Businesses exist in a state of perpetual change. They have to adapt and transform themselves at a pace equal to, or quicker than the world in which they exist. Failure to do so ultimately leads to stagnation and extinction.
In the 1950s, Unilever founder Lord Leverhulme said that he knew half his advertising was wasted, but he did not know which half. An MD today could update that statement by proclaiming they knew the worth of brand investment but not its value. At monthly board meetings across the business community, owners and managers address the traditional issues of cashflow, expenditure, investment and capitalisation. Rarely however, is that ‘intangible asset’ (corporate brand) given consideration, despite often being the asset with the biggest net figure set against it on the balance sheet.
BUT WHAT IS BRAND?
What it is categorically not, is an ‘intangible asset’. In reality it is the most tangible entity of any organisation, conveying direction, intention and positioning to all critical audiences from investors to employees. Neither is it a singularly superficial badge of uniformity, a logo, a look, or the founder’s charismatic personality.
A brand is simply the collective perception derived from expectation, image and experience and these are projected through reputation, branding and product.
For embryonic and young growing businesses there is a paramount lesson to be learned from the catalogue of brand failures. To be successful you must have absolute synergy between the building blocks of brand, reputation, and product. Failing on one would result in a business that is ‘synergetically challenged’ and misfiring on two or more would be indicative of a business that was ‘synergetically dysfunctional’.
Take for example the BMW Mini – everything about it is right. The product is a fantastic design of the moment – massproduced individuality. Only two in 100,000 are likely to have the same specification and with exciting derivatives such as the new convertible, the company is keeping its product fresh and ripe for market. The combined brands of BMW and Mini are extremely strong, while the reputation of BMW and its owners the Quant family – although both briefly tarnished by the Rover debacle – is now back to full strength. Result: strong brand, strong product, strong reputation. A real win, win, win situation, and a prime example of a true synergetic business.
Not so the lamentable Rover. This once proud brand – at least in the 1950s, ‘60s and early ‘70s – is a shadow of its former self. The product line-up is too ‘long in the tooth’ and the reputation of those running the business – and therefore the business itself – has been tarnished by fat-cat accusations and ‘noses in the trough’ press speculation. Result: ailing brand, mediocre product, poor reputation. A classic dysfunctional business.
Other companies get some of it right, some of the time, but are perhaps firing on less than full throttle. Take easyJet for example. The reputation of its founder, Stelios Haji- Ioannou, as well as the business he founded, rode relatively high while he was involved. The brand was strong, bold and different. No one had previously thought of pioneering online booking and painting a web address on the side of its aircraft in bright orange. By cutting out the travel agent and passing the savings to the customer, easyJet became a true consumer champion, or at least would have done had the product been better.
Stories about cancelled flights with no compensation, lost luggage and an indifference towards passenger care from a young and inexperienced workforce undid much of the positive sentiment being created. Had all these elements been in concert – as with Mini – the business could have been even more successful than in fact it was.
Marketing pundits would have you believe that customers ‘buy’ into your business through a linear process that is led by image (brand) and supported by expectation (reputation) and then experience (product). The reality however is that we ‘enter’ businesses through any one of these main touch points – image, experience or expectation – which is why brand, product and reputation are all avenues of equal status when it comes to attracting new customers and maintaining the loyalty of existing users.
Body Shop, First Direct and Virgin Atlantic are examples of successful businesses that have promoted themselves through reputation and word of mouth and until recently spent relatively little on advertising. Sony, Apple Inc and Dyson are companies that lead through product innovation. Prada and Rolex are examples of branded organisations that are driven foremost by image and brand desire.
However, their position in the table of successful businesses is not due entirely to their pre-eminence in one of these three portals to market. It should be no surprise that Body Shop, First Direct and Virgin Atlantic also have first rate products and brand image. Apple Inc, Dyson and Sony have excellent brand image and healthy reputations, and Prada and Rolex have strong product ranges with a solid brand reputation. In short, they are businesses with ‘synergetic communications’.
Like the stock market, brands can decline as well as rise. Businesses that find themselves in ownership of brands with failing reputations rarely overcome the prejudices of the consumer in the short term. Lancia, the Italian car maker, pulled out of the UK market after years of defensive marketing, trying to overturn the damage caused by the appalling rust problems endemic in its range of cars of the 1980s. Perrier, the French mineral water importer, has still to fully recover its ‘pure’ credentials after the scandal of contaminated water from a decade ago. Consumers, like elephants, have long memories.
More recently, global giants such as Coca-Cola and Proctor & Gamble have tarnished their UK brand reputation and product range through launching supposedly healthier products like Dasani bottled water (Coca-Cola) and orange drink Sunny Delight (Procter & Gamble), which upon examination, proved to be less than pure. In the case of Dasani, it was alleged the product could actually increase the risk of cancer in some circumstances. A perfect example of how even the strongest brand won’t hide a flawed product.
CURING UNDERLYING PROBLEMS
Alternatively, re-branding a poor business, if you do not address the fundamental problems, is like plastering over the cracks. It looks better for a while but the underlying problems overwhelm the deceptive camouflage. In most cases branding is simply a mirror of business, not a mask. Witness BMC = British Leyland = Rover Group = MG Rover. Outcome, confusion, devalued branding and weakened reputation. Consumers can be fooled once by ‘new’ flashy packaging and ‘distraction marketing’ but if the product is still poor, they don’t come back for a second bite.
Another example of image failure is when an organisation attempts to ‘pull’ the business in a new strategic direction through image alone. Take the case of British Airways and the now notorious tail fin debacle of the late 1990s. Intellectually the decision to present the airline as a global, cosmopolitan airline was a statement of fact but it failed to embrace the emotive issues surrounding why people choose to fly with national carriers. The then boss of BA, Bob Ayling, said: “Perhaps we need to lose some of our old fashioned Britishness”, but in reality ‘flying the flag’ was exactly what punters wanted, whether they were from Brighton, Brisbane or Barcelona. By the time BA announced the final demise of the ‘ethical’ brand approach in 2001, Virgin had simply stolen the ground by adding the Union Flag to its fleet of aircraft. BA is now adding Union Flags to all of its tail fins to regain its ‘Britishness’, having gifted this core brand value to Virgin. Managers looking to maximise the value of their businesses to gain VC funding, sell or float their companies, would do well to examine the case study of another airline operation, that of Go, the no-frills European airline, an offshoot of British Airways. The CEO of Go, Barbara Cassani, although it was not her intention at the start, built the business, went through an MBO and eventually sold the company within an astonishingly short four year period.
She turned a £25m investment into a £373m sale price and a personal fortune of £10m. This was achieved by creating a crisp, clean brand proposition that, whichever way you cut through the organisation, revealed the same bright, fresh, can-do attitude with a commitment to customers and workforce alike. It was this value that 3i, the venture capital investors, recognised and easyJet, the purchasers, bought into.
Another automotive example, which powerfully demonstrates the fiscal value of an ‘intangible asset,’ was the sale of Rolls Royce Automotive in 1998 to the German car manufacturer VW. It promptly sold the Rolls Royce brand/marque rights to BMW for £40m effectively preventing VW from building and marketing Rolls Royce vehicles despite owning the factory at Crewe. It did however retain the rights to Bentley, another highly bankable brand, which has gone on to sell more strongly than its once more dominant sibling.
BUILDING BRAND FOR PROFIT
You can derive from the examples in this article that brand investment can be a double-edged sword for management. It is however a tool of immense persuasion when it comes to maximising the potential value of your organisation when it comes to seeking a sale, merger or flotation. It is worth bearing in mind, that whether you are seeking funding through a VC or via an AIM listing, investors prefer to put their capital into companies they have at least heard or seen something of.
For businesses and their brands, more success brings more change; acquisitions, flotation, restructuring and diversification all create cultural stresses, which organisations like yours need to absorb and overcome.
At each step along the path of business growth, from start-up to sale, corporate brands and their communication must be analysed for suitability. All organisations are at some point along this path and translating strategic and structural change into a meaningful language (visual and literal) is of paramount importance.
To understand this fully, let us take a quick look at what some of these issues might be:
Launch: Will the image restrict future growth? How does it translate? What is the positioning of the brand? Can it be registered?
Acquisitions: What is appropriate: a monolithic, endorsed or independent approach? Where do the various brands, corporate reputation and product fit into the matrix?
Flotation: What is the level of awareness of your brand? Will registering ‘Brand’ Plc restrict future operations, such as disposals?
Diversification: Does the brand have an image specific to its original sector? Does group endorsement devalue the potential of new sector expansion?
Mergers: What culture will prevail? Do you combine identities or create an entirely new brand identity? Whatever stage your business is at, it pays to focus on five essential points to build a strong and healthy corporate brand.
Decide what your basic promise is, by which you can be measured and judged. Deliver the promise better and more consistently than your competitors and make sure you stand out visually from the rest of the pack.
Synergise the key elements of reputation, brand and product and avoid the ‘silo’ effect of traditional departmental structures by building connected communication channels.
Don’t allow image to fall behind or run ahead of your business’s true capabilities or strategy. Use reputation management as a positive marketing tool and for crisis management.
Connect all knowledge-based resources, both internal and external, that model your strategic direction and capability and above all ensure you remain at the helm of all brand decisions. And finally, remember that brand marketing continues after the sale is over. So building dialogue with your customers, opinion makers and investors, is an ongoing programme for the development of your brand.
Happy Brand Building
