As Denn’s
Biomarkt suffered from negative headlines in the recent past it is indispensable to
start thinking about brand ethics. The report provides guidelines for the future
marketing strategy based on the analysis of both sides of the argument.

First the paper focuses on the composition and requirements of a successful brand
by reviewing the literature about branding. It points out the complexity of a brand and
the fact that the majority of the whole brand organism is invisible for the consumer
such as high service level or a strong supply chain.

To give recommendations it is important to analyse the no-brand arguments as well
as the pro-brand arguments from an objective point of view. Both sides have strong
and convincing arguments. The key point of the anti-brand analysis is:
Brands communicate hypocritical values that they do not live. For instance
companies who shift their production into third-world countries where production
takes place under appalling conditions to have more money for branding activities.

The pro-brand analysis offers the following key point:
Brands help to save time as it is not necessary to critically proof, analyze and classify
all offers and they reduce the risk of a purchasing decision. From Denn’s Biomarkt’s
view a strong brand can be a competitive advantage and a strong strategic device.

The summarized recommendations that are based on the findings of both analysis
are:
 Create commitment among the employees
 Offer consumers information about sources, suppliers and ingredients of the
products sold in Denn’s Biomarkt
 Focus on Corporate Social Responsibility to stay true to the values of the
brand
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CONTENTS

The Introduction .......................................................................................................... 4
The Definition ............................................................................................................. 5
The Company ............................................................................................................. 6
The Brand ................................................................................................................... 7
The No-Brand Argument............................................................................................. 7
The Pro-Brand Argument.......................................................................................... 10
The Recommendations............................................................................................. 14
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THE INTRODUCTION

Ethical behavior or at least feigning ethical behavior is a basic requirement for brands
to be successful nowadays. Consumers are well-informed and have a wide range of
comparable products. Having better educated customers and facing hard competition
through globalization and saturated markets is not sufficient to differentiate only
through technical characteristics of your product. The requirement is a full consistent
package of the physical product with all its characteristics and the emotions and
promises that are created by the logo that is stamped on the product.

When people make a buying decision it is driven by all of those emotions and
promises created by an excellent marketing of a company or rather a brand.
Consumption is not about spending as little as possible to satisfy a fundamental
need. It is more about buying peace of mind, affiliation to a certain group or
individuality, probably by products that we had not needed before they were
invented.

The key to success for a brand is being aware of that fact and trying to find out how
the customer feels and thinks. To understand the processes in the consumers’ mind
and heart it is not sufficient mere to ask him what he wants as emotions are not
always conform to speech. It is essential to observe the target market and
understand the motives for their behavior.

Due to all this knowledge about customers and the opportunity to influence them,
brands have strong power and therefore a great deal of responsibility. As our society
is growth- and profit-oriented a lot of companies abuse this knowledge and power by
creating and communicating values that they do not live.

This report provides a critical analysis of the no-brand and the pro-brand arguments.
It opens by reviewing the definition of a brand, followed by information about the
company. Subsequently a closer look at both sides of the argument will be taken and
to conclude recommendations will be provided.
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THE DEFINITION
A lot of experts tried to define what a brand is. However to find a definition that
covers all aspects of that term is almost impossible. Adjouri writes that there is no
perfect solution as brands have too many manifestations (Adjouri, 2004, p. 204).

Kellers definition of a brand is close to an integral way of viewing things: “A brand is a
name, term, sign, symbol or design, or combination of them intended to identify the
goods and services of one seller or group of sellers and differentiate them from those
of competition.” (Keller, 2008, p. 2). According to this definition brands help the
consumer with their decision-making process. The consumer saves time as he is not
in need to critically proof, analyze and classify all offers (Riesenbeck & Perry, 2005).

To understand the complex process of building a successful brand it is essential to
know that a brand goes far beyond naming, design or advertising. A brand is a
strategic device that can only be profitable with a successful business strategy
including marketing analysis and brand planning. A company that is too much
focused on the tactical issues of the brand will fail (De Chernatony & McDonald,
1998).

Figure 1: The ‘branding iceberg’ (Davidson, 1997)
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The visible part of a brand to the customer is above the water line and it is only 15%
of the brand in its entirety. Therefore more important is the part below the water line
which is about 85% of the whole. Those invisible key assets are adding competitive
advantages and brand equity to the brand. This figure illustrates the complexity of a
brand as a strategic device.
THE COMPANY
Denn’s Biomarkt was founded in 1996 as a subsidiary of Dennree, an organic
wholesaler, in Germany. Dennree recognized the trend to healthy and organic food
and established the perfect offer to that trend. Due to that Denn’s Biomarkt grew
rapidly and in 2007 they opened their first branch outside of Germany, in Austria.
Denn’s Biomarkt employs more than 2,000 people and has 153 outlets in Germany
and Austria. They offer convenience goods from controlled organic farming. A high
value is attached to regional suppliers and transparent origin. Another emphasis is
put on healthy and rich in nutrients food. Conform to their brand values they also
communicate a very good corporate culture and fair trading as well as fair prices.
Their branches are designed in very different ways. Some of them have a plain look
while others are furnished in a very modern way with a stimulating product
presentation.

One year ago Denn’s Biomarkt made the headlines as it became public that they pay
their employees dumping loans while advertising fair trade (Biomarktkette Denn's
wegen niedriger Löhne in Kritik, 2011). One of their most important brand values
became implausible and the brand image suffered from this exposure.

Another incident that had negative repercussions to Denn’s Biomarkt was a scandal
that is occurring at the moment in Germany. 150 farmers are accused of selling
conventionally produced eggs as organic eggs (Verdacht auf millionenfachen Betrug
mit Bioeiern, 2013). People lose trust in organic products and their origin which has a
strong impact on organic supermarkets such as Denn’s Biomarkt.
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THE BRAND
Denn’s Biomarkt tries to develop its brand through a lot of marketing activities.
However as they are not a corporate giant their marketing budget is limited. For that
reason the most important marketing tool is the Facebook page, which is hosted
regularly and provides followers with several posts every week. Customers get
informed about products, recipes, promotions, competitions and new openings.

Furthermore they use poster advertising in the cities with Denn’s branches and
adverts are placed in regional newspapers. The emphasis in the advertisements is
put on the wide product range consisting exclusively of organic items. Additionally it
is highlighted that Denn’s products are fair trade products at fair prices.

To sum up their most important brand values are:
 Sustainability
 Quality
 Transparency
 Health
 Fair Trade
 Respect for the human being
THE NO-BRAND ARGUMENT
This section of the report provides an analysis of the no-brand arguments and
focuses on the other side of the coin, meaning negative aspects and effects of
brands.

There is an overload of brands and advertising everywhere that is unavoidable for
customers. Little wonder that a lot of people are fed up of all those brands trying to
influence them, having an emotional impact on them and to engage them in a
relationship.
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“Brands are omnipresent: They confront us bold in public and hidden in our most
intimate areas of life.” (Riesenbeck & Perrey, 2005, p. 16)

Customers have started to take a closer look at the whole ethical aspect of branding
and question the colorful and shining world of brands.
 Is it ethical to sell hypothetical values without living them?
 Are brands to blame for all that stereotyped thinking?
 Are consumers still in control of their purchasing decision?
 Is branding always hypocritical?
 Do we need brands?
In the 21st century customers are better informed and at the same time more
demanding than ever before. An anti-brand movement has been established which is
part of a wider anti-consumption movement where consumers question globalization
and capitalism.

A famous speaker of that movement is Naomi Klein, a Canadian author and social
activist. She is convinced that nowadays branding “is not about the product being a
good quality but the consumer being a good quality because he buys that brand”
(Klein, 1999, Youtube Video).

Naomi Klein’s bestseller “No Logo” illustrates a captivating example of a brand
abusing its power. It is the expansion strategy of Starbucks. This has involved
targeting successful independent stores, buying out competitors’ leases, operating at
a loss and saturating local markets (Klein, 2011) while advertising diversity as an
essential brand value. People started to protest against Starbucks as a lot of small
cafés lost their leases and were forced to close their stores. The anti-Starbucks
community was growing.

This case highlights how dangerous it is for brands if they are not living their brand
values. As soon as a brand is revealed to be hypocritical, customers lose trust and
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feel disappointed from the brand. This disappointment can lead to brand avoidance
and boycotting.

Furthermore anti-brand activists argue that the quality suffers from the circumstance
that companies spend more money on marketing their brand than on the product
itself. Consumers do not buy products anymore, they buy experience and emotion.
As a result companies extend their marketing budget and reduce their production
budget. An impressive example for that fact is the Red Bull energy drink. While the
costs of productions are less than € 0.20 ($0.30NZD) (Hage & Hirn, 2010) the retail
price at the supermarket is approximately € 1.29 ($2.00 NZD). Red Bull spends twice
as much on marketing as on the production of their products.

However beside quality of the production also the process and circumstances of
production are criticized. As marketing a brand is so expensive many brand
orientated companies choose to hire cheap contract labor. Goods of high-price
brands are produced in sweatshops under appalling working conditions. Often
enough the values of such a brand are totally incompatible with this kind of
production. They spend billions of dollars to communicate values like “Freedom” or
“Individualism” and act in the exact opposite.

A high profile case example of worker exploitation for the brand establishment is
Apple and its manufacture Foxconn. Foxconn’s plants in China have been constantly
in the media since it became public in 2006 that sweatshop conditions exist there.
The situation made news again after a string of suicides at the factories. When the
iPhone5 was released Foxconn’s management complained about the pressure Apple
is putting on them (Biermann, 2012).

In this example the most important aspect is again revealing hypocritical brand
values. If the message that is communicated to the customers is inconsistent it is
difficult to blind them by appearance. To put it in a nutshell the anti-brand argument is
that it is unethical to shift production into third-world countries and pay minimal
wages, to afford an advertisement with a celebrity in the commercial break of the
Super Bowl.
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A further doubtful aspect of branding is the pressure that it puts on society. Wearing
certain brands is an expression of lifestyle and is used to find like-minded people.
Often enough brands play an essential role in a group building process – especially
polarizing brands like Apple. A lot of brand products are sold at a very high price and
not everybody is able to afford them. Therefore it can be more difficult for somebody
that cannot afford buying branded products to belong to a group with a lifestyle that is
connected to particular brands.

This pressure can have a strong impact on life and well-being. Especially when kids
and teenagers use brands for orientation and set store by owning those branded
products. Self-esteem and self-confidence can depend on the ability of buying
branded clothes. Is it dangerous that brands have such strong power? Why do we
barely draw on our most powerful tool towards brands – our wallets?

To conclude the anti-brand argument a list of the key points:
 Brands communicate hypocritical values that they do not live. People believe
and rely on those brand values.
 Brand oriented companies spend more money on establishing and advertising
their brand than on the production of their product. The quality of the goods
suffers from that.
 To have more money for branding activities companies shift their production
into third-world countries where production takes place under appalling
conditions
 A strong brand-related thinking puts high pressure on people and influence the
group building process
THE PRO-BRAND ARGUMENT
To imagine a world without brands is almost impossible. Brands are an essential part
of our life. We use them to express ourselves and as a point of reference. They offer
people a wider choice and help us to make a buying decision. Brands save time as
consumers are not in need to critically proof, analyze and classify all offers