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Managing Brand Equity in Rapidly Changing Markets
by Carol Holding
Several years ago, brand equity received the ultimate accolade
in a capitalist society: a dollar value- sometimes listed with
other intangible assets in the annual report. The highest valued
brand today is Coca Cola. Its value according to Financial World
is $39 billion. That's the extra margin people will pay to get
the real thing over a generic brand. On the other hand, IBM's
brand, though third in value this year, was by one estimate actually
negative last year. In other words, if you put the IBM logo on
the product, it actually reduced the value of that product versus
an unknown brand.
Both of these companies, Coca Cola and IBM, have gone through
enormous change, yet one managed to build its equity and one lost
it. Though each company's management decisions and style had something
to do with the outcomes, they also faced different types of rapid
change, one far more challenging than the other.
Coca Cola was taking its core product, Coke, and expanding the
product in new form factors and new overseas markets. The brand
promise stayed the same whether it was sold in a Coke store in
New York or a road side stand in Mongolia - refreshment, good
times, and pure Americana. While maintaining a brand's strength
through all this continuous change is certainly not a no-brainer
- witness the New Coke debacle and the Pepsi Challenge - a brand
encountering this kind of rapid change is easier to manage than
the kind of change IBM faced: disruptive change.
Disruptive change occurs when a stable market encounters a new
technology or social phenomenon that totally alters the solutions
customers will demand. The digitization of video is a perfect
example: it will alter the way we consume cable and broadcast
programming, the way we rent movies, the way we use our computers
- and companies in these industries will have to change rapidly
and radically. Another example: The social phenomenon of "the
new temperance" has led to whole new beverage categories as "alcohol
free beers" as well as the spectacular growth of coffee bars.
Bars that survived have espresso machines installed. Our public
libraries are going through this kind of brand redefinition: once
the repository of books, their focus on book acquisition dropped
while the focus on electronic access and community activities
went up, and now they are public media and Internet access centers
as much or more than they are lenders of books.
Managing a brand through disruptive change requires guarding the
historical brand promise - in IBM's case, a single source supplier
for all computing needs, safety, security - while expanding the
brand promise (and product line) to incorporate the new disruptive
technology, in IBM's case, client server networking between disparate
types of equipment.
Looking at some of the world's strongest brands, they have each
distinguished themselves from all competitors in the market. And
each has been managed through periods of rapid change which have
actually strengthened the brand. Despite morphing of markets and
products, we immediately recognize each brand's promise, just
by looking at a name and symbol - both in terms of product category
and in emotional benefit.
Think of the technology names with which we are familiar. Intel
makes the world's fastest processors. Branding through a period
of continuous change has so strongly associated this symbol with
attributes of speed and power that people buying 286 computers
are still looking for Intel Inside. It gives buyers the emotional
benefit of feeling smart, like they know what they're doing when
they buy a PC, and secure that they're buying the best. That brand
has so much equity that even the Pentium scandal where headlines
screamed that Pentium doesn't calculate accurately didn't slow
Intel sales.
So one of the benefits of branding is protection from customer
wrath in times of trouble. I've talked about the case for higher
margins - certainly true for Intel. A strong brand also yields
higher repurchase rates, because buyers tend to be risk averse,
and why try something new if you already know and like the brand
you've bought before.
Continuing with the Intel brand example: Intel gets better productivity
from its marketing efforts because it doesn't have to spend any
time or money explaining what Intel is. You see a banner for Intel
at a trade show and all it has to say is Intel. An ad for Intel
products can really focus on the products and benefits and doesn't
have to explain Intel. Best of all, every headline, every claim
has more power and credibility because it comes from Intel.
And leverage for the sales force. Who do you think has the easier
time selling chips: the Intel sales person or the Acme Microprocessor
rep?
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