Creating and managing
brand value Interbrand
The Catalysts for Branding
Business Drivers and Brand Responses
May 2003
www.interbrand.com
Business Drivers and
Brand Responses
Interbrand
In business every change made to improve performance
is in response to a catalyst. These catalysts represent
significant and complex opportunities when
encountered individually, and more so, when many
impact an organization at the same time. How the
business chooses to respond, and with what specific
intervention, determines its success. At Interbrand, we
have identified 10 key business issues that prompt
organizations to address performance issues with a
thoughtful strategic response. We contend that in
many cases the response can take the form of
focused and effective brand management.
The Business Catalysts
1. New Offering, New Promise
2. Strong, Nimble Competition
3. Sophisticated, Savvy and Demanding Customers
4. Price and Margin Pressures
5. Sales and Market Share Pressures
6. Combinations and Divestitures
7. Organic Growth
8. New Revenue Streams
9. Share Price Performance
10. Employee Attraction, Retention and Productivity
1. A New Offering, A New Promise
This business driver represents the creation of something
new or the improvement of an existing product
or service. At the heart of every thriving business is a
passionate idea. A superior vision to seize that idea by
fulfilling an unmet or unsatisfied need brings the idea
to market. Incubating a really new, valuable, and sustainable
idea is a challenge for any individual or
organization. A great idea requires a brand bodyguard
to ensure its uniqueness and relevance. In other
words, brand strategy brings business strategy to life.
2. Strong, Nimble Competition
Industry lines have blurred, the pace of business has
accelerated, and marketing and distribution channels
have become more complicated and interrelated. All
of these developments signal change in competition.
The pursuit of new and loyal customers is threatened
by innovative competition. It is increasingly harder to
catch up if you fall behind. The environment is one
where you cannot discount a single competitor. It is
increasingly harder to counter customer objections to
trying an alternative. Every day in every industry there
are new offerings with associated benefits bundled
to fit changing customer wants and needs. And from
the customer perspective, substitution and switching is
becoming an art (and part of the fun of being a consumer).
In this business situation brand is a management
tool that can be employed to communicate and
demonstrate differentiation. Brands can be employed
to communicate prestige and a premium,
or accessibility and convenience, or quality and durability.
But the greatest benefit derived from brand
investment and management in the arena of competition
is how leading brands communicate a message
of belonging. Strong brands create a club and a following
that breed intense loyalty. Once proven and
secured, this loyalty becomes difficult for any competitor
to dislodge. This is the reason why 45 percent of
current Harley-Davidson owners have previously
owned a Harley.
3. Sophisticated, Savvy and Demanding
Customers
One of the biggest business issues that exists today is
the fact that customers have never been more in control.
And this is a good thing. It keeps companies at
the top of their game. Customers no longer distinguish
between product and service quality on the
basis of a specific industry – they demand the same
best practices from all. This is why we see banks acting
like retail boutiques and hospitals learning from
hotels. A best practice from one can be applied to
all.Customer sophistication is forcing branders to
manage the customer experience more creatively and
holistically. It requires anticipating and exceeding customer
expectations with services, perks, and offers that
the most demanding customer would not envision.
IKEA set an early benchmark in this regard with its
selection, unique customer-dependent pickup, events,
and in-house restaurants. Who would have thought
an Allan Key would have revolutionized furniture
and decor?
4. Price and Margin Pressures
Perhaps the most obvious impetus for brand management
is when an offering is under price and margin
pressures. Strong brands are used to communicate a
premium offering with associated benefits. This investment
in brand returns as it elevates a product or service
above the pack,taking the focus off issues like
pricing and tells the market to purchase on differential
value.
Jeffrey Swystun,
Global Director of Knowledge
and Innovation
Interbrand
Business Drivers and
Brand Responses
Interbrand
This investment can ensure that the offering is not
viewed as a commodity. Often at Interbrand we are
asked what is the most effective way to differentiate a
product or service that is currently or is rapidly
becoming a commodity. Interestingly, when one examines
our annual ranking of the World’s Most Valuable
brands, it is clear that the leading brands actually
compete in commodity categories. Carbonated beverages,
cellular phones, automobiles, fast-food restaurants,
and condiments are prominent on the list and
are, arguably, commodities. Yet somehow, Nokia,
BMW, and Heinz are time and again recognized as
leading and valuable brands because they can
command a premium and escape price and margin
pressures.
5. Sales and Market Share Pressures
Closely related to the proceeding point, this business
driver is largely concerned with ongoing product or
service relevance. Whereas price and margin pressures
were addressed though effective brand differentiation,
sales and market share performance is largely
a function of marrying an offering to the most appropriate
customer. Brands are highly valuable in articulating
benefits and attributes and those attractive values
can be accurately designed, aligned, and presented
to the most appropriate audiences. Apple
Computer competes in a very crowded space but is
not concerned with being number one in personal
computer sales. Rather, it has tailored its products to a
market within a market making them so relevant that
they cannot be easily displaced. Along the way, their
scrappy attitude and compelling offering has only
endeared them more to this target market. The result
is customer loyalty rates that are enviable. Apple
Computer’s recent “switching” campaign marked a
departure from strategy in an attempt to grow market
share by communicating reliability, simplicity, and personal
empowerment.
6. Combinations and Divestitures
Mergers, acquisitions and spin-offs are opportunities
for companies to grow quickly and are fertile grounds
for branding efforts. These business drivers require, at
a minimum, a name change examination, but more
often involve an extensive review of strategy and
potential introduction or rationalization of the new
brand. The various brand responses range from retaining
the current equities, merging positive elements,
or creating something entirely new. Customers are the
first to know whether a merger or acquisition has
changed the experience in any way. There are numerous
examples of companies who have made mere cosmetic
branding efforts in order to cover up service and
product quality issues, and general confusion due to a
business combination. This results in an erosion of
customer loyalty. Many companies miss a fantastic
opportunity to tell a new and exciting story. Largely
this is due to the financial reasons that take centre
stage in these transactions. But ultimate economic
success is based on how the parties intend to integrate
and how to present the benefits of the combinationto
customers. The acquisition of Canada Trust by
the TD Bank Financial Group produced a new brand
that strove to communicate “comfort”. All of the internal
and external messaging has explored the removal
of the anxieties of personal finance. This new brand
has been very well received, as it is fresh and makes a
new promise rather than a rehashing of what the parties
previously and individually had communicated.
7. Organic Growth
Beyond growth by acquisition is the ever-present
need to grow organically. A strong brand acts as a
fantastic ambassador for a company that is entering
new markets, creating line or product extensions, or
seeking alliance and co-branding partners. But brands
also learn their limits in this regard. Take the case of
dessert and snack food leader – JELL-O. Of course,
vanilla and chocolate were obvious flavours that found
large audiences. In an attempt to find a wider market,
more flavours were introduced. Without much surprise,
celery, coffee, and cola flavours did not result in huge
followings. A category that has had more success of
late is oral hygiene (arguably the opposite of JELL-O).
Crest and Colgate have packed the shelves with many
types of toothpaste, electric toothbrushes, teeth
whiteners, etc. These brands have been successful
because they are entirely credible. In point of fact, customers
have given those brands the right to produce
complementary products. Strong brands are fantastic
levers for measured and appropriate organic growth.
Customer sophistication is forcing
branders to manage the
customer experience more creatively
and holistically.
A strong brand acts as a fantastic
ambassador for a company
that is entering new markets,
creating line or product extensions,
or seeking alliance and
co-branding partners.
Business Drivers and
Brand Responses
Interbrand
8. New Revenue Streams
The pressure applied to brands to produce new revenue
streams has never been more acute. The most
effective of these is licensing. Appropriately expanding
the brand into new markets through new configurations
is proving for many to be a lucrative proposition.
The licensing of the Caterpillar brand into apparel and
accessories is a case in point. The revenue derived
from the brand’s new markets has totaled $US800
million over the last 10 years. This has directly offset
the marketing operations of the core heavy equipment
products and produced ancillary revenue.
Brand licensing in professional sport has been
extremely beneficial to professional and amateur
organizations. The attraction has been the consumer’s
demand to live these brands as much as possible.
There is a catch, though. Frequently, companies and
organizations lose control of their brands through too
prolific licensing. Quality issues result and often the
brand is applied to products and services that dilute or
impact the equity of the original offering.
9. Share Price Performance
Increasingly, publicly traded companies are grasping
the power of branding in the realm of investor communications.
Interbrand has conducted a study that
proves that heavily branded companies outperform the
market by 15%. This share price premium proves that
brand investment provides a measurable and valuable
return. Often there is a direct correlation between the
share premium and the price premium. Related to
share price performance is the notion of attracting
more investors to the stock through brand communications.
If a strong brand attracts and retains customers,
it must be able to do the same for investors. The most
recent example of this strategy is Altria Group, the
parent company of Kraft Foods, Philip Morris
International, Philip Morris A and Philip Morris Capital
Corporation (also the largest shareholder in the
world’s second-largest brewer, SABMiller plc.). Altria
oversees some of the most recognizable and profitable
consumer product brands: Marlboro, Chesterfield,
Kraft, Jacobs, Maxwell House, Nabisco, Oreo, Oscar
Mayer, and Tang. Taking a page from product brand
management, Altria has embarked on a significant
print campaign touting itself as a strong parent company
and an attractive stock. This has been a difficult
sell given the company’s ongoing tobacco litigation
issues. Regardless, the strategy represents the nexus
of brand management and investor relations. This is a
huge area of opportunity and one not fully explored by
the vast majority of traded entities.
10. Employee Attraction, Retention and
Productivity
More thoughtful and progressive companies understand
the value of their people. Peter Drucker has
written, “I have come to the conclusion that the decisive
change which underlies the rise of organizations is
the shift from viewing the worker as a cost center to
viewing him/her as a resource.” In order to attract,
retain and promote healthy productivity, companies
are just now embracing the idea of internal brand
alignment. For many years, the last to know of the latest
marketing communication campaign were the
employees. This model has been broken for a long
time and a profound shift is taking place. Companies
are investing first in employees to ensure that they
are aware of the promises the company is making to
customers and investors. This helps ensure the promise
is delivered. A strong brand is an amazing tool in the
search for talent. Just as we choose a product that
embodies the values and benefits we find attractive,
potential employees evaluate companies by their brand
and its values. It comes down to fit. It saves recruitingtime
and costs and acts as a positive sorting mechanism
to guarantee that the relationship makes sense.
This focus on internal branding is truly the next frontier.
At Interbrand we see leading companies spending
time, energy, and funds on making sure that the consistency
between what is said and practiced internally
is communicated and delivered uniformly. In fact, great
companies use brand as their central organizing
principle. It becomes part of the fabric and helps with
decision making. These companies understand that
true motivation comes from achievement, personal
development, job satisfaction, and recognition. They
further understand that the brand and its values are
excellent tools to evaluate the effectiveness and satisfaction
of their workforce.
Summing Up
When confronted with one or more of these 10 business
catalysts, it is important to evaluate the role that
brand can play. To acknowledge the power of a brand
intervention is to embrace both a strategic and creative
response. But by no means can brand be applied
in every situation and by no stretch of the imagination
Increasingly, publicly traded
companies are grasping the
power of branding in the realm
of investor communications.
Business Drivers and
Brand Responses
Interbrand
it a magic panacea. However, in increasingly crowded
markets where consumers have less time for evaluation,
branding and all of its associated benefits may
provide a competitive advantage worthy of management’s
consideration and the proper response to critical
business catalysts.
Interbrand has conducted a
study that proves that heavily
branded companies outperform
the market by 15%.
Great companies use brand as
their central organizing principle.
It becomes part of the fabric
and helps with decision making.
Creating and managing
brand value Interbrand
Founded in 1974, Interbrand serves the world with
34 offices in 22 countries. Working in close partnership
with our clients we combine the rigorous strategy and
analysis of brand consulting with world-class design
and creativity.
We offer a range of services including research, strategy,
naming and verbal identity, corporate identity, package
design, retail design, internal brand communications,
corporate reporting, digital branding tools, integrated
marketing services, and brand valuation.
We enable our clients to achieve greater success by
helping them to create and manage brand value.
www.interbrand.com © Interbrand 2003 |
|
