Battle of the brands

What makes a successful global brand? And how can success be sustained? Developing and nurturing a brand in today’s competitive global marketplace is a challenge for brand owners, but the rewards from capturing and maintaining consumers’ attention and loyalty can be immense. The big names in the Brandz Top 100 Most Powerful Brands ranking, compiled by Millward Brown Optimor, have all shown the way.

In this online Q&A session, Nigel Hollis, chief global analyst for Millward Brown, and Hayes Roth, chief marketing officer at Landor, answer your questions about branding in today’s tough business climate. With weakening economic conditions and a possible recession in the US, how fit is your company’s brand portfolio?

Mr Hollis and Mr Roth answered your questions on Tuesday, April 22, 2008.

Most brands that annually are rated in the top echelons across the world do not include banks or banking related companies. Yet, we as consumers/investors rely on banks for our very livelihood and existence to a large degree. With the current melt down in financial markets hitting banks and by association their brand(s), what do they need to do to start to rectify their brand value?
Derek Lubner, Cape Town, RSA

Hayes Roth: If the core brand promise of a sound financial institution is to provide a secure haven for money, events this past year have done much to undermine faith in that commitment. Nevertheless, in many cases Optimor’s reported brand values for the major global banks held up – or declined far less – than their stock values, testifying to the longer-term equities inherent in strong brands, even among banks.

Beyond simply shoring up their financial underpinnings, leading bank brands recognize they must now focus on creating and delivering a credible, differentiating and engaging customer experience that connects them emotionally as well as financially to their constituents.

This has long been a particular challenge for this industry. But, thanks to sophisticated new interactive technologies, better, more brand-centered employee training techniques and increasing awareness among financial institutions of the importance of brand and all it represents we expect to see positive change in this category.

But it has to be more than a clever slogan promising great service – there must be tangible results, delivered consistently and well, day in and day out.

Nigel Hollis: There are actually 18 financial institutions in the Millward Brown 2008 Brandz Most Powerful Brands Ranking. Given that we are looking at some of the stronger institutions and brands it is perhaps not surprising that their collective value increased from 2007 to 2008 by 16 per cent.

With that in mind, it seems to me that reassuring their customers that they are still in good shape is an obvious first step, then focusing on ways to improve the customer experience.

How much do you think brand-owners in one industry category can learn from those in another sector, when it comes to managing their brands globally?
Matthew Paull, Zurich

Nigel Hollis: Brand-owners in one industry category can always learn from the success of others, particularly when it comes to managing their brands on the global stage.

Most global brands today were well-established in their countries of origin when their owners sought to take advantage of developing markets abroad. Their ultimate success was dearly won, the result of considerable trial and error. In today’s competitive global marketplace, however, companies cannot afford to stumble as they enter new markets. They need to hit the ground running.

While the specifics of brand success differ from category to category, the principles are the same – to become successful across countries and cultures a brand must be prepared to innovate and adapt to satisfy local needs and desires. Really understanding local needs and culture is a critical first step to doing so.

Hayes Roth: Thankfully – speaking as a professional branding consultant – virtually all of our clients believe there is value to be gained from experience outside their own industry. They look to firms like Landor to bring them “best practice” knowledge from diverse categories to ensure they don’t get trapped in an institutional box, simply following the marketing and branding conventions of their particular category.

This has been the distinct achievement of global leaders such as Accenture, Blackberry, BP and GE who have built their brand value and significantly impacted their segments by applying sophisticated brand strategies and marketing tactics once thought the exclusive domain of consumer goods.

Successful corporate leaders have learned that well-grounded branding principles transcend categories; it’s not just parroting what worked last year for their nearest competitor, it’s about “what will change the game entirely to our advantage?”

When do you think we will see the emergence of brands from India on the world stage? And which are the first ones likely to be?
Daniel Butt, Melbourne

Hayes Roth: Both Indian and Chinese corporate leaders are now searching hard for the answer to this critical question in their respective countries. For India, the Tata Group is becoming better recognized globally and its recent purchase of the world-class Jaguar and Land Rover brands may well help it achieve global brand stature in its own right. Note, however, that this approach has been only modestly successful for China’s Lenovo in its purchase of the IBM “Thinkpad” brand earlier this decade.

Building a pure-bred Indian consumer brand into a global powerhouse will be a serious challenge for some years to come, I believe, but if any organization – or family – can do it, my money is on the Tata’s!

Do you think that for a global brand to be successful it must move to the places where it is most appreciated, for instance, to the emerging and frontier markets?
Viktor O. Lodenyov, Ukraine

Hayes Roth: It is always very tempting to look at as yet untapped markets and contemplate charging in with a big, established global brand. From a pure marketing communications standpoint it’s relatively easy – create some ads and maybe online buzz in the native language and flood the market. The limiting factor, of course, is inevitably distribution.

It is one thing to announce one’s product and quite another to make it available, particularly in new markets where distribution channels, supply chain infrastructure, cultural sensitivities and quality control all have to be created and/or cobbled together.

So entering new markets, no matter how big your brand may be in the rest of the world, must always be meticulously planned and executed. And even then, many fail.

Nigel Hollis: There is little doubt that people in emerging markets are still more open to brands, particularly ”Western” brands than are consumers in developed markets.

Our Brandz data suggests consumers in the US or UK are less likely to believe it is important to get the best brand and more likely to focus on getting the best price.

The challenge to many ”Western” brands trying to launch in emerging markets, however, is to solve the value equation. In other words, to get the right balance between product features and price – just because people want to buy your brand does not mean that they can afford it!

Nokia, Proctor & Gamble and Coca-Cola have all had to solve the value equation in order to be successful in the BRICs [Brazil, Russia, India and China].

In the report, it says that Tide and Ariel had the same branding characteristics as a luxury brand. How can a washing powder inspire the same emotions as an expensive designer watch?
Anonymous, London

Hayes Roth: In its more than 60 year existence, Tide (and its compatriot, Ariel) have redefined their category many times over. To accomplish this remarkable feat, both brands have managed to transcend their everyday wash care category to become iconic franchises that connect emotionally with their constituents.

Each is a premium product in what is often labeled a commodity; each commands higher pricing while still dominating sales; and each has spawned a broad family of related products that build upon their core promise and deepen the value of the brand.

No luxury brand – and one could make a plausible argument that a diamond is every bit a commodity as soap, though probably not to my wife – could ask for a better customer relationship than that!

Nigel Hollis: Tide and Ariel have a similar degree of emotional involvement to some of the luxury brands but they create that bond in a different way. They are not aspirational brands but they are ones that people trust and believe will work better than others.

There are many case studies and theories which detail best practice management of a global corporate brand. However many of the companies I work with in (acquistion-driven) FMCG industries often rely on a network of sub-brands, many of which they are trying to develop globally. How do the challenges and potential solutions which face these brands based on single products (e.g. beer brands) differ from the those of the corporate entities that own them?
Ieuan Owen, London

Hayes Roth: If I understand the question correctly, this is about the challenges of portfolio branding on a global scale. Well managed brand portfolios are, of course, a strong hedge against competitive threats across regions, allowing corporations to manage to the specific tastes and needs of highly selective audiences.

Large, single branded global products and retailers (eg. Starbucks) have the advantage of focus, where they can concentrate on making their core brand fit regional tastes. But they are vulnerable to any erosion that happens to that single brand and must stay true to its promise wherever it is marketed. The strength of a strong brand portfolio is its flexibility to extend, refine, trim and introduce new brands irrespective – usually – of the corporate brand.

Nigel Hollis: First of all, beer is a tough category to extend beyond a brand’s home country. The brands like Heineken and Guinness are the unusual ones not the norm.

What is the relationship of the corporate brand to the product brand? We cannot assume that it is positive. The answer will have all sorts of ramifications for the brand and the corporate share price.

How can you establish a strong brand as an Internet startup without spending a major amount on marketing campaigns?
John Jensen, Antwerp

Nigel Hollis: It depends on how newsworthy your product or service offering is! Look at Google. News spread fast because people found it worked well and recommended it to friends, that’s how I found out about it.

The same would be true of MySpace or Facebook. But, then, of course, word of mouth only gets you so far. You have to keep innovating to keep the news fresh.

Hayes Roth: Starbucks is the legendary story of a world-class brand that never spent money on traditional marketing – until very recently, anyway. The internet arguably makes this easier still since it is, by definition, ”global” from the start.

How one makes the brand known and accessible becomes the key issue, which on the Internet has its own set of new rules, opportunities and, yes, costs.

Why are some brands able to successfully extend beyond their original product market to other product markets? An example would be the Dove brand, which extended from a soap brand to shampoo and other hair and skin products. Could a brand like this extend further into dish washing liquids, for example?
Fernando Soares, Portugal

Nigel Hollis: Brands like Dove have a set of core attributes with which they are closely associated. When these are appropriate to the new category then it helps the brand gain acceptance. As always, however, the product needs to live up to expectations and offer some form of advantage over the incumbents.

I would be somewhat doubtful about Dove extending into dish washing liquids simply because the category is less associated with skin care. It might detract from the core franchise.

Hayes Roth: Dove actually tried this for several years, trading on its ”cosmetic cleansing cream” position in the dish soap category but ultimately abandoned the product as too far of a stretch.

What effect will the debacle at Heathrow have on the British Airways brand?
Name withheld, London

Nigel Hollis: British Airways is a relatively strong brand and should be able to ride out the storm. They have to take the issue head on, acknowledge the problems and publicize what steps are being taken to address the issues. Until they do so people are more likely to consider using other airports. The biggest detractor from airline equity is actually lost baggage.

Given their rise in this year’s ranking, do you think Chinese brands will dominate the top ten?
Anon., Hong Kong

Hayes Roth: First, to some extent the Chinese brands carry a somewhat unfair advantage given the sheer size of their market. China Mobile is, to date, not a brand that’s especially well known or understood outside of Asia and the global financial markets, yet its customer base and pervasive strength in its market makes them an impressive leader in terms of brand value.

What Chinese brands must do to break into global recognition is essentially what the pioneering Japanese brands did in the 1960’s, eg. Sony, Toyota, Panasonic. They established a cultural reputation for reliability and innovation that helped lift perceptions of all products Japanese. China is determined to achieve this same goal, only on faster timing.

My guess is Haier will be the first and possibly one of their car brands if they can define a global benefit associated with ”Made in China” that doesn’t mean ”cheap and perhaps carelessly made”. Remember that the Japanese very successfully overcame the same obstacle so it can, and I firmly believe will be done in the next 10 years.

What effect does shelf placement have on sales of a branded product in a supermarket?
Laura Martin, London

Nigel Hollis: Shelf placement can have a massive effect on the sales of a branded product. Even if someone enters the aisle intending to buy a specific brand it needs to be easily visible. If they don’t see it they may well choose an alternative. The challenge for other brands not in the person’s consideration set is to disrupt their routine by getting visible placement at the end-aisle or elsewhere.

Hayes Roth: No shelf placement, no sale. It’s obviously critically important. However, no “brand,” no shelf placement! There are exceptions, of course – a new product can buy its way onto a retail shelf – but this will only work so long as there is customer pull-through in the end and that depends upon the power of the brand and its ability to communicate a differentiating, relevant promise.

Are sporting brands expanding in terms of their international ranking? I am referring specifically to the desire of the English Premiership football [soccer] league to play competitive games abroad and of US sports seeking to play games in Europe and Asia?
Daniel Yugin, UK

Hayes Roth: I’m guessing we’re not talking about the game that uses the pointy-ended ball here? In truth, thanks to the pervasive globality of communications and TV and internet content in particular, it is inevitable that traditionally regional sports will expand their footprint.

Again, well branded teams and leagues have an advantage. The NBA, PGA, NFL and MLB probably need little explanation as acronyms outside the US these days, even if not everyone is a fan. The same is true for major soccer and football teams in the US and will likely continue.

Nigel Hollis: Sporting brand are trying to expand their presence internationally but people are very loyal to their national sports, it may be a very slow process.

Nigel Hollis: Premier League is an enormously strong brand in the UK and may have some equity elsewhere, similarly the PGA, I am not so certain about those other weird acronyms!

Do global brands beat local? Which is it better to be?
Fred, Boston

Nigel Hollis: The answer is it all depends!

Local brands have the home field advantage because they are embedded in the local culture. People grow up with them and feel nostalgic about them. Often they have logistical and price advantages over global brands.

On the other hand, global brands can leverage their scale to develop strong relationships with consumers. To be successful they need to solve the value equation I referred to earlier, ensure good distribution – often no easy thing in emerging markets – advertise and promote their brand aggressively to gain market share and then get as close to the local culture as possible.

Hayes Roth: That’s a bit like asking whether it’s better to be young or old. Depends on who you ask and how you define ”old”! A strong, local brand – and there are many everywhere – can match and hold its own against a big global brand so long as it sticks to the basics and delivers its uniquely localized, and therefore highly relevant promise to its key customers. That said, if a major global brand wishes to focus its considerable resources in pounding down a local player, it’s a tough game ahead for the local.

The only way to win that contest is to know your customers better and deliver your brand promise with exceptional care and follow-through while using the most cost effective local marketing resources – and local knowledge – you can. Not everyone wants a Starbucks in their neighborhood, so it is not a given that the big guys always win.

How does the accounting treatment for brand value differ between different countries?
Anon., London

Nigel Hollis: The answer is – not much any more. There used to be major differences in accounting standards by country. However, in the last few years, in order to keep up with the growing need to clearly and transparently present brands and intangible assets on the balance sheet, accounting standards boards across the world have enhanced efforts to standardise financial reporting.

Throughout Europe, Japan, Australia and other nations, the method by which intangible assets are recorded in financial statements has begun to converge with the standards set by the International Accounting Standards Board.

Nigel Hollis: My colleague Joanna Seddon tells me there are two major bodies regulating brand accounting standards: the IAS, whose IFRS standards have been harmonised internationally outside the US since 2005 (IAS 36 and 38) and US GAAP (FAS 141 and 142).

They now all say much the same thing, which is that if a company acquires a brand it can put it on the balance sheet; however, no home grown brands can be put on the balance sheet.

From a brand point of view this clearly makes little sense: The Coca Cola Corporation can put the value of Glaceau Vitamin Water or Powerade on its balance sheet, and in certain cases may have to, but it is not allowed to recognize the $58bn value of the Coca Cola brand asset in its financials. The UN is looking at addressing this oddity, but it is likely to be some time before things change.

There were so many financial services brands in the Top 100 – during these difficult times, how critical is a brand to win consumer banking loyalty?
D. Fawer, New York City

Nigel Hollis: I would suggest that a strong relationship with existing customers was absolutely critical at times like these. People are much more likely to forgive and forget poor short-term performance if they have some respect and trust in the company. A focus on the customer experience will be key. From the Brandz 100 we observe that financial services companies with stronger brands have lost less value than the weaker ones.

Hayes Roth: Although consumer banks have long been in the marketing business, it’s generally acknowledged – and confirmed by Optimor’s studies – that branding in financial services has less impact on sales than, say, in the soap business – no surprise.

However, in recent years as major banks have consolidated and the lines between consumer and institutional banks have blurred, brand equity has grown in importance.

In retail banking, delivering a consistent brand experience across all venues – the bank itself, on-line, at the ATM, in non-bank environments with ATM’s and even in stadiums – has taken on new significance. Accessibility, ease-of-use and the emotional connection I think I get from my bank – eg they remember me when I walk in or log in and anticipate my needs and their marketing messaging and brand environment speaks to me personally – will be a determining factor.

Once in, of course, the more ways I am connected to my bank, the more enduring my relationship will be. Said more crassly – ”the stickiness factor” will dominate.

What non-public companies might have been on the list if you had a comparable method for valuing them?
Howard Weinberg, New York City

Nigel Hollis: Non-public companies are included in the valuation – Prada, Levis and Chanel. We take the available publicly available information and combine it with the brand equity data to produce a comparable valuation. Where data is not available we use comparable company valuations.

Hayes Roth: This is really an Optimor question for Nigel but I would love to have seen companies like Danone and Cargill probed on brand strength.

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