Abraham Lincoln talked in parables quite often and one of his favorites was to ask someone, "If you call his tail a leg, how many legs does a dog have?." The answer, of course, is four. Calling a tail a leg doesn't make it one. Same is true with car batteries, it seems.
The folks running Sears have been about three or four steps behind from the get-go on just about everything, including their acquisition of Kmart. Now it seems they have hired a brand management guy from P&G – the Houdinis of the consumer products world – the masters of illusion over substance. The folks who built an empire on the principle that what is in the bottle doesn't matter – it is the image you create through advertising that has the real value – convincing you a tail is leg because they call it one. Only people are onto them.
Sears didn't know the jig was up, however, when they hired a P&G tap dancer by the name of Guenther Trieb "to develop a brand-building factory that grows the business, the brand equity and shareholder value of Craftsman, Kenmore and DieHard." The idea is to have other stores sell products with the Craftsman, Kenmore and Die Hard brand names, and have Sears cash a commission check on every sale because, after all, the value is in the name, and people are going to scoop up this stuff because of the brand name regardless of whether the goods are a better value than the competing stuff or not. The soap peddler said, "We believe this will be the next big thing in corporate America."
That's a hoot.
As even the Tribune reporter figured out. "Just how much money Sears can make by selling products that it doesn't manufacture itself is questionable," she wrote.
Walmart has already laughed them out of Bentonville, and apparently just about everyone else has too. What the boys running Sears didn't think about is that their Die Hard batteries are made by Johnson Controls, and guess who makes Walmart brand batteries: Yep, Johnson Controls. The hole in the brand management strategy is pretty plain to see. Why would anyone want to pay a premium for a Johnson Controls battery just because it says Die Hard on it, enabling Sears to take their brand commission, when they can buy a Johnson Controls batterythat says EverStart (the Walmart brand) without paying a premium to a middle man for nothing but a brand name?
Manufacturers everywhere should take heed. For years the conventional wisdom has been to avoid trashing your brand by private labeling your product. If the Acme Manufacturing Company is out there selling their proprietary Acme Widgets, they would not want to dilute the Acme brand name by manufacturing the same thing for Walmart, enabling them to sell WallyWorld Widgets right next to yours.
China has changed all of that. There are no Chinese brand names to speak of. Chinese factories – whether they are owned by US companies like Johnson Controls – or by Chinese companies more and more make the same thing for just about anyone who wants to buy them. That is the hard lesson so many American companies have learned. You can't get more for your Chinese made product with your hot shot brand on it than the retailer can get by private labeling the same product at a mirror image Chinese plant down the street from yours, or often from the same Chinese plant that is making your product.
The price and the sales of your product are not a function of your brand name – they are a function of the quality, utility and reliability of the product – its value to the consumer. Make a good product and people will buy it at a fair price – and it doesn't matter much whether they buy it under your name or someone else's. That is the lesson Johnson Controls learned – no great shakes at lean manufacturing by the way. But they understand that it doesn't matter whether the battery says Delphi (which they also make), Walmart, or Pep Boys. They are going to sell batteries or not because they are good or not.
If you make a good product and someone wants to buy it and slap their label on it instead of yours – let 'em have at it. the only way it will detract from your own brand is if the price you are charging for your own brand isn't worth it – which is going to catch up with you sooner rather than later anyway. Just ask Guenther over at Sears.