Building Powerful Strategies that Strengthen Brand Equity
Creating the Preeminent Global Brand
By Ken Roberts, CEO & Chairman
And just as brand dominance sets one company apart from another in local markets, achieving the top position globally is becoming the ultimate competitive weapon for those that aim for global success.
Companies that aspire to having world brands are seeking to take advantage of a singularly under-leveraged asset, and the The age of the preeminent world brand is very much upon us, signalling the irrepressible growth of global markets. payoff can be extraordinary. In 1998, globally recognized brands accounted for eight of America's 10 most admired companies according to Fortune. The monetary value of Coca-Cola's brand has been estimated at $39 billion—more than twice the company's annual revenues.
But financial rewards are more a motive than an explanation for the sudden mushrooming of dominant global brands. The fact is, technological advances and political and economic trends are combining to create unprecedented opportunities to build world b rands. And big companies in industries ranging from financial services, health care and retail, to technology, transportation and energy are looking to capitalize on this new environment. Merrill Lynch, Novartis, McDonald's, Microsoft and Boeing come imme diately to mind. At the same time, smaller companies such as GAP, Starbucks and Armani that would once have been content to succeed as domestic brands, are now repositioning themselves as global icons.
What makes a strong brand so powerful?
Simply put, it carries enormous weight in the marketplace, standing for everything about a company and its products that is communicated by the company name and related identifiers. Whether you are Mercedes-Benz, Goldman Sachs or Hoechst, your brand ha s a direct influence over customers' decisions—it provides buyers with a short cut in processing the information involved in choosing a product or service. Norio Ohga, the chairman of Sony, put it well when he said, "Our biggest asset is four letter s: SONY."
[to top]
Defining the global brand
The core issues for any company looking to play the global stage are, how do you get there—and how do you stay in the limelight? Before tackling this subject, let us be specific about Brand equity is the total value of all qualities and attributes implied by the brand name that impact the choices customers make. what we mean by a global brand. Companies often confuse the strategy of "operating globally" with the concept of global brands. Indeed, says Robert L. Wehling, senior vice president, Advertising/Corporate Affairs & Government Relations for Procter &am p; Gamble, "Assuming adequate levels of capitalization, anyone can accomplish the former; achieving the latter means fashioning a brand that has a clear and consistent equity or identity with consumers across geographies. It is generally positioned the sa me from one country to another. It has essentially the same product formulation, delivers the same benefits and uses a consistent advertising concept. That isn't to say there isn't room for local tailoring. In fact, there must be room to adapt to local ne eds."
Taking on the challenges
Building and maintaining a truly global brand is not an easy proposition. There are a lot of smart, knowledgeable people around the world looking to identify the best opportunities to expand flagship products and services, and the competition is gettin g keener. Bombarded with a confusing array of competing offerings and marketing messages, consumers and business customers will come to rely even more on brands to guide their buying choices.
The flip side of brand potency is that penalties for weak brand management can be very steep, and well-established brands can be undermined—quickly. Remember the recent tribulations of IBM? And what about once hallowed, dominant airlines like Pan Am and TWA? The threats can come just as readily from within as from the marketplace. Think about the fatal damage done to globally ambitious financial organizations like Berings. Consider the growing number of Japanese banks whose global ambitions and i mage have been tarnished by fiscal improprieties and/or ethical scandals. All it takes to deflate a brand in today's hyper-linked global network is a single misstep.
The challenges extend beyond misguided policies and errant behavior. Global entrepreneurs must also contend with the fundamental reality that consumers tend to prefer domestic brands over foreign brands. Studies show that home-grown brands almost alway s get preference. In some of the biggest and richest markets—the U.S., Germany and Great Britain among them—the appeal of local brands is especially pronounced.
[to top]
However large these challenges may loom, they shrink beside the potential rewards of achieving global brand status. Given the mounting importance of branding, it is natural to assume that companies analyze and manage their brands every bit as rigorousl y as other major corporate assets—like finances, people and technology. That is not generally the case. Relatively few companies demonstrate a clear, consistent commitment to managing their brands.
Obviously, such a commitment is an essential building block for a preeminent global brand. From the most senior management through the ranks, there must be an understanding that brands matter and that building brands is a complicated task requiring cea seless vigilance, creativity and investment. For some marketing-driven organizations like Microsoft, Procter & Gamble and Disney, this comes naturally. Such organizations set the benchmark for global branding. But there are numerous multinational corp orations that are "flag planters"—whose global expansion has been predicated on maintaining decentralized operating units with independent branding objectives. And there are many companies that aspire to global success but lack the marketing disposi tion necessary to create global brands.
An integrated approach to branding
While there is no single mantra for global branding that can work for everyone, Lippincott has developed an approach that is providing different types of companies in different industries a highly effective framework for building powerf ul brand strategies.
Its foundation rests on an integrated approach to brand management in which an analysis of brand equity is directly linked to the key economic factors of price, market share and brand value. This approach provides information that is extremely benefici al in identifying targeted marketplace actions and strategies to improve brand equity and business performance.
Brand equity is the total value of all qualities and attributes implied by the brand name that impact the choices customers make. It translates into monetary terms a brand's power to convince a customer to buy the company's product. In other words, it represents the brand's ability to actually shift demand from one product to another. Figure 1 shows how higher brand equity can enhance competitiveness by providing significant price and market share advantages.
A compelling example of how a powerful brand can result in big price and market share advantages versus a weaker brand is illustrated here by comparing the divergent fortunes of the Toyota Corolla and the Geo Prizm. These cars have been manufactured th rough a joint venture between General Motors and Toyota since 1989. While the cars are virtually identical, Toyota sold more cars at a higher price between 1990 and 1994. This resulted in $108 million more in operating profits for Toyota, while its dealer s made $128 million more than those of GM. Why? Buyers believe a Toyota is superior to a GM car in the same class.
All brands have equity. The equity can be a positive or negative value, depending on whether it makes a customer more or less likely to buy, and the equity can range from strong to weak.
How do brands influence buying decisions? They act as "signals" to customers, conveying, often in a very complex way, what is commonly known as "brand image" information. For example, ABB, a global industrial brand, hypothetically might convey an image of "Swiss engineering," "global performance," "excellent technology," "excellent value," "trustworthiness" and so on.
[to top]Identifying brand equity and economic links
Using Strategic Choice Analysis®, a proprietary analytical model, we are able to recreate the decision the consumer makes when choosing among different product design or service options. This methodology clearly identifies the link between brand im age perceptions and economic factors such as price and features. The richness of the information that flows from this analysis enables us to quantify a client's brand equity at three levels, each of which can be the basis for recommending actions and stra tegies:
- Valuation—we measure the relative value of brand equity and existing product configurations for our client's company and its competitors. This analysis, typically provided on a segmented basis, permits a high-level view of competitive o pportunities and threats, and can immediately be put to work to manage the brand better.
- Equity element identification—brand equity is broken into key components that actually determine demand. The analysis reveals positive areas of the brand's image that could be exploited to greater advantage, as well as aspects of the br and that influence demand negatively and need to be addressed.
- Subgroup impacts—the diagnosis is taken down to the lowest useful level, describing the specific aspects of the brand's image that come together to form the equity elements. Improvements in each aspect have measurable impacts on market share. This level provides detailed information for use in marketing and promotional initiatives.
Figure 1 gives the results of a typical effort to value and separate brand equity into its constituent elements, in this case for a global financial services firm in one of its major markets. Figure 2 shows the results of repeating this analysis across three customer segments.
Figure 1: Pinning Down Brand Strategy For A Global Financial Institution (1) Here, we have quantified brand equity at three levels, each of which can be a basis for strategy. From the first level of analysis, it is clear that the brand 's equity generates more than $100 per customer. In fact, the brand is more valuable than the firm's product configuration, which represents a value of only $80 per customer.
The second level shows that three parts of the firm's image drive brand equity: customer orientation, upscale user identity and trustworthy products. The firm should exploit its positive image in customer orientation and trustworthy products, and fix t he negative impact of its upscale user identity.
In level three, specific information is shown about how the firm might exploit and correct its image. For example, its upscale user identity could be made into an asset by eliminating the perception of arrogance.
Figure 2: Pinning Down Brand Strategy For A Global Financial Institution (2) Here we repeat the brand analysis across each customer segment. Among existing customers, it is clear that the firm's reputation for quality is a significant asset, but that its arrogance is a large detractor. Among potential customers, the firm has a reputation for fixing problems fast and is appealing because of its strong connection with "sharp people." For distant prospects, the firm's perception as a slow innovator is a striking liability. Any attempt to expand the firm's appeal into other segments will have to take this negative perception into account.
[to top]
Maximizing brand equity
In our experience, describing a brand's value in terms of both its individual image and economic elements unlocks management insight and innovation in a way never before possible. It sheds light on previously unrecognized opportunities and approaches f or increasing revenues and building profitability. It permits the development of powerful global strategies for maximizing the value of a firm's brand equity and, in turn, diminishing the equity of its competitors' brands.
Global brand strategies generally reflect four essential goals:
- PROTECTING "core equity elements"—those that are driving market share.
- FIXING negative equity elements—which represent lost share.
- ATTACKING competitors' positive equity elements—that is, neutralizing their brand advantages.
- LEVERAGING competitors' negative equity elements—taking full advantage of their weaknesses.
These strategies need to address each equity element for each competitor and each customer segment. Management can choose from an array of actions to implement the strategies. The particular choice depends on which aspects of a consumer's perception ar e affected by the equity element in question. Does an equity element, for example, affect the consumer's perception of the product or service offering itself? If so, then the consumer's beliefs should be altered by new product advertising or changes in pr oduct design. Is the consumer's choice affected by perceptions of the company? If so, the consumer's view can be influenced through corporate communications and improvements in service and support. Consumers' feelings about themselves and other customers can be managed through image advertising or product repositioning.
The goal is to manipulate each of these levers in a systematic way that maximizes overall brand equity and generates the largest returns.
Brand management as a global competitive weapon
The age of the preeminent world brand is very much upon us, signaling the irrepressible growth of global markets. And just as brand dominance sets one company apart from another in local markets, achieving the top position globally is becoming the ulti mate competitive weapon for those that aspire to global success.
Achieving such a lofty position requires an unprecedented commitment from top management and a highly disciplined approach. Management's investment in building brand equity must be as unequivocal as for any other valued corporate asset. The disciplined approach that we have summarized here—integrating the analysis of a brand's image with economic measures—generates the information and allows the analysis that results in informed, effective decision making. The payoff can be a significant ed ge for companies aspiring to leadership in the age of the preeminent global brand.
[to top]This article was written with editorial and research support from Dr. Eric Almquist and Ian Turvill. Dr. Almquist is a Director and Vice President of Oliver Wyman and a Vice President in the firm's Strategic Capabilities Group. He s pecializes in marketing strategy, new product development and the management of customers as assets. Ian Turvill, an Associate in the Chicago office of Oliver Wyman, was named the George Hay Brown Marketing Scholar of the Year in 1997, rec ognizing him as the top MBA student in the U.S. with a concentration in Marketing.