Opinion:Brand new opportunities for business

Opinion

Opinion:Brand new opportunities for business

To maximise your brand value you must shift your focus from being supplier-driven to being market-driven. Customers remember and return to a brand they see as good value

You can dress it up any way you like but there is no denying the fact that many businesses are struggling to make money. Many are cutting back on cost, some reviewing product investment, and others slugging it out to win what few sales there are.

In some sectors, however, managers are taking a closer look at a well-proven method of creating value: brand management. It is surprising that brand management is not generally recognised to be the powerful tool that it is. It certainly has more impact than many things tried over the past 20 years by senior management teams. In that time firms have reached for passing management fashions (such as total quality management or process re-engineering) as a means to create value for shareholders.

These fads, sponsored by pundits, management gurus, or the City, have come and gone, with dubious benefit for organisations or shareholder value.

By contrast, a number of firms have managed brands, with their associated price premium, in different markets over many decades, showing that it is possible to create an entity which appeals to a group of customers and, over time, becomes a valuable asset. This flies in the face of much recent management thinking but it is, nonetheless, true. It is astonishing that more companies have not invested in this proven technique.

Despite the proliferation of experts in the field of brand management - be they strategists, design consultants or valuation specialists - it is still hard to define exactly what a brand is. As a result, some industries have ignored the precious role that brands can play in the life of both companies and customers.

Despite the disparity of work, we know that a carefully designed image rests in the memory of customers. Numerous firms have proved that, by managing image carefully, a product or a service will appeal time and again to a group of interested customers. It becomes a familiar part of their lives, giving them consistent benefits. As a result they will pay a premium and develop a loyalty to it.

Two weeks ago I was in a supermarket with my student son. I reached for my normal premium brand baked beans. He pointed out that, as a student, he bought the "own-brand" from that supermarket because the price difference was so enormous. The price differential, once pointed out to me, was indeed remarkable and what's more the cheap can was right next to the brand I had reached for. This happens thousands of times a week and the price difference yields huge profit.

So why hasn't this technique been fully adopted by IT companies? The answer lies in the fact that truly adopting brand management involves a major change to an organisation. The company must become market, rather than supply, driven. Customer segments need to be defined and their needs understood in immense detail. Branded propositions are then created by giving direction to sales, service and operating functions.

Companies have to be driven to make this radical change. There seems to be a correlation between market evolution or maturity and the adoption of brand management techniques by different industries.

For instance, in the early 1960s the major consumer goods companies faced market maturity after years of sustained growth. As they coped with a dramatically slowing growth rate they began to adopt brand management techniques that created true value propositions. A similar process occurred in the car industry of the 1970s. In response to market maturity and the worldwide invasion of cheap Japanese product, many companies faced bankruptcy. As a result a form of brand differentiation evolved. Nowadays, although they have common manufacturing processes, car makers produce different products for customer segments.

To survive, then, computer companies of all sizes need to take a hard-headed look at brand management. This has been shown in different sectors of the world to produce real value over time and guard against the ravages of the market. Whether it is the corporate brand or a product brand it is time that computer industry became less supplier-driven and learnt to create true value propositions, as those in other markets have been forced to do.

Laurie Young is global head of marketing, corporate finance and recovery at PricewaterhouseCoopers

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This was first published in June 2002

 

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