Strategy. Innovation. Brand.

brand equity

Make a Brand Promise or Keep a Brand Promise?

I promise.

You have $10,000 left in your marketing budget. Should you use it to make a brand promise or to keep a brand promise?

It’s a tricky question and one that Bain & Company tries to answer in a newly released white paper. (Click here). As Bain points out, we often think of branding as a way to create an emotional attachment with a consumer. Bain suggests a different approach: we create brands to shift demand. With a strong brand, we may shift demand to higher prices or greater volume or, maybe, some of both.

As we build brands, we need to make brand promises. This often involves emotional advertising and direct marketing. On the other hand, for a mature brand in an established market, more advertising may deliver diminishing returns. Rather than shifting demand, we’re just spending money in a senseless arms race.

Bain gives four examples of fashion retailers that take very different approaches to brand promises. At one end of the spectrum, American Apparel and Benetton advertise heavily and often provocatively. In other words, they’re making promises. However, recent results — stagnant at best — suggest that they’re not keeping promises.

At the other end of the spectrum, Patagonia spends far less on advertising but has invested heavily in environmental causes. Patagonia’s strong word-of-mouth momentum focuses on promises kept. Similarly, the fashion retailer, Zara, does no advertising at all. Through smart locations, however, and short, fast production runs, they’ve built a strong company. The chatter about Zara also focuses on promises kept. For both Patagonia and Zara, the results have included faster growth and higher margins than almost all their competitors.

Bain argues that brand equity is really a brand’s power to shift demand. To illustrate, the authors review brand equity for 21 different product categories. (The research is based on discrete choice analysis, which I’ll describe in more detail in the near future). The research isolates different elements of the consumer decision — allowing us to compare the power of pricing, brand, and specific features. For MP3 players, for instance, the leading brand captures 38.5% of consumer choice based on brand alone. This compares to 13.9% for the second strongest brand. In other words, the leading brand was 2.9 times more powerful than the second brand in shifting demand.

Brands were powerful in both B2C and B2B categories.  Many authors have suggested that brands are not as important in B2B categories — that B2B purchase decisions are not “emotional”. The Bain study suggests otherwise. As the authors write, “Companies have built strong brands even in … B2B … categories such as construction tools and medical devices. On construction sites, the loyalty to tool brands runs as deep as the passion that fashionistas demonstrate for their favorite jeans.”

Think about your brand — whether corporate or personal. Do you need to attract attention by making more brand promises? Or do you need to build loyalty by fulfilling brand promises? Either way, consider the power you have to shift demand simply by the way you behave.

Branding: Free The GM Five!

Chevy. For the young set.

Once upon a time, General Motors had five major brands. Why five? Because there were five decades in the car buying experience. GM had a car for every need and every age.

Back in the day (my Dad’s day), everyone understood how to buy GM brands. Chevrolet was for young couples in their twenties, just starting out in life. In your thirties, you traded up to a Pontiac — a little nicer, not quite so bare bones. Oldsmobile was the choice for forty-somethings — a good middle of the road brand. In your fifties, you opted for a Buick — more luxury, near top-of-the-line. When you reached your sixties (and beyond), you wanted to signal that you had made it — so you bought a Cadillac.

In the late 80s, Tom Wolfe’s Bonfire of the Vanities had a good line comparing a European brand with GM.  One of Wolfe’s characters talks about getting rich and buying a Mercedes. Another character responds, “Oh, a Mercedes is just what a Buick used to be.” I recently bought a large Volvo sedan. I like it a lot but I also think, “Oh, it’s just a Swedish Cadillac”.

So, what happened to GM? They stopped building brands and started building cars. Instead of clearly differentiating their brands, they decided to aim for manufacturing efficiency by consolidating platforms, parts, and styling. They may have saved some money on the manufacturing line but they wound up producing indistinguishable cars. Whey would I pay more for a Buick when it looks just like a Chevy? GM reached the nadir with the Cadillac Cimarron — a re-badged Chevy Citation. A GM engineer was asked, “What’s the difference between a Citation and a Cimarron?” He famously replied, “About $5,000”.

What’s the lesson here? Brands belong to buyers, not sellers. GM thought they owned the brands and could treat them to a dose of industrial efficiency. The move made sense from a manufacturing perspective but not from a brand perspective. Once the brands lost their distinction, they also lost their markets.

It’s probably time to review your brands. Don’t review them based on features or functions — that’s the way sellers think. Rather, review your brands based on which markets they appeal to. Are those markets really different from each other? If they are, then keep accentuating the brand differences. If they all appeal to essentially the same market, however, you may want to consolidate your brands. There’s no point keeping five brands around if potential buyers can’t tell them apart.

My Social Media

YouTube Twitter Facebook LinkedIn

Newsletter Signup
Archives