“Brand Squeeze” – Protection and Exploitation of a Brand in Challenging Economic Times

“Brand Squeeze” – Protection and Exploitation of a Brand in Challenging Economic Times

October 8, 2015

by

Tom Blackett, Brand Advisor, Ex Vice Chairman, Interbrand

What is it all about?

Brand Management is very important in any business no matter what, so it’s necessary to identify some of the keys to successful brand management in difficult times, and how one can keep their brands in good shape.

Firstly, it’s important to look at the international scene and seeing how the world’s leading brands have fared in the post-Lehman years. After that, we will look at how the brands in UK have dealt with particular challenges. And lastly I will offer my ‘top tips’ for successful brand management.

What is happening to all the Leading Brands?

ID-100246533Each year, the brand consultancy ‘Interbrand’ publishes its ranking of the world’s leading brands and the results appear in the famous ‘Business Week’ magazine. The rankings are based on the financial valueof each of the leading hundred brands.

In 2007, before the Lehman brothers went out of business, the cumulative value of the world’s top ten brands was approximately US$411bn. In 2011, the value was $461bn, an increase of 12%.

Over the same period – 2007 to 2011 – GDP per person in the major western economies fell: by 3.5% in the US, 5% in the UK, 2.5% in France, and 6.5% in Italy. Only Germany grew, by 2%.

The big gains came from the BRIC countries. China grew by 35%, India by 22%, Indonesia by 16.5%, and Brazil by 10%. Russia grew by 2%.

So one can conclude from this that the performances of the top ten brands were sustained by an increasing demand in the BRIC countries. But there’s been a significant shift in the value of the leading technology brands and the Western markets are still amongst the leading early adopters. The consumers in the West may be cash-strapped, but technology exerts a powerful hold on the public imagination and people have been prepared to juggle their priorities, putting the latest iPhone or iPad ahead of other purchases.

The top 10 brands of the world in 2011 were:
1. Coca-Cola
2. IBM
3. Microsoft
4. GOOGLE
5. General Electronics
6. McDonald’s
7. Intel
8. Apple
9. Disney
10. Hewlett- Packard

Coca-Cola is at the top of the list, and it has been there since these rankings began. Coke is valued at $72 billion; the stock market value of the company is $160 billion. Thus, roughly 45% of the value of the business is down to the Coke brand – and without the Coke brand the company would be reduced to a global bottling and distribution business.

The biggest movers and shakers in the top ten were Google, which was outside the top ten in 2007 and is now at number four, and fellow newcomers Apple and Hewlett Packard. Microsoft, IBM, Intel and McDonald’s all posted decent improvements in value.

However, Nokia, Toyota and Mercedes fell out of the top ten, and the value of GE took a bit of a hammering.

What do we learn from all this? Well, all the brands here are global, so the risk these businesses bear couldn’t be more widely spread. Google and Apple are ‘hot’ brands: Google is the search engine of choice; Apple has a fabulous record of innovation. Both ride the zeitgeist, together with Microsoft. HP’s business is now more focused and it has solid technology and great distribution.

IBM, Intel and McDonald’s, consolidated their positions. IBM has a terrific reputation for technology consulting, underpinned by a valuable portfolio of patents; Intel retains its status as the world’s number one electronic-chip maker; and McDonald’s has successfully overhauled its product and marketing strategy.

Nokia, on the other hand, has suffered through its leaden-footed approach to innovation – particularly of a ‘smart phone’; Toyota has been beset by product recalls;and Mercedes seems to have lost out to BMW in emerging markets.

So we can see that, technology brands are rampant – and likely to remain so. But brands like Coca-Cola, McDonald’s and Disney are immensely strong, due to their adherence to marketing fundamentals: products tailored to consumer tastes, universal availability and powerful symbolism – all these brands stand for something that resonates deeply with consumers.

So, a mixture of innovation and very good marketing drives the success of these global brands.

What challenges of brand management are the brands in UK facing?

The ‘Known-Knowns’

The first known-known is pressure on margins and the influence of the retail trade. Even the market leader of retailers: Tesco is suffering for this, which goes to show that the pressure on margins will head in to the foreseeable future.

The second known-known is that there are simply too many brands in the market. If we take an extreme example, there are over 2,000 brands of beer available in UK. Now this makes the UK a beer drinker’s paradise and a retailer’s dream; but it’s bit tough for the brewers to create a national brand! The vast majority of these brands sell on a regional basis and only a few have national distribution. Very few can afford to advertise extensively – or at all – because the cost of doing so is prohibitive. And as long as this situation continues, we will never see a British beer brand with a truly international presence.

This leads me to what many people see as the central known-known, justifying marketing expenditure. Advertising is the oxygen of brands, but it’s expensive. How can one make the case for setting aside at least 5% of a brand’s revenues for marketing support – much of which could be gobbled up by advertising? However, the long-term effect of reducing marketing support is less easy to quantify and can fatally weaken brands. If one stops talking to consumers in fiercely competitive markets, consumers will defect to those brands that do – unless you present them with a particularly compelling reason to remain loyal.

Then there’s the challenge of the digital marketplace’ and social media.

The Known-Unknowns

Counterfeiting and patent infringement is the most insidious form of copying and a scary known-unknown. It’s estimated that the trade in fake goods in the UK is worth at least £10billion per annum. The most commonly counterfeited goods include: designer label clothes; watches; perfume and cosmetics; alcohol; cigarettes; CDs and DVDs; video and audiotapes; computer games; vehicle parts; DIY tools; and pharmaceutical product. Intellectual property abuse arises because counterfeited branded goods violate the trademarks of other companies. On the other hand, counterfeited media -such as music, films and computer games – represents copyright theft. The two types of crime can often overlap where both trademarks and copyright are involved in a counterfeited product, like in the case of computer software. The interesting thing is, even when a product doesn’t have a registered trademark, if it’s copied, the genuine manufacturer may still have a claim against the counterfeiter for ‘passing off’ their copies.

A colorful example of the impact of counterfeiting is the counterfeiting of the wine Chateau Lafite. The ‘wine’ looks like the real thing but is made of some nasty chemicals and doesn’t even contain any real grapes; it costs just over one US dollar to make and had been selling for $158 a bottle.  This revelation has had the effect of driving down the price of authentic Chateau Lafite by 45% in 2011, and the maker is now faced with the task of re-building consumer confidence in its famous brand in China.

The Internet has been a real boon to counterfeiters, mainly because intellectual property law has failed to respond to the challenges posed by the Internet. A couple of years ago the patent and trade mark firm Marks & Clerk ran a survey with 266 UK business executives responsible for brand ownership. They said that while the digital age has brought tremendous opportunity for brand promotion, intellectual property abuses and threats to brand integrity are now more numerous and difficult to protect against. This calls for an imposition of tougher conditions and penalties on platforms such as eBayto combat counterfeiting.

But what of patents? 
Many small businesses feel that the cost of defending their patent rights is just not practical. Inventors now say that patents are expensive, distracting and time-consuming to get in the first place, and then one needs 10 times the money to defend them. But, on the other hand, the World Intellectual Property Organization says that patent applications in 2011 were up by nearly 11% – driven by China, Japan and the US. These seem to be by big companies – with lots of financial muscle. So the question is: do we now have one law for the rich and another for the ‘not so rich’?

Well, those who think that buying a fake Rolex is a bit of harmless fun should be aware that IP theftcan be a very dirty business.  IP theft is often linked to other forms of criminality – chiefly benefit fraud, money laundering and drug crime, with a little prostitution thrown in for good measure.

Finally, a very big and scary “known unknown” – the decision by the Australian parliament to outlaw branded cigarette packs, requiring manufacturers to feature only a gruesome picture of a diseased lung together with the brand name, on pack. In defense of branded cigarettes, The British Brands Group argues that branding works to the benefit of the consumer in helping to distinguish between products. It ensures that companies maintain quality and comply with regulation. Removing the ability to differentiate could result in loss of choice and more mistaken purchases, because sales staff will find it more difficult to distinguish one product from another. Also, there’s the risk of increased counterfeiting, as the knock-off merchants have only to replicate one simple design putting the consumers at risk of low quality, even dangerous, ingredients.

ID-10074110What are the ‘top tips’ for successful brand management?

  1. Understand the financial value of your brand
    Ensure that management reporting and accounting systems are constructed on a brand-by-brand basis. One must know their true brand profitability because, “what gets counted gets done”.
  1. Manage your brands conservatively
    Brand building is a long-term process. One must resist the temptation to fiddle with the brand’s formula, market positioning, and advertising or ‘personality’ unless research says that change is imperative. Consumers don’t like ‘change for change’s sake’.
  1. Maintain responsibility for your brands
    Your brands are your responsibility; don’t surrender this to an advertising agency, overseas distributor, joint venture partner, or external licensee.
  1. Maintain a point of difference
    Consumers have loads of brands from which to choose and most of these have similar functional values of quality, efficacy and reliability, what differentiates brands are emotional values that underline the brand’s personality.
  1. Support your brands
    Keep the message fresh, relevant – and honest. Remember the power of ‘word of mouth’, which is amplified hugely by social media.
  2. Review your brand portfolio
    Brands are separable, transferable assets. Dispose of brands that have no strategic purpose or potential and consider replacing these with brands that do.
  1. Consider the international arena
    Global branding is here to stay. International brands are more powerful, more profitable and more valuable than national brands. If you don’t think internationally, you run the risk of being overrun by more aggressive internationally oriented competitors.
  1. Protect your brands
    Use all the measures available to you under the law. Police your rights and act swiftly to deal with any breach of these. This is indisputably the most effective way of protecting the investment you’ve made in your brands, be it through marketing or innovation or both – which, after all, are the keys to brand and business profitability.

So in conclusion, it can be said that brand management isn’t just about maintaining a unified brand image, it’s also about competing internationally and about overcoming the many challenges in today’s world that can not only harm the brand image but also obliterate the entire brand itself. That is why it’s of utmost importance to recognize those challenges and compete accordingly to manage the Brand!

 

About the author

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Tom Blackett is the Brand Advisor &  Ex Vice Chairman of Interbrand, World’s largest Brand Consultancy firm.Tom has specialized in helping organizations develop and manage their brands to realize maximum value for owners and investors. He has contributed to many books and articles on brands, branding and personally edited ‘Trademarks’ (1999), ‘Co-Branding’ (2001) and ‘Brand Medicine, the Role of Branding in the Pharmaceutical Industry’ (2002).

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