BRAND AND FOCUS

BRAND AND FOCUS

Saturday, 19 June 2010 10:08

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BRAND AND FOCUSOne of the highly discussed topics in branding is the relevance of maintaining consistency for brands in the current market place which is characterized by diverse cultures, increasingly empowered consumers and ever changing trends and consumer preferences. Consistency is often mistaken by brands for complacency or static existence.  Consistency in the branding lexicon refers to the ability of the brand to convey to the consumers in a single voice across all customer touch points, the fundamental building blocks of any brand namely the brand identity, brand image, brand personality, brand essence, key performance indicators such as quality, features, price points and such. But such a consistency should not come at the cost of the brand refusing to constantly adapt to the dynamic market structure. Obviously carrying out these two seemingly contradictory things becomes highly challenging. Such a complex maneuver proves even more difficult for an established brand such as Sony, as it will have entrenched brand structure, and brand management practices. Even though there are many specific reasons for Sony’s slide from the top, at a corporate level, Sony’s inability to manage consistency while constantly changing appears to be at the root of Sony’s decline. Sony’s iconic ascent and recent descent – An analysisAn analysis of Sony’s ascent to global prominence and the reasons for its slide from the pinnacle during the last couple of years brings to fore some pressing reasons. Three major factors contributed to Sony’s ascent to global supremacy in the consumer electronics sector and they are:  Innovation: Innovation, to a great extent, defined the brand character of Sony. Sony grew to global prominence due to its ability to constantly create products even before other companies could conceptualize them. Further, Sony had the ability to sense the hidden consumer demand and create entire product categories through its innovative products. When Walkman was introduced into the market, there was no existing market for portable music. But Sony’s innovative product brought about an entire generation of products and created a new category altogether. Such an innovative culture differentiated Sony from the other consumer electronics brands for a very long time. Visionary leadership: Sony is was one of the early Asian brands to recognize the importance of branding, which was again supported and lead by the management team. Pioneer advantage: Given the innovative edge, Sony emerged as the pioneer in almost every sector that it was operating in. Being the first mover or in many cases, the inventor of the category, Sony had a great leeway in defining the rules of the game as it were. It set the expectations for the other companies that entered the category. Also, the brand image was enhanced every time a competitor imitated Sony as it became an indirect way to accept Sony’s leadership position. Being the pioneer also offered Sony an opportunity to make more mistakes, test new ideas, and experiment with innovative concepts. As can be seen, each of these three factors lead into each other thereby creating a virtuous circle. The combination of these factor pushed Sony into the exclusive club of iconic brands. But over the last decade, Sony seems to have lost the magic formula. It has been gradually sliding down from its high seat. Many reasons have contributed to Sony’s decline: Unrelated diversification: An important and unique factor that has distinguished several Asian businesses from other Western business is the extent of diversification. Controlled and managed largely by business families, companies blow up into conglomerates that does business in very diverse and unrelated industries. Many Asian companies such as Samsung and LG that have become global forces to reckon with also started as bloated conglomerates. But these companies seem to have learnt the importance of focusing on core competence. As such, Samsung trimmed down its organization, came out of unrelated industries and channeled its resources around one or two dominant businesses. But Sony still seems to have stuck up in multiple businesses. This sort of unrelated diversification not only drains the brand's resources to a great extent but also diverts the brand focus from the core of the brand. Innovation dearth: Case of Apples’ iPod explains this point very well. Walkman made Sony the undisputed leader in portable music player category. As is the usual case, success breeds corporate complacency. As such, Sony did not follow up with any outstanding and innovative product line to sustain the initial success. Apple came out with iPod that appealed to the younger generation worldwide and also established its standard iTunes from where consumers could download songs for a nominal payment. This not only established Apple as the undisputed leader in mobile music market but also helped Apple to establish the industry standard. This dented Sony’s brand reputation. Sony has suffered similar challenges from many brands such as Samsung, Nokia, LG and others in different product categories. Sony’s lack of consumer oriented innovation has contributed greatly to its decline in recent years. Lack of brand evolution: Sony’s past surely contributes an enormous amount of heritage, history and achievements into the brand identity. But for a brand to be successful in the current ultra competitive globalized market place, it has to make itself very relevant to the current customer segments. Harping back on past laurels and expecting the customers to still support the brand due to its past glory will be a grave mistake as has turned out in Sony’s case. Sony has not been very successful in evolving as the brand for the new masses of the twenty first century. Apple, Samsung and a few others have hijacked that from Sony. As such, the brand has not been in with the times as it were and that has contributed to its slide from the top. Brand Rejuvenation - GuidelinesFrom the discussion so far, it is clear that Sony has not been very prudent in managing its brand and its components very well over the last few years. But even then, Sony still continues to be one of the most valuable brands in the world. What should Sony do to regain its lost brand supremacy? It seems ironic that for a solution Sony may want to look at a brand that prides itself on structuring its brand plan based on Sony's - Samsung Electronics. Samsung Electronics has been hugely successful in creating a brand from scratch and making the brand one of the top consumer electronics brand in the world. If Sony has to regain its lost brand supremacy, then it may want to follow some of the fundamental steps discussed below: Regain focus: Effects of unrelated diversification has been very pronounced for many family owned Asian conglomerates. Operating in a number of unrelated businesses is often justified on the logic of scale and scope economies. But from a brand perspective, such diversification will be more detrimental than helpful. Sony, like Samsung, should conduct a due diligence to evaluate the financial and brand worth of its different business units. Before the unrelated business units erode the equity of the core Sony brand, it would benefit Sony to come out of such businesses. Regaining focus and investing in nurturing and enhancing its core competence will be the first necessary step towards regaining brand leadership. Elevate marketing/branding to the boardroom: Sony should revamp its departments that have a direct impact on creating strong customer perception for the brand - R&D, design, and marketing. For innovation to make any brand sense, it has to reflect consumer preferences. Innovation has to lead to products and services that would enhance the relationship between the brand and the consumer. For this to happen, R&D, design and marketing have to become more customer-centric. In other words, Sony needs to elevate the marketing function to the boardroom and enable marketing to take a lead of the business and the strategy. Marketing and branding can no longer be relegated to a tactical level handled by marketing managers who hardly have an appreciation of the larger picture. Brand oriented leadership: Over the last couple of years, many brands have emerged from Asia that provide tough competition to Sony. Further, with the resurgence of many American brands, the market place has become extremely competitive. In such a scenario, Sony’s path back to brand supremacy can happen only if it is guided by a brand oriented leadership. The CEO and the top management team at Sony should evaluate the meaning and identity of the Sony brand to its customers in these changing times and enable the brand team to innovate and lead the industries in which Sony operates in. Design, features and the cool factor: Given the aggressive strategies of Apple, Nokia, Samsung and others along with their superiority in design, customer oriented features and the loyal following of “cool” customers, it becomes very important for Sony to regain the cool factor and beef up its designs and features. Relevance to current customers and the ability to morph into a brand that can reflect customer needs prove very crucial for Sony as it charts its path back to the top position. ConclusionThe brief market euphoria that would follow the launch of PlayStation 3 should not be confused with long term brand success or the return of Sony as it were. Even though this latest product will allow Sony a much need breather, it should just be a starting point for Sony’s resurgence. Sony, by methodically evaluating its brand culture and following the steps described above, could surely rejuvenate itself in the long run.                      Leadership and Branding - The Role of the CEO   A recent report by Goldman Sachs discussed the coming of age of the Asian century. The report analyzed the impending domination of China and India as economic and technological powerhouses in the global scene. With more than 2.2 billion people, economies growing at a combined average of 8 percent a year, young and educated population and increasing disposable income, it is no wonder that Asia has become the darling of the world’s corporations. Most of the Asian markets are inundated with a number of local and global brands. The competition has intensified and even though Chinese companies off late have been aggressive in their expansion (Lenovo’s acquisition of IBM’s PC division, Haier’s failed bid to acquire Maytag, CNOOC’s hostile bid to take over Unocal and the leading Chinese television maker TCL’s acquisition of France’s Thompson to name a few), most often it is the global brand that wins the battle in market after market. This begs the question – what is the secret behind the success of these brands?  At the outset the answer seems quite simple. Global brands, as the name suggests, are global in their reach. They operate in a number of markets, have huge resources to support their market entry and communication efforts, have the requisite expertise and have deep enough pockets to absorb initial losses. Though this answer seems quite logical, it overlooks one very key component – the role of visionary leadership. Most of the hugely successful brands have had the benefit of being led by leaders who had a vision. These leaders have led their brand from the front, been the brand’s chief ambassador, understood the strategic importance of branding and nurtured the brand as a favored child. Not many local brands have had this critical success factor to boost their equity. This begs another obvious question – what is the role of CEO in branding and why should branding be treated so carefully? Understanding the answers to these seemingly simple questions have separated the winners from the also rans. Branding as discipline has evolved over the last couple of decades from being just an addendum to advertising campaigns, fancy ideas of the marketing department, optional function of the elite few to finally being recognized as a boardroom discipline that not only contributes to the top and bottom line of the company but also aids in enhancing shareholder value contributing to the market capitalization of the company. It has been proved that over 70% of the market capitalization of companies listed on the NASDAQ is contributed by the intangibles of which brand equity is the important element. But for companies to leverage on the brand equity, branding must become an organizational wide activity practiced by all functions. Moreover, branding must enable the following: Channel internal communications Align internal stakeholders around the brand mission Fuel innovation to stay on the cutting edge For branding to play a pivotal role in the company, it has to have a strong support from the CEO and corporate management. Only when the corporate strategy is aligned with the branding strategies will the company attain a unified direction both internally and externally. Further brand equity can be optimally leveraged only if branding is allowed and supported to play the following roles: Shaping the organizational culture Initiate organization wide cross-functional training Facilitate leadership Nurture the right mind set, skills and resources When the CEO and the corporate management team actively involve themselves in and nurture branding, the above roles of branding can be effectively utilized. A strong brand with a unique identity and personality would help define the culture of a company. It facilitates companies to either be customer centric or product centric and thereby shapes the internal and external relations of the company with its many stakeholders. But for a brand to perform this role, the presence and back up of a strong leadership is quintessential. By being a strong brand evangelist, a CEO can define and defend the actions of a brand. For branding to realize its full potential in any company, employees across functions must be educated about the significance of branding and how branding affects each function in any company. Such a cross-functional training would not only allow employees to understand the strategic contribution of their own part of the work but would also facilitate a better participation in various activities. Most importantly such training would allow all employees to realize the huge impact branding makes on every aspect of the business. This realization is crucial for internal branding – a process by which a brand is brought to life within the company. A disciplined cross functional training program would then lead to a favorable atmosphere that would allow a whole generation of leaders to be groomed. As more employees are trained beyond their functional duties, they tend to develop qualities and skill sets that can prove useful in building strong leadership traits. These implications are indeed very strategic and influence the very nature of business. Such a function cannot be left to middle level marketing executives who would not understand the holistic perspective and appreciate the greater role branding plays in the larger scheme of things. Moreover, branding viewed in its totality transcends the functional barriers within an organization and thus requires brand guardians to have a much complete view of the business. Only the CEO in consultation with his senior management team can provide consistent teeth to the branding function. The corporate board would have the necessary information to decide on such strategic issues. Going ahead, it will be these strong initiatives from CEOs and corporate boards that would anchor and sustain brands in the highly competitive global market.                    Branding and culture - The strategic winning combination   One of the biggest implications of globalization for companies seeking to expand to foreign shores is the task of balancing standardization with customization. From a branding perspective, this issue assumes even more significance. When some of the world’s biggest brands expand beyond their home markets, they are tempted to repeat their tried and tested formula in the new market as well. In fact this has been the path followed by many brands. The assumption in such a case is that customers would be too eager to consume the great brand because of its authenticity, heritage and associations. Brands as channels of self expression Brands in the current globalized world signify more than just products with recognizable logos. Brands have transcended the commodity trap and have seeped into peoples’ lives in many aspects. Brands have come to signify avenues through which people tend to express their personalities, attitudes, likes and dislikes, association to groups/ communities and so on. As such, brands succeed if they offer customers opportunities to express. Being global brands with entrenched identities and personalities and still be able to adapt to local demands is a Herculean task. The following steps would facilitate brands to make a smoother transition: Understand the local market: Companies would do themselves a huge favor if they do not generalize the markets based on some superficial parameter. Each market has its own subtleties, unique characteristics and customer preferences. Many of these unique characteristics are deeply inspired by the cultural underpinnings of the society. To understand these underlying parameters would allow companies to effectively target the customers. Finer segmentation for faster adaptation: Markets by nature are known for their multiple segments. Segmentation though a very basic exercise in marketing, is indeed one of the fundamental tools that can equip a company to effectively channel its resources. With emerging economies integrating into the global market, the diversity is bound to multiply. This not only offers companies a huge increase in potential customers but also an opportunity to segment finer and leverage the market situation. Based on the product category, the product line, the brand strategy and the availability of channels, companies must decide on the segment that they wish to target. Channels – A strategic brand component: In many markets, reaching the customer at the right place at the right time differentiates success from failure. In China and India, channel management is the key to success. Many global brands that are used to huge supermarket chains such as Wal-Mart, Sears, K-Mart and others tend to think in similar terms in foreign and developing markets as well. In many Asian markets unorganized retail still dominates. In such scenarios, global brands would succeed if they recognize the criticality of building strong channels and adapting their model to ground realities in the market they are present. Bottom of the pyramid customers: In spite of the growing economy and increasing spending power, emerging markets and still developing countries are characterized by a sizeable bottom of the pyramid segment. This segment mainly consists of customers who are gradually aspiring to integrate into the main stream. They are low on resources but high on aspirations and ambitions. This segment also shows the promise of being a very lucrative segment in the long run. But majority of this segment are not ready to pay high prices. Customers always look for a proper quality-price balance. Customers in this segment seek products that offer considerably good quality at an affordable price. This poses new challenges for global brands that are used to offering customers either a highly priced high quality products or low priced goods with an average quality. Further, with many local brands in many countries already offering products with quality comparable to global brands but with half or even one third the price, the success of global brands depends on their ability to adapt to the local conditions and respond to the local demands. Global brands’ local act: Developing countries are finally seeing light at the end of the tunnel. Countries especially in Asia are in a boom phase. The economies are booming, global trade has increased, technical and knowledge outsourcing has given birth to millions of jobs, disposable income is on the rise and governments have taken the lead to integrate many such countries with the global economy. These factors have led to the emergence of customers who no longer look to the West to build an identity. These customers are confident and satisfied with many local brands. Though these customers do like and purchase many global brands, they also have a strong preference for many local brands that have managed to provide high quality products with a distinct local feel. This once again compels the established global brands to balance the global identities with local subtleties. This balance will allow global brands to be successful. These guidelines will facilitate a smoother transition for global brands into localizing part of their experience to suit the local subtleties in order to attract and retain the local customer. Further, these guidelines will also offer global companies reason to think about the possible challenges that a complete lack of localization will bring to the fore. Unilever and Nokia, two global giants have also proved the point discussed in this article by glocalizing and winning in their game. Unilever is a classic example of a global brand which has pioneered serving the locals with products that address the local sensitivities. Unilever’s Indian subsidiary Hindustan Level Limited (HLL) has been the leader in recognizing the tremendous opportunity lying at the bottom of the pyramid. The customer base that aspires to consume products but in smaller quantities and at lesser prices. HLL literally invented the shampoo sachets – small plastic packets of shampoo for as less as INR 1 (USD0.022). This became such a rage among the rural consumers that many other brands started offering products such as detergent, coffee and tea powder, coconut oil and tooth paste in sachets. Even though the unit price was higher, rural consumers were able to afford to purchase the smaller quantity at their convenience. Another example is of the leading mobile brand Nokia. Nokia also recognized the growing importance of rural customers in the Indian mobile telephone market which grew from a mere 300,000 subscribers in 1996 to a whopping 55 million subscribers in 2004. Nokia introduced its dust-resistant keypad, anti-slip grip and an inbuilt flash light. These features, albeit small, appealed to a specific target of truck drivers initially and then to a broader segment of rural consumers. These features endeared Nokia to the Indian consumer as Nokia displayed a genuine commitment in responding to local customer needs. ConclusionThis article illustrates the importance of inculcating the element of culture – local practices, customer preferences, local pressures and purchasing patterns – into the brand’s DNA. The process by which global brands strive to appeal to local customers in spite of maintaining their global aura is also referred to as glocalization. Glocalization is a part of the process of being culturally sensitive. Global brands are usually adamant to continue their winning structure into every market they enter. After all it is these structures that have made these brands so powerful. But in the process of being dominant and refusing to budge from the standardized procedures, these brands tend to ignore the underlying force that drives customers and their purchase decisions in diverse markets. As markets integrate and customers migrate, there is a possibility of the emergence of a much similar force that is common among markets. But this is a far fetched thought. As Late Professor Theodore Levitt of the Harvard Business School wrote in his landmark article Globalization of Markets, markets across the globe may one day become similar in literally every aspect and then the global corporations would rule. But despite the confidant march of globalization across the world, markets still continue to be unique. Till such a time arrives when differences cease to exist, global brands must continue to honor local cultures and adapt their brands to such conditions in order to be successful.   Branding and Celebrity Endorsements   Nike is known around the world for being one of the most iconic brands. It was recently ranked as the world’s 31st most valuable brand in terms of its brand value – USD10.8 billion – by the annual Business Week’s global top 100 brand survey. In spite of many market maneuvers (such as the recent merger between Adidas and Reebok), Nike has remained the leader in its category. Nike is also very well known for another aspect and that is its consistent use of celebrities to endorse the brand. In fact one of the most successful collaborations between a brand and a celebrity is that of Nike and Michael Jordan. So successful was the collaboration that Nike and Jordan launched a new brand variant called the Air Jordan line of sport shoes. Nike pulled off a very similar coup in the sports industry when it joined forces with the ace golfer Tiger Woods to enter the golf category with its apparel, equipment and accessories. Nike had no experience in golf before. Moreover, golf being a very elite game, it was generally considered that a brand like Nike would not be very successful. This might have probably been true had Nike chosen the traditional path to building its equity in the golfing arena. But Nike chose to associate with the best golfer in the world and have him endorse the brand. As is known today, Nike has emerged highly successful in golf. This channel now being used by many brands around the world raises some crucial questions about ways brands are built and also about the impact such collaborations have on branding. Is associating with a leading celebrity the easiest way to build a brand? Should celebrity endorsement be the principal channel of brand communications? How can brands decide on potential brand endorsers? What are the advantages and disadvantages of such endorsements? Is celebrity endorsement always beneficial to the brand? How does a celebrity enhances a brand image? Answers to these and many other related questions are the content of this article. Celebrity Endorsements – A brief introductionEndorsement is a channel of brand communication in which a celebrity acts as the brand’s spokesperson and certifies the brand’s claim and position by extending his/her personality, popularity, stature in the society or expertise in the field to the brand. In a market with a very high proliferation of local, regional and international brands, celebrity endorsement was thought to provide a distinct differentiation. But over the years, many aspiring brands in Asia have jumped on to this celebrity endorsement bandwagon. Even though endorsements have taken on a quasi-industry stature, there is hardly any hugely successful collaboration as those of Nike’s. There are many reasons for such a happening. The next section addresses this issue. Essentials of celebrity endorsementsEven though to an observer it may seem that Nike’s success is totally based on Tiger Wood’s association with the brand, nothing can be far from the truth. As a brand, Nike has established a very strong brand identity and a brand personality over the years. What Nike did was to use celebrity endorsement as one of the main channels of communicating its brand to a highly focused set of customers. So, Nike’s association with Tiger Woods was one of the parts of an entire branding process that Nike has been practicing consistently. Contrary to this, most of the brands in Asia that have used celebrity endorsements have used it as the main brand building tool. Before any brand signs on a celebrity, they should consider three main aspects. Attractiveness of the celebrity: This principle states that an attractive endorser will have a positive impact on the endorsement. The endorser should be attractive to the target audience in certain aspects like physical appearance, intellectual capabilities, athletic competence, and lifestyle. It has been proved that an endorser that appears attractive as defined above has a grater chance of enhancing the memory of the brand that he/she endorses. Credibility of the celebrity: This principle states that for any brand-celebrity collaboration to be successful, the personal credibility of the celebrity is crucial. Credibility is defined here as the celebrities’ perceived expertise and trustworthiness. As celebrity endorsements act as an external cue that enable consumers to sift through the tremendous brand clutter in the market, the credibility factor of the celebrity greatly influences the acceptance with consumers. Meaning transfer between the celebrity and the brand: This principle states that the success of the brand-celebrity collaboration heavily depends on the compatibility between the brand and the celebrity in terms of identity, personality, positioning in the market vis-à-vis competitors, and lifestyle. When a brand signs on a celebrity, these are some of the compatibility factors that have to exist for the brand to leverage the maximum from that collaboration. Even though these three major principles must be adhered to by companies, practically it might be difficult to find celebrities that satisfy all these three conditions. Depending on the nature of the brand and the kind of product being used, companies can selectively emphasize one factor over the other. Celebrity endorsements – Do’s and Dont’sAll brands must be aware of some of the important aspects of celebrity branding as discussed below: Consistency and long-term commitment: As with branding, companies should try to maintain consistency between the endorser and the brand to establish a strong personality and identity. More importantly, companies should view celebrity endorsements as long-term strategic decisions affecting the brand. Three prerequisites to selecting celebrities: Before signing on celebrities to endorse their brands, companies need to ensure that they meet three basic prerequisites, namely the endorser should be attractive, have a positive image in the society, and be perceived as having the necessary knowledge (although it might be difficult for a celebrity to meet all three prerequisites) Celebrity–brand match: Consistent with the principles discussed earlier, companies should ensure a match between the brand being endorsed and the endorser so that the endorsements are able to strongly influence the thought processes of consumers and create a positive perception of the brand. Constant monitoring: Companies should monitor the behavior, conduct and public image of the endorser continuously to minimize any potential negative publicity. One of the most effective ways to do this is to ensure that celebrity endorsement contracts are effectively drafted, keeping in mind any such negative events. Selecting unique endorsers: Companies should try to bring on board those celebrities who do not endorse competitors’ products or other quite different products, so that there is a clear transfer of personality and identity between the endorser and the brand. Timing: As celebrities command a high price tag, companies should be on the constant lookout for emerging celebrities who show some promise and potential and sign them on in their formative years if possible to ensure a win–win situation. Brand over endorser: When celebrities are used to endorse brands, one obvious result could be the potential overshadowing of the brand by the celebrity. Companies should ensure that this does not happen by formulating advertising collaterals and other communications. Celebrity endorsement is just a channel: Companies must realize that having a celebrity endorsing a brand is not a goal in itself; rather it is one part of the communication mix that falls under the broader category of sponsorship marketing. Celebrity ROI: Even though it is challenging to measure the effects of celebrity endorsements on companies’ brands, companies should have a system combining quantitative and qualitative measures to measure the overall effect of celebrity endorsements on their brands. Trademark and legal contracts: Companies should ensure that the celebrities they hire are on proper legal terms so that they don’t endorse competitors’ products in the same product category, thereby creating confusion in the minds of the consumers. These guidelines are intended to provide companies a useful framework that they can use while deciding on the celebrities to endorse their brand.  ConclusionThe important aspect that companies must note is that celebrity endorsements cannot replace the comprehensive brand building processes. As branding evolves as a discipline companies must be extra cautious to utilize every possible channel of communication rather than just a celebrity endorsement. When all other steps in the branding process is followed and implemented, then channels such as celebrity endorsements can provide the cutting edge as it did for Nike.                     Branding and Mergers & Acquisitions   A quick scan of the business press over the years would reveal one common thread of business activity – mergers and acquisitions (M&A). Companies for a long time now have readily adopted this route to business domination and market leadership. Examples of glorious and often controversial M&As are galore in the business world – Procter and Gamble’s acquisition of Gillette, Adidas’s merger with Reebok, Mittal Steel’s merger with Arcelor (one of the most controversial mergers that raked up national sentiments amongst the French and even the French government initially opposed the merger), HP’s merger with Compaq and the list goes on. In spite of such tremendous M&A activity, a recent report by McKinsey claims that only one in every five mergers and acquisitions actually succeeds. Further research has found out that the larger the target firm acquired, the greater the percentage loss in terms of market share after acquisition. In spite of such claims, there seems to be no slowing down the M&A bandwagon.  Even though many have written about the consequences of M&As in the larger business perspective, not much is precisely known about the effects of M&A on brands, brand management and brand equity. What are the critical questions to be asked by companies before an M&A? What happens when two big brands come together either through a merger or through an acquisition? How should the brand strategy of the resulting entity be designed? These are some of the critical questions that this article addresses. Factors to consider before M&AWhen brands such as Adidas and Reebok decide to join hands, the stakes are very high. Both brands have been built around unique personalities – personalities so strong that the very identity of the brand is based on the underlying brand personality. Further, being competitors till the merger, such brands will have carved out unique niches in the market place. As such, the challenge for such M&A is post-merger integration. But before analyzing the post merger, companies need to fully understand the critical factors that they need to consider before merging their brand with another brand. The following section of the article discusses such critical factors. Does the M&A enhance shareholder value? This is the most important question any brand/company has to ask itself before taking the mergers and acquisitions route. As the primary goal of any business entity is the enhancement of shareholder value, it is only fair that the factor that determines a company’s growth strategy be measured in terms of that dominant variable. Further, this issue gets complicated as the measurement of shareholder value is a much debated but yet a gray area. Many M&As result in an instant boost in stock price of individual brands. The value generated by such M&A should also be analyzed in the long term to ensure that the increase in stock price was not a market aberration but indeed a reflection of the potential of the newly formed entity. Does the M&A allow the new entity market dominance? There are usually a plethora of reasons why companies choose the mergers and acquisitions route. One of the main results of a merger and acquisition activity should be market domination and leadership. This goal is very much inline with the goals of enhancing shareholder value. If two brands come together, then it is assumed that the combined resources of the two brands would enable the new entity to command enough market power that will be greater than the sum of their individual might. But this does not happen all the time. Does the M&A maximize synergies between brands in culture, organizational capabilities and market reach? It has been well recorded in the annals of business literature that one of the main reasons for the failure of any merger and acquisition is the resulting conflict between the combined entities. An M&A can be a great example to demonstrate the innate power of organizational culture. It is often wrongly assumed by companies that the overarching goal of market domination, profitability and growth would tame the hidden dragons of either company. As such, this is one of the most crucial questions that any brand must ask itself before joining hands with another brand. Can the two brands attain synergies in terms of their culture? Can the M&A maximize the organizational capabilities in terms of brand portfolios, market share, financial, managerial and technological resources? Can the M&A guide the new entity towards achieving market reach and growth without hindering the established brands? Does the M&A allow for brand compatibility? Brand compatibility is a broad term that refers to the level of synergies attained by brands of both companies that are parties to an M&A. Any brand is distinguished by its all powerful identity, unique personality and the underlying brand culture/philosophy. In the brand world, these three aspects are explosive and ready for conflict when they are forced to adjust to a new situation. In this context, brand compatibility refers to the level to which the identity, personality and philosophy of brands of the two companies match or show a possibility of peaceful existence. If the main objectives any M&A activity – shareholder value enhancement and market domination – has to be achieved, a very high level of brand compatibility becomes critical. Post-merger brand strategies Post merger period is the real acid test for the new combined entity. Most often the combined company is so overwhelmed with the complexities of integration that majority of the actions tend to be reactive to the ensuing flow of events than proactive whereby the management channels the combined synergies in line with the pre merger objectives. One of the key success factors for brands in the post merger scenario is to have a two pronged brand strategy – one part engaged in managing the marketplace perceptions given the strategic blueprint of the combined entity and the second part engaged with ensuring that all internal stakeholders are motivated and are in line with the overall brand vision. An essential prerequisite for either of these is clear cut system of brand management. Defining brand strategies under multiple scenarios and establishing guidelines to monitor integration are very important before any corporate level strategy is designed and implemented.  Brand Strategy: Brand strategy in a post merger scenario assumes high significance given the high percentage of M&A failures. As discussed earlier, brands of the two merged companies usually have their own unique identities, personalities and philosophies. As such the fundamental question of brand strategy would be – how to treat these brands – one brand, joint brand, flexible brand or a new brand. Depending on the market power, brand equity and the product line of the brand, a company can decide to one of the following three strategies: Acquirer corporate brand: More often than not, the acquirer corporate brand replaces the acquired corporate brand. In such a case the acquirer corporate brand becomes the brand of the combined entity. This is the case when the acquirer brand is the market leader and the acquisition would have been done primarily to consolidate its position ra>ther than to leverage the equity of the acquired brand either for market reach or growth. Joint brand: This is a case where the combined brand will be a combination of the acquired and the acquirer brand. This strategy is resorted to when M&A happens between equals. Further, both brands enjoy an equal or similar market standing, market reach and brand equity. Daimler-Chrysler and AOL-Time Warner serve as cases in point. Flexible brand: This strategy is based on geographical separation. When two well known brands have come together and each of these brands are big brands in different geographical regions, then the resulting brand, though a combination of both brands, tend to reflect the dominant brand in the relevant geographical region. The Renault-Nissan is a good example. Nissan is a highly known brand in Asia and also in the US. Renault similarly is a well known brand in Europe. These dominant markets are geographically separated. In line with the flexible strategy, Nissan is the preferred brand name in the US and Renault is the preferred name in Europe. This strategy serves well when each brand is highly regarded in its primary region and letting go of the name will be detrimental to the brand. Brand Integration: Integration is probably the most challenging of all issues after a merger. Integration, like branding, encompasses all functions of the company. Especially when two companies have come together either through a merger or an acquisition, integration of organizational capabilities becomes quintessential for the merged entities’ survival and success. Management should establish clear internal organizational expectations and guidelines for the interaction of employees, resources and brands to ensure that all activities are channeled towards the objective of a smoother transition. A branding platform must be set up whereby brand managers of both companies can discuss the possibilities and future paths of individual brands. This would ensure that brand managers would work in tandem with each other. ConclusionM&As have a tremendous impact on brands. The challenge for companies is to devise a system whereby the basic objectives of the M&A are always kept in mind so that post merger confusions and challenges would not drive the new entity from the set path. Most importantly, all strategies for the new entity should be guided by the underlying brand blueprint so that all post merger decisions are in line with the overall brand vision and is driven by the brand identity.                      Market Orientation – Essential foundation for a strong marketing strategy   Apple Computers, Starbucks Coffee, Virgin Group, L’Oreal, Nike, Singapore Airlines, Banyan Tree and Samsung are among some of the most successful brands in the world. Much has been written about the power of their brands that has allowed them to dominate their respective industries not only in the domestic markets but also globally. Most if not all accounts of success of such brands have emphasized on the branding process, the systems of brand management and the role of the brand equity in enhancing the company’s overall profile. The dynamics and the cultural aspect that are the powerful underlying forces behind these brands are rarely talked about. In today’s hyper competitive global markets, success depends more on the overall vision and philosophy of the companies that drives their activities rather than on their product level or business unit level strategies. The role of brand equity in a company’s market capitalization and shareholder value maximization is well documented. But to achieve such strong brand equity, companies need to develop a culture and an orientation that not only supports market oriented thinking but also nurtures the integration of cross functional integration of thought and activities. This article takes a detailed look into the components of such an orientation and what makes a company’s internal structure conducive to building strong brands. Market orientationMarket orientation is usually defined as the organization wide generation, dissemination, and responsiveness to market intelligence. This definition at once changes the dominant paradigm that has defined marketing for decades. Marketing has traditionally been defined within the narrow confines of the 4P framework. Such a conceptualization of marketing has relegated marketing to a tactical discipline to be performed by middle level marketing managers who did not possess the overall holistic view of the organization. But the connected knowledge economy, globalizing, converging and consolidating industries, fragmenting and frictionless markets, empowered customers and adaptive organizations among others are forcing organizations to alter their view of marketing.  The concept of market orientation is built on three pillars of customer focus, coordinated marketing and profitability. An organization’s capabilities to develop an orientation towards each of these three pillars depend on the internal structure and culture. The next section further elaborates these three constructs and how they allow companies to create a strong internal culture that can support building brands. Pillars of market orientationCustomer focus: Organizations have traditionally emphasized either profitability or market share (growth) as their guiding orientations. As the fundamental responsibility of any organization is to maximize shareholder value, such an orientation did not seem wrong. Further, with the advent of branded goods, globalization and increasing competition, companies placed a very high emphasis on products. But all these extant orientations have been challenged with the explosion of the Internet and resulting empowerment of customers. Internet to a great extent reversed the information asymmetry and allowed access to hitherto unavailable information about product features, price and peer recommendation. These factors are forcing companies to shift their fundamental orientation from that of profitability, growth and products to customers. Customer centricity is at the center of creating any future corporate strategies. Customer centricity primarily proposes that the basic philosophy of companies should be to serve customers rather than sell products and in the course establish long-term relationships by treating customer as strategic assets. Coordinated Marketing: For a company to have a market orientation, marketing has to break the narrow confines of the tactical 4P framework. Marketing should be transformed into a company-wide discipline practiced by anyone and everyone. Simply, marketing has to become a coordinated, cross-disciplinary function. This is easier said that done. For any discipline to claim a much broader responsibility and scope beyond its functional domain, the ability to quantitatively measure the outcomes of its activities becomes paramount. This is where marketing has been suffering for a long time. Measuring marketing productivity has indeed become a major challenge for marketers. But further, marketers have refused to acknowledge that customers are not the sole responsibility of the marketing department but of the company as a whole. These factors have together stalled marketing from becoming a coordinated activity that involves other functions such as finance, operations, human resources and strategy within any company. Profitability: In today’s global capital economy, the future potential of the company and its potential attractiveness is often controlled by the capital markets. Companies and managers are constantly under immense pressure to demonstrate the financial strength every quarter. The effect of quarterly results on the company’s stock price, the signals that such results have come to convey to a wide array of stakeholders and the extent to which financial analysts have managed to unleash havoc and terror for companies have collectively forced companies to adopt a very short-term perspective on profitability. Further, the focus on short term profitability invariably comes at a very high cost. Most companies tend to ignore the impact of their actions on the long term strategic capabilities. Moreover, under the traditional marketing paradigms, short-term focus was inevitable as the emphasis was on products rather than on customers. But within the framework of market orientation, profitability encompasses both financial measures (such as ROI, EVA, and market share) and non financial measures (such as awareness, attitudes and behavioral patterns). Such a comprehensive measurement would allow companies to balance between short term and long term profitability with a cautious eye on long term financial health of the company. These three pillars of market orientation have proven to allow companies to create a very strong philosophy and in turn contribute to companies’ long term strategic competence. But having followed the traditional marketing model for decades, it is indeed a tough call for companies to become market oriented. The following section of the article offers guidelines on how companies can establish a structure that allows management and employees to inculcate new way of thinking about marketing and ultimately channeling the aggregate mentality towards a market orientation. Guidelines to adopt a market orientationLeverage customer database systems: One of the greatest advantages that companies have today is the power of customer databases. The explosion of internet and the possibility of recording very specific details about customers, their online movement and their purchase behavior have only added power to these databases. The first step for companies in moving towards market orientation is to optimally leverage these databases. The potential marketing intelligence that these databases offer would allow companies to understand the customers’ current and potential needs clearly. Such an understanding would lead to marketing functions to be in line with customers’ needs rather than compulsions centered around products. As such, pricing will be in line with customer’s willingness to pay rather than to cover costs, advertising and communications will inform, appeal and endear to customers, customer’s convenience will dictate distribution rather than logistical ease and product features would essentially reflect customers’ unmet needs rather than show off the latest technological supremacy. Such a shift from product centricity to customer centricity will be an important first step. Create a marketing dashboard: To achieve complete market orientation, companies should create a systematic structure that would enable different functions to collectively discuss about customers and markets. Traditionally, marketing department handles customers and their needs, finance looks after the money, operations is singly focused on production and strategy generally looks at the market outside to decide on the company’s future. A market orientation mandates that all these functions operate jointly. Marketing dashboards create a platform whereby representatives from each of these departments can come together and discuss the various functional issues so that the collective action will result in activities that enhances the company’s relationships with customers. Further, for marketing to become an organization wide discipline, it must not only understand the different functions within a company but also should be able to relate marketing activities to other functional activities. Marketing dashboards provides marketers a structured platform to ensure marketing become coordinated and company wide. Constantly update metrics: Metrics used to measure the outcomes of marketing activities cannot be generalized across companies. Rather, they have to be modified and adopted depending on the company, the product class, the industry, the important criteria being measured and the ability of the company to track marketing investments. A first step in recognizing and developing useful metrics would be a collaborative discussion with other functional departments within the company. Further, the corporate mission and underlying philosophy would offer some insights into what metric are regularly tracked such as quarterly market share, relative share within the category, brand awareness, conversion ration through the purchase funnel, shifts in attitudes in response to advertising campaigns, shift in purchase patterns in response to discounts/promotions and so on. But caution should be taken to ensure that these metrics capture both financial and non-financial measures. Marketing should also strive for developing metrics that go beyond the discipline and are able to capture the outcomes of all activities that bear on the relationship with customers. Such a move would take marketing a step closer to becoming an organization wide discipline. ConclusionBrand equity is undoubtedly the most important of corporate assets. To create strong brands, as important as a structured brand management process is a strong guiding philosophy that is customer and market oriented. Such an orientation spawns a self-enriching culture that not only drives the company in the right direction but also facilitates the creation of a strong corporate strategy. As such, companies would benefit tremendously by shifting from a complete product or growth orientation to a market orientation. Such market orientation after all is the basis for building strong brands.                        Brand Community - Creating differentiation through consumption   Marketing thought has strongly advocated differentiation of products and services as a means of achieving competitive advantage. As the Harvard Business School professor, the late Theodore Levitt argued quite early on – What companies sell is the claimed distinction of their execution, the efficiency of their transactions in their clients’ behalf, their responsiveness to inquires, the clarity and speed of their confirmations, and the like. In short the offered product is differentiated. Differentiation has been one of the corner stones of marketing. But, lifting of trade barriers between countries, integration of many emerging economies into the mainstream global economy, globalization, fragmentation of media, explosion of the Internet, and advancement of database collection technologies are some of the dominant factors that have rendered differentiation as it has traditionally been known ineffective for companies in the long run.  These developments have ushered in an era of empowered customer. As professor C. K. Prahalad says – customers have been increasingly engaging themselves in an active and explicit dialogue with manufacturers of products and services.  Individual consumers can address and learn about businesses either on their own or through the collective knowledge of other customers. Customers are fundamentally changing the dynamics of the marketplace. The market has become a forum in which consumers play an active role in creating and competing for value. Co-creation of value as a marketing concept is gaining ground rapidly. The emphasis on recognizing the centrality of customers in any business transaction or relationship is further fuelling marketing research and practice to search for marketing approaches that gives customers their due credit. In light of these developments, one of the alternatives that have been suggested to traditional differentiation and value creation has been differentiation on the basis of ownership and consumption. By enhancing the experiences that customers have with the multiple players that they interact with before, during and after their consumption, ownership and consumption can be effectively differentiated. Enhancing consumer experience, it has been argued, is effectively possible by creating communities around brands whereby consumers have an opportunity to experience consumption not only with the brand but with also other users of the brand in a community setting. Building communities around brands to create and sustain excitement in the brand is catching up in corporate circles like a wild fire. The growing popularity and penetration of the Internet across the global has only added fuel to this fire. All of a sudden, creating communities around brands and involving customers actively is increasingly being seen as a magic mantra that can ensure corporate success. This article addresses this increasingly popular phenomenon of a brand community. Brand community - An introductionBrand community simply is a group of loyal brand customers who are bound together by their loyalty for the brand. Such a group is different from other groups in that a brand community shares not only the loyalty towards the brand but also some shared rituals and a sense of moral responsibility. As such, a brand community, it has been proposed by marketing researchers, is fundamentally based on three defining characteristics: Consciousness of kind: Consciousness of kind refers to the intrinsic connections that members feel toward one another, and the collective sense of difference from others not in the community. It also refers to the sense of belongingness to an imagined community of people who share similar interests. Community members tend to identify themselves with others of similar ‘type’. Through the consumption of the brand, community members feel that they sort of know each other. In a brand community, consciousness of kind is due to the common thread that ties the community – the brand. Existence of shared rituals and beliefs: One of the core components of any community is the existence of rituals and beliefs that are shared by all the community members and that are unique to the community. These rituals and beliefs are passed on through the members and they define the culture, character and conduct within the community. In a brand community, such rituals and traditions are predominantly related to the brand – the usage of the brand, the occasion of use of the brand, the associations with the brand, knowledge about the brand, willingness to participate in brand related activities and such. As such, in a brand community, the rituals and traditions are decided upon not just by the users of the brand (community members) but also the makers of the brand (the company). In creating rituals and traditions that would enhance the involvement and participation of the members with the brand, the company gains immense leverage to build loyalty early on during the usage life cycle of the brand. Sense of moral responsibility: This refers to an inherent sense of duty that members of a community feel towards the community as a whole and towards other members individually. The members of a brand community are observed to share a sense of moral responsibility towards other members, which often manifest through activities that recruit new members and retain existing ones, and assists fellow members in the consumption of the brand, technical assistance and such. In a brand community, this sense of moral responsibility is created by the usage of the brand. The members of brand community would help others in realizing the full potential of the brand, share product knowledge, and also screen prospective members through their knowledge of the brand, passion towards the brand and the extent to which they identify with the community. Steps for building a brand communityThese three defining characteristics allow companies to actively involve with customers in creating resonating communities around their brands. Even though it is simple as a marketing concept, building brand communities that resonates with loyal customers is indeed a Herculean task. The following section proposes four essential steps in building brand communities. Create a strong brand story/myth: Brands in today’s world are not mere inanimate ‘things’ but thriving entities with identities and personalities that allow customers to express themselves through its consumption. As such, to attract customers to it and to make them actively participate in varied branding activities, brands should have a strong story or myth that customers can easily identify and relate to. Such a story/myth would not only provide authenticity to the brands but also allow customers to express their sense of self through the consumption of the said brand. Create a need for collaboration among consumers: For a community to be actively adopted by the customers, they should feel a need to connect with other members (customers) in the context of the brand’s consumption. Such a need to connect with other fellow brand users can arise for a number of reasons such as Sharing of information – Members of many video game communities, technical products communities become members in the first instance because such communities allows members to share information with others and to learn many technical details easily. Validation – Members of the Nike or Louis Vuitton brand community seek validation from fellow members about their choice of the brand, its usage situations and its superiority over other brands in the market To express one’s personality – Members of the Apple computer brand community feel a strong sense of expressing their unique personality by embracing Apple and rejecting the market leader Microsoft. Identify with a specific segment – Members of the Samsung brand community are part of the community because of their need to be identified as part of the global ‘cool’ segment that is in tune with the latest in technology and fashion. Therefore companies should decide the main reason for which they want to build communities around their brands in line with the segments that it wants to target.  Create identifiable brand elements: As with any community, brand communities should be able to offer its members unique identifiable community elements in terms of terminologies, icons, symbols and spokespersons. Such community elements would not only help the community to distinguish itself from others but also offers the community members tangible tools to identify themselves with the community. These community elements should be in line with the brand’s underlying identity. Create a unique culture: One of the fundamental reasons for the growing popularity of brand communities is that it offers companies real time feedback about the brands. Further, brand communities allow companies to co-create value with customers on a continuous basis. As such, companies must create a culture that allows customers to interact with the brand, other users and the company simultaneously. Such an environment would allow customers to experience the brand in a memorable manner as they will be part of the value creation process. The above mentioned four steps would assist a company in framing a robust structure to build a brand community. As with any business venture, the success of such a brand community depends on how proactively does the company engage customers on a continuous basis. ConclusionWhen managed properly, brand communities could prove to be that elusive new tool to tackle the ever growing competition. Brand communities not only allows companies to collaborate with customers in all phases of value creation – product design, pricing, places of availability, and phases of promotion – but also provides companies an effective platform on which to engage customers and create loyalty towards the brand. As the novelty of the concept begins to fade away, more and more companies would jump into the bandwagon. But the successful ones would be those communities that are built on strong fundamentals centered around the brand identity and that support the brand strategies.; 

Martin Roll

http://www.venturerepublic.com

Business, Brands & Leadership


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