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Building Strong Brands

SUNARTO PRAYITNO
Introduction 2

 It is not easy to build brand in today’s environment.

 The brand builder who attempts to develop a strong brand is like a golfer playing
on course with heavy roughs, deep sandtraps, sharp doglegs, and vast water
barriers. It is difficult to score well in such condition.
 The brand builder can be inhibited by substantial pressures and barriers, both
internal and external.
 To be able to develop effective brand strategies, it is useful to understand these
pressures and barriers.
Introduction 3

 Toward that end, eight different factors (Figure 7-1) that make it difficult to build
brands will be discussed.
 The first, pressure to compete on price, directly affects the motivation to build
brands.
 The second reason, the proliferation of competitors, reduces the positioning
options available and makes implementation less effective.
 The third and fourth reasons, the fragmentation in media and markets and the
involvement of multiple brands and products, describe the context of building
brands today, a context that involves a growing level of complexity.
Introduction 4

 The remaining reasons reflect internal pressures that inhibit brand building.
 The fifth reason, the temptation to change a sound brand strategy, is particularly
insidious because it is the management equivalent of shooting yourself in the
food.
 The sixth and seventh reasons, the organizational bias against innovation and the
pressure to invest elsewhere, are special problems facing strong brands.
 They can be caused by arrogance but are more often caused by complacency
coupled with pride and/or greed.
 The final reason, is the pressure for short-term results that pervades organization.
Introduction 5

 The irony is that many of the formidable problems facing brand builders today are
caused by internal forces and biases that are under the control of the organization.
 The fact that many brands fail to reach their potential or maintain their equity is
nether surprising nor puzzling when the various pressures against building strong
bands are examined.
 The real curiosity may be that strong brands exist at all in the face of these
pressures.
The Pressures to Build Brands 6
The Pressures to Build Brands 7

1. Pressure to Compete on Price

2. Proliferation of Competitors
3. Fragmenting Markets and Media
4. Complex Brand Strategies and Relationships
5. Bias Toward Changing Strategies
6. Bias Against Innovation
7. Pressure to Invest Elsewhere: The Sins of Complacency and Greed
8. Short-Term Pressures
1. Pressure to Compete on Price 8

 There are enormous pressures on nearly all firms to engage in price competition.
 In industry after industry – from computers to cars to frozen dinners to airlines to
soft drinks – the picture in today’s market is the same: Price competition is at
center stage, driven by the power of strong retailers, value-sensitive customers,
reduce category growth, and overcapacity.
 Often caused by new entrants and by old competitors hanging on, sometimes by
bankruptcy.
1. Pressure to Compete on Price 9

 These market realities imply that the key success factor is low cost.
 Organizations must reduce overhead, trim staff, downsize, and cut all unnecessary
expenditures.
 What, the, happens to the people who support the brand with market research or
other brand-building activities?
 There are vulnerable to the organization’s new cost culture.
 Also vulnerable are investments in brand equity, which come out of precious
margin dollars.
2. Proliferation of Competitors 10

 New, vigorous competitors come from a variety of sources.

 A host of food categories have watched Weight Watchers and Healthy Choice
enter their markets through brand extension strategies.
 In the snack category, Frito-Lay has seen regional brands expand and Budweiser’s
Eagle brand break out of its niche to become a major competitor.
 The soft drink market has been encroached on by new product forms that provide
real alternatives for the customer: bottled water, carbonated water, fruit-based
drinks, and “new age” drinks, among others.
2. Proliferation of Competitors 11

 Additional competitors not only contribute to price pressure and brand

complexity, but also make it much harder to gain and hold a position.
 They leave fewer holes in the market to exploit and fewer implementation
vehicles to own.
 Each brand tends to be positioned more narrowly, the target markets become
smaller, and the non-target market becomes larger.
 Efforts to market to a brand segment thus become more difficult in the face of the
complex “brand-scape”.
2. Proliferation of Competitors 12

 Further, some new or desperate competitors may be motivated to take risks or

attempt unusual approaches.
 The result can be destabilization of the competitive dynamics.
 There is also an enhanced motivation to copy anything that is successful, in part
because the risks of copying are offset by the difficulty of coming up with brilliant
new alternatives.
3. Fragmenting Market and Media 13

 At one time, being consistent across media and markets was easy.
 There were limited number of media options and only a few national media
vehicles.
 Mass markets were the norm, and micro-segmentation did not exist.
 Brand managers now face a very different environment, one in which it is difficult
to achieve the consistency that is needed to build and maintain strong brands.
3. Fragmenting Market and Media 14

 Coordination is all the more difficult because different brand-support activities are
often handled by different organizations and individual with varying perspectives
and goals.
 When advertising, public relations, event sponsorship, promotions, trade shows,
event stores, direct marketing, package design, corporate identity, and direct mail
for a single brand are handled by separate organization, each with direct influence
on the brand – and even worse, when the firm’s internal organization mirrors this
diversity in order to interface with these various players – conflict and lack of
coordination must be anticipated.
3. Fragmenting Market and Media 15

 In addition, companies are dividing the population into smaller and more refined
target markets, often reaching them with specialized media and distribution
channels.
 It is temptating to develop different brand identities for some or all of these new
target segments.
 Developing and managing multiple identities for the same brand, however,
presents problems for both the brand and the customer.
 Since media audiences invariability overlap, customers are likely to be exposed to
more than one identity relating to the same brand.
4. Complex Brand Strategies and 16

Relationships
 There was a time, not too long ago, when a brand was clear, singular entity. For
example, some brands were brand name that simply needed to be defined,
established, and tortured.
 Today, the situation is far different. There are sub-brands (such as Kraft Free
Single) and brand extensions (such as Kraft Miracle Whip).
 There are ingredient brands, endorser brand, and corporate brands.
 The Coke logo can be found on a dozen products, including Diet Cherry Coke,
Caffeine Free Diet Coke, and Coke Classic – and it doesn’t stop there.
4. Complex Brand Strategies and 17

Relationships
 In the grocery store, Coke is a product brand, at sporting event, it is a sponsoring;
and in communities where its bottling plants operate, Coke is corporate brand.
 This complexity makes building and managing brands difficult.
 In addition to knowing its identity, each brand needs to understand its role in each
context in which it is involved.
 Further, the relationships between brands must be clarified both strategically and
with respect to customer perceptions.
4. Complex Brand Strategies and 18

Relationships
 Why is the brand complexity emerging?
 The market fragmentation and brand proliferation mention about have occurred
because a new market or product often leads to a new brand or sub-brand.
 Another driving force is cost: There is a tendency to use established brands in
different contexts and role because establishing a totally new brand is now so
expensive.
 The resulting new levels of complexity often are not anticipated or even
acknowledged until there is a substantial problem.
5. Bias Toward Changing Strategies 19

 There are sometimes overwhelming internal pressures to change a brand identity

and/or its execution while it is still effective, or even before it achieves its
potential.
 The resulting changes can undercut brand equity or prevent it from being
established.
 Most strong brands, such as Marlboro and Volvo, have one characteristic in
common: Each developed a clear identity that when virtually unchanged for a
very long time.
 The norm is to change, however, and this powerful identity supported by clear
visual imagery never get developed.
6. Bias Against Innovation 20

 While there may be a bias toward changing a brand identity or its execution, a
psychic and capital investment in the status quo often prevents true innovation in
products or services.
 There is an incentive to keep the competitive battleground static; any change not
only would be costly and risky but could cause prior investment to have a much
reduced return (or even make it obsolete).
 The result is vulnerability to aggressive competitors that may come from outside
the industry with little to lose and none of the inhibitions with which industry
participants are burdened.
7. Pressure to Invest Elsewhere: The Sin 21

of Complacency and Greed

 A position of great brand strength is also a potential strategic problem, because it
attracts both complacency and greed.
 When a brand is strong, there is a temptation to reduce investment in the core
business area in order to improve short-term performance or to fund a new
business diversification.
 There is an often-mistaken belief that the brand will note be damaged by sharp
reductions in support, and that the other investment opportunities are more
attractive.
 Ironically, the diversification that attracts these resources is often flawed because
an acquired business was overvalued, or became the organization’s ability to
manage a different business area was overestimated.
8. Short-term Pressures 22

 Pressures for short-term results undermine investments in brands, especially in the

United States.
 There are several reasons why a short-term focus might persist among U.S.
executives.
 First, there is wide acceptance in the United State that maximization of
stakeholder value should be the overriding objective of the firm.
 This acceptance is coupled with a perception that shareholders are inordinately
influenced by quarterly earnings – partly because they lack the information and
insight to understand the firm’s strategies vision, and partly because they cannot
evaluate intangible assets.
 As a result, managers are motivated to make current performance look good.
8. Short-term Pressures 23

 Second, management style itself is dominated by a short-term orientation.

 Annual budgeting systems usually emphasize short-term sales, costs, and profits.
 As a result, brand-building programs are often sacrificed in order to meet these
targets.
 Planning is too often an exercise in spreadsheet manipulation of short-term
financial data rather than strategic thinking.
 In addition, became U.S. firms tend to rotate managers through the organization,
the long term becomes much less important than current results to career paths.
Managers feel pressure to perform – to “turn it around” quickly and visibly.
8. Short-term Pressures 24

 Third, a short-term focus is created by the performance measures available.

 Measurements of intangible assets such as brand equity, information technology,
or people are elusive at best.
 The long-term value of activities that will enhance or erode brand equity, for
example, is difficult to convincingly demonstrate, in part because the marketplace
is “noisy” and in part because experiments covering multiple years are very
expensive.
 In sharp contrast, short-term performance measurements are ever more refined,
timely, and detailed.
8. Short-term Pressures 25

 The net outcome is a sometimes debilitating bias toward short-term results.

 This bias translates into a need to demonstrate with hard sales, share, or cost
numbers that expenditures pay off.
 In that context, it become difficult to justify investments in intangible assets (like
brands, people, or information technology) which lack a demonstrable short-term
payoff.
 As a result, these investments are often forgone and the organization becomes
weak at the core, lacking such assets when they are needed.
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