Tag: Malaysia

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?

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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.

Does Air Asia need to be a brand?

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Whenever I find a brand that matches its offerings to my requirements for value, I become not only a brand loyalist but also a brand ambassador. For years I was a Marco Polo member and sang the praises of Cathay Pacific to anyone who would listen. Then about 15 years ago I moved to Malaysia. Initially I flew Cathay, even though it meant going in the completely opposite direction to Hong Kong to pick up a connecting flight to Europe. But after a while, probably around the same time as I had run out of miles and therefore could no longer get an upgrade, I looked around for someone else to build a relationship with. The obvious choice was Singapore Airlines and I dabbled for a while but the hassle of changing flights in Changi and the extra 3 – 8 hours that added to my return trip meant this wasn’t really an option.

Next I tried BA for a while but they were in the process of pulling out of Malaysia so the only other option was Malaysian Airlines. I was reluctant, really reluctant for a number of reasons. MAS was horribly managed or rather mismanaged at the time. Safety was an issue, coffee shop talk was negative, morale was at an all time low, rumours of imminent sabotage were rife and the numbers suggested a severe crisis was due. But by then I had no choice as MAS was the only airline flying directly to London.

It was a gradual process but in the first year I flew a lot of domestic and international miles. I learnt the system and was able to get the best out of the airline which allowed me to experience all classes. It wasn’t so bad and by the end of the year, I was a Malaysia Airlines loyalist.

When AirAsia arrived I dismissed it as a little upstart, out of it’s league and destined to go the way of Pelangi Air and many others. The LCC model wasn’t something I believed in. Since when was travel no more than stuffing as many bodies as possible into the smallest plane that could fly the distance required? But a couple of years later I had to fly to Macau and the only flight that matched my schedule was an AirAsia flight. I swallowed my pride, apologised under my breath to the MAS 747 taxiing past the terminal and boarded the brand new Airbus, so crisp, clean and shiny compared to the 25 year old MAS Boeings and their tired interiors.

As I boarded, I was greeted by a smiling face and enthusiastic personalities that was contagious and impossible not to like, especially compared to the glum and tired looking MAS crews. Since that December day in 2007, I’ve become a regular AirAsia customer but every time I chose AirAsia, my choices are made based on price – RM680 for my wife and I to fly to Singapore and back compared to RM1710 on MAS and so on. I justify delays by reminding myself of the price and the savings. I reluctantly accept the fact that I have to pay (more and more) to check in a suitcase. I bite my tongue at the instructions that say I cannot take my own drinks on board. And this is key, I don’t have a relationship with AirAsia. And with the exception of 2 trips where I flew the night before a meeting, none of the trips have been time sensitive. To me it’s simply buying a commodity. Perhaps this is the way the business of flying is headed. Perhaps LCCs are the new legacy carriers and this is how all flying will be.

If this is the case, then fine. But how does a LCC like AirAsia build brand loyalty and the far more profitable repeat business critical to brand building? I’m fortunate in that I’ve not been subjected to one of the delays just about everyone I know has been subjected to when flying AirAsia. But when I do, I’ll immediately look at the other LCCs plying the same routes and I will switch in a heartbeat. As far as I am concerned, there is no brand loyalty with AirAsia. So essentially, the company model is based on the hope that there will be enough demand enough of the time on enough of the routes. If this is the case, then AirAsia doesn’t need to be a brand.

Perhaps this is enough for the aviation business to survive, and perhaps thrive. But judging by the LCCs in the US, I doubt it. What do you think?

It failed once so let’s try it again

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According to a Ministry of Health (Malaysia) survey carried out in 1996, there were 2.4 million smokers in Malaysia. This was a rise of 41% over the number of smokers in 1986. Today the country has about 5 million smokers, about double the number in 1996. One can deduce therefore that the number is doubling every 10 years or so. As of 2003, approximately 49% of all adult males and 5% of all adult females are smokers.

Of most concern is the prevalence of smoking among young Malaysians. 30% of teenage boys aged 12–18 years smoke while smoking among girls doubled from 4.8% in 1996 to 8% in 1999. The prevalence of smokers aged 15 and above has increased from 21% in 1985 to 31% in 2000. This compares with about 21% of the population in the UK who smoke in 2009, down from 45% in 1974.

No data is available on what smoking costs the country but we do know it costs the Canadian government around RM10.5 billion in direct health care and another RM38 billion in lost productivity. Meanwhile revenue from taxes on cigarettes totaled around RM9 billion. Canada is a good benchmark for Malaysia because in 2001 approximately 5.7 million Canadians smoked, about the same as Malaysia.

To combat the rising number of smokers in the country, a number of initiatives have been put into place. These include a rapid rise in the price of cigarettes and a number of health ministry driven initiatives to alert smokers to the dangers of smoking.

The first of these initiatives was an anti smoking campaign launched in 1991, in conjunction with the National Healthy Life Style Campaign. This extensive campaign that ran for over 10 years raised the level of awareness of the hazards of smoking among the general public, both smokers and non-smokers.

The “Tak Nak” campaign was initially launched in 2003 and consisted of TVCs, Radio, print and Outdoor (including school notice boards). Costing almost RM18 million (US$5 million) for the first year, and rumoured to cost in total RM100 million for the 5 year campaign, it was widely lambasted in the media.

This is because although the campaign raised the awareness of the effects of smoking, it did little to reduce the number of smokers. Even the Health Minister Datuk Dr Chua Soi Lek said in 2005 that there was no indication that the number of smokers had gone down since the campaign began.

Despite the ineffectiveness of this campaign, in August 2009, The Malaysia Ministry of Health launched the latest (and most harrowing) installment (see video) of its anti-smoking “Tak Nak” campaign via TVCs. The TVC’s feature gruesome images of mouth cancer and lost limbs due to gangrene caused by smoking.

This campaign follows the legislation, earlier this year that all cigarette packets sold in Malaysia must carry graphic images related to smoking. These include images of the results of neck cancer and a dead foetus. Displaying these graphic images on cigarette packets is a requirement of the World Health Organisation Framework Convention on Tobacco control of which Malaysia is a signatory.

It’s not clear if the latest series of graphic commercials that are obviously designed to shock, and the images on cigarette packets are part of a strategic plan or two independent tactical campaigns.

I’m not sure what the goals of the latest campaign are but I am sure they do not want to simply raise awareness of the dangerous side effects of smoking. I would imagine the goals include reducing the numbers of smokers in Malaysia and discouraging young adults of both sexes from taking up the habit.

If these are the goals then one has to question whether or not this is the best tactic. Certainly evidence from previous campaigns in Malaysia and other countries suggests that campaigns featuring shocking images and graphic descriptions of the consequences of smoking using old economy tools such as TVCs, print ads and outdoor are ineffective.

Malaysia spent RM100 million over 5 years on such a campaign that was inneffective in bringing down the number of smokers in Malaysia. In the UK, after extensive research of more than 8,500 smokers over a ten-year period, 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.

And even failing health may not persuade a smoker to reduce or even stop smoking because smoking is linked to a lack of psychological wellbeing and often failing health results in psychological decline.

I have a hunch that this campaign will not reduce the number of smokers in Malaysia. Data shows that traditional marketing tools are even less effective today than they were 10 years ago.

What is required is a data driven approach to the issue. Specific and comprehensive qualitative research with relevant targeted questions related to each segment (and each segment will be specific and targetted) that are designed to deliver actionable data. It is imperative that the audience is identified and then communicated with using content that resonates with them. It will be a long term effort. That doesn’t mean repeating the same one size fits all commercials or messages, this means developing a relationship with these partners through engagement.

Also critical to the development of the strategy will be the buy in from stakeholders such as doctors, educators, retailers and others. Discussions must be held with these key elements to determine strategies. Once research is completed and analysed, a comprehensive strategy must be developed featuring a fully integrated program to communicate with all stakeholders with specific emphasis on education at kampung level and dynamic, preventative programmes for schools. Existing smokers will be targetted individually through interviews with doctors, rather than one-size-fits all shock and awe campaigns.

Only once the strategic blueprint is ready can the implementation begin. There is no easy way to reduce the number of smokers in Malaysia. It’s going to take a long term investment in time, effort and money. Wasting money on creative driven campaigns that have not worked in the past is not the way forward.

Warning: Viewer discretion advised.

Pitching for a bank name change in Malaysia

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Last Friday we were pitching against 4 advertising agencies to a Malaysian bank. Essentially, the brief was for a name change and to create awareness of the name change in Malaysia. We were invited to pitch despite being a data driven brand consultancy. In fact I had personally discussed this fact with one of the corporate communications representatives at the bank.

He told me that if we went into the traditional FusionBrand pitch (We had presented to them 12 months ago) we would not get very far however, if we presented a ‘traditional re-brand’ pitch and suggest the FusionBrand approach for after the name change then we might generate some interest.

So, much to my chagrin, we pitched in the traditional way and suggested that this was only half the battle and what the bank also needed once the population was aware of the new name was a strategy to get prospects and customers into the branches and to buy product(s) and so on.

As my colleagues presented, I was imagining how the other agencies would make promises based on their new “positioning” of the bank.

I found myself thinking that what sort of a position could an agency offer the bank that would make them stand out from all the other banks? What position would make consumers cast aside their ingrained perceptions (not very good) of the bank? How would a new positioning strategy encourage prospects to walk into branches? And once they had walked into those branches, how well preparred would the staff be to sell to them?

I already knew that one of our competitors was a global agency but because they are very busy they were outsourcing the creative element so it was unlikely (though not impossible) that they would have the best talent in the market working on the creative.

And then I thought how could the bank make inroads into existing markets using the same type of ‘positioning strategy’ that all the other banks are using? Sure, the tactics might be different, then again perhaps not, but the positioning strategy, of finding a space in the consumers mind would be the same.

I also thought of how tumultuous the world is at the moment and how any positioning ‘strategy’ that had been implemented before the global economic crisis would be a worthless (and expensive) waste of money now because the world is a different place compared to even a year ago. What if something similar were to happen in the next 6 months, as this bank’s positioning ‘strategy’ was implemented? Would they too waste their valuable resources?

I also thought about my own issues with my bank and how, despite numerous negative experiences over the last 10 years, I was still with them. And yet during that time, I’ve seen so many ‘re-brands’ of banks or financial institutions, RHB, CIMB, Bank Islam, etc, all of them used positioning to influence me and hope that I would become a client (I didn’t and I wonder how many did. I certainly don’t know anyone who has changed their bank in the last 5 years).

It made me realize that the FusionBrand approach, where we use customised research to deliver actionable data, operational excellence as the foundations for the brand strategy, brand planning to eradicate the hope mentality, and segment specific communications that resonate with those segments alone and meet the economic, experiential and emotional needs of customers and prospects in those segments. Metrics and measurement that ensures valuable marketing resources are not wasted are what is required to build a brand in the customer economy of today.

The issue of course, is whether the bank knows this! I will let you know how we get on!

Principles of Nation Branding

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Here are my eight key principles for a strategic Nation branding initiative.

Having said that, I also believe these principles should be applied to government ministries, departments, agencies and the private sector as well. What do you think?

1) Research and data are fundamental: Qualitative and quantitative research is essential to data-driven branding (see below) and data-driven branding is essential to building a brand in the customer economy of today and the demand economy of tomorrow. Without research and data, branding decisions are no more than guesswork and the nation brand strategy is too important to base strategic decisions (or, any decisions) on guesswork.

Research is vital for uncovering perceptions, attitudes and requirements for emotional, experiential and economic value, the three key elements of a successful brand. Research also provides benchmarks for measurement and accountability.

Qualitative research gives you valuable data on the requirements of target segments in the future. It allows you to tailor communications to resonate with target segments and also identifies key influencers, thereby saving valuable funds that are wasted on a mass market, one-size-fits-all approach.

2) It is impossible to build a brand on creativity alone. Too much is at stake – both in terms of a country’s brand and resources invested – to depend on a creative-driven branding campaign (and that’s all it is because it is impossible to sustain) to form the foundations of a nation brand. Let’s face it, if you sit back and think for five minutes, how many country related advertising campaigns can you remember? More relevant, how many made you act?

Furthermore, a creative campaign is best suited for mass markets and mass media whereas data-driven branding enables segmentation and targeting of communications that ensures content resonates with target markets. For instance, divers don’t think, “Let’s go to Malaysia and see if we can dive.” They think, “Let’s go diving.” And then determine the destination.

Likewise, are potential investors going to be impressed by white sandy beaches or communications that resonate with them because they offer specific value?

Other benefits of data-driven creative driven branding include a focus on acquisition and relationships that ensure ongoing business, while creative driven branding focuses primarily on acquisition. Crucially, a data-driven approach to branding places strategy in the hands of executive management whereas a creative driven approach puts the strategy in the hands of an advertising agency.

3) Segmentation enables differentiation: “One-size-fits-all” branding doesn’t work. Despite the power and sweep of globalization, which has Malaysians wearing the same fashions as Italians and Aston Martins in hot demand from Brazil to China, each country has its own requirements and world-views.

Once research has revealed the differing characteristics of various audiences, branding must be devoted to tailoring messages, media, channels and activities to the specific values and requirements of target markets. Such segmentation not only ensures more receptive targets but also easily ensures differentiation from competitive countries trying to be all things to all people.

4) No buy-in, no success: Nation branding is difficult, requiring planning, support and coordination from a wide array of public and private entities. But even the best plan in the world will not succeed without buy-in from brand stakeholders. The most important step to ensuring buy-in is involvement in the research and planning process. As much as possible, brand stakeholders that are involved in implementation must have the opportunity to add their input to the plan.

Such buy-in has two advantages. First, it allows valuable perspectives and experiences to be incorporated into the plan, making the plan stronger and more effective. Next, it facilitates better execution. If all the parties involved have a complete understanding of the entire plan and their role in it and what its success means to them, then redundant efforts can be avoided and resources maximized.

5) A brand blueprint must be developed: A strong, visible Nation brand must have a blueprint based on the research findings to enhance the country’s reputation and image while enhancing economic, education and social growth and increasing its ‘share of voice’ in the world community. Specifically, the Nation Brand Blueprint must communicate a positive and dynamic personality with economic, experiential and emotional values that reflect target audience requirements.

The blueprint must be holistic and comprehensive to enhance export promotion, economic development, tourism, foreign direct investment and other key national initiatives. It must also communicate the intended message to the target constituents and stakeholders in multiple countries and at the same time, it must lay guidelines to strengthen the strategic, communications and visual impact of the Nation Brand.

The blueprint must also systemically connect the Nation Brand to the country’s core industries, corporate brands and Small and Medium Enterprise (SME) sector brands. This must be established via a systematic, holistic process that accommodates the requirements of both national and international stakeholders. This process must not only be effective to optimize the Nation Brand, but also maximize limited national resources.

6) Nation branding is a marathon, not a sprint: There are no silver bullets or quick fixes in any branding and this applies especially to Nation branding. Even in these technology driven times, establishing a Nation brand may take as long as a generation to develop. For example, the current view of Japan as a nation famed for its precision and electronics is not based on its efforts during the past decade. Rather, the seeds of Japan’s current nation brand were planted more than thirty years ago, when it began exporting transistor radios and two-stroke engines overseas. Just as Malaysia launched its Vision 2020 program in 1991 to become a developed nation by 2020, the country must adopt a similar long-term view for Nation branding. Malaysia and other countries must look at establishing a Nation brand not for us – but for our children.

7) Private sector must carry its weight: As an example, with responsible policies, funding and resource allocation, the Government of Malaysia can and has tried to do a lot for the Nation brand – but it cannot do it alone. Private-sector involvement and initiative are crucial. Private sector initiatives can range from promoting country of origin on foods and industrial goods, as Australia has done, to helping to fund trade missions to even good business ethics. The bulk of activities outlined in the Nation Brand Blueprint must be carried out by private and non-profit organizations

8) Measurement and evaluation: Why should money or resources ever be spent without knowing the return? Wherever possible, perceptions, activities and processes must be measured, ideally with quantitative benchmarks. Such measurement and evaluation must be used to establish accountability and to ensure continuous improvement.

These key priniciples form the foundations of any nation branding initiative but there are other equally important elements.

One example of these other elements is a crisis plan which should be incorporated into the brand blueprint.

Recent events in Malaysia and Angola show little signs of a planned response with either silence or multiple and often conflicting responses coming from various sources and little or no reactions to debates on social media.

This failure to engage consumers, citizens and potential investors will undo much of the good work carried out to date.

Positioning, part two

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A couple of respondents to this blog (and thank you all for commenting) have used Coke and Seven up as examples of successful positioning strategies. I appreciate they are great brands and they were built up over time but that was during an economy that no longer exists. Many sugary drinks launched in more recent times using similar positioning strategies to build the brand have failed to make a significant impact or even failed completely. Even those launched during the mass economy era, when positioning was considered the holy grail, failed.

One example is Pepsi One, a diet cola lauched in October 1998. Sales were healthy enough to begin with thanks to a hugely expensive positioning campaign and Pepsi One soon had 2% market share. However, it didn’t take long for consumers to realise that it tasted much like Diet Pepsi. Pepsi One’s market share dropped to about 1% and never moved.

New Coke was launched in April 1985, it was an unmitigated disaster and in fact, it is considered by many to be the ‘biggest marketing blunder of all time’. This despite a huge advertising budget funding a massive positioning strategy. Remember in the 1970’s, Coke had been positioned as ‘The Real Thing’ and at the time of the New Coke launch, the tagline for Coke was, ‘Coke Is It.’ So basically, Coke tried to position it as ‘The New Real Thing’ or worse, tell consumers, ‘Sorry, Coke wasn’t it, this is it.’ Al Ries said it best, ‘It was like trying to introduce a new God.’ Even Mecca cola, that should really be the number 1 cola in any muslim dominated country, hardly sells anything outside of a few cities in Saudi Arabia and Egypt.

BTW Coke is acknowledged as the world’s most popular soft drink, with about 50% of the global market. I would argue, and this is really setting the cat amongst the pidgeons, that what built the coke brand was not its positioning strategy and its iconic advertising, but actually its brilliant use of the supply chain via its franchise system and its ability to distribute to just about every nook and cranny in 200 countries and territories on the planet.

Other problems I have with positioning, and I didn’t really go into this in the earlier piece, is that developing a positioning strategy is extremely expensive and impossible to measure. So essentially you spend a small fortune to play a guessing game. If you are a multi national, like Coca Cola, then this may be an option, although if I owned, the stock, I would do my best to resist such an approach. If you are a small business, or even a large Asian organisation looking to develop a global brand strategy, you are simply wasting valuable resources in the hope that consumers or other businesses will take note, remember and buy your product or service. However, as Rick Page said, ‘Hope is not a strategy’.

One person commented that lower valued brands don’t occupy any position in the minds of consumers. If by lower valued brands, he means smaller sized companies, then he is right, they generally don’t occupy any position in the minds of consumers, because 1) In today’s fast paced, complex and cluttered world, most consumers don’t have any space in their minds for anything and 2) because the communications or content do not resonate with them.

Another comment was related to who is responsible for the brand, strategic development or the creative department. Well, brand building is a strategic endeavour not a creative exercise.

Luxury branding in Malaysia & Asia

Published on by brandconsultantasia2 Comments

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Is it time to put positioning to bed?

Published on by brandconsultantasia18 Comments

40 years ago this year, Jack Trout published his first article on positioning. But the term didn’t really become advertising jargon until his articles entitled “The Positioning Era”, were published in Advertising Age in the early 1970’s.

There are numerous definitions of what positioning is today but to ensure we’re all on the same page, I propose this version: http://en.wikipedia.org/wiki/Positioning_%28marketing%29

But in today’s marketplace, positioning has multiple problems:

1) Positioning is immeasurable: You can’t say “our positioning has improved our sales by 5 % or as a result of our positioning strategy, our brand is 12% better than competitions. Furthermore, it is impossible to measure the ROI or benchmark positioning.

2) Positioning is only suitable for mass markets. Yet branding today is about segmentation and communicating and engaging with those segments via relevant channels and with messages that resonate specifically with those segments or niche markets. Does this mean that a company should develop different positioning for different niches?

3) Positioning is suitable for mass markets with limited competition and limited consumer access to media and information. Today, consumers can get any information they want on anything from anywhere.

4) The wikipedia definition is a top-down, company knows best, hierarchical marketing approach. Yet we live in a C2C environment in which consumers define brands.

5) Positioning is one-way. The company knows best and you must listen to us. We tell you how our products are positioned. But today, if you are not entering into 2 way conversations with consumers you are about to join the brand graveyard.

6) Positioning was developed for the US mass market of the 1970’s. But we’re in a globalized world now, with much more competition and more knowledgeable consumers.

7) Positioning is competition, not customer driven. The basic premise of positioning is that you want to be number 1 or number 2 in a category in a prospect’s mind. If you can’t be number 1 or number 2 in an existing category because of competition, you make your own category. In today’s congested marketplace, the investments required to develop a new category are enormous. Furthermore, besides the difficulty and expense of creating your own category, you are also letting your marketing be driven by the competition rather than consumer demands for value.

8) Positioning is dated. With limited competition (by today’s standards) in most categories, positioning was a compelling theory. The problem is that the world has changed a little since 1969. Yet agencies continue to recommend positioning as the foundation for any brand strategy.

9) Positioning uses mass market channels such as TV and billboards to reach as many consumers as possible using repetition to create interest. Yet ask yourself, what do you do when the commercials come on? Surf? Put the kettle on? Go to the bathroom? Text a friend? Surf the web? Basically, do anything but watch the commercial. Same with billboards. How many billboards can you remember from your morning commute?

10) Positioning requires massive, and I mean massive budgets that few companies have. If you do have a massive budget and you do execute your campaign across multiple channels for say six months, what happens if it doesn’t work?

So my question is, what are agencies doing recommending a theory that was developed before the PC was invented? I welcome your comments.