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A Little
Resistance Goes a Long Way
By Michael Alan Hamlin
August 12, 2002
How can a brand name be worth as
much as US$70 billion? Most branding experts agree that there are
at least five reasons why brands have value. The first has to do
with brand loyalty. Strategic branding programs are always ultimately
intended to make profitable customers loyal customers. Aside from
the obvious benefit of loyal, profitable customers and their direct
impact on the bottom line, it costs less to market to loyal customers
than it does to recruit new customers. So resources are conserved.
Other standout benefits of customer
loyalty include an enhanced capacity to attract new customers and
breathing room to respond to competitive threats. All customers
want the assurance that when they make an investment, it's a wise
investment. A strong corporate brand exudes success, strongly suggesting
that the company has many satisfied customers. And that's reassuring
to prospects.
A strong corporate brand can temporarily
insulate a company from base erosion because like any relationship
breakup, there are many hurdles customers must leap over to "divorce"
a long-standing trading partner. First, there is comfort in familiarity.
It's troublesome and often irritating to establish new relationships,
and going through the process of learning how another partner does
business.
Second, consider the relationship
that exists between a small- or medium-size company and the manager
of the bank branch where it does business. The manager understands
the business, and the regular requirements of the business for operating
capital. The company and the branch manager, if they have worked
together for very long, probably have a regular routine that make
doing business together painless and quick. It takes a lot for the
customer to give up that relationship.
Other benefits of a strong brand,
according to Building Strong Brands author David A. Aaker, include
brand awareness, perceived quality, brand associations, and other
proprietary brand assets, or, for instance, the perception of innovation
and leading-edge technology. Or it could be an easily-recognizable
symbol that aids brand recall. Like brand loyalty, each of these
benefits provide compelling reasons for customers to patronize brand
leaders.
But if brands can be so powerful,
or worth so much, why do so many organizations resist investment
in strategic branding programs? Why don't more chief executives
become brand champions, considering the strategic importance of
brands?
Aaker provides at least eight reasons.
First, in response to competition, companies frequently have no
alternative but to lower prices, especially when they haven't invested
in the development of a strong brand that provides some breathing
room to think about a more strategic and sustainable response. But
when companies race to thin their margins, there's very little energy,
and no money, left over to invest in brand building. In these cases,
the chance to build a strong brand may have passed the company by
forever.
The second reason companies fail
to prioritize strategic branding may have to do with the sheer volume
of competitors, which rapidly commoditizes products and services.
Lower barriers to entry in a sector also contribute to intense margin-based
competition. There are so many competitive threats to respond to
that the organization doesn't have the time or the resources to
invest in strategic brand building.
A third reason is fragmenting markets
and media. With so much focus on relatively small market segments
at the same time that communication channels are exploding, brand
managers throw their hands up in despair trying to figure out where
scarce resources can be applied effectively to get the message of
the brand across to prospective customers. As a result, they do
nothing.
On the other hand, very complex brand
strategies also inhibit a company's capacity to effectively implement
a strategic branding program. Strong brands are simple to understand.
Take GE. Its slogan, "We make good things for life." is
simple and easy to understand. And it applies to every product and
service this huge, mostly magnificent company offers.
Often, strong brands can't be built
because brand champions can't let go of their pet strategy, even
when it's clearly not working. Another type of bias is the bias
against innovation, or doing things differently. Although we hear
all the time that among a company's most valuable asset is its propensity
for innovation, it is still monumentally difficult to get people
to let go of tired ideas, stereotypes, and practices. While it's
every brand champion's dream to develop an enduring brand, no amount
of persistence or patience will ever make a bad brand strategy work.
A seventh reason companies often
neglect building a strong brand is competition within the organization
for scarce resources. This is particularly true in technology-based
organizations with a strong engineering and research and development
tradition. Opposing mindsets develop between scientists and marketers,
with scientists passionately arguing that the company won't succeed
unless it spends all its money on R&D and marketers arguing
that the best products in the world won't sell if no one knows about
them.
Finally, other short-term pressures
such as capital investment, the need to hire more, and more expensive,
people, or a downturn in the market make strategic brand building
a third, fourth, or fifth priority. Yet giving up on strategic branding
building is essentially giving up on the business strategy itself,
because the two can't be separated. If a company isn't managing
its brand, it's not in control. Not of its future, not of the industry,
and not of the market.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001). He can be reached
at mahamlin@teamasia.com.ph.).
Copyright © 2002 Michael Alan
Hamlin. All Rights Reserved.
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