A “mathematical equation” of how to create and manage brand wealth 3 August 2011
Synopsis of this presentation This presentation contains a review of a mathematical model that was conceptualised to create and manage brand wealth – in brand asset value, current and potential revenue and profit. It provides a systematic diagnostic of the key elements that make-up the creation and management of brand wealth. The model enables brand owners to: Identify the elements they need to consider to systematically create and manage brand wealth. Identify the factors that undermine their brand wealth. Identify the factors that enhance their brand wealth. Determine how these factors relate.
This tool makes brand management More focused, efficient and effective.
The market environment is complex today The consumer is informed. The consumer has easy access to brand information. The consumer is in touch with significant others on a minute-by-minute basis - this enables feedback about brands and endorsements.
The market environment is complex today Traditional media is now less successful. There are four reasons for this: The cost of media. The sophistication of consumers. The plethora of brands available in most markets. To simply break through the competitive clutter, has become difficult and costly. A decline in the impact of traditional marketing (in some markets and product/ service categories like financial services, the number of breakthrough messages is less than 10 in 100 (Millward Brown). The result of the above is that consumers increasingly see brands within the same product or service class the same. If so, why pay more for a given one?
The market environment is complex today The consumer engages, but on his/ her terms. They know what they want and look for it. They resist one-way mediated content. They search more than one source. They complain when they are not happy - and they tell everyone.
Complex environment (cont.) Marketing is becoming increasingly expensive. Most companies have to do the same with less. Even in emerging economies the high demand for media space is making media expensive. Unless a brand has “new news” that is meaningful, it will get lost in the noise. Whilst traditional brands grapple with this change, new technology brands have leapfrogged this issue. New technology brands have high levels of newsworthiness. They get noticed even when they do not overtly market themselves.
Complex environment (cont.) Many industries are highly proliferated with brands. The number of brands in all categories have multiplied. Most product and service categories suffer from parity. The boundaries between product and service categories are converging: consumers often use “categories” inter-changeably. These factors make it difficult for any given brand to gain a significant advantage over others. Even if it can, communicating this advantage is difficult. In some industries, it may have become impossible to establish a competitive advantage unless a brand fundamentally changes the rules of competition. Then it creates its own competitive context.
Complex environment (cont.) The media channels we can use as marketers have grown exponentially. It has proliferated message dissemination and it makes it more and more difficult to reach a given consumer. It has made media planning and buying much more complex. Social media are more measurable, which is a major change from historical media. Yet, many clients are still sticking to their traditional ways. The result if often an “illogical mix” of media types and budget allocations.
Amidst this increased complexity, all brand owners: Have to extract greater value from existing brands. Have to create new brands or brand extensions. Have to create or adapt consumer value propositions. Have to attract new customers. Have to make sure that any new brand – or brand extension or innovation - works – and delivers profit – from the outset. Having to do it all with less resources.
Brand owners now need to be more efficient, effective and cut wastage out of marketing This is not always easy: knowing where to focus for the maximum gain; how to integrate resources to “multiply” results - and knowing what detracts from brand success so that these can be corrected or eliminated. The above means brand owners need to look at all the factors that build or detract from the value of their brands. Within the competitive environment of today, the strongest competitors leverage scarce resources better than their peers.
Any brand owner needs to create and manage BRAND WEALTH Brand wealth is a function of: identifying the best opportunity for a brand, positioning and naming it right amongst the most opportune market segments, marketing this in the most opportune way in communications - and delivering upon this promise when consumers experience the brand.
Despite the importance of “magic” in brand management, it is a mathematical process of creating and managing value Despite the fact that brand management consists of a complex process of analytics, insights, intuition and creativity, we often make brand decisions without any sound foundation. Experience has shown us that brand management can be simplified to a mathematical formula. This enables an insightful and systematic management of existing or new brands. At least, it enables us to identify elements of the brand that requires most attention because they undermine brand wealth. Or the elements that provide the greatest opportunity to create greater brand wealth.
As brands evolve, they need magic and logic! This process, combined with “magic”, enables efficient and effective brand management. And whilst a brand can get away with magic only for a while, as it grows and matures, or it faces new competition, it will require a greater degree of systematic and logic. or/ and
The equation we use to create and manage brand wealth Creating “brand wealth” is a function of aligning company resources to maximise the value and growth of its brands, preferably at a lower cost than for competitors. Brand wealth requires a brand to align: Its market opportunity in terms of segments and value propositions; Its brand positioning; Its brand architecture, naming and identity; Its marketing communications; Its customer experience at all contact points. At the same - or at a lesser - cost than for competitors. It needs to put the strategies and activities in place to do so. It needs to measure and adjust these as and when required.
The opportunity: 1.MACRO ANALYSIS Identify the opportunity - and our company capability to leverage the opportunity. This phase mainly consists of external factors we need to review:
The competitive opportunities and constraints;
How the opportunity matches our capabilities as a company.
Market, industry and competitive factors: what external factors drive and inhibit the opportunity? Consumer need segments: what segments enable the greatest opportunities for growth? What competitive advantage/ capabilities does the company have to leverage the opportunities? Factors we need to align to leverage the opportunity Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X Infrastructural & marketing costs to deliver the brand
Our brand solution: 2.MICRO ANALYSIS Once the opportunity has been determined, the process to establish and manage the brand starts. This consists of the factors outlined below (identifying the best gap for the brand; positioning the brand; expressing it in terms of name and identity, communicating it to the current and potential market and delivering the positioning at every point of contact the consumer has with the brand). Together, these will signify the success of the brand. Market, industry and competitive factors: what external factors drive and inhibit the opportunity? Consumer need segments: what segments enable the greatest opportunities for growth? What competitive advantage/ capabilities does the company have to leverage the opportunities? Factors we need to align to leverage the opportunity Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X Infrastructural & marketing costs to deliver the brand
When reviewing an existing brand, we can rate the brand according to its delivery upon the key factors – a useful tool to enable focus Factors where the brand performs well Align Product gap & idea Brand name & identity Brand delivery Brand expression Brand strategy & positioning = X BrandWealth® X X X Infrastructural & marketing costs to deliver the brand Factors where the brand performs badly
Brand wealth is exponential: multiply instead of “adding-up” In the model we use, we believe that successive “on-specification” performance in a particular area enables exponential growth in brand wealth, in the same way that successive failure in a particular area will lead to an exponential decline in brand wealth. The sum of the parts of successful brand management, is exponential. The opposite is also true. As examples: if a brand focuses on the wrong market segments, with low growth rates and lower profit potential, it can not maximise its resource utilisation better than its rivals, so it will perform less well. If the advertising and other marketing communications does not express the brand positioning, it will undermine the brand potential, and resource utilisation, as well as under-deliver in terms of growth. If a brand focuses on the opportunity markets and markets itself well, yet delivers bad service to its existing customers, it undermines the brand and renders a fair amount of its marketing expenditure wasted.
Apple illustrates this principle well: everything it does supports one brand “concept” “Design is not just what it looks like and feels like. Design is how it works.” (Steve Jobs) The Apple brand experience
The alignment of each step adds incremental brand value. Non-compliance or failure in one area will undermine the brand Marketed and advertised in ways that endorse and expand upon the brand concept A unique design targeting a clear market segment The Apple brand experience Packaged in a way that enhances the expectation and surprise Sold and serviced by stores and staff that enhance and expand the brand concept
Let us review the factors that make up brand wealth step-by-step We will now cover each area in turn and explain how these collectively add-up to brand wealth.
Step 1: What is my brand wealth at this point and what may impact that positively or negatively? Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X How strongly is my brand positioned for future revenue and profit growth? How does my brand compare to others in the same or related consumer need categories in terms of achieving new revenue or margin growth? Can my brand extend into new markets and sources of revenue? What is the asset value of my brand - and is it growing? What market or competitive changes are likely to impact the future value or profitability of my brand?What entrants into my current or related market are achieving high levels of growth or profitability? Infrastructural & marketing costs to deliver the brand
Step 2: Define the growth opportunities after reviewing the macro context - and satisfy the opportunity What growth and profit opportunities are there in terms of market segments and value propositions? How large or profitable are these opportunities? What new spaces can be created that my brand can dominate? How far can my brand stretch? If a new growth opportunity is strong enough, how can I create a brand to play there? What are the chances that I can redefine the competitive landscape entirely with a new brand? Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X Infrastructural & marketing costs to deliver the brand
Step 3: Position the brand according to the opportunity to ensure that consumers know and understand what it offers Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X How do I position my brand that it maximises its opportunity in the marketplace and clearly differentiates itself? How can I redefine the competitive space? Is the strategy relevant to consumers? Can we establish the brand relative to the market, consumers and competitive constraints? Is my positioning credible and sustainable? Infrastructural & marketing costs to deliver the brand
Step 4: Does the name and identity of our brand make it easy for consumers to understand and relate to? Does my brand name & identity maximise my competitive opportunity in the marketplace? Are there any changes I may want to make to make it clearer? Can the brand name and identity, ideally, express the positioning of the brand? Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X Infrastructural & marketing costs to deliver the brand
Step 5: Do the messages and media channels convey the brand positioning impactful and directly, and do the channels compliment one another? Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X What messages do I use to convey the brand positioning? Are they simple and easy to understand and relate to? Do I give consumers substantive reasons to believe my claims? Are they expressed in an impactful creative way? Do I adhere to the brand tonality or personality my brand has? Do the media channels chosen reach the desired target audiences? Do the media channels compliment one another? Do they include social media and how am I managing that? Infrastructural & marketing costs to deliver the brand
Step 6: Are we delivering the brand consumers expect from its positioning at every touch point? Are my customers experiencing the brand they expect when they deal with it - and according to how it is positioned? Are my facilities and staff aligned? Does our brand deliver in the trade by being in stock where people want to buy it, merchandised and displayed well? Does my brand deliver the quality consumers expect? Is it consistent? Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X Infrastructural & marketing costs to deliver the brand
Step 7: What results are the brand achieving in its brand wealth measures: asset value; market share; trial; awareness; imagery; preference & customer satisfaction Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X Infrastructural & marketing costs to deliver the brand Brand results measurement are the ultimate measures of brand success:
Are target market consumers aware of my brand? If not, why not? If they are, what do they say about my brand? How does that differentiate my brand from others – if at all?
Do they try it? If so, do they keep on buying it after trial? If not, why not?
Are my users happy with my brand? If not, why not? Do my users extend their usage within my brand space? If not, why not? Do they recommend my brand to others? If not, why not?
What is my market share? Is it growing? If not, why not?
What is the trend of profit margin for my brand against the market average? Does it increase or decrease – why?
Is the market I am in growing? Am I getting my share of the growth?
Are there market segments that are under penetrated? How do I fair within the different segments?
What is the asset value of my brand? Is it growing? If not, why not?
Step 8: Are we achieving better - or the same - results with the same - or less - resources? Brand delivery Brand expression Brand name & identity Market opportunity/ idea Brand strategy & positioning = X BrandWealth® X X X Infrastructural & marketing costs to deliver the brand Am I doing this at the same or a lesser cost than competitors? How can I index my own brand efficiency and effectiveness against competitors? Why am I doing better or worse?
To conclude We have used this model consistently over the years to strategise and audit existing brands - and provide the template for launching new brands. It provides a consistent platform to review and manage the wealth of a brand. It provides a useful benchmark to identify brand weaknesses. It assists focus. Overall, we have used it to make brand management more consistent, efficient and effective. And although it will not solve all brand ills - and retains a degree of subjectivity, it does take us through a systematic way of thinking and analysis.