Faculty & Research
Faculty & Research
Three golden rules of brand management: Differentiation, innovation and communications
By Dominque Turpin
Recently, a number of marketers and academics have expressed concern that brands are increasingly losing their appeal and that consumers are becoming less and less brand loyal. Havas, a European international communications agency recently reported that:
- 81% of consumers would not care if 74% of brands disappeared from their lives
- 75% of consumers expect brands to make a significant contribution to their lives
- 40% of consumers believe that brands are making a significant contribution to their lives
- 60% of all content created by brands is poor, irrelevant or is not delivered
I don’t share this feeling of pessimism. I believe that today brands are more important than ever. Building a brand is about building trust with customers and this trust is more critical than ever as the world becomes more and more complex and uncertain.
One reason why customers and consumers may be less loyal to brands is that they don’t see much value in what certain companies have to offer, simply because some companies have become complacent, or because they have decided to cut their communications and innovation budgets or to compete on price with less and less differentiated products.
When brand cuts its budget, the impact on its reputation – in the short term – may be limited. However, if this behavior becomes a habit, then the consequences can be dramatic – since continuous investment in marketing communications and innovation are crucial to keeping brands alive.
This pattern is classic: Executives start cutting budgets to improve their bottom line and the overall business performance. As a result, financial performance improves, they often get promoted and leave the problem of declining brand reputation and declining market share to their successor. Then, they often repeat the same behavior in their next job.
One of the golden rules for building and growing brands is first to offer a differentiated and meaningful value proposition. In other words, branding is putting the brand in consumers’ minds with its point of differentiation. If I take the example of CEIBS, we are the only business school in the world that has “China Depth” and “Global Breath.”
A meaningful differentiation is the essence and the mission of marketing itself. If Chinese brands want to grow at home and internationally, the starting point is to create different and meaningful value. Different is key – because if you are just like the others, why should customers buy your product?
But being different for the sake of being different is no good. You need to be meaningful – which means that you bring value to the customer by solving their problem (or what I personally call “a customer headache”). You create value for customers by making their life easier, better, cheaper – not more difficult.
This is the reason why many marketers are not asking anymore what customers need and want – customers today typically don’t know what they want or need. Remember that nobody wrote an email to Steve Jobs to say, “I need an iPhone.” But Steve Jobs solved a huge headache; specifically, how to carry a telephone, a timepiece, a camera, games, thousands of songs and much more all on a device I can carry in my pocket (the iPhone!).
Building a differentiated and meaningful value proposition is the first step. If you don’t do that, you risk commoditizing your products and services. When customers do not see any clear differentiation or meaningful value in what you have to offer, price becomes the determining factor for the consumer to buy (or not buy) your product or service.
Price should be the reflection of the perceived value of your products and services in the eyes of consumers (and not the main factor of their purchasing decision). Ideally, branding is not about getting your prospects to prefer you over your competitors – it’s about getting your customers to see you as the only solution to their problems.
The second step is innovation (i.e. broad innovation, not just products). Innovative brands like Huawei, BYD, Rolex or LEGO are thriving — while complacent brands are tempted to save money by cutting their marketing and R&D budgets. As Konosuke Matsushita, the founder of Panasonic, used to say, “In good times, you need to communicate and innovate; in bad times, you must communicate and innovate.”
I know that for some people this is quite counterintuitive, but I believe that Matsushita was right: Communications and innovation on all fronts is critical if you want to maintain brand visibility and brand attraction. And innovation is not just about products; innovation must be at the forefront of everything we do (e.g. communications, distribution, processes, business models, etc.).
The most successful disruptors today are not just innovating on products, they are innovating on every aspect of their business model. They outsource production, they build digital platforms and they cut intermediaries and go direct to customers. In other words, they totally rethink the business system by reducing all the pain points that their customers faced with old business models. Just think, for example, how Didi has displaced the old-fashioned taxi business.
Innovation is the second pillar of brand growth. The main challenge that many companies today have in marketing is a lack of imagination. If you think that sugar, electricity and oil are commodities, you are wrong. Moreover, there are many examples of so-called commodity categories in which creativity has make brands stronger: In Germany, for example, you can buy non-nuclear-produced electricity. Japanese companies are masters at creating sugar in all kinds of shapes and colors. The French are great at branding water with bubbles (Perrier) or without bubbles (Evian).
As another example, take Shell, the energy company. In Switzerland, when 95% of motorists stop at a gas station they buy the cheapest gasoline. However, 95% is not 100% and 5% of Swiss drivers buy V Power, a gasoline developed by Shell together with Ferrari. It is 10% more expensive than regular gasoline. It’s only 5% of the total volume of gasoline that Shell sells in Switzerland but this 5% represents 15% of their total profits. But in order to convince customers to buy V Power, Shell had to create a beautiful and credible story: namely, that they worked with Ferrari to develop gasoline that is good for your engine!
This leads me to my third point: the importance of consistent and credible communications. Storytelling is very critical in building a brand because the difference between a product and a brand is that a product is functional while a brand is both functional and emotional. In fact, the more emotions you build into the consumer’s mind, the more iconic your brand will be.
The Swiss, for example, make great luxury watches. But, why do people still buy watches when the time is more accurate on your mobile phone? Because when you buy a Rolex, a Patek Philippe, an AP, an Hublot or an Omega watch, you are buying more than a timepiece — you are buying prestige, status, and the image of being a connoisseur!
Now, one of the biggest traps in communications is changing your message too often. This is another mistake that many marketers make because they often get tired of their own message faster than their customers. Here is a bit of a paradox, I said earlier than you need to innovate – yes, you need innovate. However, when it comes to communications, you need to be both innovative and consistent.
A good example of this is Singapore Airlines. Singapore Airlines has used the Singapore Girl as a key element of its communications for years. How many years? Well over 50 years. If I showed you pictures of the Singapore Girl from 1972, 1982, 1992, 2002, 2012, 2022, I would challenge you to give me the exact year when each of the pictures was taken.
To conclude, I believe that branding is the ultimate form of differentiation. It’s no longer just about quality or service. In the past, in many industries, differentiation was all about quality, but today consumers take quality for granted. People are ready to buy products at low prices often because they believe that the quality of most products is good enough.
Ultimately, in order to grow and/or nurture brands (whether local, national or global) three rules must be applied:
- Create a differentiated and meaning value proposition
- Communicate extensively and credibly
- Innovate on every possible dimension
Dominique Turpin is the President (European) and a Professor of Marketing at CEIBS. For more on his teaching and research interests, please visit his faculty profile here.