Understanding Value

Michael Porter defines value as;

“A firm is profitable if the value it commands exceeds the costs involved in creating the product”.

Your customers will understand the concept of value intuitively.  It is therefore difficult to measure value dispassionately.  Every customer will have a different concept of value.  They buy on the basis of value and they spend much of their lives as consumers searching for it.

Value does not mean lowest price and you should not confuse the term value with the cheap and nasty end of the market.  In my former career in local government; where local authorities are legally bound by the concept of best value, I was continually frustrated that managers and councillors confused value with the lowest bid or price for a product or service.  It was part of my job to procure the services of test laboratories.  My managers were keen that I only accepted low bids.  However, I recognised that the expertise of the laboratory and the status of the evidence they could provide was important value criteria.  I would always see more value in a test report signed off by a recognised specialist in say, Toy standards, than a laboratory which could provide a test certificate but who could not provide the Bona Fides of the specialist lab.

What is important in the consumer’s calculation in value is their perception of the utility of your offer i.e. what they believe the product will do for them.

When consumers are considering buying a product or service, they spend a considerable part of the decision process trading off different perceived values of different offers for the goods or service demanded.  The more expensive or complex the goods or services being purchased; the more complex the decision process and the trade-offs.

Value is a critical concept in any market offer but it is still one of the most over-used and least understood terms in business.  All too often, senior management only link value to price.  They ignore other concepts of value.  They forget value means different things to different people.

There is a formula which is often used to represent value:

Value = Benefit – Effort – Risk – Price

The more value you are able to offer, the more likely your ability to create profit.

Value is not about price and it is not about being cheap.  It is about what the customer perceives about a product and that your offer will meet its promises.  It is the value of a job being done in the way your promise demands.

Consumers see benefit as the ability of a good or service to provide the perfect solution to their specific problem.  The closer to the perfect solution you are able to provide, the greater the customer will perceive value in your offer.  The greater the benefit the customer perceives in your offer, the more they will be willing to pay.

 

To understand perceived customer benefit, you need to find out:

  1.  The nature of the consumer’s problem.
  2. What the consumer perceives to be the perfect  solution to their problem
  3. Where your product and service fits on the scale of the consumers perception of ‘a perfect solution’ i.e. does your product fully meet their needs or will it just about do, or is it useless.
  4. If your product won’t provide the perfect solution, where does it fall down.

As every consumer’s perception is unique, these are difficult questions to answer.

Effort is how much work the consumer has to put in to solving their problem when they use your product.  It is the question of ease and convenience.  We live in a convenience society. So the greatest value for consumers is the product or service which is most convenient.

Consumers see risk in many facets of choice and value criteria.  The greater the risk inherent in the decision to purchase a particular product, the lower the perceived value of that product.  Consumers ask themselves, if I buy X brand of a product:

  • What can go wrong?
  • What are the downsides?
  • How long will it take to choose?
  • How long before benefits will begin to flow?
  • How will that product affect my image?
  • What utility will the product offer?
  • If the product doesn’t meet its promise, how will I feel?

Price is a more complex issue than just whether consumers feel they are paying too much or whether goods may be cheaper elsewhere.  If a product or service seems to be too cheap, consumers will wonder if your offer is unfit for purpose or that your goods are of inferior quality.

You also have to consider the opportunity cost of a consumer’s purchase.  This isn’t just the cost incurred in arranging to buy the product.  There is the opportunity cost of the time taken to buy the product; transportation costs, etc.  There is also the thoughts in the minds of consumers of what they could buy if they chose not to purchase your product.

So to maximise customer value:

  1. You can cut prices.  This is the dinosaurs method of maximising value; offering more for less. It is crude and it can be expensive.  It can drag you into expensive price wars out of which no-one can win.
  2. Perhaps it is better to increase the benefit from usage,  You can add more benefits to your products.  But these must be real benefits your customers want.
  3. You can reduce the effort required by consumers to buy your product.  Make it easier for consumers to acquire the benefits of your offer.
  4. You can reduce consumer risk through guarantees and warranties, you can offer free trials and use your brand reputation to build consumer trust.  You need to become a brand that can be believed in.  Your branding effort can reduce risk.

All stakeholders in your business, both external and internal, from shareholders to prospective customers, need a value proposition. If you cannot easily describe your value proposition to them, you may have trouble convincing them that your offer is something in which they can invest.

Brand Revitalisation and Brand Repositioning

It is commonly understood that products have a life cycle.  They are introduced to the marketplace; hopefully they catch on with target consumers and sales volumes grow; eventually growth slows and the product becomes mature in the market; finally, the product, through changing consumer tastes or through new technologies, goes into decline.

Where marketers are working with mature or declining products, their focus tends to be on maintaining the position of the mature product in the market or in slowing the products decline.

It is also recognised that brands have a lifespan.  For example, who in the UK drives a Datsun car?  Who watches a Thorn television? Who shops at Safeway?

Of course, brands are rarely linked to a single product offering.  So a brand’s life cycle tends to be longer than a product life cycle.

Brand revitalisation is the process of gaining sales volume for the brand by expanding its market.  Six distinct opportunities exist to revitalise a brand:

  1. You enter a new market with the brand.  This can be geographic (Irn Bru is now sold in Russia) or it can be selling a brand previously associated with a business to business market to consumers.  For example, four by four vehicles were seen as suitable for farmers and the military; now they are used by mothers on the school run.
  2. You can enter new market segments.  For example, Johnson and Johnson changed the marketing of their baby shampoo to target adult users.  Listerine started life as a floor cleaning detergent: It is now sold as a mouthwash.
  3. You can increase the frequency of use.  Kellogg’s has just started to re-run a campaign advising that their cereals are not just for breakfast and they can be eaten as a snack at any time of the day.
  4. You can create incentives for purchase.  This could mean offers where collecting tokens gets you free gifts such as cheap airline flights.  Airlines run frequent flyer programmes where ‘club’ members get the use of exclusive departure lounges and priority booking.  Coffee shops stamp loyalty cards and when the card is filled, the customer gets a free cup.
  5. You can increase the quantity used.  Fast food outlets make their standard sizes bigger (with a price rise).  Consumers get used to the higher price and to the larger standards size.  Chocolate biscuits are sold in packs of seven.  This means, that a family with 2.4 children will buy two packs not one.  Weetabix advertise on the slogan ‘Can you eat three’ to promote the idea of bigger serving sizes.  You can also remove barriers to consumption through product reformulation e.g. sugar free soft drinks, low-calorie chocolate, etc.  Many breakfast cereals despite high sugar contents are advertised on the fact they are fortified with vitamins and minerals.  Such health claims became an issue and now the EU strictly regulates their use.
  6. You can move a brand into a new category e.g. Mars bars as an ice cream or as the flavouring in a milk drink.

Brand repositioning is a strategy to increase or improve your competitive position in the market place.  In doing so, you aim to increase sales volumes and your market share.  Often this means seizing market share from your rivals.  Repositioning is achieved via changing aspects of your products or by changing the target market for a brand.

This leads to four strategic opportunities:

  1.  Image Repositioning – Product attributes are unchanged and the product is aimed at the existing group of target consumers.  This is the process of changing a product’s image amongst target consumers.  For example, Adidas was seen as a ‘dull’ brand.  The Adidas brand was repositioned to develop ‘street credibility’ amongst sports shoe wearers.  Tango was a minor player in the UK soft drink market but by creating its ‘You’ve been Tangoed’ anarchic image, it is now a major player in the market aimed at 18 to 24 year olds.
  2. Market Repositioning – In this strategy, you change the target market whilst keeping the product the same or similar.  For example, Lucozade was sold as a drink for invalids, particularly children (in my native Scotland, it’s a hangover cure!).  The brand was repositioned as an isotonic sports drink.
  3. Product Repositioning – In this strategy you reformulate the product to adapt to changing customer tastes.  So the target market remains the same but the product changes.  Castlemaine XXXX beer upped its alcohol content from 3.7% to 3.9% (4% for pub sales) to match changing tastes among lager drinkers.
  4. Total Repositioning – This is where the brand’s target segment changes and the brands products change.  Skoda went through a total repositioning following the brand’s purchase by Volkswagen.  The quality of the company’s cars was vastly improved to attract more affluent consumers.

Marketing is about creating sustainable competitive advantages which are profitable.  Brand Revitalisation and Brand Repositioning are critical strategies to ensure that sustainability.

 

Making your brand authentic

Traditionally, when the word authenticity was mentioned by senior executives, it was defined by the term ‘the genuine article’.  It was a reference to official goods as opposed to counterfeits.  Authority was conferred on a product through the enforcement of intellectual property and the use of legal force in terms of both criminal and civil sanctions. Thus authenticity was conferred on products by their manufacturer.

Today, authenticity is conferred through the perception of consumers.  To develop an authentic brand story, you must buy in to the perceptions of your target consumers and fit within their concept of the truth.

What recent political campaigns have shown is that something doesn’t need to be true or factual to confer authenticity.  Leave won the EU referendum campaign through the widespread dissemination of lies and myth.  They plastered a bus with a false and misleading statements about “£350 million a week for the NHS”.  This was a lie as the UK only ever paid a fraction of that sum to the EU as its membership fee.  Donald Trump continues to send out false and misleading messages.  For example, this week he tweeted about a large rise in the crime rate in Germany.  In truth crime in Germany has fallen to its lowest level in over a decade.

Obviously there are laws to prevent the dissemination of false or misleading statements about products (e.g. the Consumer Protection from Unfair Trading Regulations 2008) and there are far less robust controls in politics.  However the Trump and leave campaigns won because their messages fitted best with the perception of the truth amongst the target audience.  Common sense and facts did not matter, the misleading messages fitted with the target audiences beliefs.  Both Trump and Leave cynically targeted the less well-educated and the politically dispossessed with fairy stories and the creation of a false Utopia.  In the long run the lies told by Trump and Leave will be exposed and the effects of a policy based on lies will be felt.  But politicians aren’t trying to maintain a product over decades.  Their concern is for the immediate campaign, not the campaigns of ten years time.  They are quite happy to deliver a prospectus which contains false authenticity because by the time the effects are felt, the ‘product they sell will be gone.

That is not an appropriate strategy if you are trying to develop brand authenticity in the long-term.

However, as with politics, something doesn’t need to be true to be authentic.

Charles Morgan, of the Morgan Motor Company, which makes ‘classic British sports cars’ said:

“Rather than a brand, I think it’s an attempt to interest the cult and to keep the cult going.  we like telling stories people can tell in the pub and that makes them feel part of the family.  And so the brand is made up around a series of myths; some of which are true, some of which are owned – The one about the wooden chassis in France, we have tried and tried to get rid of that, but it still persists; and I think eventually we’re going to have to say, “Okay, yeah, yeah, it’s true”.

Of course, parts of a Morgan car are constructed from wood, but the chassis is not and never has been.  The wooden chassis myth is part of the subjective nature of brand authenticity.  The fact Morgan talks of myths, truthful and owned, is part of the firm’s creation of an alluring mystique which is authentic in the minds of its target customer group.

So why does brand authenticity matter:7

  1. Consumer brand choice is an extension of their desired self.  They use brands to achieve self-actualisation (the peak of Maslow’s Hierarchy of Needs.  Consumers use brands to confirm a preferred identity but they also go further and use brands to connect with a preferred community.  A brand is a connection to those who think alike.
  2. Authenticity can increase brand equity.  Brands considered authentic are often viewed more favourably by consumers and therefore are seen to have greater worth.  Authenticity can lead to greater loyalty, more word of mouth communication, helps to create brand communities, makes consumers more tolerant of failures and often acts as a defence in tougher times.  In market research, if consumers see a brand as authentic, it is an indicator of purchasing intention.
  3. Authentic brands are often long-lasting.  Their product life cycle is long or cyclical.  Brands seen as authentic can persist for decades.  The UK has two of the oldest brands in the world, Lyon’s Golden Syrup and Bass beer.  Both these brands have persisted for nearly two centuries.

Developing authenticity provides an ongoing point of difference.  It can also provide excitement and élan.

For example, Lexus cars are seen by consumers as technically excellent but boring.  Alfa Romeo cars have a record of inconsistent performance (particularly electrical faults) but they are seen as having soul.

Here are five strategies for building brand authenticity:

  1.  Become part of the community:  Assimilate the psyche of nations and sub-cultures.  What is Australia without Vegemite? What is France without Champagne?  What is London without the red double-decker bus?  What is Scotland without Tartan?  Being part of the community makes it difficult for new market entrants to gain a foothold.  If you are part of the community, buying your product is an act of identity, not just loyalty.
  2. Challenge conventions:  It is often authentic to go against conventions; although admittedly that sounds counter-intuitive.  For example, nineteenth century Britain the accepted culture was one of modernisation and technological advance.  William Morris, patron of the arts and crafts movement went against the zeitgeist.  Through Liberty he chose to champion artisan skills and a culture of craft.  He espoused a simpler age based on nature, tradition and emotion.  Liberty still exist to this day.  Punk arose in the late 1970’s as a reaction to the convention’s of progressive rock.  Where many saw the future of popular music as complex and taking influence from classical music, Punk looked to the simpler three chord structures previously seen in fifties rock and roll.  these simpler structures were seen as more authentic than prog.  Dyson are all about challenging convention.  Dyson’s technology is seen as authentic because it challenges vacuum cleaner designs which hadn’t changed in decades.  It is authentic to target the rebellious spirit in all of us.
  3. Stick to your roots:  Authentic brands are stubborn.  It is often a convention in marketing that to sustain a brand over time, you need to adapt to changing environmental, societal and technological factors.  However brands recognised as authentic often ignore societal change and stick to their roots.  In fact there could be a consumer backlash if they do not.  For example, Irn Bru recently changed its recipe.  It reduced the sugar content as a result of a tax introduced by the government on sugary soft drinks. Barr’s faced a backlash from its customers in Scotland who were unhappy at the recipe change.  In contrast, Coca Cola accepted the new tax and raised prices rather than lower the sugar content.  Perhaps Coke was ‘once bitten, twice shy’ following the failure of the New Recipe Coke in the late 1980’s.  Brand history is critical to authenticity.  Heritage, sincerity and love of production are central to consumers’ perception of authenticity.
  4. Love of craft:  Are your people passionate about your products and services?  Do senior managers spend time on the shop floor?  Consumer’s see authenticity when a firm shows true love of their craft.  Morgan cars are one such example.  It has retained the craft of hand-built coach work when other car manufacturers have factories filled with robots.  The firm is family owned and its managers own and drive its products.  Currently there is a group of Star Wars fans who want to remake The Last Jedi ‘properly’.  They feel the latest film in the series didn’t fit with the values of the ‘Star Wars’ brand and with its established conventions.  Brands run and staffed by enthusiasts are seen as authentic.
  5. Business Amateurism:  Authentic brands are often run by people who the general public see as amateurs.  A fine example is Ben and Jerry’s Ice Cream.  In the minds of many consumers, Ben and Jerry are two hippies who decided to sell ice cream.  They are not seen as hard-nosed businessmen.  The impression is that such firms reject market research and use gut feeling.  Of course, this is nonsense but the brand is seen as authentic as it has developed the myth of the amateur.  Amateurs have redeeming features.  They do it for love rather than remuneration.  They think differently (often through a lack of training).  Amateurs are often unconcerned about fame, paying bills or meeting targets.  They are viewed as grounded, humble and playful.

Authenticity is shown, not described.  Overt claims of being authentic are often seen as hype.  Such claims may make genuine brand claims seem fake.

For cultural immersion, small details and one-off experiences can count as much as extensive research programmes.  It is appropriate to immerse yourself in the market culture.  I have just watched Darkest Hour, the film-based on the early days of Churchill’s premiership during World War 2.  The critical scene is where Churchill takes a short journey on the London underground and ask the opinions of the commuters in the tube car.  This is what he bases his policy on, not the statistics produced by his civil servants.  Ugg, the sheepskin boot manufacturer takes a great interest in the views of its ‘brand fans’.  Ugg invites these fans to have work experience in the company where their individual views can be examined. Ugg fans directly impact decision-making.

Employing a brand historian can help develop authenticity.  A brand’s past can inform its future.  authenticity can be built through a company’s history and the colourful characters associated with a brand.  How many firms advertise themselves through the quirks of their creator?  For example, Huntley and Palmer biscuits sponsored Captain Scott’s expedition to the south pole.  Despite the expedition being a disaster, it is seen by many British consumers as an expression of British bulldog spirit and bravery against adversity.  Huntley and Palmer’s exploit  their history to develop brand authenticity.

Authentic brands are not afraid of letting their consumers in on their processes.  It is often critical to firms to get their consumers’ views on new technological innovations, new recipes and new products.  For example many software manufactures use beta testing.  They get trusted consumers to use prototype software and to identify bugs and potential improvements.  Showing you trust your consumers with your ‘in development’ products builds the impression of partnership, shared values and thus authenticity.

Authenticity can be developed through the exploitation of lucky breaks.  Ugg boots started life as a specialist product for male surfers.  they were designed to keep surfers feet warm when they got out of the cold ocean.  The brand got a lucky break when young female consumers saw the boots as comfortable and fashionable.  Dyson took advantage of a market where product design was assumed to be unchanging.  He was also lucky in that the market leader, Hoover, was in financial difficulty following the Sinclair C5 debacle and a disastrous free flights offer.  Dyson took advantage with new technological designs and fashionable design.

Creating and developing brand authenticity is a challenge.  It is critical to develop open-ended and rich stories rather than technical position statements.  It is important to espouse enduring values, emphasise love of craft and to develop a powerful organisational memory.

Tomorrow’s World – Where are markets heading?

I am writing this blog the day after British, American and French forces carried out raids over Syria to knock out chemical weapons facilities.  This is just the latest example of how our world has changed since the cold war.  I was listening to an expert on the middle east trying to explain the Syria situation, and even he was struggling to put coherent labels on the situation.  He basically said that Syria was part civil war, part proxy war, part tribal conflict; in short a complete and confusing mess.

And that, at least in the medium term is the state of our world, one of confusion and complexity.

JP Kapferer in his book The New Strategic Brand Management describes our world as one of disequilibrium.  The old certainties, the balance in the world, has suffered entropy and it is going to be a long time before a new set of equilibria are established.

After World War Two a number of equilibria developed which gave certainty to brand planners and marketers.  There was a political balance between the capitalist entrepreneurship of western nations and the planned economies of communist dictatorships.  However, even China is now trying to balance a Communist one party state with capitalist markets.  For a while, following the collapse of the Soviet bloc, the United States was seen as the world’s sole superpower.  It is arguable, particularly with the situations in Ukraine and Syria, that Russia is now trying to re-establish its former status.

For many years, America and its allies had a clear purpose, to defend democracy against dictatorship.  The collapse of the Warsaw Pact and the fracturing of the USSR means that purpose is less certain.  Trump’s ‘America First’ policy is seen as increasingly isolationist and as threatening the economic consensus of organisations such as the World Trade Organisation.  Trump’s election campaign also put pressure on the NATO treaty as he accused other members of not pulling their weight.

In recent years we have seen the rise of the BRIC economies and political commentators have talked of a new world order emerging.

There is also a financial disequilibrium.  China is now the USA’s banker.  The Chinese hold significant numbers of US government bonds.  Households are spending more than ever before but wages are stagnating.  Despite the 2008 credit crunch, consumer debt is rising.

There is an ecological disequilibrium.  For most of human existence, there have been enough natural resources for demand to meet supply and the main concern was variation of price.  Now because of the growing human population; soon there will be 9 billion of us; there will no longer be sufficient resources to go round.  China has been stockpiling resources such as diesel and mineral ores.  In Africa, and other parts of the developing world, China has embarked on a campaign of resources for infrastructure.  China is building Africa’s roads, railways, dams and schools.  In return it is paid in iron ore, copper and timber.

There is a demographic disequilibrium.  There are aging populations in developed western nations where birth rates have fallen.  The world population is increasing but the majority of this increase can be put down to two factors, a high birth rate in the developing world and people living longer as health services improve.

Our world has never been so connected, with the rise of the digital world, but continents are developing divergent socio-economic models.

Sociologists state that human mentalities do not change, they are added to.  Deep in our brains, the ape which climbed out of the trees still exists.  Sports psychologists talk of our ‘inner monkey’, the primitive part of our brain that takes over in times of stress and excitement.

Sociologists talk of four social mentalities:

  • Tradition:  This mentality has been dominant in humans for thousands of years.  It is our tribal instinct, our sense of belonging to a particular community.  It is still relevant in some parts of the developing world.  It means we are all what our parents were.  We inherit tastes, religion and cultural norms.
  • Material Success:  This mentality promotes individual success and breaking free from the tribe.  Existing as a person and not as part of the whole.  China is a primary example of this mentality where the uniformity of the cultural revolution has been replaced by a desire for a western lifestyle.  Many Chinese now see themselves by what they buy and consume.  Shopping is now the primary leisure activity in Shanghai as much as it is in Seoul.  A process described as the ‘malling of Asia’.  It is an attitude of ‘I buy therefore I am’.  An attitude of success through the material goods you own.
  • Individualism:  This is the mentality where the individual is the centre of their own life.  At its extreme this mentality is evidenced by an egotistical, self-centred vision of human relationships.  We can all remember Margaret Thatcher’s comment that, “There is no such thing as society”.  David Cameron’s attempt to build a ‘big society’ went down like a damp squib.  Individualism at its worst can be shown through the election of Donald Trump and to some extent, Brexit.
  • Re-alliance: Sometimes referred to as ‘Me-Us’.  This is an attitude of a deeper me through connection to a greater ‘us’.  It is mirrored by the rise of social media and networking.  It is a mentality of there being no individual benefit if it does not supply collective benefits too.  It is a re-alignment of the tradition mentality.

So what does all this sociopolitical uncertainty and different parts of the world exhibiting different sociological states mean for brands and marketers?

A brand is a name which symbolises long-term engagement, a crusade or a commitment to a unique set of values which is embedded in a product, service or behaviour.  The goal of a brand is to make your chosen name become a reference point, a landmark, of a category or territory it has itself created.  For example, people ask for a Coke, not a cola’ (who has not experienced the ‘will Pepsi be okay?’ response at some fast food restaurants’).  The aim of a brand is for people to make it their number one choice criterion.

One way to examine where branding is heading is to look at the attitudes of young consumers, many of whom exhibit a ‘Me-Us’ mentality.  When asked about the attributes of their favourite brands they point to the following specific characteristics:

  1. Being known by their peers.
  2. Being active in communication.
  3. Symbolising a unique and strong value proposition
  4. Holding a deep, authentic, long-term value
  5. Being flawlessly incarnated into products and services that change the lives of consumers.
  6. Being a brand you can meet, interact with and which provides experiences through people, places and in different modes (both physical bricks and mortar contact AND digitally).  Note that digital contact on its own is not sufficient.
  7. Being extremely ethical.

Many fans of the Apple brand see it as meeting these criteria.  They view the Apple brand as:

  • 35 years of unchanged, meaningful high goals;
  • Consistency in the delivery of brand promise;
  •  Producing disruptive innovations and creating new product categories and changing lives:
  • Optimism and peacefulness;
  • Holding strong values and not compromising on them; even when under pressure to do so.  For example Apple bans apps which have sexual content; a position which caused significant problems for the Playboy corporation.
  • Being charismatic. Often through the executives promoting the brand (e.g. before his death, Steve Jobs).  This is seen as making the brand’s high technology pleasurable and which epitomises the company spirit.  This results in the brand seemingly having a magic touch.  Steve Jobs was seen as performing magic, so Apple products are seen as magic.

Apple is very much a post-modern brand.  It creates passion through the championing of values which appears to change the lives of people for the better.  Contrast this with the current problems facing Google and Facebook.  Google uses the tagline ‘Don’t be evil’ yet there was shock at some of the less ethical investment decisions of the brand’s parent company.  Facebook may be in serious trouble following the theft of personal data and its failure to take seriously data protection issues.  Facebook’s failings may cause a significant backlash from its core ‘millennial’ demographic which has the ‘Me-Us’ mentality.

As consumers move to a ‘me-us’ mentality, brands need to offer both individual and collective benefits.  It is not longer sufficient just to offer individual pleasure.  Hybrid cars are an example.  These vehicles may actually, through their lifespan, be more polluting than a diesel car fitted with a particle filter.  For example, the disposal and recycling of heavy metals in batteries may be an environmental concern.  However, these vehicles offer a ‘Me-Us’ position.  I am individually expressive in my choices but I am also contributing to the greater good by being green.

We are entering a world where big is good but big also needs to be responsible.  Brands need to be leading on ethical values, not a follower.

Future brands need to be optimistic.  The complexity of the current world and the prevalent disequilibria means that consumers face two choices.

  1.  To escape into dreams and to forget realities; or,
  2. To work harder in confronting difficulties and negating them.

Disney is a brand exhibiting the first option.  It is a brand which promotes happiness and which encourages social ties through connectivity, interaction and by being experiential

Nike is a brand following the second option.  It’s ‘Just Do It’ slogan is a hymn to social willpower and the determination of the spirit to overcome adversity (in the sporting world).

We live in a world of rapid change and uncertainty.  We live in a world where social mentalities are fragmenting on continental lines.  We live in a world of increased connectivity but divergent social norms.

To exist in such a world marketers and brand managers need to offer flexibility beyond their traditional values.

Tips for managing a portfolio of brands

In previous blog entries I have discussed the concepts of a branded house and a house of brands.

A branded house is where one brand name is spread across a wide product portfolio.  A house of brands is where different brand identities are used in different market segments and for different product categories.

The firm I used use as an example of a branded house was Heinz.  But circumstances have changed.  Last year, Heinz merged with the American food conglomerate, Kraft Foods.  Heinz has gone from a position as a branded house and has become part of a house of brands.  Heinz has become part of a brand family which includes Philadelphia, Oscar Meyer, Cadbury, Planter’s Peanuts and Maxwell House coffee.  Heinz is now part of a multi-brand portfolio.

So what principles must you apply when managing a multi-brand portfolio?

Brand portfolios require strong management above brand level.  You do not want brands within a portfolio to duplicate their product offers.  You can end up competing against yourself.  Each brand may duplicate innovations doubling research and development costs.

To manage a multi-brand portfolio, you need a brand coordinator or a brand committee to avoid the duplication of effort and cost.

In some sectors, such as pharmaceuticals, independent duplication of effort may be necessary.  Scientific peer review may be required so teams independent of each other may have to carry out the same experimental work simultaneously.  There is only a single particle accelerator loop at CERN and the cost of building a second is prohibitive, so two teams of scientists carry out the same work to maximise the efficiency of the accelerator and to provide peer review evidence of each others work.

It is also true that a bit of organised competition may accelerate product development and innovation. But note the word organised.

Innovations should be allocated to brands according to their market position.  Innovation is the lifeblood of brands which grow through extensions and product renewal.   These maintain brand relevance as the market changes and allow brands to differentiate themselves from their competitors.

You must develop clear brand charters which describe the brands identity and which clarify the main lines of development and innovation for the brand.

This allows innovations to be allocated according to a brand’s values and not under pressure from sales departments who want every brand to have the same advantages.

It is important to differentiate between innovations which are to be offered exclusively for one brand and those which are to be phased-in over the whole portfolio.  It is no accident that car firms apply innovations to their luxury models first before applying them in stages down to their base models.  If you are to phase in innovations throughout your brand portfolio, you must clearly establish the order in which innovations are to be allocated

In certain circumstances, innovations may have to be introduced across a portfolio simultaneously.  It may be more cost-effective to spread the cost of an innovation across a brand portfolio, e.g. battery technology for electric cars or for manufacturing innovations.

In managing a brand portfolio, you shouldn’t ‘rob Peter to pay Paul’.  You want a portfolio of strong brands.  You don’t want a few stellar performers and other brands which struggle, sucking up hard-fought income.  Mars recently took steps to streamline its portfolio focusing on those brands which it considered market leaders.

It is standard practice to position brands so that they don’t compete with one another.  Brands must be designed to fit particular market segments.  Thus, each brand in a portfolio should be able to grow strong. Citroen Peugeot has to mass brands and innovation is key to both.  To focus innovation budgets on one brand would destroy the other.  There are no non-innovative brands in the car market.

A brand portfolio should not represent a history of product development and acquisition.  They represent a strategy of global market domination.  Why did Coca Cola pay a billion dollars for the Orangina brand; a geographically local brand.  It wasn’t because Coke lacked an orange soft drink (they own the Fanta brand).  Coke bought Orangina because Pepsi didn’t have an orange soft drink in their brand portfolio and to cover this gap relied upon a distribution deal with………….Orangina.  Coca Cola’s purchase of Orangina denied Pepsi a foothold in the Orange-flavoured soft drink segment.

Your brand portfolio is like pieces on a chessboard and it should be used strategically to defend your market position and to attack your competitors.  Each brand should stick to its defined strategic role.  Fighter brands are like pawns defending your king; your star brand.

Some brands will have a financial role providing income for other marketing activities.  Others will be banner brands which are closely related to, and bear the name of the brand owner.

Flanker brands, your knights and rooks prevent your opponents attacking your star brand indirectly.

Some brands will be attack brands taking on your competitors. On the chessboard of competition these are your Queen and Bishops.

Some firms design their portfolios as parent and child brands.  Each child brand has a specialised role.  Nivea have their traditional face cream but they also have thirteen child brands each with its own strategic intent.  It can be disastrous to purchase a parent brand and not to purchase its children.

All brands have a tendency to duplicate innovations and strategies. This can erode brand identity as effort is applied to create economies of scale.  This tendency must be avoided. Brands are designed to target particular customer segments within a market. If brands become indistinguishable from one another, that targeted appeal may be lost.

For firms such as Volkswagen Group.  Volkswagen, Audi, Skoda and Seat vehicles all come off the same production lines and share the same platforms.  Seat and Skoda have been pushed up market.  To ensure that each of these brands retains its individuality visual attributes have to retain distinct difference.  Design is playing an increasingly important role in brand management.

Managing a brand portfolio is a game of three-dimensional chess.  It takes continuous supervision and strategic control to ensure and maintain success.

 

Do brands have a life cycle?

Marketing science and history tells us that products have life cycles.  For example, consider the typewriter.

For about 100 years, the typewriter was the pre-eminent letter-writing tool in business and administration but in the 1960s, its dominance began to decline.  First there was the rise of the electronic typewriter, then the word processor arrived and finally, the personal computer arrived.  The PC basically killed the market for typewriters: its went into near terminal decline.

In some circumstances, it is possible to revive products using tactics such as line extensions, changing distribution channels, using price reductions and through market repositioning.

If products have a life-cycle, do brands?

Brands are not products, or logos, or company names.  They have wider recognition and a well-defined ‘personality’. Nike for example started as a pair of trainers but now is a far wider fashion and sports brand.  Nike doesn’t just make clothing and footwear, it makes golf clubs and other sport’s equipment.

L’Oréal began life as a hair dye but is now a major soap and cosmetics brand.

Louis Vuitton began making luggage for the upper classes but is now recognised for ladies handbags.  Vuitton has a clothing range and fragrances.

Many brands keep surfing for new products.  Virgin has major product/service lines such as Virgin Rail, Virgin Music and Virgin Atlantic.  However Virgin Group has over 200 corporate ventures in markets as diverse as healthcare, banking, tourism and cosmetics.

Some brands which are closely associated with a single product may decline, such as Polaroid and instant cameras, but brands with wide product portfolios is diverse markets can survive the loss of individual products.

So how do you protect a brand identity in the long-term?  This often means resisting low-cost competition.  This can be achieved by

  1. By enforcing intellectual property rights – Organisations like Coca Cola and Manchester United ensure they hold a variety of trademarks and other rights and do not tolerate brand imitations.  The shape of the coke bottle is a trademark.  Manchester United ensure they hold the image rights of players.  Intellectual property rights can be used to keep those who copy brands confused.  Many football clubs register trademarks they have no intention of using.  They send private investigators to pass fictitious strip designs to counterfeiters.
  2. You can nurture perceived difference in the minds of consumers.  This is achieved by always being ‘good news’.  ‘Good news’ is being seen as always making progress; always being at the forefront of market innovation through product reformulation and continuous but selective innovation.  Colgate Toothpaste is regularly reformulated for new ingredients.  Gillette razors are continually adapted to give an increasingly smooth and comfortable shave.  To preserve a superior image products should be renewed frequently.  Renewal should integrate mew and emerging customer needs.  Market superiority can be confirmed using line extensions.  For example, Head and Shoulders was originally aimed at people who suffered with dandruff.  Now it is the UK’s favourite shampoo brand.
  3. You can invest in media communication to protect a brand identity.  By ensuring strong share of voice, you can use communication as the brand’s weapon.  Guinness is almost as well recognised for its long history of advertising innovation as it is for its stout.  Media communication can be used to re-communicate the dangers of brand switching.  Faced with a flood of cheap Chinese lighters, Bic produced a leaflet highlighting potential safety dangers with cheaper products and distributed it to retailers.
  4. A dangerous tactic is to reduce price gaps.  This may be achieved using special offers and techniques but a BOGOF (buy one get one free). A permanent price reduction may do serious damage to a brand’s perceived value in the minds of consumers.  Often firms protect the brand by making a ladder which allows consumers to eventually achieve a premium brand.  Golf club brands do this by creating fighter products which allow consumers to experience a brand cache but at lower cost.
  5. A brand can be defended by identifying and suppressing unnecessary costs through the use of tools such as value chain analysis.
  6. You can fight destruction of brand value through education and innovation.  Consumers have an internal reference price for a class of product by reminding them of the additional value attributes of a brand you can recalibrate that reference price in their mind.
  7. Finally, you can protect a brand log-term by creating market entry barriers.  For many years Black and Decker defined the home power tools market by giving competitors little room to manoeuvre.  This was achieved by globalised production and economies of scale.  Coca Cola dominate their market through scale of distribution.  Other firms have vertically integrated into the supply chain or through purchasing raw material providers.  In the printer market Hewlett-Packard use technology as an entry barrier.  Their printer cartridges are brand specific and have software which prevents generic cartridges being used in their machines.  Manufacturers of photocopiers collect the empty cartridges for recycling but  this also prevents them being refilled by other parties.

The majority of brands can exist outside the frame of the product life cycle if properly managed.  A brand identity extends beyond product features and in some cases comes to define a whole market segment.

How the Tories forgot the rules of brand promotion

The consensus amongst political commentators is that the campaign delivered by the Conservatives; sorry, Theresa May’s team; at the 2017 general election was a complete disaster.  At the beginning of the election’s long campaign, the polls gave the Tories a massive lead over Labour.  Theresa May’s approval rating as Prime Minister soared above other part leaders.  The election looked like it would be a landslide win for the Conservatives; the parliamentary Labour Party would be decimated; and Mrs May would get her mandate to deliver a hard Brexit.

Now, following her cataclysmic campaign, Theresa May’s dreams are dust.  She has been transformed from a reincarnation of Margaret Thatcher into a creature of ridicule.  She has lost all credibility.  She is a zombie prime minister awaiting the delivery of a blade to her political cerebral cortex.  It is only a question as to which of her backbenchers delivers the blow.

So how did May’s campaign disintegrate so spectacularly?  Many have pointed to her robotic and awkward delivery, her inability to think on her feet and her unwillingness to actually meet the electorate.  It is true that an attempt to run a campaign based on personality when your candidate doesn’t appear to have one is a major mistake.  Certainly a significant proportion of the UK population were confused by the campaign’s presidential style.  However, I believe a far greater flaw was that those running the campaign had clearly ignored the lessons in marketing strategy and brand management which Mrs May’s predecessors had successfully used to win elections.

When I was growing up in the 1970s, the presentation of political campaigns was staid and boring.  it was men in grey suits, sitting in sepia clad television studios, arguing about economic statistics.  All that changed in 1979 with the general election campaign of Margaret Thatcher.  The Iron Lady had employed Gordon Reece as her image consultant to ensure that she projected an appropriate personality to the electorate.  for the campaign itself she went outside her party machine and employed the advertising and marketing firm Saatchi and Saatchi to run the campaign.  The principles of commercial marketing and PR were applied to the campaign.  It was politics packaged like a tin of beans.

Many may think of Mrs Thatcher winning several successful landslide majorities

Mrs Thatcher’s successors took things further; Tony Blair in particular.  Blair clearly applied techniques used in Neuro-linguistic Programming such as the subtle use of repetitive phrases and mirroring body language of his inquisitors.  Blair used prominent slogans, such as ‘Education, Education, education’ but was also evident in his interviews and speeches were more subtle phrases and nuanced language designed to enter the subconscious of voters and make them act in a particular way.

I suspect Theresa May had been told of Blair’s neuro-linguistic tactics and tried to emulate them but her ability to execute them was sadly lacking.  Just repeating the same phrase over and over may get your message across but such overt declarations are will more likely bore your audience than affect their behaviour.

Perhaps the biggest fault in the Conservatives 2017 campaign was that it took an extremely old-fashioned view of promoting a brand.

The traditional view of a brand image is the creation of a solid identity.  To build this identity, it was felt that regular repetition of key attribute was required.  Sameness would build brand equity.  This was done to excess by Mrs May and it was the repetition of a single phrase ‘Strong and Stable’.  To Tory campaign managers ears this may have sounded perfect; the brand identity boiled down to three words.  The electorate however clearly read this message differently. To them it signalled not stability but a lack of adaptability, no fleetness of foot and a political ideology with its feet planted firmly in concrete boots.  The electorate clearly didn’t want a government determined to stick to its right-wing guns; it wanted a government with the ability to change in the face of a turbulent political climate.

The torpedo which sunk HMS Theresa May was her policy of using pensioners property equity to pay for their social care.  This policy directly attacked the Conservatives target audience, the over-50s.  Clearly, the unpopularity of the policy panicked Tory central office and the subsequent U-turn completely destroyed the single brand message of Strong and stable.  Such a U-turn wasn’t strong and stable, it was weak and wobbly.

A more modern view of developing a brand is to treat it as having two layers of attributes.  Kernel attributes at its core and peripheral attributes.  This view is to address a dichotomy in brand presentation.  Brands need a solid identity to provide capital but in modern markets, where consumers are impulsive and used to rapid change, a brand must have the ability to surprise and have diversity.

A brand which only has kernel attributes may have power but it will lack relevance in the minds of the intended audience.  A brand with only peripheral attributes may be relevant to the target audience but it will lack the necessary power.

The modern view of creating a brand with kernel attributes to provide solidity but also peripheral attributes which can be adapted to meet the variety expected by modern consumers.

This is where Theresa May’s campaign failed spectacularly.  It had a kernel attribute ‘Strong and stable’ but it had no peripheral attributes.  The campaign was based almost exclusively on Mrs May.  The rest of her party hardly got a look in.  So when that kernel attribute was blown out of the water by the social care U-turn, the campaign was left as a hollow shell.  If Mrs May had run a more diverse campaign, with more than a single attribute, she may have been able to ride out the social care fiasco and retain her majority.