Branding Strategy Insider

Did You Know? - May 21

•    It costs 7 times more to get a new consumer for the brand than it does to get a current consumer to make an incremental purchase.

•    In some sectors, an increase in the consumer base by just one percent is otherwise equivalent to a 10 percent cost reduction.

•    Depending on the category, a 5% increase in customer loyalty will lift the lifetime profits per customer by up to 95%.

•    Increasingly, brands are shifting their focus from penetration to usage.  Greater success comes from getting a larger portion of a smaller segment’s business (versus getting more consumers to buy your brand).  This can be accomplished in many ways, including offering more and different products and services that deliver against your brand’s promise.

Sponsored By: Brand Aid

Maintaining the Leadership Position

Historically, the top three brands in a product category occupy market share in a ratio of 4:2:1. That is, the number one brand has twice the market share of number two, which has twice the market share of number three. The success of a brand is not due to the high level of marketing acumen of the company itself, but rather, it is due to the fact that the company was first in the product category. Take Xerox, they launched the first plain-paper copier and were able to sustain its leadership position. However, time after time the company failed in other product categories in which it was not first.

Similarly, IBM failed when it tried to compete with Xerox in the copier market, and Coca-Cola failed in its effort to use Mr. Pibb to take on Dr. Pepper. These examples support the point that the success of a brand usually is due to its being first in the market rather than the marketing abilities of the company. The power of the company comes from the power of its brand, not the other way around.

With this point in mind, there are certain things that a market leader should do to maintain the leadership position. First, it should not boast about being number one. If a firm does so, then customers will think that the firm is insecure in its position if it must reinforce it by saying so.

If a firm was the first to introduce a product, then the advertising campaign should reinforce this fact. Coca-Cola's "the real thing" does just that, and implies that other colas are just imitations.

Another strategy that a leader can follow to maintain its position is the multibrand strategy.

Repairing the Flaw in a Diamond Brand

Tiffany launched the 'Return to Tiffany' collection in 1997.

The accessibly priced silver jewellery was so named because every piece carried the 'return' message alongside a prominent Tiffany & Co logo. The collection, headlined by a large silver charm bracelet priced $110, sold fantastically well.

Over the next five years, thanks in no small part to this collection, sales at Tiffany rose by two-thirds. The financial markets were impressed and the company's share price rocketed. By 2002, however, a flaw was growing deep in the heart of the Tiffany brand. The company was selling too much of the wrong product to the wrong people.

At this point the Tiffany story could go in one of two directions. If the firm was being run by the average British chief executive, with no training, experience or appreciation for brand equity, the likely response would be to open a few more stores, set some aggressive sales targets and gradually drive the brand towards disaster. But Tiffany was led by Mike Kowalski, the kind of chief executive we rarely encounter in the UK. Prior to assuming the role in 1999, Kowalski spent five years heading Tiffany's marketing. So he was experienced enough to recognize that Tiffany's explosive sales success masked bigger, long-term problems. His diagnosis: the large number of silver customers represented a fundamental threat - not just to the business, but to the core franchise.

BrandQuote - May 18

"A brand that captures your mind gains behavior. A brand that captures your heart gains commitment."

                                  - Scott Talgo

Sponsored By: Brand Aid

The Brand Extension Checklist

When considering brand extensions ask yourself these yes or no questions:

•    Have you identified what your brand owns in the consumer’s mind?
•    Have you identified all areas in which the consumer gives your brand permission to operate?
•    Do you have a clear understanding of whether your brand is over or under extended?
•    Have you identified all the ways your brand and others in its category have made compromises with the consumer?  Have you found ways to redefine your business to break those compromises?
•    Have you identified new categories for growth?  Can you create new categories that meet previously unmet consumer needs?
•    Have you targeted new market segments to which you would like your brand to appeal?
•    Have you explored ways to make your brand more relevant to the next generation of consumers?
•    Do you know what must be done to ensure the parent brand maintains a relationship with the consumer throughout his or her life (cradle-to-grave marketing)?
•    Do you have a plan that specifies what categories your brand will enter next, in what order it will enter them and on what time frame?

The Reality of Brand Authenticity

We don't know the name of the first brand. What we do know is that up a grassy mountainside a few millennia ago, a big Norse farmer was getting a bit annoyed about having his cows stolen. In a fit of Viking desperation, he started to burn his initials into his cows to stop them being nicked. Brandr, the Norse word for fire, became our operative verb. An industry that would dominate marketing was born not from the desire to differentiate or connect with consumers, but from the simple need to mark ownership and origin.

Unfortunately, a great number of marketers operate under the mistaken impression that brands are built purely around consumers. This is partly true, but brands must also represent their origins. A brand is not a malleable product that can be moved willy-nilly around a perceptual map to follow consumer needs and drive sales. Brands are anchored in provenance, founders and heritage.

The Citroen C5 work is a case in point. A blond male whizzes around Germany in his car to the strains of Wagner. A German-accented voiceover describes the car as 'unmistakably German' before revealing it is a Citroen made in France. It's a smashing ad that agency Euro RSCG should take pride in. But it is entirely inappropriate for the brand, and Citroen should hang its head in shame.

This ad will drive awareness in the short term, but over the long term it will damage the brand associations of Citroen and leave it in no man's land. If consumers want German-made, there are several exceptional, authentically German brands. It is a message lost on Citroen's UK marketers - the way to build brand is to focus on Citroen, not your competitors.

Getting Into The Mind Of The Consumer

The easiest way of getting into someone's mind is to be first. It is very easy to remember who is first, and much more difficult to remember who is second. Even if the second entrant offers a better product, the first mover has a large advantage that can make up for other shortcomings.

However, all is not lost for products that are not the first. By being the first to claim a unique position in the mind the consumer, a firm effectively can cut through the noise level of other products. For example, Miller Lite was not the first light beer, but it was the first to be positioned as a light beer, complete with a name to support that position. Similarly, Lowenbrau was the most popular German beer sold in America, but Beck's Beer successfully carved a unique position using the advertising,

    "You've tasted the German beer that's the most popular in America. Now taste the German beer that's the most popular in Germany."

Consumers rank brands in their minds. If a brand is not number one, then to be successful it somehow must relate itself to the number one brand. A campaign that pretends that the market leader does not exist is likely to fail. Avis tried unsuccessfully for years to win customers, pretending that the number one Hertz did not exist. Finally, it began using the line,

    "Avis is only No. 2 in rent-a-cars, so why go with us? We try harder."

After launching the campaign, Avis quickly became profitable. Whether Avis actually tried harder was not particularly relevant to their success. Rather, consumers finally were able to relate Avis to Hertz, which was number one in their minds.

Killer Competition: Will Your Brand Survive?

In the beginning, choice was not a problem. When our earliest ancestor wondered "What's for dinner?" the answer wasn't very complicated. It was whatever animal in the neighborhood he could run down, kill, and drag back to the cave. Today you walk into a cavernous supermarket and gaze out over a sea of different types and cuts of meats that someone else has run down, killed, dressed, and packaged for you.

Your problem is no longer catching it. Your problem is to try to figure out what to buy of the hundreds of different packages staring back at you in the case. Red meat? White meat? The other white meat? Make-believe meat?  But that's only the beginning. Now you have to figure out what part of the animal you want. Loin? Chops? Ribs? Legs? Rump? And what do you bring home for those family members who don't eat meat?

An Explosion of Choice

What has changed in business over recent decades is the amazing proliferation of product choices in just about every category. It's been estimated that there are 1 million SKUs (standard stocking units) out there in America. An average supermarket has 40,000 SKUs. Now for the stunner. An average family gets 80 to 85 percent of its needs from 150 SKUs. That means there's a good chance we'll ignore 39,850 items in that store.

Buying a car in the 1950s meant a choice between a model from GM, Ford, Chrysler, or American Motors. Today you have your pick of cars, from GM, Ford, Chrysler, Toyota, Honda, Volkswagen, Fiat, Nissan, Mitsubishi, Renault, Suzuki, Daihatsu, BMW, Mercedes, Hyundai, Daiwa, Mazda, Isuzu, Kia, and Volvo. There were 140 motor vehicle models available in the early 1970s. There are 260 today. Even in as thin a market as $175,000 Ferrari-type sports cars there is growing competition. You have Lamborghini, a new Bentley sports car, Aston Martin, and a new Mercedes called the Vision SLR.  And the choice of tires for these cars is even worse. It used to be Goodyear, Firestone, General, and Sears. Today you have the likes of Goodyear, Bridgestone, Cordovan, Michelin, Cooper, Day-ton, Firestone, Kelly, Dunlop, Sears, Multi-Mile, Pirelli, General, Armstrong, Sentry, Uniroyal, and twenty-two other brands.

The big difference is that what used to be national markets with local companies competing for business has become a global market with everyone competing for everyone's business everywhere.

China's Big Brand

According to that notable macro-economist Frank Zappa, you aren't a real country unless you have a beer and an airline. It also helps if you have a decent football team and some nuclear weapons, he added, but at the very least you needed a beer.

Perhaps Western thinkers have exaggerated the influence of Mao on China and in doing so overlooked the influence of Zappa. For it is indeed a beer brand, Tsingtao, that will usher in the new era of Chinese capitalism.

Tsingtao is more than merely a good beer to accompany your spicy dumplings.

It is quite simply the most important brand on the planet because it is the only great Chinese brand.

China and branding are the sexiest concepts in modern business. At the moment, however, the two have almost nothing to do with each other. The growth in China's economic power, its developing infrastructure and the rise of its production capabilities are now widely known.

However, among the hyperbole, mind-boggling market sizes and extrapolation effects, there is a glaring weakness in the nation's business model. For all their economic scale and prodigious production, the Chinese have not got a clue about marketing; 50 years of communism is not the best preparation for brand-building.

While the Chinese are making and consuming an increasing proportion of the world's consumer goods, they are doing so using other countries' brands.

Brand Name Overload

Twenty-eight years ago, in a book entitled Positioning: The Battle for Your Mind, I wrote: "The single most important marketing decision you can make is what to name the product."

By now, the world seems to agree.

A booklet from Johnson & Johnson says: "Our company's name and trademarks are by far our most valuable assets."

The former chairman of Quaker Oats says: "If this business were to be split up, I would be glad to take the brands, trademarks and goodwill, and you could have all the bricks and mortar--and I would fare better than you."

A former commissioner of the Patent and Trademark Office said that a trademark is "frequently a more valuable asset of a business than all other assets combined."

A survey of 400 companies by our naming partner Steve Rivkin shows that, compared to three years ago, marketers are introducing more names, trying more ways to nail down a name and finding it more difficult to get the job done.

The availability of names is today's No. 1 problem. Communications overload is strangling the world of names too.

There are about 2.5 million registered trademarks in the United States--and at least 3 million more in the rest of the world. Last year, more than 500,000 new names were registered around the world. A standard dictionary has about 100,000 entries. We're running out of words to use for names. So, how hard is it to come up with a good name for a product? Here's how hard. A number of years ago, the industrial products sector of Kimberly-Clark actually trademarked the name "Brand X."

How hard is it to name your company?