Branding Strategy Insider

What Marketers Can Learn From Ford

Alan Mulally turned 65 this month. You might not know the name, but you surely know the company he leads. Mulally is the CEO of Ford. That might sound a pretty unpleasant role with all the challenges of declining sales, government bail-outs and union action. But Ford is different. And it’s different because of Alan Mulally.

While General Motors and Chrysler were heading blindly over the edge of the cliff during the global financial crisis, Mulally steered his company in a very different direction. Almost as soon as he took over at Ford he went out and raised funds using the company as collateral.

Many onlookers questioned why Ford needed $26bn but the money, raised while credit was cheap and available, allowed Mulally the chance to totally restructure Ford and the way it made vehicles. It also enabled Ford to survive without the government bail-outs that both GM and Chrysler would later depend upon to stay afloat.

What GM Should Learn From The Brown Rat

Last Sunday, GM announced plans to introduce a new car brand into the Chinese market. Baojun - which means “treasured horse” in Mandarin - will go on sale later this year. Shen Yang, the general manager of SAIC-GM-Wuling, the joint venture responsible for the new car, was brimming with enthusiasm on launch day: “Baojun is being positioned as a reliable partner with an image that is confident, smart and dependable”. It all sounds very exciting but marketers with long memories might take the news with some degree of scepticism.

Only 18 months ago, GM was on the verge of disaster thanks to an over-sized portfolio of a dozen automotive brands. No bad thing you might think - after all there are many companies like Procter & Gamble or LVMH that manage much larger portfolios than twelve. GM, however, made the classic error of targeting the same brands at the same segments with the same positioning. Back in 2006, for example, it was not unusual to see Saturn, Buick, Pontiac, Chevrolet and GMC all competing on price to snare the same American consumer. The result was a company with huge marketing costs, poor margins and an abject lack of differentiation across its loss-making portfolio.
 
Meanwhile better-run competitors like Toyota and BMW used more parsimonious brand architecture to ensure superior levels of differentiation and profitability. In the end President Obama had to step in and save GM from bankruptcy with a $50bn injection of taxpayers’ money and a specific demand that GM shed some of its weaker brands. The company has since sold Saab, closed Saturn, Pontiac and Hummer and begun to make a profit again in the US as a result.

But while GM might be down to four core brands in the US, Baojun marks the company’s seventh brand in a Chinese portfolio that also includes Buick, Cadillac, Chevrolet, Opel, Wuling and Jiefang. GM China president Kevin Wale rejects any notion that his latest brand will detract from the existing portfolio: “The introduction of Baojun is part of GM’s multi-brand strategy in China. Baojun will complement our other brands sold in China; it will enable us to better address the increasingly segmented Chinese vehicle market.”

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.

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.

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.

Sponsorship Should Not Be A Random Act

Somewhere inside the Istanbul headquarters of Turkish Airlines there must be a very large wall. And on that wall are plastered random images of people and organisations that all have two things in common. First, they have absolutely no association with Turkey or its national airline.

Second, they are extremely expensive. I have not seen the wall, but one would imagine an arbitrary assortment of movie stars, supermodels and famous sporting clubs. Written across the top of this wall a large banner probably reads “Turkish Airlines Potential Sponsorship Partners”.

Then, it seems, once a year Turkish Airlines embarks on “marketing planning” by inviting its chairman, Hamdi Topcu, to put on the ceremonial blindfold, stand 20 feet from the wall and throw the all-important Turkish Airlines “Dart of Truth”. The airlines marketing team then rush to the wall to discover who or what they will recruit for the coming year’s sponsorship strategy.

In 2009, the dart landed on movie star Kevin Costner. Despite the fact that Costner had never been to Turkey, ever flown Turkish Airlines, or had ever expressed even the most passing interest in Turkish Airlines - the “Dart of Truth” was infallible. Costner was contacted out of the blue, and paid a small fortune to fly to Istanbul and make a series of TV and print ads in which he was made to “feel like a star” on Turkish Airlines business class service.

Apple: Brand of Profits

Last week, Apple overtook Microsoft as the world’s most valuable technology company. How has it managed to be so successful? Pundits love to say “innovation”, but if you go beyond the generic answer and break down the specific steps in Apple’s business model, an intriguing picture emerges.

Let’s take the iPhone, and follow the stream of money from its origin of an initial consumer purchase all the way to the ocean that represents Apple’s incredible profits.

Our journey begins with a consumer who heads into O2, Vodafone or another network provider to purchase a new iPhone 3GS. If Apple was any normal company it would now expect to give away up to 15% of its revenues in margin for the retailer. But Apple’s brand strength combined with the latent threat of its own retail stores means it usually sells its products to retailers for virtually the same price as they will charge their consumers. That’s right - zero profit for the retailer. Apple can do this because it is a destination brand that every retailer wants and one that often confers lucrative peripheral sales.

Brand Design: A Penis For London's Olympic Games?

They’ve done it again! Three years after the 2012 logo united England in disappointment, Locog – the organisers of the London Olympics – delivered another body blow for British design.

Wenlock, the mascot for the Olympic Games, was unveiled alongside Mandeville, the Para-Olympic mascot. With the usual Locog flair for impending disaster, the superficial elements were all stage-managed perfectly: a London schoolyard filled with happy, multicultural children playing harmoniously together against the backdrop of a graffiti rainbow. Suddenly, horrifically, they were joined by a man dressed as a large, white phallus who proceeded to frolic with the children in a quite alarming manner.

It was an indelible image. As a voiceover explained that the figure with the helmet-like head, single eye and dual appendages around his base was Wenlock, I was struck with a single, horrifying realisation: yes, but he looks like a penis.

Rebranding: Not Beyond Credibility

The bad news mounts for BP as the petrol giant has admitted that efforts to plug its Deepwater Horizon well and prevent any more crude oil escaping continue to fail.

One mile from the surface, and 50 miles from some of the most beautiful and valuable coastline on Earth, the leak continues unabated. And you can forget the estimates of how many gallons of oil are being pumped into the Gulf of Mexico each day, because BP has also conceded it has no clue exactly how much oil is leaking out.

These uncertainties add to the growing list of major imponderables facing the beleaguered British oil company. BP has said it does not know when the leak will be stopped, nor does it have any idea what the long-term ramifications for local communities and industries will be. It has also said it has no clue what the final cleanup bill will come to - except that it will be in the billions and that BP will be liable for every penny. Indeed, the implications are so inestimably huge at this stage that the only accurate bellwether of the kind of trouble BP now finds itself in has been the ashen, horrified look on chief executive Tony Hayward’s face. All the media training in the world cannot disguise the enormity of the problem now facing Hayward and his company.

Any oil company finding itself in this situation would be in trouble. But there is, of course, a very specific reason why BP, of all companies, is going to suffer more spectacularly than any other from this disaster. BP, as we now all know, now stands for “Beyond Petroleum”. In the most famous repositioning case of the century, Ogilvy and Landor helped BP to change its logo, its name and its positioning to reflect the fact that the company was now actively “exploring new ways to live without oil”.

Countries Are Not Brands

The World Cup approaches and, once again, the English nation hopes against hope that it can win the tournament and finally end 44 years of hurt. Meanwhile, in South Africa the dreams are just as bold but aimed in a very different direction. FIFA’s World Cup presents its hosts with, what they believe to be, their biggest ever opportunity to build a stronger country brand.

That’s a shame because, despite its growing popularity and firm establishment within marketing, the business of “country branding” or “nation branding” is nonsense. Countries are not brands. They are countries. Brand strategy should be reserved for brands. I may have a hammer, but it doesn’t mean that every problem is shaped like a nail. Real expertise in a field is to know the limitations of that field and behave accordingly.

I can appreciate the attractions of country branding. Selling a brand strategy to a public servant in Finland or Ghana must be a lot easier than pitching to a trained marketer from the likes of Unilever or Ford. And I can also appreciate that even the gigantic budgets of P&G or HSBC are dwarfed by a nation’s coffers. I can imagine, too, that measuring the impact of a country branding strategy is far less taxing than the typical corporate branding work, where sales figures and brand equity scores always influence the assessment of impact. But the core problem endures: conceptualising a country as if it were a brand is stupid.