Branding Strategy Insider

Aggression: A Worthy Brand Builder

Irish low-cost airline Ryanair was in trouble again last week. Chief executive Michael O’Leary was forced to apologise to easyJet founder, Sir Stelios Haji-Ioannou, for depicting him in the January ad campaign above as a Pinocchio who misleads clients about punctuality.

To avoid a court case, Ryanair agreed to pay Sir Stelios’ costs and damages of £50,000 which will be donated to a charity of the easyJet founder’s choosing. Stelios joined in by claiming O’Leary was the “ugly face of capitalism”.

The “ugly” face, however, was smiling broadly this week with the expected announcement that Ryanair would report first-quarter sales of £730m.
 
Despite angry volcanoes and even angrier competitors, Ryanair continues its transformation from a tiny brand that had only one plane to fly between Gatwick and Waterford in 1985 into Europe’s largest airline. More importantly, the brutal intelligence of Ryanair’s marketing strategy has once again proved itself.

Exploring Premium Brand Extension

 
Regular readers of Branding Strategy Insider know we welcome and answer marketing questions of all types. Today, Eugene, a marketer in London, England writes…

"Dear Derrick and Brad, I really enjoy Branding Strategy Insider, thanks for the resource. My question is  how to measure the Halo effect a premium brand extension can have on the rest of the range, and the Halo effect mechanics."  

Eugene, thanks for the compliment and your question. Regarding the Halo effect a premium brand extension can have on the rest of the range, following are things to consider:

• One cannot add a significantly more premium or inexpensive product within a brand’s range without encountering credibility problems. This is especially true if one is trying to move a lower cost brand into a more premium market segment. This is why Toyota has the Lexus brand and Honda has the Acura brand. Even Marriott’s association with the Ritz Carlton brand (as its parent company, even though they are not linked in an identity system) could lead people to think less of Ritz Carlton compared to the (luxury only) Four Seasons brand, for instance.
• Adding a more expensive product at the top of a brand’s price range may increase people’s propensity to buy a higher priced (but not necessarily the highest priced) product within the range. They may think, “I cannot afford the most expensive product, but I can afford the second most expensive one.” Adding a more expensive product to the top of a brand’s price range may also increase the average perceived value of products in the category. (Investigate reference pricing. I cover this concept in greater detail in my book Brand Aid.)

Brand Crisis And Brand Survival

 
A brand crisis can take many forms, which can linger differing lengths of time depending on the survivability of the brand. Every corporate brand crisis is unique; each has a starting point when the CEO becomes responsible for the survival of the company. BP's bumbling management of its Gulf crisis, its seemingly endless decision making process, not to mention post-crisis effects that will last decades, make this crisis unprecedented.

Tyco, Texaco, Dynegy, IBM, Enron, Worldcom and Citigroup are a few of the crises we've studied. Some companies survived, not only intact, but emerged stronger than ever. Others were destroyed, or forced to merge. A handful limped on, weakened but not ruined.

In 2002, Tyco's CEO and CFO were accused of theft of over $600 million. With negative press around the scandal, brand familiarity increased dramatically, while brand favorability plummeted. The speed and magnitude of this brand's collapse indicates a brand catastrophe. Even after management had been changed and the company got back to business, the Tyco brand continued its downward slide for years.

Nationwide attention spotlighted Texaco for racial discrimination in 1995. The tremendous media exposure immediately heightened brand familiarity, while perceptions reduced favorability in the eyes of influentials. Texaco's immediate, focused response by senior management helped mitigate an adverse environment. Still, it took Texaco nearly five years to fully regain its previous brand strength, at which time management decided to merge with Chevron.

Brand Messaging For A Strong Emotional Response

Recent breakthroughs in neuro-science confirm what we marketers know in our guts, but sometimes forget in the day-to-day rush of preparing the next ad campaign launch. Namely, everybody feels (emotions) before they think (rational decision), and without generating the appropriate emotional response, no ad campaign can succeed.

Here are some guidelines to help avoid that fate.

Get Physical

Sight and sound are fine, but over-used. Leverage the sensory dimensions of feel, touch and taste to create more intimacy and differentiation. Remember: the brain originated with the sense of smell. So Descartes got it wrong: it's more like, I can smell, therefore I feel/think and will buy your product.

Keep It Simple

You've got three seconds to connect. The joke that has to be explained is never as funny as the joke you just get. The frustration of "huh" (message-itis) is marketing's hidden emotional cancer. Consumers feel lost more often than anybody wants to admit.

Negative Brand Equity: A BP Death Sentence?

Buy shares in BP. That was the bizarre advice from Royal Bank of Scotland analysts last week after those bright sparks worked out that even the worst possible costs of the Deepwater Horizon will total less than the actual drop in BP’s market value.

RBS has, of course, got it wrong again. Long after the costs have been paid and the oil cleaned up, BP will continue to live in infamy as one of the world’s most shamed brands. The official terminology for this kind of perilous state is negative brand equity. And it spells disaster and probable death for the company that was once known for being “Beyond Petroleum”.

Negative brand equity occurs when a company’s brand actually has a negative impact on its business - meaning that the company would be better off with no name at all. It happened in the Seventies when Tesco’s brand was so poorly perceived that Imperial Tobacco decided not to acquire the retailer for fear of being associated with such a tarnished and unpopular organisation. It happened again in the Nineties when Skoda discovered to its horror that it could not get British consumers to buy its cars despite spending millions on advertising. Consumer research later confirmed that two-thirds of its target market would literally not consider anything at any price that carried the Skoda badge.

And now we have BP. Like every case of negative brand equity before it, the peculiarities of the situation mean that all the traditional advantages of branding are now inverted. BP would be better off whitewashing its forecourts and removing all evidence of its Helios brand identity. That said, the actual impact of the Deepwater disaster on BP’s petrol pump sales is likely to be localised and temporary. We know from past history that petrol consumers are a fickle bunch. When the Exxon Valdez oil tanker spilled its load into Prince William Sound in 1989 the enduring impact on Exxon’s gas sales, even in the state of Alaska, was virtually zero.

In Search of Brand Accountability

Many departments within a corporation will argue the need for accountability in marketing, but none steps forward to take ownership of how to account for brand equity.

Theoretically, the CEO is responsible for the value of the corporate brand. Unfortunately, it is a rare CEO who understands how brand equity value is created. CEOs would love to see their company prosper but few understand how to take command or utilize the tools available to make it so.

The CFO properly challenges the high costs of marketing today because there is no standard for accounting for the profitable return on investment for brand building activities. In the world of the CFO, marketing is ONLY seen as an expense without any direct connection to ROI. Thus, creating a self-fulfilling prophecy.

CMOs would be wise to step forward to take command of brand marketing accountability. Many would argue that they have done so, but attempts to date to create a unified set of standards have been anemic. Most attempts to build accountable ROI bridges to the CFO or CEO have been misunderstood or at the least unrequited.

Comcast Makes Classic Marketing Mistake

Comcast is in the process of rebranding some of its offerings to "Xfinity," although the company name will remain Comcast.

Consumers in 11 markets will have a choice of Xfinity TV, Xfinity Voice and Xfinity Internet. Presumably, Comcast will soon be rolling out these high-speed, high-definition services to other prospects in the 39 states the company serves.

Is this a good move?
Lawyers will tell you the best trademarks are "coined" names such as Kodak and Xerox. So we are seeing a raft of coined brand names you can't find in any dictionary, including Xfinity.

But wait a minute. There's a well-known automobile brand called "Infiniti." Isn't Comcast worried about the confusion between the two? If not, did Comcast consider using Xonda or Xundai or Xoyota?

But there is a bigger issue here. Comcast is a large company with revenues last year of $35.8 billion. In addition to its cable, telephone and internet services, Comcast has cable programming interests (G4, Versus and The Golf Channel) and also owns entertainment channel E!

Not to mention the company's 51% interest in NBC Universal, a joint venture with General Electric.

It makes sense for Comcast to have a pure "company" name like Procter & Gamble and have its services, programming and cable channels defined with their own brand names.

Internal vs. external
But what makes sense from an internal point of view often doesn't make sense from an external point of view.

Marketing Lessons Continue To Flow From Apple

Look at how the company executes a pre-launch strategy to build anticipation and generate awareness. Examine closely how Apple uses its retail partners to make the launch events an actual occasion rather than just the start of availability. Study carefully how Apple initially uses premium prices at the outset to maximise profits and communicate exclusivity, and then later as the reference price to discount from in order to drive sales from less involved market segments. But most important, look at how Apple always runs out of product long before the initial launch ends.

Sales managers and finance people must think Apple is insane. Why make less stock than the guaranteed demand? Only marketers, the good ones at least, understand that the success of the iPhone 4 hinges as much on running out of initial supplies as it does on the phone’s sleek new design. By running out of iPhones, Apple actually ensures its product will eventually be more successful. Scarcity keeps its retailers like AT&T, Vodafone and O2 onside by restricting their supply. It also ensures a vital additional hit of publicity as media coverage of retailers selling out of iPhones underlines both the massive demand for the new product and the continued success of Apple.

The anticipated scarcity also drives thousands of consumers into store to pre-order their iPhone – a vital success factor for a product that is actually (whisper it) little more than an upgrade to a phone that most of these consumers already own. It also ensures essential word of mouth from consumers who did manage to get one of the phones before they sold out. Surely someone last week bored you with the news that they had secured one of the precious new machines or gave you a demonstration of their hot new phone? This is wonderful free promotion for Apple and the sort of thing Google’s Android phone, with its buy-one-get-one-free approach, is hardly likely to achieve.

If marketers want their brand to have equity they must avoid the perception that it is available in unlimited amounts to everyone – no matter how many units they actually sell.