How to Successfully Invest in Brand: Part 1

case study

Concept:

C-suite to treat Brand as an investment to create brand equity and value.

Method:

Align customer relationships & differentiation focus with business model objectives.

Action:

Target & track returns on touchpoints to make more of the intangible, tangible.

FROM START-UPS TO CORPORATIONS

In Part 1, the first of three commissioned articles, Mike Emery of BRAND ECONOMIX offers brand investment thinking from Start-Ups to Corporations with an emphasis on creating brand equity and value.

Part 2 considers ways of putting that thinking into practical use and discusses some of the issues involved, including implementation and tracking return on investment (ROI) in Brand.

Part 3 looks more closely into the abstract – where Lean Start-Up thinking of hypothesis, trial and error, even for the smallest start-up up to the giant entrepreneurial corporation, can produce healthy investment returns for winning brands.

Brand is an investment

Why does Brand need to be the real stuff of CEOs, CFOs and Founders?

Because Brand needs to be addressed at the very top of organizations since spending on Brand is not an expense but an investment – and needs to be treated like any other investment.

Yet few companies systematically apply investment fundamentals to Brand and what functions they need their brand to do.

That’s pretty strange given that other investments that companies may make e.g. real estate, training, sponsorship etc. are much more likely to have some degree of ROI criteria automatically in place from the outset?

So when considering how to invest in Brand, C-suite executives will want to keep in mind the growth ambition of the core business; they may also want to look at how different business model solutions, perhaps using examples from outside their industry, might deliver superior returns on brand investment.

Simultaneously, whether B2C or B2B, the customer needs to be championed within the organization by asking what customer pain will be solved – or what outcomes can – and will – be achieved by anyone engaging with the brand – and what else, besides the product or service offered in itself, will likely impact on the customer experience.

To understand what truly drives customers to engage with the brand usually requires some deep-diving analysis beyond the obvious.

The Value Creation Dilemma

However, working out how Value gets created can be tricky, not least because “value” means

a)      something different to the organization and

b)      something different to the customer.

    • – Customers value such psychological receipts as confidence, trust, familiarity and an enhanced experience.
    • – Organizations value things like performance, customer loyalty, higher prices and attracting talent.

When developing brand strategy, keeping both value viewpoints in mind in a networked, connected world requires a degree of academic rigour, systematic and often multi-dimensional, flexible approaches – all mixed with an affordable amount of trial and error to determine what works?

The Power of Perception

What makes branding so powerful is the collection of positive – or negative – perceptions that associate with a name or logo. When those perceptions get taken for granted by customers, a point has been reached where those intangibles have become more tangible – one that many refer to as “brand equity”.

So brand equity can be something that’s both positive and negative.

Brand equity can enhance – or destroy – value in the status of a company, product, service, government, country or celebrity.

Perceptions can also be established via many forms; experiences, pictures, stories, associations etc.

Yet the good guys can suddenly become the bad guys with a decent portion of negative brand equity e.g. paying poor wages to downtrodden workers; producing cars with defects; waiting hours for call centers to respond; mysterious line charges on bank statements.

Principally the key to successfully investing in Brand is therefore about creating robust, positive brand equity to create value – which usually occurs through a MIX – e.g. awareness, perceived quality, associations, stories, personality, customer loyalty and, for some, trademarks and intellectual property.

Who’s the customer anyway?

Very few brands are for everybody.

Creating brands that are intended to suit everybody almost always end-up pleasing nobody.

So deciding upon the profile and targeting of a likely Core Customer Segment to align with business model objectives is the main and continually-ongoing functions of C-suite, since, until those decisions are made and broadly substantiated with data, then the brand can’t be shaped to talk or act directly to the needs of that segment.

We’ve often said to a Board of Directors, “we believe that you’ve got the wrong customers”.

Consider the case of Burberry that had been in business for over 150 years when their few products and iconic check-pattern ended-up being mass-market and often counterfeited.

Today, Burberry is cool, up-market at the height of fashion, a digital global retailer, having changed their range, raised prices and tripled their revenue to $3 billion in about 6 years.

IBM pretty much invented payroll accounting and certainly invented the magnetic strip on credit cards, bar coding, the first computer disc drive and Fortran programming.

Known as Big Blue, IBM were biggest blue of any blue-chip company – until they failed to predict the likely devastation created by the rise of personal computers as opposed to the mainframe computers they were selling. By the early 1990s IBM was losing billions and laying-off people that had had plenty of reason to assume they would have had a job with this market leader for life.

Today, IBM has reinvented itself as a kind of giant consulting firm that sells solutions using its technical and operational know-how amassed over generations. Had it not made that brave shift to a new business model, instead of today being the 18th largest US Corporation now competing alongside Microsoft and Google, IBM might certainly have headed for an irrelevant future?

The message is… until you can identify where future revenues will be coming from and who your future Core Customers are likely to be, brand actions and communications will always risk being targeted or misdirected to the wrong audiences.

Again, these are CEO and CFO issues before anyone else, since they are related 100% to present and future business strategy long before CMOs can be expected to even get their teeth into the challenge with much chance of success.

Case Study

Toyota designed the Aygo, a car that’s built in the Czech Republic, using a Peugeot engine and supply chain. Almost identical cars from the same production lines and distribution channels are also sold as the Citroen C1 and the Peugeot 107.

When launched in Europe in 2005, Toyota’s Aygo successfully outsold its competitors at prices that were approximately 10% more than the Peugeot and 25% more than the Citroen.

All three versions of the same car are still manufactured and sold today.

However Toyota’s brand equity has been dented, perhaps due in part to a massive recall of cars in the United States in 2010 and again recently – which may have contributed to Citroen, Peugeot and Toyota now selling the same car in 2014 in Europe at more or less the same price.

The conclusion is that when brand equity is higher than your competitors, you can get a lot more money for an almost identical product.

What do customers value?

If the role of Brand is to create value – and to create value for customers – so what is it that customers actually value?

Unhelpfully, often the answer is…that the customer can’t always communicate what he or she values – so it’s the job of brand owners to create a process of discovery, to nail some of that down and draw some test-worthy conclusions.

The brilliance of people like Steve Jobs was in a hunch that customers are ready to buy something exciting – but that leap of faith meant that Apple had to make the product first for people to experience it. Asking people in advance how they might react to the iPhone or iPad – to a concept so new – was unlikely to be helpful.

Henry Ford’s famous quote, after he’d made the Model T and started the birth of the mass-market motor car, was that if he had asked customers in advance what they really wanted in terms of more efficient transportation they would have replied, “a faster horse”.

Consequently, discovering the real truth of what customers value often requires a rigorous approach on multiple levels.

Discovering the hidden needs of what customers want – and then how those needs generate value – is not always as straightforward as asking potential customers directly because they don’t know until an experience or service has formed itself as a feature connected to brand.

We can’t all be Steve Jobs or Henry Ford and dare – or need – to work on a hunch, but many of the techniques of the Lean Start Up approach, even when applied to long-established Corporations – basically multifaceted, trial and error research – can produce exciting, new insights and new business model directions to be considered for even the most-tired of brands and products.

In Part 2, we’ll take a look at actions and practical approaches as to how some of these issues might now be considered to form a successful brand strategy, creating brand equity and value and getting a meaningful return on brand investment.

http://www.brandeconomix.com/strategy/how-to-successfully-invest-in-brand-part-2/

Case Study

Business travelers on their way to New York at Heathrow Airport were asked by British Airways to prioritize what would make them choose one airline over another.

Overwhelmingly, these BA customers said Safety, Route and Schedule – yet none of these core competencies are reasons to win business, but they may have been reasons how to lose business since obviously they’re basic to anyone’s choice of airline?

Core competencies may seem like an easy focus but customers tend to buy on attributes (e.g. faster journey times, air-miles, reclining seats). And the power of attributes changes all the time. Remember when free delivery was once a delightful bonus and is now something so commonplace as to be unexceptional?

September 15th, 2014 Posted by mike Filed in: Strategy