Tag: brands

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.

Outstanding performance by Tourism Malaysia

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Tourism Malaysia should be commended for its performance last year. A total of 23.65 million visitors in 2009, beating the target set by Putrajaya by an impressive 4 million. In fact the 2010 target of 23 million visitors was beaten by over 500,000 visitors. This generated over RM50 billion for the country despite the difficult global situation.

You may be interested to learn that FusionBrand carried out the research that addressed numerous areas and culminated in over 300 actionable recommendations, including that TM move away from a global one size fits all strategy to a geographic focussed, segment specific stategy.

To realise these recommendations, FusionBrand also wrote the 2009 Tourism Malaysia global brand plan and 12 key market brand plans that were the back bone of the Tourism Malaysia brand strategy for 2009.

FusionBrand would like to think it was responsible, at least in a small way, for part of this impressive performance by an organisation that will be, within 10 years the number one industry in Malaysia, in terms of revenue.

What is the impact of the mosques referendum on the Swiss brand?

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Last month a much reported public referendum in Switzerland voted to implement a complete ban on the construction of minarets in the country.

The referendum, sponsored by the right-wing Swiss People’s Party sparked numerous national debates and 57.5% of the electorate voted in favour of the ban. This despite the protestations of the ruling pary of Switzerland, religious and business leaders who all campaigned for a no and public polls that suggested a significant majority opposed the referendum.

This is not a political blog so I won’t go into the details, but I am curious to know what people think about the consequences of this decision in respect of the impact it will have on the Swiss brand. Switzerland has an image of a country that has respect for human rights, no doubt influenced, ironically, for a tradition of religious tolerance. Although the decision is likely to be overturned in the European Court of Human Rights, the Swiss image of neutrality and tolerance may have been damaged. If it has, what are the consequences of this, from a branding perspective?

After all, the country is home to many international brands, especially from the financial services industry and luxury brands. These luxury brands and financial institutions are popular with Muslim consumers from all over the Muslim world.

Will we see these Muslim consumers withdraw their funds from Swiss banks and transfer them elsewhere? Will they shun shops selling Swiss watches and other jewellery? Does anyone have any thoughts or firm data on the impact of this decision on the Swiss brand?

How not to sell a London property to Malaysians

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I spotted the sign below on a lamp post in Damansara this morning. In case you can’t read it, the content is as follows:

London – Condo
Good Buy & Invest (sic)
West London £220k
Call for Preview
012XXXXXXX

I cannot believe that a genuine UK property developer or estate agent would encourage a company to sell million Ringgit properties with signs on lamp posts. After all the UK property market, and in particular the London market is benefitting from substantial investment and has hardly been affected by the global financial crisis.

Commercial property
Jones Lang LasSalle expects the total direct investment in commercial real estate in the UK to be around £23 billion (RM125billion) for 2009. Prime yields in the West End are 5% and in the city, around 6.25%. That’s impressive compared with a bank rate of, well about 0%.

Residential Property
Meanwhile, the residential market is also performing strongly. International buyers increased by 25% in 2009 compared to 2008. Most of the investment is coming from Europe, Russia and the Middle East. Knight Frank estimates demand from new buyers is “almost 25% higher than a year ago” and “prices have now risen 13.8% in the nine months since March.”

In fact, most of the investment is coming from the overseas market. Foreign buyers account for 80% of the investment, the highest ever. Indeed, the average over the last 10 years has been closer to 46%. The latest sources of this overseas investment include Oman, Libya, Lebanon, USA, Korea and Ireland.

UK property roadshow
Little wonder then that Malaysian firms want to get in on the act and sell UK property. I can’t find any figures on the total Malaysian investment in the UK or London property market however, the recent launch of a luxury development at Imperial Wharf, London, Malaysian buyers purchased £9.25 million (RM56 million) worth of luxury apartments and penthouses over the 2-day road show in Kuala Lumpur.

Olympic games
With more than 10,000 Malaysians studying in the UK and a number of companies keen to make the UK their European HQ, there are going to be plenty of willing buyers. Especially with the Olympics to held in London in 2012.

Wrong way to sell
But this is not the way to sell those properties. It dilutes the value of the property, negatively impacts the credibility of the local representation and makes it harder for future efforts to sell UK properties here in Malaysia. But worst of all, it portrays Malaysia as an amateur in a professional world.

Updated: 11th January 2010. I have since called the number on the bunting. I spoke to a nice guy with a pleasant attitude. I asked him where the property is. He stated the property was in South Ealing. As I know this area well I asked for the exact location and I consider it to be more Brentford than Ealing. He asked for my email address and promised to email me more information.

That was last Thursday, I have not received anything as of today.

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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What happens if a brand no longer means quality?

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I spotted an interesting bit of research carried out in the UK recently by PWC.

The study analysed the durability of clothes available on a typical UK high street. The study tested 10 pairs of jeans ranging in price from £7 (RM38) to £123 (RM680) and ten polo shirts ranging in price from £12 (RM66) to £85 (RM470).

PWC wouldn’t divulge the names of the ten retailers because, well they represent most of them but it did disclose that on the whole the cheaper versions of the jeans and polo shirts fared better than the designer brands.

The garments were put through 15 different trials to analyse the strength of their seams, if they shrank, and if so, by how much, their colour fastness and how they resisted abrasion. The study focussed on how well made the clothes were and the quality, not the fit, brand name or how fashionable the garments were.

The best performing jeans, in terms of cost were

1) Jeans priced at £9 (RM50)
2) Jeans priced at £18 (RM100)
3) Jeans priced at £9.50 (RM53)
4) Jeans priced at £123 (RM680)
9) Jeans priced at £40 (RM222)
10) Jeans priced at £25 (RM139)

It was a similar story with the polo shirts. The top two versions cost £12 (RM66). A polo shirt costing only £4.50 (RM25) came in an impressive 3rd. The £85 (RM471) came in fifth.

From a branding perspective, this study is interesting because consumers often justified paying a high price for a fashion brand because they felt that if it was expensive, it must be of good quality.

Does this mean that this is no longer the case?

If we can no longer trust brands to produce quality products, do we need brands?

Or are we able to get fashionability without the price tag?

What do you think?

Retention is key. Low cost carriers must learn from the mistakes of legacy carriers

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The legendary Peter Drucker said it best: “The purpose of business is not to make a sale but to make and keep a customer”. This is what branding is about. It’s not about aquisition, it’s about retention. And the airline industry, and in particular, Low Cost Carriers (LCCs) need to realise this soon otherwise they will find it tough to build brands that can compete, long term with the mighty legacy carriers with their frequent flyer programmes, multiple classes, business lounges, inflight entertainment and gourmet food (well some of them).

Most of the LCCs have a price based offering. Being small, they are nimble and more efficient than their lumbering competitors. These young, brash and determined airlines, often helmed by charismatic individuals with little industry experience have ripped up the industry manuals and replaced them with revolutionary business models that charge consumers for peanuts, coffee, noodles, seats, luggage and most recently in the case of Air Asia, a ‘convenience fee’.

According to an official response from the airline to an indignant passenger, this ‘convenience fee’ is “meant to recover costs in implementing, upgrading and maintaining our online payment systems. It is also to enhance security features for credit card payments to give guests a comfortable and safe booking environment.”

You’d be forgiven for thinking that this response, available here in full on malaysiakini.com came from one of those stuffy legacy carriers mentioned earlier. You’d be forgiven too for scoffing at the line, “give guests a comfortable booking environment”. How does charging me more make me more comfortable? You’d also be forgiven for thinking that perhaps the online payment system wasn’t good in the first place and wondering what the implications of that might be.

In the past most airlines, including Air Asia, would have absorbed these costs. I quote again, “However, now that AirAsia is experiencing a rapidly growing number of online transactions, these costs have significantly increased.”

The official response to the complaint goes on to say, “This convenience fee is charged on a per way per guest basis because the costs of these systems are driven by the value of the transaction rather than by the number of transactions. As costs vary per country, the convenience fee also varies.”

The whole process has been dealt with in a manner more suited to one of the aging behemoths than such a young, aggressive and savvy carrier. To me it says that because you, the customer have helped us grow so fast, we’d like to reward you by charging you to use our online booking service. Even though it is automated and therefore doesn’t require the ongoing investment in real estate and talent that a booking office requires, we’re going to make you, the customer pay for it.

The danger here is that Air Asia is making a common legacy carrier, or perhaps I can call it legacy branding, mistake. It is treating passengers as if they are insignificant seat fillers and it is assuming that all passengers are the same, don’t have options and will put up with being treated badly. Irrespective of whether it is the first or fifty first time the passenger is using the airline.

Surely, if a passenger is a long time user of the airline, there will be significant personal data available (and Air Asia offers customers the opportunity to submit a lot of personal, travel and other information) and multiple transactions with that customer mean that the liklihood of fraud is low, should that passenger be treated, and charged, the same as a new customer? And anyway, the burden of fraud is with the Credit Card company and not the carrier, which is why it is the Credit Card company that sometimes calls after you use the card to make a booking.

Unfortunately, because the prevaling attitude in most agencies (and companies) is that acquisition is key, the typical response is yes. And it would seem, based on this episode, that Air Asia agrees with this attitude.

However, FusionBrand has long argued that retention is key to brand building. Although LCC’s have thrown some traditional branding theories out the window with their price driven strategies, you cannot build a long term profitable brand, on acquisition alone. Indeed, a low price strategy that aims to ‘buy’ loyalty can often encourage only disloyalty. That’s because a price driven customer is always looking for a cheaper alternative. And, in the LCC space, will often find it.

This is substantiated in a survey carried out by Sabre Airline Solutions, which found that 86% of airlines believe that customer loyalty and retention will have the most positive impact on their business in 2010.

So my advice to Air Asia and other LCCs is that if you want to become a brand, you must start treating customers with more respect, understand that a low price alone will not build relationships, think carefully about how you communicate with your passengers and remember that the purpose of business is not to make a sale but to make and keep a customer.

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

Published on by brandconsultantasia2 Comments

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

Published on by brandconsultantasia10 Comments

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?