Here’s another example of poor control of ad placement online. If you are responsible for your own ad placement, make sure this will not happen. If the channel won’t let you dictate where your ads cannot appear, find another channel. If your agency is responsible for your ad placement tell them if this happens again, they’ll be one client short in a heart beat.
Not too long ago, the Michigan (U.S.) State Business School reported that every US$1 (RM3.36) invested in marketing earned US$5 (RM16.80). By contrast, for every US$1 (RM3.36) invested in operational excellence, returned revenue was US$60 (RM201.75).
Despite such data, the majority of Asian firms have been slow to grasp the importance of everyday operational excellence that requires a continuing commitment to quality service, as well as processes that are effective from the customer’s point of view and advanced supply chain skills.
Many Asian firms prefer to spend fortunes on tactics to acquire customers yet very little on the operational and other strategic requirements needed to keep them. Sales and marketing growth based on increased awareness are fine and important but they are activities to be embarked on only after the operational foundations are in place. This is because an acquisition only approach is generally unsustainable.
Therefore, once a customer is acquired, it is critical to develop relationships to retain them. Firms cannot simply ‘hope’ they will come back time and time again because, with so much competition, so many alternatives, if you are not communicating with them – and selling to them, someone else will.
Customers build brands
And because customers have the power to make or break our brands, Asian companies must learn to do business on their terms. At the same time, they must become focused on creating PROFITABLE customers (on average, 15% of customers are unprofitable), ensuring those customers become our brand ambassadors, and consistently increasing their share of wallet.
Coca-Cola, Marlboro, Pan-Am, Ford and so on, represent mass-economy brands. These Western brands were successful because they shrewdly used the tools of the mass economy. They positioned themselves by repeatedly advertising in the mass media of one, two or three TV stations, one or two newspapers and knew where consumers were most of the time as there were few leisure time activities to take them away from the home.
Global markets
They also used mass production to achieve economies of scale, and they used distribution to penetrate mass markets. Global markets were opening up, disposable income was increasing, competition was limited. Customer retention didn’t really matter. Markets were growing so fast, and the mass-economy tools were so powerful, that it is was fairly easy to acquire a new customer for everyone that was lost. They also had a large, essentially one segment, ready made affluent domestic market.
But today, the mass economy is dead. The mass economy was killed by the fragmentation of the media, new leisure time activities, the Internet, greater competition, globalization, immigration, increasing number of and power of retailers, marketing segmentation and other forces.
In its place, we now have the “Customer Economy.” Companies no longer have the exclusivity to make the rules and control information by “positioning” products or promoting “brand equity” through advertising and PR like they did in the mass economy. Moreover, where in the past, prospects were segmented by demographics and geography, now they are part of communities. In these circumstances, can advertising and PR be effective to build brands? As part of a comprehensive brand strategy, yes. On their own, no.
For example, in the 10 year period to 2006, the computer manufacturer Acer spent US$10 billion (RM33.6 billion) trying to build a global brand via advertising. The effort failed. Acer withdrew from the retail market and has only recently reentered it with a new strategy focusing on individual segments.
Sony mass market failure
In 2000 and 2001, Sony spent an incredible US$2.5 billion (RM8.4 billion) on advertising worldwide. The result? The first three months of 2003 saw stunning losses, a 25% slide in the company’s share price in just two days and layoffs of more than 20,000 workers worldwide.
Unperturbed, Sony again tried mass economy tactics in 2008, spending an astonishing US$4.9 billion (RM16.5 billion) to position its diverse range of products including televisions, Blu-Ray players, music players, Laptops, PlayStation games, movies from Sony Pictures and new music from Sony Music. The approach failed and Sony is now exploring a more specific product focused niche approach.
Asian companies
Asian companies obsess with using traditional marketing tools such as advertising and PR to acquire new customers. But what good does it do to acquire customers if you have no idea how long they are going to stay and how profitable they will be? Also required are investments in operational excellence and accountability.
There is also a belief by many firms that they just have to ‘participate’ in an activity to get business. One local firm we’re familiar with collected 200 qualified leads from a trade show, yet months later those leads were still collecting dust! They were waiting for the prospects to contact them!
Another Asian company invested over US$50,000 (RM175,000) on a trade show, instructed 3 ‘top’ sales people to represent the company at the trade show and then failed to train the staff on how to behave and sell at the trade show. Moreover, there was zero investment in a lead management programme for leads generated. This meant the company was unable to measure the effectiveness of the trade show.
Finally, within 3 weeks of the trade show ending, two of the sales people manning the booth left the company, taking all the leads generated with them.
As we work to move up the value chain, the goal of every Asian company that wants to build a brand must be profitability, backed by measurement and accountability. Reaching solely for sales or market growth is no longer enough.
Repeat business
Not so long ago, in the US, to reach its sales goals, Ford offered $3,000 in rebates and other special deals off the cost of the Taurus car. Ford maintained its market share – but at the cost of losing money on each vehicle sold. Interestingly, Ford learned from its mistakes. Its next TV ad campaign in the US was based on the following line: “The highest proportion of repeat buyers of any car in its class.” What better testimonial is there? Little wonder then that in a report released by LeaseTrader.com in August 2009, Ford had the highest brand loyalty of any American automotive brand.
Despite the obvious need to invest heavily in retention strategies, ask a typical advertising agency about the branding issues faced by Acer, Sony, Ford and other companies, and what do you think the most common response will be?
Exactly. Recommendations for more ads, in more media across more platforms! They’ll promise a better creative team to provide greater creativity, but what’s really required is accountability for results! The usual agency attitude of “spraying and praying!” may have been the best strategy during the mass economy when there were a limited number of media conduits. But in the customer economy, the proliferation of media outlets and competitive advertisers now makes it practically impossible to build a brand solely based on ‘spraying and praying’.
Strategic approach required
What Asian companies need more than anything else is a strategic approach to branding that is aligned with the new imperatives of the customer driven global economy. Branding in the customer economy requires a fresh look at how the organisation engages with customers, as well as market and profitability requirements.
Rather than a simplistic reliance on logos and creative driven, one-size-fits-all, repetitive advertising, branding today demands research, data, measurement, supply chain effectiveness, customer intelligence, service AND accountability to both customer requirements and resources spent. Only once the company has identified who it should talk to and how, can it start to talk to those prospects.
Because acquisition is so expensive, and existing customers make the best brand ambassadors, branding also requires an emphasis on the identification and retention of PROFITABLE customers. This is especially true as the balance of power shifts from sellers to buyers.
The payoffs from such customer-economy branding can be substantial. British Airways calculates that customer retention efforts return $2 for every dollar invested. The clothing label Zara has thrived against powerhouses like Gap by moving from four collections a year to releasing new styles every two weeks.
So, as Asian firms attempt to move up the value chain, it is imperative companies monitor their retention rates (which fewer than 20% of companies do), because it is the best indicator of future profitability and brand strength.
Track RFM (Recency, Frequency, Monetary Value) because it shows which customers may be prone to defection and which are candidates for up – or cross – selling. Since it is likely 20% of customers are generating 80% of profits, segment customers according to profitability, and develop unique value propositions for the top 1%, 4% and 15%.
Calculate the lifetime value of clients. For instance, Ford calculates that a customer who buys his first car at the age of eighteen, upgrades it every three years and services it at a Ford dealership is worth a six figure sum to Ford over a lifetime. Cadillac estimates the lifetime value to be $300,000.
Revisit dormant customers. And optimize spending by developing marketing ROI based on actual customer profitability.
Other areas of organisational excellence that are key to building global Asian brands include recruitment and training. The retail sector is only realizing a fraction of its potential. This is partly due to the lack of training of staff and subsequent indifference of frontline staff when interacting with customers. If there is no attempt to build rapport with a prospect, why should the prospect return?
This is also true of manufacturing. One company in Malaysia we contacted recently listed 2 markets it wanted to develop as the UK and France. Yet when we called the office, no one spoke English.
Building Asian brands will take much more than basic advertising and PR. Core requirements include research, accountability, operational excellence, data management and customer equity (lifetime value of customers).
In Malaysia, according to research carried out by PriceWaterhouse Coopers, 86% of Malaysian CEOs and their Board of Directors say that they believe in the economic potential of effective brand building. However, almost the same number of CEO respondents admitted that they do not have a brand unit to integrate brand practices within their organisation. Sentiments are similar in Thailand, Indonesia and Vietnam
Until those C level executives take the plunge and invest in their brands by building operational excellence into their brand strategy, the concept of building global Malaysian or other Asian brands will remain just that, a concept.
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Here are my eight key principles for a strategic Nation branding initiative.
Having said that, I also believe these principles should be applied to government ministries, departments, agencies and the private sector as well. What do you think?
1) Research and data are fundamental: Qualitative and quantitative research is essential to data-driven branding (see below) and data-driven branding is essential to building a brand in the customer economy of today and the demand economy of tomorrow. Without research and data, branding decisions are no more than guesswork and the nation brand strategy is too important to base strategic decisions (or, any decisions) on guesswork.
Research is vital for uncovering perceptions, attitudes and requirements for emotional, experiential and economic value, the three key elements of a successful brand. Research also provides benchmarks for measurement and accountability.
Qualitative research gives you valuable data on the requirements of target segments in the future. It allows you to tailor communications to resonate with target segments and also identifies key influencers, thereby saving valuable funds that are wasted on a mass market, one-size-fits-all approach.
2) It is impossible to build a brand on creativity alone. Too much is at stake – both in terms of a country’s brand and resources invested – to depend on a creative-driven branding campaign (and that’s all it is because it is impossible to sustain) to form the foundations of a nation brand. Let’s face it, if you sit back and think for five minutes, how many country related advertising campaigns can you remember? More relevant, how many made you act?
Furthermore, a creative campaign is best suited for mass markets and mass media whereas data-driven branding enables segmentation and targeting of communications that ensures content resonates with target markets. For instance, divers don’t think, “Let’s go to Malaysia and see if we can dive.” They think, “Let’s go diving.” And then determine the destination.
Likewise, are potential investors going to be impressed by white sandy beaches or communications that resonate with them because they offer specific value?
Other benefits of data-driven creative driven branding include a focus on acquisition and relationships that ensure ongoing business, while creative driven branding focuses primarily on acquisition. Crucially, a data-driven approach to branding places strategy in the hands of executive management whereas a creative driven approach puts the strategy in the hands of an advertising agency.
3) Segmentation enables differentiation: “One-size-fits-all” branding doesn’t work. Despite the power and sweep of globalization, which has Malaysians wearing the same fashions as Italians and Aston Martins in hot demand from Brazil to China, each country has its own requirements and world-views.
Once research has revealed the differing characteristics of various audiences, branding must be devoted to tailoring messages, media, channels and activities to the specific values and requirements of target markets. Such segmentation not only ensures more receptive targets but also easily ensures differentiation from competitive countries trying to be all things to all people.
4) No buy-in, no success: Nation branding is difficult, requiring planning, support and coordination from a wide array of public and private entities. But even the best plan in the world will not succeed without buy-in from brand stakeholders. The most important step to ensuring buy-in is involvement in the research and planning process. As much as possible, brand stakeholders that are involved in implementation must have the opportunity to add their input to the plan.
Such buy-in has two advantages. First, it allows valuable perspectives and experiences to be incorporated into the plan, making the plan stronger and more effective. Next, it facilitates better execution. If all the parties involved have a complete understanding of the entire plan and their role in it and what its success means to them, then redundant efforts can be avoided and resources maximized.
5) A brand blueprint must be developed: A strong, visible Nation brand must have a blueprint based on the research findings to enhance the country’s reputation and image while enhancing economic, education and social growth and increasing its ‘share of voice’ in the world community. Specifically, the Nation Brand Blueprint must communicate a positive and dynamic personality with economic, experiential and emotional values that reflect target audience requirements.
The blueprint must be holistic and comprehensive to enhance export promotion, economic development, tourism, foreign direct investment and other key national initiatives. It must also communicate the intended message to the target constituents and stakeholders in multiple countries and at the same time, it must lay guidelines to strengthen the strategic, communications and visual impact of the Nation Brand.
The blueprint must also systemically connect the Nation Brand to the country’s core industries, corporate brands and Small and Medium Enterprise (SME) sector brands. This must be established via a systematic, holistic process that accommodates the requirements of both national and international stakeholders. This process must not only be effective to optimize the Nation Brand, but also maximize limited national resources.
6) Nation branding is a marathon, not a sprint: There are no silver bullets or quick fixes in any branding and this applies especially to Nation branding. Even in these technology driven times, establishing a Nation brand may take as long as a generation to develop. For example, the current view of Japan as a nation famed for its precision and electronics is not based on its efforts during the past decade. Rather, the seeds of Japan’s current nation brand were planted more than thirty years ago, when it began exporting transistor radios and two-stroke engines overseas. Just as Malaysia launched its Vision 2020 program in 1991 to become a developed nation by 2020, the country must adopt a similar long-term view for Nation branding. Malaysia and other countries must look at establishing a Nation brand not for us – but for our children.
7) Private sector must carry its weight: As an example, with responsible policies, funding and resource allocation, the Government of Malaysia can and has tried to do a lot for the Nation brand – but it cannot do it alone. Private-sector involvement and initiative are crucial. Private sector initiatives can range from promoting country of origin on foods and industrial goods, as Australia has done, to helping to fund trade missions to even good business ethics. The bulk of activities outlined in the Nation Brand Blueprint must be carried out by private and non-profit organizations
8) Measurement and evaluation: Why should money or resources ever be spent without knowing the return? Wherever possible, perceptions, activities and processes must be measured, ideally with quantitative benchmarks. Such measurement and evaluation must be used to establish accountability and to ensure continuous improvement.
These key priniciples form the foundations of any nation branding initiative but there are other equally important elements.
One example of these other elements is a crisis plan which should be incorporated into the brand blueprint.
Recent events in Malaysia and Angola show little signs of a planned response with either silence or multiple and often conflicting responses coming from various sources and little or no reactions to debates on social media.
This failure to engage consumers, citizens and potential investors will undo much of the good work carried out to date.
40 years ago this year, Jack Trout published his first article on positioning. But the term didn’t really become advertising jargon until his articles entitled “The Positioning Era”, were published in Advertising Age in the early 1970’s.
There are numerous definitions of what positioning is today but to ensure we’re all on the same page, I propose this version: http://en.wikipedia.org/wiki/Positioning_%28marketing%29
But in today’s marketplace, positioning has multiple problems:
1) Positioning is immeasurable: You can’t say “our positioning has improved our sales by 5 % or as a result of our positioning strategy, our brand is 12% better than competitions. Furthermore, it is impossible to measure the ROI or benchmark positioning.
2) Positioning is only suitable for mass markets. Yet branding today is about segmentation and communicating and engaging with those segments via relevant channels and with messages that resonate specifically with those segments or niche markets. Does this mean that a company should develop different positioning for different niches?
3) Positioning is suitable for mass markets with limited competition and limited consumer access to media and information. Today, consumers can get any information they want on anything from anywhere.
4) The wikipedia definition is a top-down, company knows best, hierarchical marketing approach. Yet we live in a C2C environment in which consumers define brands.
5) Positioning is one-way. The company knows best and you must listen to us. We tell you how our products are positioned. But today, if you are not entering into 2 way conversations with consumers you are about to join the brand graveyard.
6) Positioning was developed for the US mass market of the 1970’s. But we’re in a globalized world now, with much more competition and more knowledgeable consumers.
7) Positioning is competition, not customer driven. The basic premise of positioning is that you want to be number 1 or number 2 in a category in a prospect’s mind. If you can’t be number 1 or number 2 in an existing category because of competition, you make your own category. In today’s congested marketplace, the investments required to develop a new category are enormous. Furthermore, besides the difficulty and expense of creating your own category, you are also letting your marketing be driven by the competition rather than consumer demands for value.
8) Positioning is dated. With limited competition (by today’s standards) in most categories, positioning was a compelling theory. The problem is that the world has changed a little since 1969. Yet agencies continue to recommend positioning as the foundation for any brand strategy.
9) Positioning uses mass market channels such as TV and billboards to reach as many consumers as possible using repetition to create interest. Yet ask yourself, what do you do when the commercials come on? Surf? Put the kettle on? Go to the bathroom? Text a friend? Surf the web? Basically, do anything but watch the commercial. Same with billboards. How many billboards can you remember from your morning commute?
10) Positioning requires massive, and I mean massive budgets that few companies have. If you do have a massive budget and you do execute your campaign across multiple channels for say six months, what happens if it doesn’t work?
So my question is, what are agencies doing recommending a theory that was developed before the PC was invented? I welcome your comments.
brandconsultantasia.com 