Most technology companies don’t give much thought to branding, either because they think they can’t afford it, or they just don’t know how to go about it. In this paper, we’ll discuss how building brands has a direct effect on the bottom line, and how you can effectively brand your company without spending a fortune.
Developing Your Strategy
If you are a marketer or CEO, work in a technology company, and mention branding in a meeting, you’ve probably heard some of the following statements:
“We don’t need to brand, we just need to sell.”
“Branding isn”t measurable.”
‘It’s too expensive.”
“We’re great technologists. How hard can branding be?”
“We’ll do it ourselves.”
“Our product is so good it will sell itself.”
During the boom of the late 1990s, it was possible for technology companies to stay afloat without paying too much attention to their brand since it seemed to be raining money, but today’s market climate is radically different. The technology companies that will thrive and prosper going forward are the ones able to command customer loyalty, a premium price, and a premium valuation. Central to these successful
companies is a well-defined and focused brand.
Create the Offer
Let’s get a few of the preliminary definitions out of the way: a brand is a unique combination of rational and emotional values and qualities associated with a single product, service or organization that leaves an impression in the audience’s mind, and which acts as a credible guarantee of quality. Over time, a brand can become a valuable asset through accumulated customer experiences based on investment made in quality, clarity, and consistency of communication.
Brands begin as ideas, making their way into planning and strategy documents, yet ultimately reside as consumer perceptions. For some companies, brands are their most valuable asset. The space a brand occupies inside a customer’s head can create enormous value to the company, as a relationship grows out of the cumulative memory and the experiences customers have of products or services.
As such, brand building is about creating value through the provision of a compelling and consistent customer experience that satisfies customers and keeps them coming back.
The Layers of a Brand
Brands are made up of four layers: the core product or service, the basic brand, the augmented brand, and the potential brand.
Product / Service
At the most basic level, customers buy products to meet certain functional needs. However, most products and services cannot survive on functionality alone since other products will eventually become more competitive over time and lead to commoditization. Therefore, building a strong brand can be an effective barrier to competition.
The Basic Brand
The basic brand consists of the “name, term, sign, symbol, or design, or a combination of them, intended to identify the goods and services of one seller or group of sellers and to differentiate them from those of competitors.” Essentially, it should support the offering’s performance and differentiate the brand from those of competitors.
The Augmented Brand
Successful companies seek a competitive edge through the enlargement of the core product or service (with supplementary products and services) that enhance the customer’s total purchasing and use experience. These products and services add value and make the offering much more difficult for competitors to emulate.
The Potential Brand
A brand achieves its potential when added values are so great that customers will not willingly accept substitutes, even when the alternatives are cheaper or more readily available. Some consumer companies that wield a powerful potential brand are BMW, Starbucks, Coca-Cola and Nike. A few technology companies that have strong potential brands are Hewlett-Packard, Sony, and Nokia.
How Brands Create Value
Why has the interest in branding spread beyond the traditional consumer goods area? Customers now have a vast array of choices available to them through traditional channels. The Internet has added to the confusion, providing an even greater selection of goods and services without geographic restraints. Without the familiarity of trusted brands, the consumer can be overwhelmed. Certainly it is difficult for a company without a strong brand to make a market impression in the face of so much competition.
Whereas companies once measured their worth by their tangible assets―plants, assets, inventories and cash―they are now realizing that a strong brand has the power to command a premium price among customers and a premium valuation from investors. Ford Motor Company, ranked number eight in brand equity, had a rough 2001. The Firestone tire episode took a toll on the company, as did a series of quality problems and the departure of Jacques Nasser, the company’s CEO. Although the company’s position rebounded somewhat by the end of the year due to some aggressive (and debatable) financing offers, in August, first half earnings were down 91% from the previous year. The brand took a beating and as a result, the company’s ability to attract customers and command a premium price declined. As a result,
the company’s brand was worth $30.1 billion, down $6.3 billion from 2000.
There are several key points to remember about building and maintaining your brand:
- The Brands, The Market Share and The Profits ― In a typical consumer market, a brand leader obtains twice the market share of the number two brand, and the number two twice the share of the number three. The brand leader is the most profitable and all beyond number two tend to be much so.
- The Brand Leverage ― The brand leader benefits from two main effects: higher volume leads to economies of scale in development, production and marketing; and premium pricing increases revenue.
- The Value of Niche Brands ― Dominating a niche market is usually more profitable than being fourth or fifth in a large market.
- The Brand Loyalty and The Beliefs ― Strong brands are more attractive to investors. Brand loyalty also reduces marketing costs and enables firms to override problems.
- The Brand Barrier ― Brand leaders usually have the financial strength to fend off competitors. Potential competitors are usually reluctant to enter the market if existing brands satisfy customers. In addition, brand leaders can exploit their superiority in the market.
Can Small Brands Compete?
Definitely. Granted, if you think of a strong brand, chances are you’re going to say something like BMW, Nike or Tylenol. In each case, it’s a global brand that’s had millions and millions of advertising and promotional money put behind it. Even so, there’s room for a small brand to be successful in its own market space, and you don’t have to break the bank to do it. Whatever the merits of the Nike “swoosh,” we’ve all seen it so many times that the brand image is pretty well burned into our heads. Large corporations like Nike must spend huge amounts of money to be present everywhere, and to maintain their brand. That’s a weakness that can be taken advantage of by a small company. (Not to mention that large companies can have a very difficult time managing their brand through the long and complex delivery chain that might involve subcontractors or franchises.)
A company’s brand, in addition to all the things we mentioned earlier, is a collection of experiences that satisfy the consumer’s needs, whether an intellectual, emotional or ego appeal. Consider things like service, packaging, public relations, sales interactions and office culture all part of the brand, and this is where small companies can win at branding. The key is using existing communications channels to reach your target market with your brand message.
Branding Services Companies
Many technology companies are service oriented. There are stiff barriers to effective services branding, since these companies don’t have a boxed, tangible product. Trying to put a brand around a methodology can also be difficult, because business consumers can have problems creating a brand image around an abstract process. Systems integration methodology is just not very sexy. That said, services companies must build and maintain their brand by focusing on other areas.
Services companies can build their brand by creating and promoting a corporate personality. This might involve promoting certain executives at market events, training consultants to convey the corporate personality in their client interactions and in their project delivery. Branding is not accomplished so much through advertising and marketing as through focusing on instilling the corporate brand into the consultants who are interacting with clients.
People who have worked for Electronic Data Systems (EDS), the large systems integration firm founded by H. Ross Perot, intimately understand services branding. The first two weeks of every new consultant’s career is spent at a high intensity two-week “boot camp” that sets the tone for his or her initial assignments. During this time, consultants learn the EDS dress code, EDS philosophy and ethics, the EDS coding style and approach, and even the EDS style of making presentations. What may seem like an unnecessary waste of two weeks to these new consultants is in fact EDS’ significant expenditure in protecting its brand. What EDS is selling is a serious, rigorous, competent approach to solving problems, and the consultants are the delivery vehicles. By investing time and money in this process, EDS ensures with a high degree of certainty that its clients receive a consistent product regardless of the specific consultant assigned to the project.
Marketers can increase their profitability by as much as 85% by decreasing customer defections by a mere 5%.
A more recent example of a services firm that took a more aggressive approach to traditional branding is Scient. A systems integrator whose methodology might or might not have been any better than their competitors such as Viant, Sapient and CTP, Scient rose above the fiercely competitive Web integration marketplace by bursting out of the gate with a focused, repetitive message: We hired the “dream team.” For competitors in the market, the news of the hire of Bob Howe, founder of IBM’s consulting practice, was greeted with jitters and dread.
This messaging ran a few months while the company’s executives aggressively courted big name clients. As win announcements began to hit the wires, the company shifted tack to promote themselves as thought leaders, playing off the term “systems integrators” with the slogan “systems innovators.” The slogan has since changed to “eBusiness innovators,” but the idea’s the same. Every press and analyst contact with their executive team strengthened this message as they created a lexicon of Scient terminology, which in turn led clients to believe that the company was onto something in solving the technical problems of the “new economy.” Scient suffered from the Web integration market collapse like everyone else, but while the space was especially hot, the value of its brand was huge. In fact, their branding efforts contributed to a big upside in the company’s bottom line, from launch to IPO and beyond.
“Adaptability is not all you need to succeed; it is inherently reactive and relies on luck. Strategy is what you need—and if you don’t have one, you will become part of someone else’s.”
Tom Johnson, Toffler Associates and Alan White, MIT
What Business are you In?
Every branding paper is compelled to mention Disney at some point, so here goes. What business is Disney in? They have amusement parks, films, Broadway shows and other entertainment vehicles, so it could be entertainment. But how does the Disney-planned town of
What if Arm & Hammer thought baking soda was only good for baking at home? When that use became less common, they adapted, suggesting other uses for baking soda. Now they sell an entire line of fresheners and cleaners that contain baking soda. They defined a business strategy and adapted their brand accordingly. According to Stan Richards of The Richards Group in
- Be specific enough to influence the strategic and resource allocation decisions within your company
- Focus on satisfying customer needs rather than on the current physical characteristics of
- Reflect the essential skills of your organization and signal when those need to be expanded
- Enable the organization to recognize future threats beyond your normal set of “blinders”
- Be attainable, but with difficulty
- Be brief and memorable so that everyone in the company can be inspired by it.
On the Other Hand…
A wise venture capitalist said that all the dot com funding over the past few years was like playing a baseball game with the outfield fences moved in about a hundred yards. All of a sudden, business plans that were doubles were getting knocked out of the park. Pets.com was a small brand that competed vigorously, but was doomed by an untenable business plan. It was a case of a company that ended up with a brand that was ultimately worth more than the company’s core business. Not that they understood this from the beginning. Early in the company’s existence, a technology partner called up the public relations person who he had been working with to see if he could get a sock puppet. It wasn’t the first time she had been asked, and she had her answer ready. “Oh no,” she said. “We aren’t selling the sock puppet. He’s too valuable.” That attitude changed a few months later when it became clear that sock puppets were cheaper to ship than 50-pound bags of dog food.
Pets.com faced a crowded B-to-C pet care market with fairly low barriers to entry and a business plan that focused on getting customer share at the expense of profits. Against competitors who might or might not have run a tighter business, Pets.com definitely had the mind of the consumer. That the brand had overtaken the core business was especially evident on Good Morning America in which the sock puppet had an entire segment with Diane Sawyer. A few months after it was over the sock puppet was still being advertised in a closeout catalog.
All in all, Pets.com was a case of a brand that was strong, memorable and contributed to a definite increase in customer business, loyalty and mind share. It was just tied to a company with a business plan that was a double.
About NIA Creative
NIA was founded in 1996 and has grown to become one of the most trusted go-to partners for technology, medical/biotech, public/non-profit, financial service and consumer firms around Silicon Valley and the U.S. More than 225 major clients have turned to NIA for their branding needs, including Adobe, Apple, Baxter BioScience, Biogen Idec, Carl Zeiss Meditec, City of
NIA is unique in that both traditional agency and full-scale production services are available in-house. This enables our team to have greater creative control, while simultaneously reducing costs. And because we are a boutique agency, our clients experience highly personalized services that are conceived, driven and led by key members of the executive and creative teams - not by junior account people. NIA’s services include advertising and branding, web development, video production, animation, interactive media development and tradeshow/ event marketing. For more information, visit www.niacreative.com.
Creating and supporting your brand is more important than ever in rising above a noisy market and differentiating yourself from your competitors. If you’d like more information on how we can analyze and revitalize your
brand, please contact:
Jennifer Finetti
Managing Director
NIA Creative, Inc.
Cell: 408-838-7704
Fax: 925.224.9990
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Nice writing style. Looking forward to reading more from you.
Chris Moran