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L15 Meaningful brands achieve better results

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This document was developed by Corporate Excellence – Centre for Reputation Leadership and among other sources contains references to the
book Brand Premium by Nigel Hollis, VP and Chief Global Analyst at Millward Brown. The book was published by Palgrave in 2013.

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L15 Meaningful brands achieve better results

  1. 1. Any brand may be compared to a medal that has two sides: the tangible side (functional values managed by the brand’s owners) and the intangible side (emotional and social values rooted in the brand’s identity and controlled by the brand’s stakeholders through its reputation). Nigel Hollis, VP and Chief Global Analyst at Millward Brown, believes that the true risk faced by companies today is a discrepancy between these two elements. In his book Brand Premium, the expert argues that any brand should have four elements in place in order to avoid this risk and escape the danger of managing ideas, attitudes and promises without understanding the true reality, behaviours and experiences. Four keys to creating a Premium Brand The four vectors that according to Hollis enable a brand to generate value are the following: 1. Purpose: this is the cornerstone that furnishes a brand with the meaning and direction. In fact, a brand without a purpose today is considered a commodity – a brand that lacks differentiation. The purpose should differentiate one brand from another, it should promise an improvement of life for the persons targeted by the brand, an improvement related to basic human needs: self-esteem, pride, safety and security. Julian Stubbs, a UK-based expert in brands says the promise represented by any brand (buy me and your life will improve) should be fulfilled. Differentiation is not an end in itself, differentiation should truly make a company stand out in some way. 2. Meeting expectations: any interaction with the stakeholders counts and contributes to their experience. In other words, it reflects whether a brand fulfils its promise. A brand Why do consumers pay more for some products than others? Why talented professio- nals prefer to work for some companies rather than others? What makes investors and shareholders favour some values rather than others? Why does the society hold some organizations and leaders in greater esteem than others? Strategy documents L15/2014 Brands that make people’s lives more meaningful achieve greater differentiation and better results Brand Book reviews This document was developed by Corporate Excellence – Centre for Reputation Leadership and among other sources contains references to the book Brand Premium by Nigel Hollis, VP and Chief Global Analyst at Millward Brown. The book was published by Palgrave in 2013.
  2. 2. Insights 2 Brands that make people’s lives more meaningful achieve greater differentiation and better results stands for everything: the price, the product or service, the environment, communication and customer care. According to Wally Olins, there are brands that are quickly blamed (stakeholders don’t miss any fault with them), and brands that are by default considered innocent (stakeholders excuse almost all their faults). However, even in the second case negative experiences – like in any human relations – may be easily excused but not forgotten. 3. Resonance: it’s based on the emotional response, personal characteristics and brands’ ability to identify with their stakeholders. Strong, powerful and deep ties between the brand and its stakeholders increase the brand equity. However, these ties may not be based solely on functional (utilitarian) values – they should also build on emotionally rewarding experiences. That’s how the brands’ intrinsic and extrinsic elements combine to create a durable link with the stakeholder. 4. Differentiation: there are many companies that spring to mind easily when we talk about brands (Virgin, Disney, BMW, Apple or Coca-Cola are just a few examples), showing the importance of developing a sustainable competitive advantage and differentiating oneself from one’s competition. These brands are never confused with others by any of their elements (visual, physical, sensory or communicative). They are the leaders in their categories, their sectors and their markets because they are unique and impossible to copy. Abrand’ssuccessandsustainabilityinthemedium and long run is determined not by one or some of these factors, but by a correct combination of all four factors: resonance is greater and easier to achieve when the objective, differentiation and experience are all in place, thanks to the defining effect of these three elements. At the same time, high resonance makes it easier to achieve differentiation, objective and experience thanks to its amplifying effect. Making the most of amplification The power of amplification unleashed by the combination of the four factors may turn a brand into the most valuable brand in its segment. However, before reaching this stage, a brand has to take the following six steps: 1. It should be easily found: it should be readily available when and where consumers want it, both physically and digitally, quickly, without any inconvenience. A brand should offer opportunities, occasions for its consumption, and create situations where consumers may easily reach it, making this brand the most obvious and immediate choice. “Brands should try to escape the danger of managing ideas, attitudes and promises without understanding the true reality, behaviours and experiences” Table 01.a: The power score has a positive relationship with volume sales Table 01.b: The premium score has a positive relationship with price paid Source: “Brand Premium”, Nigel Hollis Power Score Volumen Bought (Indexed to average of 100) Low Medium High (top 25%) 65 100 324 Premium Score Price Paid (Indexed to average of 100) Low Medium High (top 25%) 93 100 106
  3. 3. Insights 3 Brands that make people’s lives more meaningful achieve greater differentiation and better results “Brands with a clear purpose and high differentiation are five times more likely to capture a large market share, four times more likely to increase their market value, and set a price up to 13% higher than that of their competitors” 6. Be ready to stand out: when a brand is strongly present in its stakeholders’ minds, it’s more likely to stand out, to be prominent, relevant and important. There is a direct relationship between the ability to stand out, the ability to cultivate loyalty and the ability to increase returns on investments. Why build Premium Brands Millward Brown’s studies show that those brands that have a purpose, are able to stand out and differentiate themselves are five times more likely to capture a large market share than their competitors, four times more likely to increase their market value in future and set a price up to 13% higher than that of their competitors. Therefore, there is a proven positive correlation between meaningful brands and sales volume as well as the price that consumers are disposed to pay. A comparison of Millward Brown’s BrandZ study with Standard & Poor’s 500 index, shows that those brands that follow the described model achieve 28% higher market value than other companies. After the economic recession between 2007 and 2009 these brands increased their capitalization more than others. 2. Be credible: through on-going innovation of business models, products and services. Positive associations with other commercial, business, personal or geographical brands which have the same goal and objectives may help to achieve it. 3. Be able to enjoy life: embracing the present and looking forward to the future helps brands to become popular, to be “in”, to be modern and successful. The best brands are not the ones that talk about themselves, but those that encourage others to talk about them. Aesthetic appeal and good taste, as well as a combination of sophistication with simplicity is what makes a brand attractive. 4. Be accessible: not only in terms of price or quality, but also in terms of a good relationship between the two variables. It is not a matter of being cheap or expensive, it is a matter of offering an opportunity of a smart purchase, maintaining an adequate margin and raising brand equity. 5. Be transferrable: a high brand equity makes it possible to transfer this value to other categories of products, business sectors or markets. New instances of consumption as wellasneweconomicspacesareopportunities brands have to adapt to, always maintaining differentiation in the brand’s original market and segment. Graphic 01: BrandZTM Strong Brands Portfolio vs. S&P 500 (April 2006- Dec. 2012) Source: Bloomberg, MB Optimor analysis 60% -60% Apr06 Aug06 Dec06 BrandZTM Portfolio 37,5% 0.4% S&P 500 Apr07 Aug07 Dec07 Apr08 Aug08 Dec08 Apr09 Aug09 Dec09 Apr10 Aug10 Dec10 Apr11 Apr12Aug11 Dec11 40% -40% 20% -20% 0
  4. 4. Insights 4 Brands that make people’s lives more meaningful achieve greater differentiation and better results Conclusion: brands that create value All this shows that premium brands, apart from deeper meaning and higher differentiation, are able to set higher prices in the markets and achieve greater values on stock exchanges. If a brand is committed to its purpose and promise, examines the experiences that it offers and makes sure that the experience matches the promise, it may be certain that it stays in stakeholders’ minds, further strengthening its differentiation and economic success. The balance between tangible and intangible elements of a brand is an essential aspect that has to be borne in mind in order to succeed. The idea is to cultivate loyalty of different stakeholder groups through an emotional and social connection, and its alignment with functional elements. When so many low cost products and services are available, a company should convince consumers that it’s worth to pay more for its product. The main challenge is to maintain the image of being different, which should be supported by such characteristics as superiority, value and credibility, which after all define a premium brand.
  5. 5. ©2014, Corporate Excellence - Centre for Reputation Leadership A foundation established by major companies aiming to excel in the management of intangible assets and to facilitate promotion of strong brands with a good reputation and a capacity to compete in the global markets. Our objective is to become a driving force, which will lead and consolidate professional reputation management as a strategic asset, fundamental to building value of companies around the world. Disclaimer This document is the property of Corporate Excellence - Centre for Reputation Leadership, developed with the object of sharing business knowledge about management of reputation, brand, communication, metrics and public affairs. Corporate Excellence - Centre for Reputation Leadership is the owner of all rights in the intellectual property relating to images, texts, drawings or any other content or elements of this product. Corporate Excellence - Centre for Reputation Leadership is the holder of all necessary permissions for the use of the document and therefore any reproduction, distribution, publishing or modification of the document without its express permission is prohibited. Leading by reputation

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