Archive for July, 2011

Nespresso – Emergence of an iconic brand

MRO
By On July 1, 2011 In Brand Strategy With Comments Off Permanent Link to Nespresso – Emergence of an iconic brandPermalink
Martin Roll

Martin Roll is a global business & brand strategist. Martin Roll is a world-renowned thought-leader on value creation through brand equity driven by tremendous global experience and insights.He facilitates business leaders and organizations to think bold for future strategies. By focusing on building and managing successful businesses through iconic brands, Martin Roll helps boardrooms to enhance shareholder value and create sustainable competitive advantage. For more information, visit www.martinroll.com

By Martin Roll. Building brands that resonate with customers across time and space has become the holy grail of businesses around the world. Given the emergence of empowered customers that are spoiled for choice, creating and sustaining brand loyalty is indeed the core of any successful corporate business strategy. However, not many companies have managed to create successful brands that customers are eager to associate themselves with.

At the heart of any successful strategy is how companies create a distinctive positioning in the marketplace. Creating a powerfully distinctive positioning is very challenging as companies should balance two seemingly opposite processes – establish differences and create a sense of similarity to other players in the market. This is usually referred to as optimal distinctiveness.

How can companies achieve such optimal distinctiveness in building brands? The answer lies in understanding the fundamental tenets of generic strategies. In turn that means, learning to make strategic tradeoffs that can prove optimal for the overall corporate effectiveness and efficiencies in both short and long term.

A classic case of such a brand is Nestle’s Nespresso. Nespresso is one of the most successful coffee brands to have emerged in recent times. Furthermore, having proven its might in the rather tough European markets, it has gradually established its presence in the all too important US market.

This article narrates the branding journey of Nespresso and on the way offers some important strategic steps for CEOs and brand managers of both established and emerging brands around the world on how to manage the rather challenging process of achieving optimal distinctiveness.

 

The Nespresso Brand. Creating a coffee brand is indeed challenging. Given the global popularity of Starbucks, many companies have unsuccessfully tried to create resonating coffee brands. However, Nespresso has been hugely successful in both the European and the North American markets. Since 2000, the brand has grown almost 30% annually with revenues of US$3 billion in 2009. Even more impressive is its growth in the North American market where is has grown by 50%. With more than 200 stores in 50 countries, Nespresso is here to stay.

Nespresso has implemented some very fundamental strategic steps very effectively. For starters, it has religiously followed a differentiation strategy, ensured that all possible brand touchpoints consistently convey the central brand message, and strategically create a rather unique brand identity. These elements are very central to building successful brands. The following section elaborates each of these.

Strategic implementation of differentiation strategy: Businesses around the world usually choose one of the two dominant generic strategies – overall cost leadership or differentiation strategy. However, following either of these strategies mandates some rather challenging strategic tradeoffs. As such, companies stray from implementing all the elements of any one of these strategies. Nespresso on the other hand has been very diligent in following the differentiation strategy.

Not only is it priced much higher that other coffee brands, its distribution in only five high-end stores is aligned with this strategy, as is its refusal to offer coffee on the go. These decisions inherently impose constraints on the growth and reach of the brand. However, by making such strategic trade-offs, Nespresso has been very successful in a rather short period of time.

Consistently conveying the brand message: One of the biggest challenges for brands is to maintain consistency in conveying the central brand message across possible touchpoints. Nespresso has managed to achieve that considerably. Given its overall differentiation strategy, Nespresso has managed the full suite of marketing very strategically.

Its product is of very high quality thereby standing out from other coffee brands. Given such a product, it prices its offering with a very high premium. Its distribution is only through very high end and selective stores. Finally, it carries out its promotion with a single highlight on the Nespresso experience. All these allow the brand to consistently convey the central brand message very effectively.

Creating a unique brand identity: Unlike many other coffee brands, Nespresso does two things very differently. First, it insists that customers experience their coffee in their “coffee pods” and not take them to-go. Second, in addition to its coffee, it offers its own line of very high end coffee making machines in the price range of upwards of US$800.

Both these actions create a very distinct positioning and identity for the brand in the coffee market. Not only are customers involved with the brand when they consume a cup of coffee but also whenever they make coffee at home using Nespresso coffee machines.

Martin Roll is a global business & brand strategist.

www.martinroll.com

Asian Brand Strategy. A new paradigm for boardrooms

MRO
By On July 1, 2011 In Brand Strategy With Comments Off Permanent Link to Asian Brand Strategy. A new paradigm for boardroomsPermalink
Martin Roll

Martin Roll is a global business & brand strategist. Martin Roll is a world-renowned thought-leader on value creation through brand equity driven by tremendous global experience and insights.He facilitates business leaders and organizations to think bold for future strategies. By focusing on building and managing successful businesses through iconic brands, Martin Roll helps boardrooms to enhance shareholder value and create sustainable competitive advantage. For more information, visit www.martinroll.com

By Martin Roll. The face of business in Asia is changing faster than one can blink one’s eyes. Asian companies that used to be back-end workhorses, manufacturing consumer goods cheaply for Western companies, are slowly realizing the benefits of branding.

In a market where competition implies slashing prices on their unbranded products, Asian businesses are slowly becoming more attentive to the power of branding in capturing consumers and returning larger profits on their investments. Firms are realizing that whereas they were wearing themselves down on razor-thin margins to compete with the next supplier, they could increase returns by investing in their brands. This then is the shift in thinking that is pushing boardrooms in Asia toward creating strong brands to differentiate themselves and consequently realize greater profits. Branding is an investment that must be perceived as such and is required to deliver shareholder value like any other feasible business activity.

Most Asian firms, however, still view branding as advertising or logo design. If firms are to benefit from branding, they must recognize that it impacts the entire business – the structure, goals, attitude and the very outlook of those in the boardroom. Managers will need to see branding not as an appendage to the ongoing business, but rather as an infusion which seeps through the very spirit of the organization, as a healthy return on investment (ROI). In fact, it will require a shift in focus and priority for every functional aspect of the organization aligned around multiple customer touch points.

Asia is still one of the world’s biggest providers of commodity products. At the same time, Asian manufacturers mostly produce for other companies and the majority of these products are therefore non-branded. In other words, these are volume products without strong brand identities. The largest part of the financial value is captured by the manufacturers’ customers – the next player in the value chain – primarily driven by strong brand strategies and successfully planned and executed marketing programs.

Reasons for lack of strong brands in Asia. Many reputed global brand surveys have found that only four of the top brands originate in Asia. Three classic brands come from Japan and a fast-growing ambitious brand comes from South Korea: Sony, Honda, Toyota and Samsung. But given the size and volume of Asian business today, it is evident that Asia could build many more prominent brands and capture more financial value from better price premiums and customer loyalty.

There are many reasons why Asian companies have not fostered many global brands until now. The appreciation of branding as a strategic concept can be influenced by such reasons as broad diversification of businesses, the Asian business structure and implications of intellectual property (IP) protection among many others.

  • The diversification of businesses spanning many industries with limited overlap and synergies has been a major impediment to building brands in Asia. The prevalent mindset in Asia is based on trading, rather than branding, and the generation of revenues, rather than profits. But it is hard to create a relevant, clear and differentiated brand strategy, and build a corporate brand which encompasses all areas, when a business has its hands dipped in every pie.
  • Another important reason for the lack of strong brands can be found in the prevalent business structure within Asia, which consists of many small and often family-owned businesses – with diversified business interests as illustrated before. The management perspective would favor short-term business wins against brand strategies which require more resources and long-term perspectives.
  • The implications of IP protection in Asia have been a major barrier against building brands. In their own backyards, many Asian companies have faced rampant counterfeiting and infringement of IP rights. Until and unless legislation and law enforcement get better in the region, it may be a hurdle that prevents a deeper appreciation and respect for intangible asset management in the Asian boardroom.

But the one reason, more than any other mentioned above, that influences the creation of strong brands is the mindset of the boardroom and the CEO. Branding is a boardroom discipline and successful brands can be built only when the boardroom, led by the chairman and the CEO, understands, appreciates and commits to treating branding as a strategic discipline and devotes the resources at the company’s disposal to support the brands in a continuous manner.

Martin Roll is a global business & brand strategist.
www.martinroll.com

Branding. Driving shareholder value

By On July 1, 2011 In Branding With Comments Off Permanent Link to Branding. Driving shareholder valuePermalink
Martin Roll

Martin Roll is a global business & brand strategist. Martin Roll is a world-renowned thought-leader on value creation through brand equity driven by tremendous global experience and insights. He facilitates business leaders and organizations to think bold for future strategies. By focusing on building and managing successful businesses through iconic brands, Martin Roll helps boardrooms to enhance shareholder value and create sustainable competitive advantage. For more information, visit www.martinroll.com

By Martin Roll. The primary objective of boardrooms is to build and sustain shareholder value, and deliver competitive returns to shareholders. One of the most effective ways to achieve this is to build brands with strong brand equity. Brand equity is the reputational asset that any successful business builds in the minds of customers and other stakeholders. Strong brand equity is also one of the main reasons why the market capitalization of a company often exceeds its book value. The strength of the brand equity can therefore be an indication of future financial performance.

Many Asian companies traditionally focused on asset-intensive industries. But it has been demonstrated that the most profitable Asian companies focus on intangibles such as human capital, exploiting network effects, and creating synergies based on brands or reputation, rather than investing in tangible assets.

Intangible assets like brands play a significant role in value creation and can become an important driver of shareholder value for many more Asian companies than today. On the New York Stock Exchange and NASDAQ, for example, intangible assets are known to account for 50–75 percent of the market capitalization of the listed companies, where the majority is accounted for by their brands. The market capitalization of corporations with strong brands demonstrates clearly that the market is putting a premium on them.

The role of the Asian boardroom. A strong brand is characterized by a unique brand promise (the customer focus) and an outstanding brand delivery (the organizational system and performance behind the promise). The brand promise and the brand delivery must be consistently balanced in order to build and sustain strong brand equity. The modern brand-driven organization is characterized by three distinct characteristics which set it apart from less brand-focused organizations:

  • The right boardroom mindset toward and beliefs about branding
  • The right skill sets to build and manage brands
  • The right allocation of organizational and financial resources to achieve the various business objectives and build sustainable brand equity

Companies must ensure that everyone in the company is properly aligned with the brand values with the right mindset and belief. The entire company and its multiple and cross-functional actions and activities should be channeled towards this goal.

Internally, this comprehensive task of aligning and managing customer touch points cannot be left to or even controlled successfully by marketing departments alone. The boardroom should take a more active role in the cross-functional orientation of marketing in the Asian organization.

Externally, the Asian business leaders can benefit tremendously by representing and leading their brands by example. Asian business leaders can help to build their brand portfolios by appearing more outside the boardroom, and acting as the primary spokesperson of the brand strategy and vision, internally and externally. This can add tremendously to the success of the brand and also be cost-effective in many instances.

It is important to note that marketing function and discipline has come under increasing pressure to demonstrate financial results. Boardrooms must recognize this development and act accordingly. The first change is related to the role of marketing. As marketing is increasingly taking place along the entire value chain, marketing is not the responsibility of the marketing function alone. Instead, everyone in the organization is involved. This requires a more cross-functional orientation of marketing, with a solid understanding of all the elements in the value chain including skills within engineering, purchasing, manufacturing, logistics, finance and accounting. This might require an upgrade of skill sets and ongoing training of the marketing personnel. The second change required is related to the outcome of marketing. For the marketing function to become an integrated part of the boardroom agenda, the key issue for the future is to focus on demonstrating the financial consequences of marketing expenditures.

Finally the boardroom should recognize the critical importance of resource management in building strong brands. Therefore, the last cornerstone of successful Asian branding refers to organizational and financial resources, their allocation and management. The more everyone throughout an organization can be trained and involved in delivering on the brand promise, the more efficient and competitive the brand strategy will become.

Asian cultures have always valued the long-term aspects in almost any aspect of life. Asian boardrooms should use this unique strength to influence them in creating more successful brands – but it requires a different mindset in the Asian boardroom.

Martin Roll is a global business & brand strategist.
www.martinroll.com

Social Media. Improve or Hurt Brand Equity

By On July 1, 2011 In Social Media With Comments Off Permanent Link to Social Media. Improve or Hurt Brand EquityPermalink
Martin Roll

Martin Roll is a global business & brand strategist. Martin Roll is a world-renowned thought-leader on value creation through brand equity driven by tremendous global experience and insights. He facilitates business leaders and organizations to think bold for future strategies. By focusing on building and managing successful businesses through iconic brands, Martin Roll helps boardrooms to enhance shareholder value and create sustainable competitive advantage. For more information, visit www.martinroll.com

By Martin Roll. The Internet has changed the global business landscape. The proliferation and the ubiquity of Internet across most countries in the world have brought about fundamental changes in the way global brands do business, engage customers, design their brands and strive to maintain their competitive advantage.

There is hardly any debate on some very basic facts. The Internet has significantly minimized information asymmetry between companies and customers thereby creating a new generation of empowered customers. It has also compelled global brands to devise their strategies in the context of constant and instantaneous information and diffusion of ideas.

Recently, a new phenomenon has emerged that is yet again ushering multifaceted changes in the strategies of global brands. This new phenomenon is the emergence and the gradual domination of what is colloquially referred to as the social media. Popularized by some of the most iconic of new generation brands including Facebook, MySpace, Twitter and YouTube, social media has captured the attention of CEOs and brand managers of global brands.

While global brands strive to leverage these new outlets to communicate with their customers, they are also hindered in evaluating the relevance and reach of these emerging touch points for their brand equity and brand positioning. Given the popularity and ubiquity of these media outlets within the segment of young customers, leveraging them tends not only to be rather expensive but also can significantly alter the perceived value and image of the brand.

This article offers some concrete strategic steps that CEOs and brand managers can use to evaluate whether these social media outlets are a good strategic fit for their brands and for their brand positioning, while also evaluating the relative costs and benefits of these socially central communication outlets.

Brands and Social Media. It is very easy for global brands to get on the bandwagon of whatever is the new and widely adopted in their respective industries. However, devising communication strategies is central to the very design of global brand strategies. CEOs and brand managers can more efficiently leverage the power of social media when they understand the relevance of that for very specific brand activities.

Creating brand awareness: One of the most relevant strategic activities that social media help brands achieve is to reach to a very wide array of market segments encompassing customers of very diverse profile. Given such a market wide reach, social media are very well suited when global brands are seeking to merely create awareness for their brands.

As such, global brands would do well if they strategically leverage the social media for product or product variant introductions into the market starting from right pre-launch to managing the immediate aftermath of product launches.

Addressing customer complaints: One of the defining characteristics of current businesses is the central element of managing customer relationship in order to be able to successfully co-create value with them. An important impediment to any such effort is potential dissatisfaction of customers with the brand, resulting in customer complaints. Social media can be very powerful vehicles for brands to address these complaints to both effectively address them and to minimize the discontent from rapidly spreading.

Social media, such as Facebook and Twitter, offer brands a strategic opportunity to respond right away and to enhance the two way communication between them and their customers. As such, global brands should effectively use the social media to strategically manage their interactions with customers.

Ushering in pre-purchase brand experience: Given the hyper competition that defines the current global business landscape, brands are striving to differentiate themselves on more than just the quality of the product, the variety in terms of product variants and price points. Global brands that have been successful are those that have innovated on creating an engaging brand experience before, during and after the customers’ interactions with the brand’s many touch points.

Social media are positioned as ideal vehicles that can facilitate brands to usher in very engaging pre-purchase brand experience. By aggressively advertising on the social media, creating mass awareness and addressing customer interaction in real time, brands can devise a comprehensive brand strategies that allow customers to interact with, engage with and experience the brand much before deciding their consideration set.

Conclusion. Social media have been hailed as the solution to all brand communication challenges. However, much with any other communication strategy, CEOs and brand managers should carefully evaluate the purpose for which they need to leverage the social media. Such careful strategic fit between the brand’s purpose and the social media can enhance the overall brand equity.

Martin Roll is a global business & brand strategist.
www.martinroll.com

Sustainability and competitive positioning. The embracer’s advantage

By On July 1, 2011 In Uncategorized With Comments Off Permanent Link to Sustainability and competitive positioning. The embracer’s advantagePermalink
Martin Roll

Martin Roll is a global business & brand strategist. Martin Roll is a world-renowned thought-leader on value creation through brand equity driven by tremendous global experience and insights. He facilitates business leaders and organizations to think bold for future strategies. By focusing on building and managing successful businesses through iconic brands, Martin Roll helps boardrooms to enhance shareholder value and create sustainable competitive advantage. For more information, visit www.martinroll.com

By Martin Roll. Few topics have captured the attention of the general public, business honchos, regulatory authorities, NGOs, consultants and governments as sustainability has in recent years. Such massive attention comes from the realization that we are endowed with limited resources and only a responsible way of utilizing them can be beneficial to the different stakeholders.

Despite such enormous global attention to sustainability issues, it has remained a rather murky domain as many of the central elements right from definitions of what sustainability is to how businesses can be more responsible to sustain their practices remain contested. Furthermore, the confusion emanating from the apparent confusion of equating sustainability with even more vague terms such as “green” or  “environment friendly” has only made matters even more confusing.

Given this rather important but confusing topic of sustainability, how can global brands participate in this discussion? Even more important, with sustainability facing the danger of being yet another fad, how can global brands adopt sustainable practices as a cornerstone of their brand identities and thus competitive advantage?

This article clarifies some of this confusion and offers tangible guidelines for CEOs and global brand managers about the criticality of a very important corporate asset – the embracer’s advantage. Embracer’s advantage refers to the brand, positional and social advantages that accrue to global brands that have been pioneers in adopting sustainability practices despite the lack of any sort of clear externally imposed norms.

Embracer’s Advantage. The dominant philosophy of business is centered around the shareholder value maximization logic. This logic dictates that the primary function of companies, indeed their reason for existence, is to maximize at all costs, the value that accrues to shareholders. This logic has become such a powerful guiding logic for companies that in the process of following it, companies tend to completely ignore some of the other equally important stakeholders including the society at large and the natural environment.

Being able to consistently deliver shareholder value mandates cutting some corners in the types of strategies employed, the kinds of partners to be affiliated with and the way societal responsibility is defined. A classic example is Nike being accused of using sweat shops labor in China to exploit the low cost to enhance its profitability and in turn shareholder value.

Given such powerful pressures, it is indeed difficult for global brands to depart from the dominant shareholder value maximization logic and also focus on other stakeholders. In such a scenario, global brands that do show the conviction to adapt sustainability practices in turn are bestowed with societal goodwill that contributes to the overall brand equity. The first companies that decide to adapt such practices – the embracers – are endowed with the embracer’s advantage.

However, given the mean-ends ambiguity in adapting sustainability practices, what are the more specific benefits for global brands in making sustainability practices a cornerstone of their strategies? Depending on the types of sustainability practices adapted by the brands, there are three main benefits they can reap.

Enhanced social legitimacy: One of the most valuable benefits that brands can reap is social legitimacy. With most global corporations investing heavily in creating global resonating brands with distinct positioning and value propositions, it becomes important from brands to gain an additional level of differentiation. Social legitimacy provides such an additional layer. By being early embracers, global brands become bestowed with the general societal stamp of acceptance. Such broad based societal acceptance can create additional benefits to brands.

Broad based brand awareness: Consider brands that launched products that were environmentally friendly such as Nissan’s Leaf. Although such brands were one of the many in their given industry, such innovation that was aimed at sustainable practices created worldwide awareness for the brand, facilitated its claim to being an innovative brand and offered the brand an enormous leg-up from its competitors. Such widespread awareness can in turn contribute the overall equity of the brand.

Better access to social stakeholders: One of the key success factors that can set apart a successful brand from the me-too brands is their access to key resources in the environments they operate in. One such key resource in the globalized world is access to key stakeholders such as government officials and regulators in different countries as brands seek to enter new markets. Being an embracer and the following social legitimacy and brand awareness together allows brands a heightened access to these key stakeholders, which can be critical in uncertain markets such as China and India.

Martin Roll is a global business & brand strategist.
www.martinroll.com

Five steps to build a luxury brand

Martin Roll
By On July 1, 2011 In Brand Strategy With Comments Off Permanent Link to Five steps to build a luxury brandPermalink
Martin Roll

Martin Roll is a global business & brand strategist. Martin Roll is a world-renowned thought-leader on value creation through brand equity driven by tremendous global experience and insights. He facilitates business leaders and organizations to think bold for future strategies. By focusing on building and managing successful businesses through iconic brands, Martin Roll helps boardrooms to enhance shareholder value and create sustainable competitive advantage. For more information, visit www.martinroll.com

By Martin Roll. As competition increases and the trend of commoditization continues, companies are more keen than ever to create strong brands, especially luxury brands that can increase their revenue base, enhance their overall brand equity and strengthen the base of their loyal customers. However, building luxury brands is extremely challenging. This article provides five key steps for CEO’s and brand managers that can facilitate the creation of basic building blocks for creating a resonating global luxury brand.

Identifying a niche segment: One of the fundamental principles of effective branding is for brands to diligently select a lucrative segment that can then target through an enticing positioning. Although this general principle is universally applicable, luxury brands are substantively different from other brands. Luxury brands are built on the premise of offering high symbolic value to a very selective segment of consumers that are more focused on high status and imagery associations that the underlying price. As such, the first step for companies to build a powerful luxury brand is to identify a niche segment of affluent customers and devise offerings that are valued by those customers.

Positioning based on high levels of differentiation: As global brands strategize their competitive moves, they are likely to either follow a cost leadership strategy or a differentiation strategy. All luxury brands follow a differentiation strategy. However, unlike differentiation on mere product attributes, luxury brands should aggressively differentiate their brand experience. Southwest Airlines is a leading brand that differentiates on its cost and culture. However, it is not considered a luxury brand. On the other hand, Giorgio Armani, Louis Vuitton and Rolls Royce are considered luxury brands not because they differentiate purely on product features, but because the brands differentiate on the underlying symbolic value.

Emphasizing the symbolic value: The most important element of creating luxury brands is the brand’s ability to create and communicate symbolic value for its customers. Brands usually offer two types of value – functional value and symbolic value. Functional value emanates from the features and the potential uses of the brand. As such, it directly reflects the tangible ability of the brand for the customers. Symbolic value on the other hand emanates from the social standing of the brand, that is, the extent to which the brand is perceived as being an elite offering aspired by the customers. As such, symbolic value reflects the extent to which the brand is endorsed and validated by the cream of the customers. Global brands aspiring to build luxury brands should careful devise strategies to emphasize their symbolic value for their customers.

Creating perceptions of exclusivity: What makes a brand to be perceived as possessing symbolic value? Among others, an important factor is the perception of exclusivity. All luxury brands strive to create a sense of exclusivity for its customers. Perceptions of exclusivity can in terms of unattainable price, limited geographic availability, barriers to possession, or even limited supply. These mechanisms of creating perceived exclusivity not only creates a pseudo sense of demand for the brand in the eyes of the observer but also enables those who patronize the brand a sense of special status. Furthermore, creating the perception of exclusivity also enables the brand to sustain its positioning in the face of extreme external shocks such as heightened competition, regulatory shocks or even recession. As such, CEOs and brand managers striving to build luxury brands should carefully devise their strategies and resulting tactical actions to create a sense of exclusivity for their brands.

Uncompromising delivery on superior brand promise: One of the biggest challenges for any brand is to consistently deliver on all the brand promises. Successful brands are those that create supportive organizational and operational structures that facilitate the implementation of strategies to deliver on the promises. However, delivering on brand promises involves multiple dimensions in the case of luxury brands. Not only do luxury brands need to consistently deliver on the promise of symbolic value, but they also will need to project consistency and continuity in every possible touch point. For example, the recession is a huge challenge for luxury brands as customers may postpone spending money on luxury purchases. However, the most successful of luxury brands are not right away getting involved in a price war. Maintaining their focus on superior value and unique brand experience across time and space is an important part of uncompromising delivery of brand promise. As such, CEOs and brand managers seeking to create luxury brands should make these elements core to their corporate strategies.

Martin Roll is a global business & brand strategist.
www.martinroll.com