A marketing publication emailed me an excellent set of questions about branding prior to a speaking engagement in Croatia. Here are the interesting questions about everything from profitability to social engagement and my responses:
A lot of authors who are researching brands seem to think that brand is not a physical category, that it is not a product, but something that goes beyond the product in sense that a brand is actually a metaphysical category in a way. Do you share that thought, and what is a brand to you and how would you explain it to someone who knows nothing about branding?
The first issue is to define a brand: “A brand is a long-term profitable bond between an offering and a customer. This relationship is based on economic, emotional and/or experiential value, backed by everyday operational excellence & consistently measured for accountability, usually by customer profitability.”
This definition has several key concepts. One is profitability. For businesses, the only purpose to branding is to increase profitability. It is not to generate great creative or catchy taglines or win awards. If any branding tactic does not contribute to greater profitability, don't do it.
Brands require a relationship. Anyone can sell a product once. But what is required for profitability is repeat sales. It is only after those repeat sales that a brand relationship is formed.
The next key component of value. Value can be related to price, an experience or a feeling, but no one buys anything unless value is seen.
Everyday operational excellence is the ability to consistently fulfill a brand promise. Without the ability to ship on time, ensure quality and provide service, no brand can succeed. In many ways, the "organization is the brand."
Finally, measurement is key. Measurement enables benchmarks, which in turn ensures accountability. Measurement let you know what is working in terms of ROI, and what isn't. Measurement ensures better decision-making. Without data, you are just guessing.
You are also, among other things, a brand metrics expert. How do you “measure” a brand? That is, how can we measure things like the awareness of the brand, loyalty, experience, emotions, reputation etc.?
The most important measurement of a brand is profitability. If it is not making money, any brand will fade away. The second measurement is customer profitability. Everyone knows that 20% of customers generate 80% of the profits. But what a lot don't know is that 15% of customers are unprofitable – they cost more in service and other demands than they generate. The final key measurements are operational – on-time deliveries, customer service responsiveness, quality (mean time between failures, etc.) etc.
In your book, FusionBranding, you claim that the idea that brands can dictate the consumers behaviour is absolute rubbish. You also claim that if it would be that simple, the companies would not make mistakes, and you are corroborating your claim with the information that 90% of new products don’t succeed to become a strong brand while they are, on the other side, spending billions of dollars on advertising. If brands are not affecting the behaviour of the consumers, what does?
Well, what I said was that companies cannot dictate consumer behaviour. They may make consumers aware of the brand, but ultimately it is the consumer who makes the decision to buy or not. Two factors drive consumer choice: word-of-mouth and operational excellence. Every research study underscores the point that word-of-mouth is by far the most powerful force in driving or discouraging sales. If your best friend says a particular brand is always in the repair shop, are you going to buy it, no matter what the company says about it? Operational excellence is absolutely critical, especially for those selling to other businesses. It makes no difference, for example, how cheap or pretty or how well advertised an offering is, if the product is not delivered when you need it. Even for consumers, operational excellence is key. How do you feel when you go into a retail store and can't find a service clerk?
Your most recent book “Profitbrand: How to Increase the Profitability, Accountability and Sustainability of Brands” was endorsed by brand gurus Don Schultz, Philip Kotler, George Stalk… and other leading authorities from business and branding fields of work. Could you give us a short resume of the book?
A lot of branding books are based on the theories of a faded, mass-economy era – "brand personality," "brand equity," and "positioning." Worst of all, many fail to mention the word "profit," which is the whole point of branding. This book outlines the specific, actionable and measurable steps to achieve a profitable brand in an era of peer-to-peer branding. This is why it was named as a "Best Business Book" – not marketing book – by the international consultancy Booz Allen.
Which kinds of digital branding do you consider to have a crucial relevance in the year 2008? Do you think it will be social networking, podcast, RSS Feded or something else?
The first is Web 2.0 tools that are applied to specific industries. While Web 2.0 mainly deals with technical issues, in 2008 we will be moving to "Retail 2.0," "Manufacturing 2.0," "Tourism 2.0." Looking ahead, companies will start establishing "XYZ 2.0," "Croatia 2.0," which will be based on the communities of interest – not segments – that are important to XYZ Company or Croatia.
In which direction will branding develop in the future?
The first trend, which is already in place, is the demand for accountability, which requires measurement. Marketing measurement has long been notoriously difficult, but great strides in quantification have been made over the past few years. Targeting and segmentation will continue to be important, but will evolve to incorporate communities of interest. The difference between segments and communities of interest is that companies define segments – "all women over 40," "golfers who play three times a month," etc. Communities of interest are consumers defining themselves in terms of their interest and passions – divers, bargain-hunters, eBay enthusiasts, etc.
What role in it do consumers have, and what is your view on integrating brand management and customer management, that is, how should the companies integrate those two views on business in order to have satisfied consumers through strong and big brands?
Without customers, you have no brand. As a result, I discourage companies from focusing too heavily on brand management because it generally revolves around products and issues important to the company, which may not necessarily be important to customers. If it is not important to customers, or provide them value, why do you want to do it? Customer management incorporates a lot of issues, but the most important is profitability. As noted above, 15% of customers are unprofitable. Why do you want to sell to an unprofitable customer? With customer management, you look at ways to decrease costs or increase the profitability of customers or customer segments. If they continue to be unprofitable, you recommend the competition to them.
What is the significance of executing brand strategies and creating of a consistent brand communication through all communication channels with consumers?
Two words sum up all branding tactics: consistency and engagement. Every media release or ad needs to have the same messages. Every communications material needs to have the same look-and-feel.
What do you think of the emotional branding concept and do you think that a company should be more focused on creating emotional connection between its brands and the consumers or on achieving maximal ROI on its brands?
This question assumes that all customers are created equal. They are not. Some customers are loyal and buy a lot over time. Others buy just on price and will desert you in a second for a lower price down the street. Obviously, the way to maximize ROI on brands is to focus on the profitable customers and deliver economic, experiential AND emotional value.
Recently, the social networks phenomenon became really relevant. A lot of administrators are creating only platforms that offer the consumers (usually for free) a space to fill with their own content. The notable fact about those social networks is that they lack firm economic models. How do you predict further development of user generated media?
They may lack an economic model for Web sites that interconnect surfers, but they are a branding tool much more powerful than, say, mass-media advertising (which, in the vast majority of cases, only returns about 71 cents of every dollar spent, which means that it too lacks an economic model!). For example, one study estimated that 80% of the users on Facebook discussed a particular brand. What companies need to do is to use the communities of interest that make up social network, and provide the tools and links for user generated media. Worried about negative commentary? Always a risk, but what better incentive to provide economic, emotional and experiential value to customers?
Names, signs, symbols and association are adjusting themselves to specific cultural features and values. What are, according to you, the advantages and disadvantages of global brands?
The globalization vs. localization of brands debate has been going on for quite some time. The pendulum swings from one to another because both have advantages and disadvantages. However, most companies today are moving toward localization. Localization makes it easier to establish a relationship with customers, plus gain a deeper understanding of local supply chains, media markets, etc. We may all think we are global citizens because we listen to the same music and go to the same Hollywood blockbusters, but deep down we are still Croatians or French or Russians.
European Commission recently developed an initiative to loosen the legal regulation regarding the oblique advertising in the media, and it should be (for now) restricted to movies and sport. But where is the limit? The problem of oblique advertising is present in Croatian media too and there are intensive discussions about it. How to preserve journalism from marketing interference if todays media are living on selling advertisements, and not on the number of sold copies?
In a distant, faraway time, I was a journalist, so this is a subject near and dear to my heart. The issue of advertising influenced content is also tied up with the issue of education vs. entertainment. How far do you go in educating people about, for example, government inefficiency when the public really wants to be entertained with stories about Paris Hilton? The public also likes to read about marketing-related issues – just look at all the articles discussing make-up in women's magazines. Definitely no easy answers, but some key steps include establishing strong walls between advertising and editorial, ensuring editorial fact-checking, and working to ensure that journalists have ethics.
Recently Croatia held parliamentary elections. What is your view on political parties in context of their “branding war” for the votes?
People get emotional about two things: Sports and politics. Sports teams like Manchester United have done a masterful job of connecting with their supporters worldwide (what other English product from a small town has done that?) through amazingly good marketing, merchandising and ensuring that their teams reflect their audience. You'll see politicians moving to this "Manchester United" model to connect with their audiences more effectively. What I find a much more interesting issue regarding politics is when do governments start using the Internet effectively? Governments were the first to use radio and television, but as yet have not really started leveraging the Internet other than for information delivery.
Great number of brands are directly associating with the manufacturer's country, building the image of that country on it. What is the way for Croatia, as a small country, to brand itself on the global market? Or, what is the first thing you think of when Croatia is mentioned?
Another timely issue, since I am in the middle of a three-year branding initiative for Malaysia, a country of about 25 million in southeast Asia. The hardest part of this initiative is that everyone is looking for a single image, word or tagline to brand the country overnight. Unfortunately, there is no such silver bullet. On average, it takes 20 years to brand a country, and it involves activities in public diplomacy, trade, education, culture and other areas. No ad campaign is going to brand a country. Another important area is how Croatians act overseas, because 70% of brand perception is formed by personal interaction. So, my advice for branding Croatia is to think long-term, strongly encourage tourism among segments who are most likely to be "influentials," (golfers, yachting, etc.), and work especially hard to ensure that Croatian businesses become valued supply chain partners. This will be my first trip to Croatia, and right now my dominant image is lots of beaches and islands, and a good place to take a summer holiday. Undoubtedly, however, there is a lot more to Croatia, and I'm looking forward to learning more about the country.
