The role of the brand in differentiating companies in the new economy of the 21st century


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Branding evolved from the focus on the visual design, logos, symbols, colours and fonts to a broader concept, where strategy plays a fundamental role. Brands became the drivers of differentiation and reputation and a key action tool.

Brands are essential for establishing relations between companies and their stakeholders. They generate links and create connections, which enable companies to obtain support, trust and cooperation of their stakeholders and thus create value and become the cornerstones of the business strategy.

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The role of the brand in differentiating companies in the new economy of the 21st century

  1. 1. InsightsStrategy documentsI14/2012MarcaThe Role of the Brand inDifferentiating Companiesin the New Economy ofthe 21st Century Branding evolved from the focus on the visual design, logos, symbols, colours and fonts to a broader concept, where strategy plays a fundamental role. Brands became the drivers of differentiation and reputation and a key action tool. Brands are essential for establishing relations are competing on the field of strategy – something between companies and their stakeholders. expressed by Interbrand’s tagline “Brands have the They generate links and create connections, power to change the world”. which enable companies to obtain support, trust and cooperation of their stakeholders and thus Brands have the power to create value and become the cornerstones of the change the world business strategy. Often we underestimate the power of the brands to drive behaviours and to a large extent create However, there are different kinds of brands apart contexts and conditions in which people live and from those associated with business (product and act afterwards. This is because brands, above all, corporate brands): personal brands, city brands, are culture, says Ángel Alloza, CEO of Corporate country brands, etc. In all these cases, brand Excellence – Centre for Reputation Leadership, management should be strategy-driven. and it is the identity of the brands that becomes the starting point for the vision and values which then Borja Borrero, Executive Creative Director of are projected by companies to the society. Interbrand Spain says that initially, branding was almost exclusively focused on design (a small part But even in these moments it is possible to see how of what in reality is a brand). The idea was that brands facilitate the development of social values. the visual aspect played a key role and frequently Social values can be expressed and extended by was not linked to the strategic dimensions of the means of brands, and when it is done, companies business. According to Borrero, currently brands achieve better understanding of what is expected ofThis document was prepared by Corporate Excellence and contains references, among other sources, to the statements made by BorjaBorrero (Executive Creative Director of Interbrand) and Ángel Alloza (CEO of Corporate Excellence-Centre for Reputation Institute)during the Branding Days event organised by the University of Complutense in Madrid, on January 17 and 18, 2012.
  2. 2. The Role of the brands and thus respond to these expectations Brand from Business the Brand in in a more effective manner, thus improving the Differentiating Companies in the reputation of these brands. Total Business New Economy of Delivery the 21st Century That’s why branding is not a static discipline. It is an ever-changing field that adjusts to the changes in values, lifestyles, behaviours and demands of the stakeholders, enabling this combination of tangible Brand and intangible attributes symbolized by names and Idea registered symbols – one of the definitions of the brand – when they are properly managed – to create value and have a social impact. Another function of branding is to tell stories about Brand brands, or if you will, create their stories through Communication communicating with the audiences in the medium Source: The Brand Gym, 2010. and long run, attracting followers and ensuring the consistency of experience delivered by the branded product. All elements have to tell the same story as suggested by Interbrand, which has a special and explain the same idea. evaluation methodology. This is due to the fact that the value of intangibles is increasing because “A brand The importance of brand clarity products and services turn into commodities, andis described For many companies a brand is still nothing more there are few opportunities for differentiation. than a logo, as was suggested in the beginning of this through text. The word brand is associated with something Another element that increases the value of thewhat is said almost exclusively visible and tangible. But a brand is the number of fans or “evangelists” that it has – a concept that goes beyond traditional loyalty brand is much more than this, it goes far beyond by people the tangible qualities. The idea of branding is to – as well as the kind of activities designed to promote about it, transform the brand into something much more or defend the brand, depending on the situation. meaningful than just a logo. because Brands of the Future brands are The identity of a brand is not a claim or a slogan, it is The brands that understand branding as a proactive the heart of the brand, the promise of an experience, rather than a reactive activity will drive the future, evaluated something different from others, something unique because branding is no longer governed by the by what and special. The identity goes beyond the logo – it cyclical model, where the objective was absolute is the DNA, the content. Values help to reinforce consistency. Now it is a continuous process, where they exactly this idea and are the basis that holds the the objective is relevant consistency. say and, value of the brand. The new model that governs the brands is based on especially, Harley Davidson is about liberty – the story that a progressive focus and the following features: by what this brand tells is all about this idea. BMW is about pleasure, the pleasure of driving. Apple is about 1. A change that creates the need: anticipate what they do” intelligent simplicity and intuition, it is a brand the people want. with sex appeal. Ikea is about reinvention, where 2. A dialogue and a connection that encourages each client becomes a designer. Volvo is about people to take part in the experience. security – security drives everything it does and the 3. An open and living expression that at the same way it is done. Whereas Danone is about health and time always tells the same story. care about people. 4. An expression of continued evolution in order to stay relevant. This is what in practice is the idea of the brand. Ultimately, it is the storyline that defines the Finally, branding no longer aims to ensure that behaviour and communication of the brand, brands change continuously with their stakeholders. that makes it clearly identifiable and valuable in The aim is to involve the stakeholders in the process the perception of its stakeholders, thus leading of creating value. to sustainable differentiation from the rest of the competitors. Integrated and Reputational Vision of the Brand On the other hand, the differential of the economic According to Angel Alloza, brands require a value of a brand compared to other brands serves multifunctional and integrated vision, because they as a tool that allows one to measure its robustness are assessed by what they say and, above all, by what and health on the market. Branding increases they do. The founder of Amazon Jeff Bezos agrees the average market value of a company by 38%, that a brand describes itself through the words of Insights 2
  3. 3. The Role of Interbrand Methodologythe Brand inDifferentiatingCompanies in theNew Economy ofthe 21st Century Operating Profits – Taxes = =$ NOPAT – Economic Profit x WACC = Branded Earnings x Role of Brand = Brand Strength Discount Rate ECONOMIC PROFIT BRANDED EARNINGS BRAND VALUE Source: Interbrand, 2012. the people. A brand is what is seen (the logo, the Conclusions: from Consumers to Users colours, the fonts, the design and graphics) and The brand emerged as a product associated with “Brands what cannot be seen (the ideas, the personality, the logo, based on the marketing and advertising are no the values, the positioning, the processes, the strategy and aimed at consumers, and then evolved communications, the quality and the talent). into an idea designed to transmit trust, passion, longer the pride of sharing the values and aimed at clients,property of Thus, the two most important elements in a brand employees, providers and other stakeholders and are alignment and engagement or, in other words, applied to products, services, companies, persons,companies, commitment of its talent (its professionals) to the places or groups. developed values of the brand, how they align with these values and encourage other stakeholders to align Currently, surprisingly, brands are turning into for with them. The brands are expressed by means verbs used by stakeholders. Here are some examplesconsumers. of the five senses and in the way consistent with suggested by Meg Whitman, the former President of their stakeholders (a very important function eBay: to google a word, to skype with a friend or to Instead, called the brand guardianship), but this starts with photoshop a picture. This is because now brands are they are a the robustness of its internal experience and its functioning in a different way: they are used to share external promise. images, exchange objects, get in touch with friends, property broaden the knowledge or search for information. of users Finally, the reputation of a brand starts with its identity, which is closely linked to the experience of The search – in the new digital economy – is developed the employees. Along with the Greek philosopher exactly what makes the difference in the world of to address Socrates, who said that “the way to gain a good commodities, the world of the 21st century. This is reputation is to endeavour to be what you desire a world, where brands are no longer the property of their to appear”, we suggest that it is a contrast between companies, manufacturers or advertisers developed specific what one wants to be, what is expected from one and for consumers and other stakeholders. Instead, what is actually achievable. According to Alloza, they are the property of those people who use needs” the best way for a brand to gain a good reputation the products, and are developed to address their with time is to avoid empty promises. specific needs. Insights 3
  4. 4. ©2012, Corporate Excellence - Centre for Reputation LeadershipBusiness foundation created by large companies to professionalize the management of intangible assets and contribute to the developmentof strong brands, with good reputation and able to compete in the global market. Its mission is to be the driver which leads and consolidatesthe professional management of reputation as a strategic resource that guides and creates value for companies throughout the world.Legal NoticeThis document is property of the Corporate Excellence - Centre for Reputation Leadership and has as its objective to share businessknowledge about Brand, Reputation, Communication and Public Affairs Management.This document is directed exclusively towards its addressee and contains confidential information, subject to professional secrecy, whosedisclosure, copy or non-authorized use is against the Law. If you receive this document by mistake, let us know immediately and erase itwithout keeping a copy.Corporate Excellence - Centre for Reputation Leadership is the owner of all the intellectual property rights of the images, texts, designsand any other content or elements of this product and has the necessary permission for its use, and therefore, its copy, distribution, publicrelease or transformation is prohibited, without express authorization from the owner.