Showing posts with label Marketing. Show all posts
Showing posts with label Marketing. Show all posts

Dec 14, 2013

About Brand Value

Lately, I've been involved in a lot of shopping. That's made me think hard about brands and brand value. In this piece, I write down my thoughts and opinions on the subject, based on my own experiences as a marketer as well as a customer. People have written entire books on the subject, so this may be a long post!

Like all good consultants, I've come up with my own framework to analyze brand value. And in keeping with marketing tradition, I use 4 P's


Product
The word 'brand' derives from the Old Norse "brandr" meaning "to burn". Originally, a brand was just a mark used to denote who the product was made by. It translated into an origin, and associations of quality and specific attributes. This remains true even today - a bar of soap branded Dove contains moisturiser, is gentle on the skin and is made by Unilever.

These associations are built over time, and are based on the characteristics of the product and its performance. These, in turn, can usually be attributed to materials used & specifications, and knowledge & skill of the producer. This is always true of both goods and services to various degrees. A good TV uses high quality components to deliver good picture & sound quality, and you need designers with good understanding of user needs and available technology to deliver a product that has popular features, and good manufacturing processes to ensure it works well for many years. I buy certain brands of shirts because I know they use high-quality cotton, don't fade after a few washes and retain the stiffness & shape of the collars, cuffs etc. because they use high grade materials. Restaurants are a service business, but even in this case you need good, fresh meat/produce and skilled chefs, friendly waiters etc. to succeed. 

Any compromise or gap in materials/specs and/or producer knowledge/skills directly affects product performance and eventually brand reputation. Marketers sometimes lose sight of this and focus all their energies on building brand image, running campaigns, communication etc. - and don't pay enough attention to the product itself. This is a recipe for failure in the long run.

As an example, I had considered the Asus 'Transformer' line when I was buying my first tablet, and again recently when I was looking to upgrade. On both occasions, their products had great specs - processor, RAM, screen resolution etc. - and offered a few unique features at a very competitive price, which was enough to get into the consideration set. However, both times, I read several buyers complaints about defective units, dead pixels, light 'bleed' at the edges of the screen. Clearly, their manufacturing process isn't as reliable as Apple's or Samsung's, and their quality control is also weak. No matter what the marketer does now, I'm not buying. They need to fix the product quality first.

Another example I'll quote is Energy Drinks. I love and admire the brand Red Bull. But when I'm in the UK, Relentless is available to me. With its 50% juice composition, it just tastes far, far better than Red Bull - and is healthier too. No matter how many F1 championships Sebastian Vettel and Adrian Newey win, I will drink Relentless because it tastes much better. The superior product wins.

Pleasure
In this day and age, we have greater production capacity than demand for most products. Consumers are spoilt for choice, and they demand - justifiably - a good end-to-end experience all the way from seeking information about a product (websites etc.), to buying it, using it and getting it repaired when something breaks down, and disposing of it when the time comes. Apple's products succeed because the whole experience is a pleasure at every stage.

When you think about resellers like Croma or cleartrip.com, the product you're buying is the same (an appliance or an air ticket) but you prefer buying it through these stores/sites because it is an enjoyable experience. Needless to say, brands that aren't present where you prefer to shop risk losing out on a potential sale. I book my movie tickets through a 3rd party website which offers me discounts. The same with travel. Cinemas or hotels or airlines that aren't listed on my preferred website mostly lose my business, regardless of what else they've done right.

Marketers must realize their job doesn't end with creation of demand and shipping volumes out the door. They must engage with the customer at every stage of the brand's life. They must have web-sites or catalogues where customers can get information about their products when they're evaluating purchase decisions. The product must be available on the shelf (or site). Using the product must be a good experience. I want to be wowed by performance, durability, features I didn't previously know about, and by prompt service whenever I have a problem. Makemytrip.com has almost displaced cleartrip.com as my favorite travel booking service by sending discount coupons for airport transfers when I book a flight through them. And Google are masters of the 'pleasant surprise' with things like Google Now. On the other hand, I am unlikely to buy Sennheiser products again because a set of earphones I had broke a few days after the one-year warranty ran out, and I didn't find their customer service very helpful. I will avoid such experiences in future, and those brands have negative associations in my mind now.

We also must recognize the importance of shared experiences these days. People have always talked about products they've owned with a few others, but now social media have taken this to another level. In my earlier example of Asus Transformer, I made a decision based on reviews posted on Amazon.com by people I have no direct link with. For almost every significant purchase decision these days, I check the web for customer reviews first. I see how many people have bought the product, what is the average score, the proportion of unhappy buyers and read the 'most helpful' (based on other readers' votes) reviews - both positive and negative. Buyers can be very well-informed these days, and if you don't keep them happy, they will hurt your brand and your business. Conversely, happy customers will sway others towards you. Brand loyalty (experience) is no longer the holy grail, you want to achieve brand advocacy (pleasure).

Pricing
I believe pricing must be rational and fair to everyone involved - the buyer, the business owner/investor, and all their employees.

You must have heard the adage - quality comes at a price. As I mentioned earlier, a good product requires good ingredients and skills to produce. Good distribution and service networks, committed staff etc. that provide the pleasure also cost the provider money.

A product's price must be such that it covers the costs incurred to produce, distribute and service it, and the employees committed to producing good quality, innovation, customer satisfaction etc. must be able to pay their bills and lead happy lives. In the West, a lot of people don't buy cheap items produced in sweatshops by exploiting poor workers in less developed countries - and I agree with this. Finally, business isn't charity - the investors/shareholders are in it for profit, and they deserve good returns on their investment if they're helping you meet a need. If I'm happy with a product, I should be willing to pay the fair price.

This is one of the reasons why I don't generally support duplicates/knock-offs. If P&G spent money on research to come up with the optimal formula for detergents, and a retail chain copies the formula and sells a similar 'private label' product at a 20% discount, I wouldn't buy it. It's not fair, and if P&G stops investing in R&D, we will not get better products in future. The same logic holds for premiums charged by talented designers for clothes etc.

However, the producer must try and achieve efficiency for their costs, and not waste any of the money they get from their buyers. I don't generally buy products from Indian PSUs because I know most of their employees don't work as hard as their counterparts in the private sector, and tax-payers money is wasted to subsidize both the employees and the customers. It is not fair to expect the buyer or the government to pay the price for your inefficiency. You must get a grip on your cost structure.

Also, some brands command premiums that are just plain ridiculous, and they do this to maximize earnings for a few wealthy investors. Sometimes, these decisions are driven by greed, and sometimes by conceit and an over-developed sense of their worth. E.g., I recently saw a leather belt in a Gucci store that carried a price tag of Rs. 29,000 ($450). I'm not exaggerating when I tell you that I carefully counted the zeros again because I wasn't sure I had read it right the first time. Now, I can get a similar belt in the adjacent Louis Phillipe store for about 1/10th the price. Whatever Gucci is doing - maybe they're using higher-quality leather, investing more in design (although this was just a strip of leather with a plain buckle, so I don't really see the value-add, but maybe there was something there a more discerning eye would see), maybe they're providing a better store experience, some prestige (more on this below) - it can be worth some premium, but this is crazy. The fact that some people have the disposable income to pay such an amount for the product, and the amount adds a bit more to the obnoxious wealth of a talented designer - for me just drives home the realization that we live in a world that is far from fair and where a lot of things just don't make any sense.

Thankfully, in most cases, pricing needs to make sense. In a south-east Asian country, we've seen a brand of cola drop from near-monopolistic leadership to a distant 3rd position in terms of market share in less than a decade. People still love the brand, but in times when the economy is tight, they drink others that they feel offer much better value for their money.

Pricing can also lose you a lot of business. When I bought my last TV, I had planned to buy Samsung. I expected the price to be a bit lower than a comparable Sony, but was surprised to find it ~25% higher. Sure, Samsung had introduced voice and gesture based controls and a few other gimmicky features - but in my mind, the Sony was better value for money and I bought that. I will keep this in mind when I'm considering a Samsung product in future and not just assume they're reasonably priced.

In short, the marketer should consider the alternatives available to the buyer and their prices. So should the buyers!

One of the trickiest cases is Pharma. While I agree that they must be compensated for their R&D expenses for inventing break-though drugs and avoid buying generics, the duration for which they try to hold on to patents, the tricks they use to block competition, and the way they try and squeeze dying patients for every penny they're worth and sometimes more - appears to cross the line and smack of greed. I feel this subject needs needs more critical discussion to arrive at a solution that's fair to everyone.

Prestige
There is no getting away from the fact that the brands you are seen with reflect on you, and people make judgments based on that. As a Punjabi, I understand this all too well!

A lot of the time such associations can be positive. I have my wedding coming up soon, and I'd like to buy Tanishq products after seeing their two recent ads - one where they show a dusky bride re-marrying, and one where they support LGBT rights. In these cases, it's not just about the products - the brand is helping me express something I believe in, and I'm willing to pay a premium for that.

There is some prestige associated with most premium products that usually stems from a tradition of high quality, good service, innovation or uniqueness - among other things. People are proud to own Apple products these days, because they represent innovation and the very top of the pyramid in terms of elegant design and user-friendly interfaces. Others can't necessarily achieve this by matching their products or pricing, and this enhances Apple's brand value. Creators/managers of brands must keep this in mind.

While low price is a good strategy when you're dealing in a commodity or aiming for volume leadership, keep in mind that it limits your profitability and also your future profit growth potential. Even if Micromax launched a smartphone tomorrow that matched a Samsung Galaxy in every way at a lower price, a lot of people still may not buy it because the brand is considered cheap, associated with lower-grade components, imitation of other's innovative features and its prestige value is negative in this category.

On the other hand, I'm sure the buyer of the Gucci belt feels some pride about owning a Gucci product, and I'm sure Gucci is reaping the benefits of the prestige associated with their brand. However, I feel the price premium in this case crosses the line from prestige into obnoxious vanity, which can hurt a brand in the eyes of many potential customers.

A case in point would be imported goods with high customs duties, such as cars and perfumes in India. If you want to spend good money of Davidoff perfumes because you just love their unique scent, I think that's fine. However, keep in mind that a bottle typically costs ~Rs 2,000 if purchased overseas or Duty-free at the airport. The appropriate prestige value is already factored in. Now, if you buy it in a mall for Rs 4,000 - the extra money doesn't go to Davidoff, but to the government which will waste most of it on hare-brained and inefficient schemes and line the pockets of some corrupt leaders. Sure, such a purchase allows you to show off your high disposable income - which may be your objective - but I would not include that in my definition of prestige. The world would be a better place without this phenomenon.

In an ideal world, there would be free trade and I'd have the choice to buy a good German car at the same price the Germans can. While the price would be somewhat premium compared to domestic brands, it would be justified by product superiority, pleasure of use and prestige derived from the brand's history. But paying high customs duties today is only a means of displaying wealth in an obnoxious manner.

Prestige is an important component of brand value, and it must be a priority for the brand manager, but it is co-created by the users/customers. So, in this case, I feel the responsibility for keeping things rational and keeping the producers in line lies with us. We need to be sensible about how much of our disposable income is spent on brand prestige versus perhaps more important things.

An example
When anyone I know asks me for suggestions for electronics/appliances, the budget is finite and no one has the time to do much research, I recommend they buy the best Samsung product available within their budget.
Product: Will be close to best-in-class, or just a notch below. Good enough for most people.
Pricing: They're not too expensive, and you're unlikely to easily get something much better at the same/lower price.
Pleasure: I've NEVER had a problem with a Samsung product, and I've used a few. LG matches them on product/price usually, but I've had problems once or twice with the units I got.
Prestige: While it won't be a source of great pride, it's certainly not an embarrassment. And I feel they have a better reputation than LG or others in the same price bracket.
I would consider this a success for brand Samsung.

Closure
One can look at brand value in two ways, and I think they're inter-linked. To the buyer, it is what they'd be willing to pay to meet a need and derive certain benefits. To the producer, it is a measure of what they can charge customers for their products/services and grow a profitable business. For things to work well for both sides in the long run, the two must be in balance. The above framework should help both brand managers and users to think about brand value in a structured manner and achieve such a balance.

I haven't tried too hard to isolate these dimensions or define everything formally because these 4Ps are inextricably linked with each other. Product quality & performance affect reputation, which in turn affects price, provides prestige and pleasure. Conversely, pleasure, pricing and brand prestige must be kept in mind while designing products. Also, not all brands have the same goals - some aim at economy for the masses, while others try to be premium and differentiated to please the discerning - so there is no 'ideal' position on any P, and every brand could have its own sweet spot within its category. One must think of brand value in a holistic manner. Hopefully, the above discussion and examples help.

Do feel free to chime in with your thoughts. I'd love to discuss various brands and adapt the framework as necessary.

Request: Do not quote/copy any of the above ideas or content without reference to this post.

Jul 13, 2009

Red Bull

It's commonplace for people to visit Thailand, for a variety of reasons. One visitor in 1982 was Dietrich Mateschitz, a European toothpaste marketing chap. He found that a local potion called Krating Daeng - most likely found lying in the mini-bar in his room, it's purpose probably explained by the person at the hotel's reception desk - was very effective in curing his jet-lag. He decided to take it to Western consumers. Since a 100ml medicinal-looking bottle full of strange-and-very-sweet tasting syrup wasn't likely to find too many takers, he diluted the drink to 250ml, carbonated it, and put it in a smart-looking can.

Cut to Shanghai, 2009. A Formula 1 race has just ended. The well-known and very glamorous names of Ferrari, McLaren and Williams are conspicuous by their absence on the podium. At the top of the podium stands one of the most brilliant young talents of F1, tipped by many to be the rightful heir to Schumacher's throne. The camera focuses on him. On his jacket, you read 'Red Bull... Gives You Wings'.

I feel the story of the Red Bull brand MUST be made a case study in every B-School.

Coca-Cola was the undisputed leader in the soft drinks market some decades back. It's still the leading cola brand, but still a cola brand. Facing a significant threat by the way of a growing health-consciousness trend across the world.

Sony is a leading electronics brand, but no longer associated with ground-breaking innovations (think Walkman) - that position is now owned by Apple.

Xerox is a photocopy brand. Tommy Hilfiger is a fashion brand.
Honda and Toyota are efficient and reliable Japanese cars.

Red Bull... gives you wings. It's not just a brand. It's about energy, about endurance, about passion. It's the quickest car on an F1 circuit today. It's a brave new world of music - SoundClash. It's an adventure race from Salzburg to Monaco, featuring some of the world's top paragliders and endurance sports specialists. It's the Air Race World Championship. It's a Mediterranean food festival. It's a a 600 square meter creative hub for musicians, artists and photographers in the middle of the red-light district in the Dutch capital of Amsterdam. It's a way of life, and it's here to stay.

How did some-guy manage to make all this out of a diluted, carbonated version of a cheap Thai syrup? It wasn't a fairytale. They first tried to market it the traditional way.
1. Free samples were offered to people. A terrible idea, considering the not-so-pleasant taste of Red Bull. And a small sample obviously won't relieve you of all physical and metal exhaustion - which was the whole point.
2. They advertised on TV. For one, this medium is expensive and too cluttered to be really effective in Red Bull's case. Secondly, even if some people became curious, TV doesn't lead to action immediately. And where'd they find the damn thing, anyway?

It was probably after all this, that someone realized the brand needed a strong, unique, appealing and holistic identity, supported by prominence on the shelves where their targets shopped. And since they were offering something unique and truly useful, they could charge 6-10 times what the drink originally cost in the land of it's origin. The rest, as they say, is history.

If this doesn't deserve to be a case study in a school of marketing, I don't know what does.

Oct 16, 2006

Cleartrip.com

Kotler had defined the 4Ps of Marketing. I feel the most basic, and the most important, is the Product. And there is a new 'winner' product on the block. Its Cleartrip.com.

The 'online air ticket booking' space in India was pioneered by MakeMyTrip.com (MMT for convenience). Now, everyone is familiar with MMT. MMT offers good price and reasonably good service, and has no major competitor. It is also expanding its bouquet of services. I was one of the early adopters of MMT, and used to rave about it to many of my friends (blue-eyed b-school boys most of em, and fairly frequent flyers)

But recently i saw an ad for cleartrip, and decided to take a look. I liked what i saw. And the experience of booking thru cleartrip was so good, i will not even consider MMT in the future. The improvements these people have made include a 'clean' interface - very easy to understand and use, with all the info u need, and nothing that annoys. E.g., the fares u see on the first page after search, include taxes etc. This is much better than wat we r used to, at other sites - seeing fares that seem low at first sight, but keep inflating with taxes etc at every step of the booking process. Cleartrip always gives complete results (unlike MMT which often misses results from one/more airline), and the fares they show are actually available (unlike MMT, where u often see a 'Sorry, the fare u selected is no longer available' message).

This is a great Product. Try it! This is also a lesson for marketers - never relax. Especially when it comes to product improvement and innovation

Aug 15, 2006

Kotler Update

Philip Kotler was recently in India. He did an interview with Economic Times and Im noting some points I found interesting.

4Ps was updated to include People in the 21st century. This includes your own back office and frontline people, infact anyone involved in the entire sales and support process (CCDV - elaborated below). 'Our strength is our people' is probably the greatest corporate cliche of all time!

He chose the 4 'P's because his own name begins with a 'P'. He said it jokingly but I wont be surprised if it were true. This would support my hypothesis that great people have a 'me first' thought process!

The new Marketing framework is CCDV - Creating, Communicating and Delivering Value. Lets take Tata Indicom Broadband in Bangalore as a case here. The opinions hereon have nothing to do with Kotler, they are mine!

Tata Indicom Created value by ofering a broadband service at a competitive price with freebies like Static IP, Router, No hidden charges. So far so good.

They advertised like crazy and managed to contract with big residential complexes. They have Shankar Mahadevan doing a breathles jingle and billboards all over the place. Value Communicated!

But when it came to delivery - they fell flat on their face. People who applied for broadband connections - who would be impatient by default - were made to wait more than two months without any communication about the application status from the company, let alone actual installation and activation. Most people get frustrated and cancel. Those who get the connection are annoyed by the delay and then appaled by the poor service standard.

Therefore, they lose out to Airtel in this market and Reliance in CDMA telephony.

This is quite typical of companies in India. Nice ideas, lot of bureacracy and talk, little action. Nobody wants to put in the real effort and get their hands dirty. Thats why China kicks our ass in manufacturing. I hope im part of the generation that changes that!

Apr 23, 2006

Generation Y

An extract from Kotler - Marketing Memo on 'Generation Y'

The following traits are often ascribed to Gen Y:

  • Optimism and big expectations from the future
  • An obsession with achievement
  • technology savvy
  • Greater acceptance of racial and ethnic differences
  • Media savvy
  • Busy schedules
  • higher levels of stress
  • A heigthened ability to multitask
  • A strong sense of community and teamwork
  • A wish to make money but a need to give back
  • Emphasis on immediate gratification
  • Suspicion of advertising

    Somehow I found this depressing. I thought some of these things were part of my identity, only to discover that they were genaral traits of a 'segment'. Its a 'lost in the crowd' kind of feeling which I found disturbing.

    But it also strengthened my belief in the power of market research/analytics, and my desire to make a career in the same. Hope it works out - I really dont want a 'sell soap' or a 'sell asset products' job.

    Also, Gen Y is a pun. We are also 'Generation Why' - because we question the basis of everything, and do not accept norms and conventional wisdom just because we are told so. Gen Y includes people born between 1977 and 1990 (I dont understand why 77, and not 76, 78, or the nice, round 80).

    My own term for what follows is 'generation SMS'. At least in India, I think SMSing changed the way people communicate, and a whole lot of other, related things that great 'thought leaders' can discuss in detail and depth. Somehow SMS didnt become 'big' in the West or too many other places, but in India it is huge!

    Trivia: I also discovered while typing this post that i can type without looking at the keyboard (wow!). For the record, the error is <5% and usually only 1 char left or right, usually left!

    The Anti-Gandhi post - it will happen! Just need some free time, and some clarity on the job scene first :p