Brand strategy for profitable growth

In this audio presentation, Bain partners Tamar Dane Dor-Ner and Eric Almquist  share new research illustrating the power of brands to affect customer choice.

A customer-led brand strategy focuses on supporting business strategy and customer needs.

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Presentation transcript:  Brand strategy for profitable growth 

Slide 1:

I’m Tamar Dane Dor-Ner, a partner with Bain & Company’s Customer Strategy & Marketing practice.

And I’m Eric Almquist, also a partner in Bain’s Customer Strategy & Marketing practice, and this is our point of view on brand strategy for profitable growth.

Slide 2:

Eric Almquist: Having done a lot of brand strategy work, I’d say the No. 1 lesson of brand strategy is that brands live in the minds of consumers. You don’t actually have total control over a brand like you might with other business assets. So, an example: What Cadillac is saying about its cars these days is that it beats the world’s best cars, it’s red-blooded luxury, it’s rebellious, passionate and so forth. But still, what consumers are thinking about Cadillac: Cadillac is owned by your grandfather, the cars are boats, it’s kind of nostalgic, and it’s going to take a long time for Cadillac to change its image.

Slide 3:

Eric Almquist: The second-biggest lesson is that brands reflect what companies deliver. And there are some great definitions of brands out there. One is from Jeff Bezos that says, “Brand is what people say about you when you’re not in the room.” A little bit older definition is from Socrates, which has to do with basically, “If you want a good reputation, you actually have to be what you want to appear.” One of the biggest mistakes a company makes is to make big promises in, say, advertising and then fail to deliver to customers in the real world.

Slide 4:

Tamar Dane Dor-Ner: For all the reasons that Eric mentioned and, in fact, many more, you really just can’t address brand strategy independent of business strategy. Let’s take an example from the hospitality space, and let’s look specifically at the relationship between Marriott’s business strategy and Marriott’s brand structure. So the key elements of Marriott’s business strategy: The first is, “Something for everyone.” And that means covering a really broad range in terms of price points and regions. The second has to do with leveraging scale and technology and service. And the third is about serving customers in a way that’s consistent and reliable. So how does that translate to brand architecture? Well, first of all, it’s that corporate brand umbrella, which is going to translate the consistency and scale. But when you look at the ground that Marriott is trying to cover—the ground essentially between Ritz and Fairfield—you see that it really requires differentiated brands.

Slide 5:

Tamar Dane Dor-Ner: So talking about brand strategy independent of business strategy is unwise, but unfortunately not rare. I think that many of us have been in this meeting where bigger strategic issues are displaced by more trivial brand-marketing issues.

Slide 6:

Tamar Dane Dor-Ner: We believe that a strategy based demand-led approach is different. So let’s talk through the conventional approach. I think often what you see is a focus on the Brand, with a capital “B,” rather than the strategy. You see a lot of attention paid to intangible brand values that can’t really be affected and are very hard to action against. I think you see an almost mystical creative process, which many executives don’t feel they are entitled to participate in. And you see a lot of the expertise that drives the brand strategy focused on things like visual systems and marketing communications, which are important, but often can be the tail wagging the dog.

What are we trying to do that’s different? First, we want to start with the customer. The customer is the main noun of all of the discussions we want to have about brand. And we want the customer to translate to business strategy and then to brand strategy. Second—and Eric’s going to talk about this in more depth a little bit later—we want to use economic metrics that can be influenced and improved—and that’s the demand-shift concept that we’ll cover in a bit. Third, we’d like a transparent process, which is both creative and analytical, because both are essential, but which has a language everyone can use and everyone can understand. And finally, we want the expertise in the room, the expertise that’s driving brand strategy, to be expertise that is driven by business objectives rather than by design, essentially.

Slide 7:

Tamar Dane Dor-Ner: So rather than starting with the brand as the conventional mindset does and asking questions like, “How healthy is the brand?” and “Should we rebrand?” we want to start with the customer. And we want to ask questions like, “How does our product fulfill their needs?” “How do we deliver on our promise?” and “Do they believe what we say?”

Slide 8:

Tamar Dane Dor-Ner: So we apply four lenses when we’re trying to isolate brand problems or identify brand opportunities. We think first about meaning and signals—and that’s really intent. How do want our brand to live in the minds of our consumers? And what symbols or words, what signals are we using to convey that meaning? Second, we thing about transmission. And that’s not just explicit marketing. That’s not broadcast television and print advertising. That’s very importantly all the implicit marketing we do, which is often more powerful. This is your frontline employees, it’s the entirety of your customer experience. Third, we think about amplification and distortion. And here, we’re talking about the part of the process where you really have the least control. So think about amplification in terms of the positive messages, on social media, for example, from your promoters. Think about distortion as the exact opposite—what a detractor can do on a social media site. And think about cross-talk as the way your competitors are trying to challenge or distort your image in the eyes of your consumers. This is a pretty important feature, when we think of modern brand management, and it’s a pretty different system than the one that existed some 30 years ago and was a relatively pure broadcast model, where you broadcast the message, hoped it was received, but didn’t worry that there would be a lot of interference or “noise” along the way. Finally we think, and probably most importantly we think about reception and response. The reception is how your brand actually lives in the mind of the consumer—recall the Cadillac example—and response, more importantly is what they do about it. We think about response as something you can measure, and in fact, the most important thing to measure, which is, how much more is your customer willing to pay? Or how much more share do you generally get as a result of your brand?

Slide 9:

Tamar Dane Dor-Ner: Now, when you think about the complexity of that system, it becomes really important to isolate strengths and weaknesses in specific areas. And so, we use a diagnostic tool that essentially allows us to calibrate performance—and this can be for an entire company or it can be for a specific brand—against hundreds of other companies in similar situations and identify where performance is likely aiding strategy and where it might be handicapping it. One of the features of this approach—and frankly, not one of the ones when we anticipated starting to use it—is that if often challenges a brand diagnosis. So, for example, it’s easy to think that you have a brand problem when, in fact, you have a product quality problem. It’s easy to think that you have a brand problem when, in fact, you have a customer experience problem. And one of the things I like about doing brand strategy in a way that’s closely tied to business strategy is that you’re not a hammer in search of a nail. And many of the things that I see companies initially address as brand problems would probably be more properly and suitably addresses as business problems.

Slide 10:

Eric Almquist: As Tamar mentioned, the goal of all brand strategy is to build a reputation that influences customer behavior, and specifically, customer choice. To illustrate the power of brands to affect customer choice, we recently examined competing brands in the mobile phone market. We used a marketing science method called “Discrete choice analysis,” which has the remarkable ability to identify the role of brands in customer choice, separating it from the influence of other factors like price and product features. What we found is that brands play a tremendously strong role in this marketplace. Currently, the strongest brand in the marketplace, which is Apple, has a 3x preference share over another leading brand. We can then with this model get a sense of the price premium that a strong brand can command. What we do is we raise the price of Apple, in this case, and lower the price of the weaker brand to equalize shares of the two. In this case, it turns out that Apple could charge $193 more than the oher brand for equal shares.

Slide 11:

Eric Almquist: To illustrate how brand insights can play an important role in business strategy, we’ve taken a look, in the same research, at how carriers can subsidize smartphone brands to influence customer choice. In the base case on this page, we set the price as equal. You’ll notice that Carrier A has a slight advantage over Carrier B. If Carrier B subsidizes the other leading smartphone brand, it picks up 1.4 points of market share. If that same carrier had subsidized Apple, it would gain 3.8%. And if it subsidized both, it would pick up 5.3%. So this just illustrates how different subsidies on different smartphone brands can influence choice among carriers.

Slide 12:

Eric Almquist: So thanks for your time. If you’d like to see more research along these lines or more detail on our point of view on brand strategy, please click on the following link for a Bain Brief called “Brand strategy that shifts demand.”

Tamar Dane Dor-Ner: And if you have any questions, please don’t hesitate to contact either Eric or me or any other member of our Customer Strategy & Marketing practice.