Category: positioning

More effective brand communications required to build the Volvo brand in Malaysia

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Building a brand in any country requires more than a series of tactical initiatives to create awareness and ‘get the name out there’. It takes a meticulously planned and integrated strategy that incorporates the participation of numerous stakeholders and initiatives, both internal and external. Internally to ensure the whole organisation is on brand and externally to ensure communications and content resonates with target markets and are communicated via relevant channels. There’s more but for the purpose of this article that’s enough for now.

And what if the brand is to penetrate other markets? There was a time when all it took to do this was a continuation of the positioning tactics carried out in the home country, perhaps with a few language changes in print media and perhaps some dubbing of TV commercials (TVCs). An over simplification perhaps, but essentially correct.

But as we all know, the world is very different today.

Building western brands in Asia
To build a Western brand in Asia today, as many international brands are finding out the hard way, takes an even more robust and integrated brand strategy that has at its core organisational excellence. Only once has that strategy been developed can the brand strategy be executed. And part of the brand strategy, a small but critical part, is the communications campaign.

This is particularly true of the automotive industry that has seen a number of well known European and other Western brands find it hard to repeat the successes at home in new Asian markets. There are other issues such as high duties etc but many European brands perform below expectations, despite large marketing budgets.

One of those is Volvo. Despite an extensive presence across most media, in 2009, out of a total industry volume (TIV) of just under 537,000 units, Volvo only sold 600 cars in Malaysia, South East Asia’s largest passenger market. This gives Volvo about 0.15% of the market. Although this is a slight increase over 2008 when Volvo sold 524 cars, it is way below the 2007 total of 752 units. Interestingly, in 1999 Volvo sold 839 cars, giving it 0.3% of the market. So Volvo’s market share of the Malaysian passenger car market has halved in 10 years. I think I know why.

Last Thursday, 28th January 2010, a half page full colour ad in the New Straits Times, (NST) Malaysia’s ‘premium’ newspaper caught my eye. The ad features the Volvo V50 and a headline “There’s more to life with Volvo.” The ad goes on to sell space and luxury using images of a kayak, a windsurfer and a mountain bike. The ad lists, in really small print, a number of dealers in key cities. There is no website address.

Last Friday 29th January 2010, Volvo ran another half page ad in the same publication, this time a spot colour ad. This ad features a Volvo XC60 parked on a snow covered road with the occupants, a man and a woman in warm fur collared winter parkas sitting in a pile of snow staring out at a snow covered landscape. This time the headline is “Volvo owners get more out of life!”

If I’m not mistaken, the traditional rule of thumb has it that you have approximately 3 seconds to grab a readers attention with a print ad headline, perhaps less in today’s noisy, cluttered world. I don’t know how effective the Volvo ads have been but I did notice that the offer in the second ad has been extended, rarely a good sign. I also noticed that there is no tracking mechanism in the copy. And, in case you can’t read it, the tagline in the print ad reads “Volvo owners get more out of life!” So the ad is targetting both existing and potential customers.

Coincidentally, there is a Volvo billboard outside my office, at the busy intersection of a very busy highway. The billboard ad features the Volvo XC90 Diesel. This time the headline is “Winner of fuel efficiency award.”

Sitting in my office in the Malaysian capital of Kuala Lumpur where the recent hot spell has seen the temperature top 40 degrees centigrade on more than one occassion and the humidity is often around 90%, I tried to figure out a couple of things.

1) What was the relevance of these communications to potential and existing Volvo owners in Malaysia?
2) Why are they using images featuring snow to sell a service in the tropics?
3) Why is an ad targetted at existing Volvo owners also trying to get the attention of non Volvo owners?
4) Where is the consistency?
5) Is this part of a planned out, integrated strategy or a series of one off tactics?
6) Why would anyone get out of a nice warm car and sit on wet cold snow to admire the view?

OK, ignore the last one.

Hemorrhoids and Frost bite
Well as far as I can tell, more out of life for the couple featured in the second ad is likely to be hemorrhoids and frost bite. I don’t mean to be fecetious, but what is the relevance to the Malaysian market? There are some marketers who insist that to build a brand you need to be first in a category and perhaps Volvo wants to be first in the frost bite category but I think not.

More confusing is the content. The main copy of the ad is encouraging existing Volvo owners to bring their cars in for servicing, repairs or to buy accessories and be entered into a competition to win vouchers that can be redeemed for more accessories and parts. Shooting off on a brief tangent, the takeaways I get from that copy, as a non Volvo owner are, in roughly equal amounts:

1) you are going to be spending a lot on parts and accessories so here’s a little help or
2) these cars are built so well that you will never actually win anything because nothing needs to be repaired but the model sold is so basic you’ll be spending a lot on accessories. Interestingly Volvo also offers a 3 year warranty/100,000km for cars sold in Malaysia so if you’ve got a new car you may have to wait 3 years to receive your prize!

Seriously though, The Volvo communications are confusing. Furthermore, according to the Star newspaper, 86% of Malaysians don’t trust advertising. So that means the print ads mentioned earlier are targetted at only 14% of Malaysians. Moreover, with an entry level Volvo S40 at around RM170,000 (US$48,000) it is off the radar of the average Malaysian so a mass media approach is a waste of valuable funds.

There are a number of other things Volvo can do to halt the slide in its market share and build a profitable brand in Malaysia.

1) Separate the acquisition strategy from that of the retention strategy.
2) An indifference to retention branding is short-sighted. Michigan State University estimated that US$1 spent on acquisition generates US$5 in revenue, while every dollar spent on retention creates US$60 in revenue. Bain and Co has estimated that increasing retention by 5% can increase profits by 25%. Companies have a 5 – 15% of selling something to a new customer, but a 50% chance when selling to an existing customer. But retention branding requires a completely different strategy to acquisition branding.
3) In the mass economy the brand communications goal was to increase awareness. This evolved into persuasion but the ultimate goal today is adoption. Adoption ensures the brand is seen as the best or, better still, the only choice. But adoption of a brand is not an event it is a process built on the back of organisational excellence and reinforced by the ability to deliver relevant solutions on customer terms.
4) Volvo cannot expect adoption if messaging is inconsistent and fragmented. If print campaigns and billboards are to be part of the brand communications, keep them consistent. Announcing fuel efficiency awards is not going to drive traffic to showrooms.
5) Review communication tools and explore social media options. I believe there is no benefit at all for a luxury product like Volvo to advertise in a daily newspaper in Asia.
6) Understand social media is for communities and those communities must be relevant. The only opportunity for interaction on the Volvo website leads the viewer to an international site. Volvo owners in Malaysia will want to be part of a community here, and learn about issues and opportunities in Malaysia, not in Istanbul.

The purpose of this article is not to embarrass Volvo. So if anyone from Volvo reads this article, please view my comments as feedback, not criticism. There are a number of automotive manufacturers making similar mistakes but Volvo caught my eye!

Stop your product joining the 95% club

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According to an Ernst & Young study, the failure rate of new U.S. consumer products is 95%. 95%! Imagine if Boeing or Airbus had a 5% success rate! Yet despite this appalling return, companies spend approximately US$1.5 trillion on marketing, and in particular advertising, annually!

A couple of years ago, (before the explosion of social media, Dominique Hanssens, a director at the Marketing Science Institute in the US and a professor at UCLA’s Anderson Graduate School of Management, reported that the average advertising elasticity for established products is .01. He went on to say that if one of those brands increased its advertising expenditure by 100%, it would see a sales increase of only 1%.

He used as an example Anheuser-Busch. If the firm doubled the US$445 million that it was spending at the time on TV, print, radio, outdoor, and Internet advertising, it would enjoy a 1% increase in net revenues from the then base of US$5.7 billion. Put another way, Anheuser-Busch would spend a total of US$890 million to make US$57 million.

We have to accept that mass economy models that made global brands out of such products as Coke, Budweiser, Marlboro, Sony and others are no longer relevant. And if firms continue to invest in outdated tactics that no longer work, their products will join the 95% club.

If they are to survive, brands today must address current branding imperatives. Current branding imperatives include building and maintaining relationships with customers and partners, internal communication, education, understanding and adaptation of corporate goals throughout the organisations.

Clearly defined organisational processes that are developed with the customer in mind and not shareholders or the organisation. These processes must be developed for both customer facing and non-customer facing departments, not independently but in tandem.

Communications, including advertising are important, but not the traditional one size fits all mass market approach. Communications must understand the requirements of prospects and customers and communicate with them using content that resonates with them via channels that are relevant to them.

Branding imperatives also require effective use of technology and, most important of all, ongoing feedback, measurement and improvement. These establish the foundations for identifying prospects and acquiring and retaining (key to brand success) profitable customers.

If John McEnroe were to play tennis against Roger Federer today, using the racquets he played with back in the day, he might win a few points but he is going to lose the match. It is the same for companies who fail to adapt to the branding imperatives of today.

If consultants recommend you emulate models used by such brands as Coke, Pepsi, Sony and other mass economy brands that were built when tennis racquets were made of wood, show them the door. Likewise, enormous budgets, integrated, synergistic, holistic, innovative, design or creative driven, energetic, positioning campaigns will not establish a brand.

Companies, and governments must understand that there is no quick way to build a brand. It is this obsession and belief that there is a silver bullet and it is called advertising that keeps the 95% club growing.

Dodge seeks survival with mass economy approach

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Chrysler has, like most US auto manufacturers, with the exception perhaps of Ford, seen its market share drop further in 2009. But this time it is down below the psychological 10% barrier at 8.9%, down from 11% in 2008. Sales are down a worrying 40% over the same period. This is not good, especially as the company stated in early 2001 that it intended to have 20% of the US market by 2005.

A restructuring plan in November 2009 introduced a number of initiatives including using models from Europe to mask the fact that Chrysler has made little investment in new products.

In what has become a depressingly familiar process, executives at the restructuring also introduced a number of new positioning strategies for the Jeep, Ram and Dodge brands. According to the executives, new models are to be redesigned or improved in times quicker than ever known to the industry. Ambitious sales figures include global sales targets of 2.8 million vehicles by the year 2014, of which about 60% are projected to be in the US. The firm forecast break even in 2010 and anticipated posting a profit in 2011. Revenues are forecast to be in the region of US$70 billion.

Specific brand initiatives include the biggest marketing budget for the Jeep brand in four years. Showrooms are to be redesigned to reflect off road heritage and Jeep managers will engage more with consumers at events. Meanwhile at Dodge, another new logo has been created to reflect a ‘sporty, youthful, inexpensive’ car. New entry level cars are to be available in different ‘flavors’ or equipped ‘differently’ not ‘expensively’. Are there such words as ‘differently’ or ‘expensively’?

Ralph V. Gilles was appointed President and Chief Executive Officer of the Dodge Car Brand in October 2009, with full profit and loss responsibility for the Dodge car product portfolio. Before this he was VP of design. He is responsible for halting the Dodge slide but to do so he is going to need more than a new positioning strategy, new logos and a one-size-fits-all approach to marketing. Unfortunately the signs are not good as he has appointed Wieden & Kennedy, an advertising agency to build the Dodge brand.

Gilles is on record as saying that Dodge cars are, “Cars that make you feel good, that are niche-like in their demeanor, but have mass appeal.” Well I’m sorry, but that sounds to me like a one-size-fits-all typical mass marketing ad agency driven concept that will, in the end, appeal to nobody.

What do you think?

Singapore Airlines Suites, branding blunder or recession victim?

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There have been numerous branding blunders and you can read about some of them here but rarely does Singapore Airlines feature. Singapore Airlines (SIA) consistently leads the industry in profitability and manages to ride out turbulent times better than most in its class. It has always been aggressive, acquiring aircraft and expanding its fleet quickly, in 1979 it set a record at the time, when it traded relatively new aircraft for an updated version of the B-747 for a then record of S$2.2 billion. SIA also differentiated itself early on with its adoption of the Singapore Girl as the face of the airline and service as the unique selling point.

But the world of today and the world of the 1970s are very different. The 1970s were the halcyon days of the mass economy. In the mass economy, with its mass markets and mass media, perhaps a little bit of help from the government and a large dose of nationalism. And by broadcasting the same message to large audiences who had limited sources of information, it was a lot easier for an airline to establish a brand.

More of this and more of that and better this and better that or bigger this and bigger that coupled with large advertising budgets worked well. As competition increased, consumers became more segmented and media choices fragmented, like many other industries, airlines turned to positioning as a strategy.

Positioning
Positioning consisted of creating a position in prospects minds that reflected the strengths and weaknesses of the offering as well as those of competitors. Ideally, this position was based on being first in a particular category. If someone was already first in a category, then companies attempted to redefine themselves in a new category to be first. In the airline business, this tended to be related to passenger comfort or service. The effectiveness of positioning depended on the ability of advertising to drive branding perceptions in the mind of consumers. To do this, airlines often made promises they were unable to keep (admittedly, often due to third party issues out of their control), failed to meet traveller expectations, often because dynamic competitors moved quickly and so raised the bar, which in turn led to brand disillusionment.

Positioning was ideal for the mass economy. It was also ideal for advertising agencies and marketing departments because it gave them enormous power without the responsibility of accountability. Al Ries and Jack Trout invented the concept of positioning. The preface to one book states, “Positioning has nothing to do with the product,…. (it) is what you do in the mind of the prospect.” So, essentially this means that the consumer can be made to believe, through extensive advertising and PR in the right conduits to consumers, and other vehicles, what an offering means to them.

Airbus A380
When Airbus announced it’s super plane, the Airbus A380, ever aggressive, SIA was one of the first to sign up and the first A380 delivered was delivered to Singapore Airlines on 15 October 2007. It entered service on 25 October 2007 with an inaugural flight from Singapore to Sydney. Passengers bought seats in a charity online auction paying between US$560 and US$100,000 for seats. Understandably, the new aircraft, a clever publicity stunt and an inquisitive general public, generated a lot of media coverage and by the end of February 2009, a million passengers had flown with Singapore Airlines on the A380.

Suites
But the majority of those passengers are flying economy. The problem has been getting passengers to use the suites, positioned as, “a class beyond first.” When the new A380 service was launched, in the way that has always done, SIA used global TV, print and online advertising and PR campaigns to launch the new A380.

Beautifully executed TVCs were developed for the Suites by a top advertising agency using taglines such as “your own private bedroom in the sky”. Other taglines included “an unprecedented level of privacy” in a “cabin unlike any other”, and sleeping on a “standalone bed that was not converted from a seat”. Givenchy Beddings (and pyjamas) Ferragamo toiletries and Krug or Dom Perignon were also part of the deal.

But despite a unique product, some slick marketing based on a huge investment in a one-size-fits-all message to mass markets using mass media, consumers and corporations haven’t bought into it. Why not?

Lack of research
One of the reasons could be that SIA didn’t talk to customers and prospects about what they might want from such a service, and, more importantly, how much they would be preparred to pay for it. In fact, it appears that SIA didn’t even engage with members of its Frequest Flyer Programme. SIA simply went ahead and developed the product and then, in a traditional 4 Ps (product, price, place and promotion) and positioning strategy, tried to sell it.

To make it even harder for themselves, and despite charging a premium of more than 50% over the first class fare, SIA would only reward loyal members of its Frequent Flyer Programme (FFP) Krisflyer with 10% more miles than a regular first class ticket! Moreover, any redemption of miles could only be for economy, business or first class and not for the Suites!

According to Shashank Nigam, “Several HR departments of companies, including civil service departments in Singapore, issued circulars or directives stating that “Since the Singapore Airlines Suites are a class beyond first, officers who are usually eligible for First Class travel will be ineligible for Suites”. So by now, SIA had upset its two most important customers, its own government and elite members of the frequent flyer programme!

In 2008, as the economic crisis began to take hold and suite sales nosedived, SIA maintained its pricing strategy, making it even harder for financial institutions, already under scrutiny for lack of risk management, to justify such extravagance.

Another reason for the poor response is probably related to the ground experience. Although positioned as a class beyond first, elite passengers were expected to use the same check-in facilities as passengers travelling in first class, the same lounge and essentially, the same food as first class passengers.

Premium revenues drop by 40%
By the middle of 2009, SIA was feeling the heat on a number of fronts. The economic situation gripping the world caused international premium passenger numbers to fall by 18% year on year in the first 10 months of 2009. At the same time, premium revenues dropped by up to 40% over the same period (IATA). Another challenge was from competitors such as Emirates and Qantas who don’t offer Suites but do have exceptional first class experiences including cabins on their A380s that feature a Bar and bathrooms with showers, limousine transfers at departure and arrival (not available to SIA passengers, even those using Suites).

SIA reviews incentives
SIA scrambled to recover some marketshare. The first incentive was a free night’s accommodation at the Raffles Hotel in Singapore for all passengers flying Suite class. Neat, but hardly enough to justify a 50% premium over first class. Then SIA remembered the people who have made it such a success story in the past, first class passengers and lucrative members of Krisflyer. SIA relented on the bonus miles and began offering 300% bonus miles instead of 10%. Definately a step in the right direction but perhaps too little too late as it is rumoured that a significant number of key SIA customers have defected to Emirates and Qantas. If this is true you can be sure these airlines will make it harder for these premium passengers to leave than did SIA.

So what could SIA have done better? Here are 5 things I would have done although, if they had done number one the rest would have been redundant. What else would you have done?

1) Research. Your existing customers are your best source of information. Talk to them, find out what they are looking for and match attributes to their requirements for value. If SIA had talked to its premium passengers and its own government departments, it would have realised that the market could not support the suites product.
2) Mass market branding with a focus on the 4 Ps is no longer effective. Brands today are built on relationships, access, personalisation and relevance.
3) SIA should have focussed on developing more profitable relationships, not a more profitable product. Brands evolve when companies start buying for customers instead of selling to them.
4) Branding is an organisational not a departmental responsibility. And the organisation is the responsibility of the CEO. To expect a passenger to pay a 50% premium over the price of a first class ticket and not offer a limousine service on the ground when all competitors offer it to first class passengers shows a real lack of judgement.
5) Retention is key to brand building. Companies no longer sell a product, customers buy a product. And once they’ve bought the product, companies should do everything possible to hang onto those customers.

SIA is a great brand. As I write this, I am sure SIA is working out what to do with its Suites. If SIA aims to meet customer requirements for emotional, economic and experiential value, then the airline will bounce back stronger and better for the experience and the Suites can be written off as a victim of the recession. If they don’t the suites may become yet another branding blunder.

Does shock and awe advertising still work?

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This is a brutally graphic public service announcement from Australia’s Transport Accident Commission (TAC). Viewer discretion is advised.

This is an immensely powerful piece of work beautifully executed. And it had an emotional impact on me. All the characters resonated with me as I imagined myself as many of them at various stages of my life. At the end I was breathless and close to tears.

But the question being asked by Bill Green is “Does this stuff work? Really work?” According to Bill, TAC says yes. According to TAC, “in 1989 the first TAC commercial went to air. In that year the road toll was 776; by 2008 it had fallen to 303”. That fell again to 295 in 2009. However, despite these powerful commercials, 16 people died over the Christmas period.

Topically, I have just spent 10 days in Australia over the festive period and the only TVCs I can recall were for alcohol (beer and hard liquor) and fast food. I was stunned to see so much alcohol advertised on TV. I didn’t see this TAC commercial or if I did, it didn’t register.

Using creativity to communicate
Advertising, and in particular well executed advertising, used to be a great way to reach a great many people over a relatively short period of time. With less competition, more accepting and attentive consumers, such reach could ensure the message was received and absorbed by the right people. Not anymore. Mass media has fragmented into niches and communities. Using creativity to communicate a message is no longer effective because the message is blocked out or soon forgotten because we simply don’t have the interest or bandwidth to absorb all the messages assaulting us throughout the day, every day. Increasing frequency doesn’t help, it makes it worse as it adds to the noise. Even beautifully executed work like this is lost in the fog of products and services.

I wrote an article about a similar approach used toward smoking in the UK and Malaysia. You can read the full article here,

Chilling commercials don’t work
With smoking, the research, carried out over 10 years by the Institute for Social and Economic research found that the warnings on cigarette packets that smoking kills or maims are ineffective in reducing the number of smokers. Likewise, chilling commercials or emotionally disturbing programs are also ineffective. The study also discovered that when a close family member become ill from the effects of smoking, the smoker takes no notice. In fact, according to the study, smokers only reduce the number of cigarettes or sometimes quit when their own personal health is at stake.

In Malaysia, despite nearly US$50 million spent on shock and awe campaigns to create awareness of the dangers of smoking, the number of smokers has practically doubled every 10 years. Whether or not there are parallels between campaigns for smokers and those who drink and drive, I don’t know.

Personally, I suspect that the reductions in fatal traffic accidents since 1989 are due to better safety features in cars, better roads, better lighting, highly visible enforcement measures, increased penalties for offences such as not wearing seatbelts and using mobiles, reductions of speed limits, more drug testing and better educated consumers.

The key then is not to add to carpet bombing of consumers via advertising, but to identify how those consumers become better educated? Was it the commercials or a reaction to the commercials or other initiatives?

Pubs legally obliged to breathalyse patrons
This can be done using qualitative research with consumers and then use that data to forge future strategies. It may be expensive and time consuming, but it will give us the answers we are looking for and determine future strategies. Of course it may be that it is not the commercials but in fact peer pressure at key times such as when consumers leave a pub, club etc. I think this may be the case and I see a time, not too far in the distant future when all bars and restaurants have to, by law, breathalyse all patrons as they leave the premises.

Personally, although this is a powerful TVC, I wouldn’t watch it again. If this commercial came on, I would change channels because if I am watching TV, I don’t want my leisure time to be challenged by issues I don’t want to address at that particular time.

Thanks to Andy Wright for the heads up on this story.

The organization is the brand

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Japan Airlines was established as the national flag carrier of Japan in 1953. The government was the largest shareholder and for over 30 years, JAL was the only Japanese domestic airline with the rights to fly international routes. In other words, as a government entity it had a monopoly on those prized international sectors.

Rather than employing professionals in the industry, the government tried to run the airline, creating bureaucratic inefficiencies that had little inclination to deliver the value customers are looking for.

Hope came in the late 1980s when the government sold it’s stock in the company and the airline was privatized. In 2002 Japan Airlines System was incorporated to manage JAL and by 2006 the airline’s daily operations had reached 192 international routes and 387 daily flights.

A new brand identity and aircraft livery themed around ‘the arc of the sun’ was created and it was hoped that ‘the identity would help JAL build a stronger global brand and position a JAL flight as a means to acclimatizing to Japanese culture, attempting to attract more international business people flying to Japan to choose JAL over other international carriers’.

In 2010, JAL is fighting off claims of imminent bankruptcy by multiple media organizations. According to etravelblackboardasia.com, JAL has experienced financial difficulties for quite some time and currently owes more than US$5.8 billion.

JAL shares plunged to a record low in Tokyo trading last week, however the airline is still positive that it will experience a turnaround with the support of the Japanese government. The site also quotes a JAL spokesperson as saying that reports that JAL was planning to cut all of its international routes to cut costs are 100% false.

Well, only time will tell but it is crystal clear that the airline is in big trouble and is surviving on bail outs from the ETIC (Enterprise Turnaround Initiative Corporation of Japan).

What lessons can other legacy carriers learn from this?

Using creativity to build a brand.
When Japan Airlines and Japan Air Systems merged, the idea was to provide the foundations for a more efficient organisation to compete both domestically and internationally. Nothing wrong so far.

Next came the development of the brand image. This was to clearly communicate the fact that the merger had created a new and improved organization. According to Landor, the JAL agency, “the JAL brandmark needed to express a new business philosophy and strategy and at the same time be flexible enough to apply at every touchpoint where travelers, airline employees, and travel advisors have exposure to the brand.”

Landor also says on it’s website, “The JAL mark reaches dynamically to the sky. It is derived from the motif of a rising sun, one of the best-known icons of Japan. The mark is drawn in a modern way and is reflected in the red sun on the tail of the aircraft. In 2002, the integrated holding company was established and the JAL mark was introduced. It is now visible in advertising, ticketing, airport environments, and the combined fleet of aircraft. Implementation of the design will be gradually executed through prioritized applications.”

Sounds good, but the problem is that consumers aren’t buying that stuff anymore. Positioning products belongs in a mass economy that no longers exists. There are too many airlines essentially positioning themselves in the same way. This is because positioning and the 4 ‘Ps’ are imprinted on the DNA of an entire generation of marketers. But the market conditions have changed and it is time to bury the concept otherwise we’ll see more companies in the same position as JAL.

JAL should have focussed it’s brand building efforts, not on reaching for the sky with a motive derived directly from the sun but on providing value to customers based on bespoke relationships with existing customers, access, relevant content to relevant segments, userbility, technology and more. Sure a slick identity is important but it will not build the brand on its own.

Strategic relationships
JAL was late joining an airline alliance which meant it couldn’t offer the interconnectivity of competitors. This has had a profound impact on the airline. ANA, JAL’s competitor joined Star Alliance in 1999, eight years before JAL joined ONEWORLD.

Operations
Although once the airline was privatised, it did reduce costs by cutting staff levels and employing cheaper foreign staff, it still operated at high unit costs which had a negative impact on operating effectiveness.

The right technology
It is critical to invest in technology that is user friendly. JAL’s flight planning software is awkward and confusing.

Flexibility
Like many airlines, JAL focussed on attracting customers to the high yield spots at the front of the plane. There is a general theory (I don’t know how true it is) that if you fill business class on a 747, the flight is paid for and the rest is gravy. This is a common strategy but in the recent economic meltdown it’s not a very effective one.

Despite no longer being a government company, JAL was slow to adapt to the economic situation and suffered as a result. It is imperative therefore that airlines become more nimble and whilst a strategic plan is important, it has to be versatile enough to adapt quickly to challenging market situations. At the same time, it has to be adaptable to take advantage of opportunities.

I doubt very much that the Japanese government will let JAL fail. But what about other Asian legacy carrier established by governments to fly the flag globally? Many of them are already sucking funds out of already empty coffers. Will they be alowed to fail?

Organisational excellence required to build global Asian brands

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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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In a social media world, are Billboards a necessity or expensive exercise in vanity?

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We all accept that the way consumers source and absorb data has changed dramatically in the last 10 years. Instead of listening to brands and what they have to say about themselves, consumers now listen to other consumers and buy brands based on data sourced from those other consumers.

The way consumers partition their worlds is also changing and nowadays, consumers segment themselves into communities. For companies, this should be seen as an exciting development because it gives them the opportunity to communicate directly with consumers in pre identified commuities using content that resonates with those communities in a more personalised and dynamic manner and using tools that are widely available and relatively inexpensive.

But when we meet with prospects, they only seem to be interested in traditional tools such as print ads, TV commercials and billboards. And they soon lapse back into semi indifference as we suggest the future is not about these expensive, outdated tools that are increasingly closed out by consumers.

All prospects seem to want is reach, awareness and creativity to build a brand. The high profile, mass economy tools and creative stuff that looks good, reaches the most consumers, irrespective of whether or not the product or service is relevant to those consumers and wins agencies awards.

Even if it means spending millions of Ringgit on immeasurable campaigns that are lost in the fog of messages consumers are bombarded with every day. Even if it means they cannot measure the effectiveness of the campaign with real, actionable data that they can use to save money and improve the effectiveness of future campaigns. Even if the messages within the campaign make claims the company simply cannot live up to, they still prefer this route to less expensive, targeted messages with relevant content to specific communities based on the requirements for value of that community.

It’s as if they are reassured that they are getting value for money because they can see the print ads, the billboards, the TV Commercials and therefore, so can lots of other people. Sure, billboards can be an inexpensive medium to pass on a message to a large audience. Indeed one company BPS states in their marketing collateral, …”Perhaps it’s because they (billboards) reach more people for cheaper prices than any other type of media.” But is reaching more people for cheaper prices a sound strategy for a social media world? From this we deduce that if lots of people see the product or service on TV or on a billboard, then many of them will seek out the product or remember it and buy it when they encounter it in the ‘flesh’. This may have been acceptable in a more sedate world, with limited competition etc. But we all know that in today’s marketplace, this approach is no longer effective.

Is this an Asian thing? Or is it universal? Here in Malaysia, one mass economy tool that is really popular is the billboard. Billboards, and in particular getting a company on one, is fast becoming a national obsession. One prospect recently interupted our strategic proposal and asked us to find a number of billboards at strategic locations across the capital to raise awareness of the company (The company is almost 100 years old).

The belief is that if enough consumers see the product on a billboard, preferably a really big billboard alongside a really busy highway, then the success of the brand is all but guaranteed. This obsession is growing fast. Currently, out of home accounts for only 2% of ad spend in Malaysia, but it is growing at over 35% per annum and is now worth in excess of RM100,000,000 (US$30million).

But I fail to understand the logic in this. Because think about your behaviour when you are driving. Unless you spend your days splitting molecules or working on a vaccine for AIDS, driving is probably the most complicated daily activity you will do. Not only is it a complicated activity that requires great skill, but according to research, it is a skill that consists of more than 1500 ”sub skills”.

When we’re driving, there is no opportunity to relax (This is where a wry grin appears on the faces of Malaysians). Throughout the journey, we are navigating badly signposted and unforgiving roads and terrain that changes on an almost daily basis. We’re constantly scanning the environment (well some of us are) for cars that don’t signal, pedestrians who take their time crossing the road, despite the obvious implications of being hit by a ton of steel at 50km, motor bikes driving the wrong way and debris from a recent lorry puncture. Plus, we’re constantly seeking information that can help us.

At the same time, we’re trying to maintain our position on the road. We’re also constantly checking our speed and mirrors (well some of us are), making decisions (apparently, about twenty per mile), evaluating risk and reward, looking at instruments and, despite the obvious futility, trying to anticipate the actions of the white wira with a black door and five girls in the back.

Whilst doing all this, many of us, and you know who you are, are sending an sms, talking on the phone, sipping from a water bottle or thinking about ___________________(insert name of premier league team). Others are trying to stop yet another fight between irritable kids or starting one with a spouse.

Research from the USA carried out a survey on one stretch of road in Maryland and, “found that a piece of information was presented every two feet, which at 30 miles per hour, the study reasoned, meant the driver was exposed to 1,320 “items of information”, or roughly 440 words, per minute. This is akin to reading three paragraphs like this one while also looking at lots of pretty pictures, not to mention doing all the other things mentioned above – and then repeating the cycle, every minute you drive.” (source Traffic: Why We Drive the Way We Do (and What it Says About Us) by Tom Vanderbilt). With all that going on, do billboards engage consumers effectively?

And billboards are not cheap. In Kuala Lumpur, the most expensive billboard in the country is on the federal highway, costs RM900,000 a year and reaches 252,000 cars daily. Less high profile billboards cost are around RM250,000 – RM500,000 per annum, depending on traffic. But branding requires so much more than reach today. Whilst reaching hundreds of thousands of consumers and creating awareness, especially for a new product may be an important step in the branding process of some products and services, it isn’t a goal, for any product of service.

Now I’m not suggesting for one minute that billboards are a waste of money. However, I am suggesting that you should get independent advice on whether or not it is the right tool for your brand. I’ve seen a number of billboards for B2B companies, one recently was selling shock absorbers. The major investment in that billboard and the production costs, would have been better spent on sales and marketing material to engage the automotive manufacturers and repair shops that purchase shock absorbers.

You also need to be careful how you chose the location. Just because 500,000 cars pass the billboard, doesn’t mean it is a good location. Equally important is the content of the billboard. Writing an essay will defeat the object of the billboard.

Some other questions you need to ask yourself include:

What role do billboards have to play in our brand strategy?
How can we measure the effectiveness of the campaign?
If we can’t measure it, should we do it?
What happens once we take the billboard down? How do we maintain momentum?
How can we leverage the impact of the billboard?
How can we make the billboard stand out?

It may be that a billboard will become a neccessary part of your brand strategy. But it is worth asking yourselves these questions first. Otherwise, your billboard will waste a lot of money that few companies can afford.

If having asked yourself these questions, you still believe billboards are part of your communications campaign, try to make them original. 3 dimensional billboards will definately get attention and so will digital boards. It amazes me when I see a photo of a watch on a billboard. We recently had a huge watch billboard outside our office. It was there for at least a month. No one in the office had ever heard of the brand so we decided to investigate it further to see what other communications were part of the campaign.

We couldn’t find anything so we can only assume that billboard was the extent of the communications campaign. As I write this, two months later, I have asked if anyone remembers the name. Nobody does. That’s probably RM200,000 wasted.

However, if that billboard had been digital and the watch actually worked, then we would probably remember the brand. Of course this doesn’t necessarily mean we would buy the product, but at least awareness levels would have increased.

This article has some great ideas for 3D billboards. A simple search of the Internet will uncover plenty more.

Negative brand association

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Watching news videos on the bbc website. One is on child prostitution (every father’s nightmare) in the US. I won’t go into the details. The video is preceeded by a commercial for HSBC.

It reminded me of a breaking news report on a TV news channel that I saw not that long ago. The story was about a suicide bombing in Iraq that had resulted in over 100 deaths. The ad on the ticker across the bottom of the screen was for Cathay Pacific.

Surely these brands would be better off not being associated with such horrific stories and images of cruelty, depravation, slavery, carnage and murder? Stories that show the worst possible side of the human race. Or perhaps HSBC deliberately positions the commercials before such stories because the commercial projects the image of good people. This is the sort of ‘out of the box’ advice that a creative agency might give.

Is there any scientific evidence to say these associations have a negative impact on the brand?

The branding rules of engagement are evolving quickly

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What many brands don’t appreciate is that we invest a great deal of our valuable time, effort and money waiting for the opportunity to spend our hard earned cash on them. Paul McCruddon, a digital strategist and blogger in the UK knows this better than most and got tired of brands mucking him about and appearing not to appreciate the fact that they are, as he puts it, “stealing my attention.”

Earlier this year after calculating his time is worth about £102 per hour, he recorded how much time he spent waiting for service in diverse places such as a post office, shops and restaurants as well as spending 45 minutes waiting for a train at Preston station and so on.

The data is impressive. For instance, and I quote: “ (I) spent 20 hours and 50 minutes with Transport for London mainly taking the tube day in day out. And as a result of that, I’ve spent 2 hours and 35 minutes reading Metro and 80 minutes reading The London Paper, not to mention all the planted PR stories and adverts they contain. For the food shop, I spent more time at Marks & Spencer (5 hours, 16 minutes), but significantly more money at Sainsbury’s (£455). And as for eating out, then Pizza Express will find that their 2 for 1 voucher went down a treat (6 hours, 53 minutes), meaning that I didn’t spend nearly as much time and money in their competitor restaurants, with the exception of the reliable Carluccio’s (5 hours, 40 minutes).”

Paul feels therefore that these companies all owe him money. So, and this is where it gets really interesting, he sent invoices to 50 of these brands for £6,250 for his time that the brands had wasted! To make it more appealing, he offered them all a blanket 75% discount.

So how did he get on? Well the results are quite surprising. You can read about them on his blog, but here are some examples:

Pret A Manger founder Julian Metcalfe sent a cheque for £62 for spending time in their cafes. Pret really got into the spirit by also paying his food bill (£22) and also an extra £1 for to compensate for the hassle of walking to the post box to mail the cheque to his bank!

Little Chef offered vouchers to the tune of £30. Squat + Gobble, an independent restaurant offered a £5 discount card. EAT a small family run company with stores all over London, sent him £15 worth of vouchers.

Boots the chemist failed to get into the spirit, writing a letter stating that they do not recognize the time customers spend in their shops in ‘monetary terms’.

What does this tell us about branding? Well for sure, this is not going to evolve into something that we all do. Although bearing in mind how long most transactions take in Malaysia, if anyone here feels compelled to copy Paul, you should, on paper anyway, earn a lot of money! However it does reiterate that mass economy company driven tactics such as positioning, have no place in the customer economy.

Positioning proposes that the organization concentrates on a word or idea that defines the company in the minds of consumers and then communicates that idea or word relentlessly for as long as budgets will allow. Basically this is how it is and we tell you how our products are positioned. Take it or leave it.

This ‘episode’ reiterates that branding today is a very different place than it was even 5 years ago. Branding today is about entering into two-way collaboration with consumers because consumers have more power than ever before. It is imperative that brands understand and respect their customers.

If brands fail to work with their customers, those customers will take their business elsewhere and tell others of their bad experiences. Paul updates the story regularly on twitter where he has over 1,000 followers on twitter. Those followers (One has 17,000 followers) will retweet (forward) his updates onto hundreds of thousands more and so on. He has been interviewed on TV, radio and print. Many consumers will take note and go out of their way to avoid the brands that don’t appreciate his investments.

Paul used the data collection website Daytum to record all his interactions.