Consumers have changed, has your marketing strategy?

Doe this sound familiar?

You need to spend time creating a position that is driven by the corporation.

Once created, the position must be communicate across traditional media (with a nod toward social media, but a nod only) to as many people as possible and hope that some of it sticks.

If it doesn’t, create a new position and repeat ad nauseum. Hopefully you will get it right. If you don’t, well you can always discount. This model was developed by Jack Trout in the 1970s. I wrote a blog post about it here

Sadly, despite US$1.5 trillion spent annually on marketing, 70% of today’s manufactured goods will be obsolete in six years (Industry Week magazine). There are estimated to be more than 30,000 new product introductions in the US alone every year, and that’s just in the packaged goods market. According to AC Nielsen, up to 90% of products fail to become brands. This means that as many as 27,000 of those new products will fail.

Today’s consumer has changed the way he lives his life and moreover, markets are so fluid, spending time developing a position and watching your competitors is the fastest route to business oblivion.

The key to success is the sales force and their ability to build your business through collaborations and by matching products/services to individual customer requirements for value and then maintaining those relationships and your brand communities team who develop brand evangelists and influence influencers.

And with social media and modern technology, that is not difficult. A lot less difficult than creating a position and pinning all your hopes on, well hope.

What is the difference between an advertising agency and a brand consultancy?

As the consumer landscape changes and consumer habits and the purchase decision making process evolves, it is imperative that brand owners understand where, when and how to spend their valuable and increasingly limited resources.

Historically advertising agencies defined and controlled a brand’s message and through which channels it was broadcast. They would then blitz consumers with intrusive advertising and messages. The goal was to reach as large and as broad a target audience as possible on those platforms with the most extensive penetration.

But in the social economy, consumers have little faith in such corporate driven messages broadcast across mass media channels to which they are paying less and less attention.

Today consumers spend their time in a variety of social networks or in niche online communities with likeminded people. And it is to these people they look to when seeking information on products and services.

So does this mean the end of advertising agencies and advertising? Definitely not, there is still a need for good advertising agencies that create good work but the process has changed and the advertising agency can no longer be given responsibility for building brands.

In the past, branding and advertising used to be elements of marketing. Today, marketing and advertising are now part of branding and it is the brand consultant you should look to if you want to build a brand.

So here is an outline of the difference between an advertising agency and a brand consultancy. Hopefully this will give you enough knowledge to make an informed decision on who should build your brand.

1) Branding is strategic and advertising is tactical. The most strategic actions you will get from an advertising agency will be a brief. The brief will define the proposition that the advertising must communicate and to which segments. But then what? And what about internally? How will you get personnel on brand? Does the delivery driver or sales assistant know what their role is in the delivery of the promise/s made?

A brand consultant will develop a brand plan or brand blueprint that will drive the brand strategy, both internally and externally. This holistic approach will address all key elements of the brand from the copy used in recruitment advertising to customer facing departments and their ability to represent the brand to point of sale and retention strategies and more.

The brand consultant will then work with you to determine the best resources to use to get the whole organisation on brand.

It is not possible to define a brand through an advertising brief but it is possible to define a brand through a brand plan or blueprint.

2) Advertising agencies do advertising. That’s what they are good at. In fact some of them are very good at it. Advertising uses creativity and a slick message (normally defined by the organisation) to get your attention.

And this is done via campaigns pushed out across TV, radio, billboards, websites and so on. The idea is that enough people will see the campaign and the message will hopefully resonate with as many people as possible. And of course the agency gets a commission for placing these ads with the channels.

If it doesn’t work you either get the agency to come up with another creative idea and go through the whole process again, get rid of the agency, hire another one and hope they can come up with a creative campaign that does resonate or you can go out of business.

And as consumers have lost faith in traditional marketing and now distrust the messages contained in such campaigns or simply miss them because of the clutter, it is increasingly difficult to build a brand using such a model.

So unless you have very, very deep pockets and can advertise consistently for long periods of time, this approach is simply going to waste valuable resources.

A brand consultant will carry out an audit of your business, industry, processes, systems, stakeholders and more and then determine the best way forward for you.

Solutions may require advertising but will also look to improve R&D, sales, production, supply chains, operations, customer relationships and retention strategies.

3) If you are looking to go with an advertising agency, your strategy is likely to be in the hands of a creative director and his team. If the agency is going through a difficult period and doesn’t have many staff when they win your business, the agency will attempt to employ talent with experience in your industry.

Unfortunately, if the talent isn’t available, perhaps because they are working for competitor agencies, you will end up with sub standard people working on your brand and your chances of success are reduced further.

Because branding is a strategic institutional initiative, not a marketing initiative and therefore must have the buy in of executive management, a brand consultant will insist on having C level involvement in the development of the brand which places your brand strategy where it should be, in the hands of executive management.

4) Advertising agencies are often deemed successful if they have won lots of awards for creativity not whether a campaign increases sales or profitability.

There aren’t many awards for brand consultants which is a good thing because this allows them to focus on increasing profitability, often through developing and strengthening relationships with stakeholders and customers.

5) Most advertising focuses on a series of tactical initiatives to acquire customers. A brand consultant will develop a strategy to acquire and retain customers.

6) Traditional marketing activities are enormously wasteful as much of the advertising targets irrelevant demographics or customers that cannot afford or are not interested in the product. A recent report in the Harvard Business Review quoted a UK study that reported 72% of CEOs are tired of being asked for money from marketing departments without an explanation of how it will increase business.

Furthermore, in the same survey, 77% of CEOs have had enough of talk about ‘brand equity’ that can’t be linked to any real equity. A brand consultant will ensure budgets are spent on the right strategies for the right segments with metrics for measurement.

7) An advertising agency uses a one size fits all series of tactical advertising campaigns that use mass marketing across mass media with only a nod to digital and below the line activities.

A brand consultant will look to collect and leverage specific data to develop targetted communications across digital channels to engage prospects, whilst carrying on conversations with existing customers.

8) An advertising agency will often look at what the competition is doing and try to position an offering based on competitor actions. This approach is flawed because successful organisations are nimble and by the time you have developed your position the competition’s strategy will have evolved.

A brand consultant will be aware of competitor activities and will use that knowledge to strengthen the firm’s competitive advantage but will not allow competitors to define strategy going forward.

9) The impact of an advertising agency’s work is difficult to measure. A brand consultant will develop metrics to measure promotions, advertising and other activities.

Luxury branding in Malaysia & Asia

Despite the global economic meltdown, the development of the retail sector in Malaysia continues at a phenomenal pace with over 1,000,000 square foot of additional mall space becoming ready this year. Passing almost unnoticed however is the proliferation of international luxury brands in many of those malls. Familiar international names such as Asprey, Giorgio Armani, Prada, TOD’s, Van Cleef and Arpels and so on, have all entered the local market in recent years, encouraged by the success of exclusive names such as Bulgari, Cartier, Hermes, Louis Vuitton, Rolex and other famous names already familiar to KL shoppers.

Unusually in Malaysia, The Pavilion has clustered its luxury boutiques into a high profile area facing Bukit Bintang. Globally, this clustering of stores is nothing new. For centuries stores have organized themselves into districts based on what they sell – think Saville Row in London (tailors), Faubourg Saint-Honore in Paris (designer boutiques), Deira in Dubai (jewelry), and so on. The cluster approach allows the rich and famous to be dropped off in front of the store, rush in and make a purchase that would make a small African country drool and then rush out into the safety of the limousine without having to rub shoulders with the rakyat.

With its double story street facing façade the luxury section or ‘couture precinct’ of the Pavilion is an exciting development in the evolution of the retail sector in Malaysia. But there is one thing missing from this development. That is a luxury Malaysian brand.

And as Malaysia moves from an Original equipment manufacturer (OEM) economy to an Original brand manufacturer (OBM) economy, and the government rams home the need to move up the value chain, the retail sector, where so many Malaysian OEM cut their teeth, should be at the forefront of this step up the value chain. Especially as according to the MasterCard Worldwide Insight report, the value of the market for luxury products and services in the Asia-Pacific region will jump from US$83.3 billion in 2007 to US$258.7 billion in 2016. Not a bad segment.

What’s more, there’s already a ready made market because the largest number of tourist arrivals to Malaysia is from ASEAN countries, followed by Japan and China with India and the Middle East not far behind. And the burgeoning middle classes from these countries are notoriously brand conscious.

This interest almost obsession with brands is likely to continue according to Radha Chadha, author of “The cult of the luxury brand”. She believes that the Asian interest in luxury products is because of the massive changes – social, cultural, economic and political that have been affected by the traditional attitudes to who you are and where you are in the societal food chain.

She believes that over the past 50 or so years, many of the traditional cultural indicators of social standing in Asia – profession, family, clan, caste have been eroded by the onset of globalization, migration and education. Free of rigid social hierarchies, mass migration and the development of urban areas, more people are making money and making it faster. The way to differentiate oneself is by purchasing a luxury product that shouted, “I’ve got money, respect me.”

Displaying one’s status through outward appearances of rank and wealth is nothing new but Asians seem to have taken to it like the proverbial duck to water. And those LV bags, Chanel suits, Jimmy Choo shoes aren’t simple female indulgences, they are part of a new world order that identifies the wearers position in society. Indeed, these luxury brands are a modern set of symbols that Asian consumers are using to redefine their identity and social position.

The Japanese have been devouring brands for years. 94% of Japanese women in their twenties own a Louis Vuitton bag. In fact, the Japanese as a whole are the most brand conscious and a staggering 92 per cent of Japanese women own a Gucci bag, 57 per cent own a Prada one, and 51 per cent own a Chanel bag.

In fact, Japanese passion for luxury brands is so huge that they account for over 40 per cent of worldwide sales for most major luxury brands. Meanwhile, Asia accounts for a third of Louis Vuitton sales worldwide whilst Cartier depends on the region for half of its worldwide sales.

And what of China? According to the China Brand Strategy Association, 175 million Chinese people can now afford to buy luxury products. By 2010 their number is projected to reach 250 million. Already, Chinese consumers are responsible for about US$10 billion of global luxury sales. Following the announcement of the US$586 billion stimulus that is expected to encourage increased spending, 70% of consumers confirmed that they will spend more in the next 6 months than they did in the previous 6 months.

Rolls Royce, the iconic British luxury brand owned by BMW, expects to double annual sales volume from 1,000 to 2,000 when the new, smaller ‘Ghost’ is launched in 2010, many of the early enquiries for the yet to be launched model are from Asia. Not bad considering each car will cost over US$200,000.

So, with all this new found wealth in Asia, the time is ripe for the development of Malaysian luxury brands. And the good news is, Malaysian firms know how to manufacture quality products. They’ve been doing it for years for iconic brands such as Apple, GAP, Guess, Ralph Lauren and other well known global brands.

But developing a luxury brand is also like raising a family – it requires a long-term commitment and investment, attributes that don’t sit well with corporate Malaysia. It also requires limited production, value over volume, even with a successful line. It also requires quality, not only in production but also in marketing and service, especially service. Training of staff is key. Walk into the Cartier store in Kuala Lumpur and the staff will assess you based on a number of pre-determined factors. Pass the test and they’ll offer you a bottle of champagne to anesthetize the pain of the purchase!

Ongoing research is also critical to the long-term success of the luxury brand. Back in 1837, when Hermes was building its brand, the founders lent new products to customers to get feedback on how the products could be improved. Zara applies the same tactics today. If a new line doesn’t sell, it is pulled off the shelves immediately and replaced with a new range based on customer feedback on styles.

One mistake many brands make is that they ignore existing customers, preferring to always acquire new customers. The successful luxury brands have an ongoing relationship with their best customers who become brand ambassadors and grow the family.

And for those cynics who don’t think Malaysians can build luxury brands or that there is any money in luxury brands, think of Jimmy Choo, the closest Malaysia has come to a luxury brand. Six years after Jimmy Choo sold his 51% stake in his own company for US$25 million, TowerBrook Capital Partners recently paid more than US370 million for ownership of the iconic brand named after the charming cobbler born in Penang in 1961. And with annual sales that have grown since 2001 at a compounded rate of over 45% to more than US130 million today, the purchase looks like good value.

Another British based private equity group, Permira, paid US$3.5 billion a couple of years ago for the Valentino Fashion Group. This was one of the most talked about acquisitions of the year because although Valentino is a well respected brand in Europe, it does not have the penetration in Asia of say Giorgio Armani. This is reflected in the global sales of US$340 million for Valentino compared with US$3.1 billion for Giorgio Armani.

There is also a strong argument to suggest that luxury brands are recession proof. At the end of last year, when the American economy was in free fall, Saks Fifth Avenue had a massive sale, offering huge 70% discounts on iconic brands such as Manolo Blahnik and even Prada. However, at the Louis Vuitton shop inside the luxury department store, nothing was reduced. Recently, Moët Hennessy Louis Vuitton announced that sales in its fashion and leather goods division, which includes Louis Vuitton, increased by 11% to $2.1 billion in the first quarter of 2009.

So, as the average tourist spends only 22% of his budget on shopping in Malaysia compared with 50% in Hong Kong and Singapore, the time is ripe for Malaysian firms to start building brands that can take pride of place alongside Canali, Ermenegildo Zegna, Jean-Paul Gaultier and Versace in places like the Pavilion, Star Hill and other prominent malls in KL.