A Decade in the World of Branding

The future of brands is inextricably linked to the future of business if it is to be about sustainable wealth creation.

Of all the books ever written about brands, I would suggest that in excess of 70 percent have been written and published in the last decade. As branding is something that has been around for hundreds of years and developed into a modern concept applicable to all brands, one has to ask: Why all this activity? The answer is the recognition that not only are brands valuable assets, they generate huge amounts of money. As Rita Clifton, Chairman of Interbrand, London puts it: “The future of brands is inextricably linked to the future of business if it is to be about sustainable wealth creation.”

The last decade has seen huge changes in the way we live and the manner in which the world carries on business. Brands are increasingly recognised and treated as economic entities, with immense potential for wealth creation. Sometimes the most valuable assets a company can own. They are also potentially social and political weapons. In some sectors, and increasingly, the company and the brand are one, a true corporate brand. With change comes tension, some relish it whilst others get left behind, but the emergence of brands as a vital component of business in the 21st century, leaves many struggling as they play catch up.

This year’s Fortune 500 celebrated 50 years of the magazine with a celebration not of the major innovations such as fibre optics, the VCR, internet, cellphones, the personal computer, ATM, bar codes etc, but of: the modern corporation. Top companies have emerged as corporate brands and add considerable value in their own right. Modern companies demonstrate “their proven ability to marshal and allocate resources, organise and harness the ingenuity of people, respond to commercial and social environments, and meet the ever more elaborate challenge of producing and distributing goods and providing services on a global scale.” The increased competition and over capacity in most fields of industry has accelerated the realisation that branding and marketing are essentials for future survival.

In my files, I have a fax from a major South African company that I had the temerity to approach around ten years ago, pointing out that they were in dire need of looking at themselves in the mirror. They had an old fashioned visual identity, were incredibly wealthy, were smug to the point of being arrogant, and in my view lived in the past. The fax informed me “The nature of this Corporation, and the products for which it is responsible, is such that there is no requirement for branding.” Not easily put off, I pursued my quarry, only to be told that I was wasting my time. Now a decade later this same institution is a major sponsor of South Africa’s 2010 World Soccer bid, making strenuous efforts to reposition itself in the eyes of all South Africans. I was also intrigued to find myself speaking shortly after a spokesperson from this institution had themselves presented a paper, at this year’s Financial Mail Adfocus conference. My, how things can change as companies realise that branding today is an absolute necessity if they are to succeed on the global business stage.

Management guru Peter Drucker, at the grand age of 94 observed recently that the internet has changed everything fundamentally, changing the way companies operate and the markets in which they compete “it makes every supplier appear ‘local’ even if it is half a world away”. He goes on to add “the consequence is that the process of marketing and selling products is being separated once and for all from manufacturing, delivery and service. A good many companies are finding that difficult to reconcile.” That sums up rather neatly how today, no company can afford to be without a brand, nor to be not practising brand building. Companies, institutions, even countries, all have their own way of doing things, but the fact remains, if you don’t have a brand, and don’t communicate what the brand stands for, you are at a huge commercial disadvantage. With the development of the electronic age, many failed at first to grasp the long term effect on brand elements within a company, often treating it as a separate entity rather than part of the integrated whole. It was the Director I-Knowledge at Proctor & Gamble who was quick to point out: “Since people cannot see, touch or feel the actual product online, having a strong brand and strong equity, along with high awareness, becomes a key factor to internet success.”

Neither Nokia in 1865, Microsoft in 1975. even Nike in 1968 started out as brands. Neither did Vodacom or MTN in 1994. Looking at the ages of the Top UK brands compared with the Top RSA brands, it is noticeable how similar the profiles are.

Over the last decade, brands have taken on a totally new aura as they are recognised for what they really are:

• often a company’s most valuable assets;

• one of the few things that guarantees future earnings;

• ensuring major brand owning companies outperform those that don’t;

• now making up around a third the value of major stock exchanges;

• assets that can be bought or sold to the highest bidder;

• resulting in some companies structuring themselves around their brandable assets;

• resilient to challenge if handled correctly;

• able to command huge premiums over commodities;

• able to evolve and adapt to tomorrow’s challenges;

• in a word ‘trustmarks’.

Language is a key issue as some of South Africa’s major pioneering groups find that being fluent in finance, petrochemicals, gold, diamonds, luxury goods, fine paper, even tobacco allows one to travel the world and forge new relationships so opening up new markets. But, going global raises other issues such as transferring a company’s culture into acquired companies and ensuring that all business associates talk the same business language. It is often the FMCG giants who lead the charge, and both Proctor & Gamble and Unilever are currently investing a lot of time and energy into ‘homogenising’ all employees so that they use the same common marketing language across the global organisation and that all staff are kept focused and up to date through regular training sessions in global best practice and marketing excellence.

The word brand remains a problem to many in business. And Clifton poses the conundrum: “Do we love to hate brands, or is it that we hate that we do love brands”. Talk to many CEO’s about reputation and share price and you have their total attention, slip in the word brand and their eyes glaze over. Yet we know that the line between corporate and product brands is, for the most part, converging and that all elements and ‘touch-points’ must be focused’. The realisation that companies are becoming brands in their own right, and the fact that branding applies to all market sectors, not simply FMCG, has resulted in branding, increasingly being the subject of much discussion in business schools. When asked how to inflate a share price, consider this: “Investors like to see that a master brand controls all these successful sub brands. Also, raising the profile of the master brand can help cross-promote the sub brands.” – a quote from a top overseas practitioner. Peter Stringham, the highly influencial global marketing director at HSBC gave a paper recently at The Economist’s Annual Marketing Directors Summit. His whole address focused on the need for marketers to explain themselves and to talk the language of the board. He tells the story of a how a year after he had joined HSBC, a senior executive in HSBC UK admitted to him that he referred to marketing as ‘the colouring-in department’. So he set about developing a long term strategic plan for marketing within the business, defining the role of marketing the marketing department in a way that senior management could agree with and putting in place of a series of measures that would ensure that all management started to give more attention to marketing matters. This is often a major tension point in many organisations, the lack of understanding of what marketing can do together with a lack of accountability by marketers to their colleagues in other fields. Stringham makes the telling point that most of the figures put together by the finance department are themselves estimates and not ‘hard’ numbers. Likewise, with marketing, the figures maybe ‘soft’, but they may be harder than you think. They are a serious concerted effort to monitor what is happening in the business and identify the trends. Just as in South Africa there is keen interest in the annual Markinor tables, so globally many CEO’s watch out for the publication of the Interbrand ‘World’s Most Valuable Brands’ tables with great interest. The fact that these tables are also estimates does not detract from the fact it is a serious attempt to measure value and as Stringham puts it: ‘Whether that figure is right or wrong isn’t half as important to me as the fact that we can use our progress on the table to focus attention on our brand.’ Taking this a step further, HSBC operates today using three measures that demonstrates how marketing creates value and in turn endorses the fact that as a department it is as disciplined as others:

• Customer’s satisfaction. In particular, brand perception.

• Brand consideration. There are so many companies offering services that when the consumer contemplates buying a mortgage, HSBC is one of the first brands they think of.

• Brand differentiation. The most critical, and yet the most difficult to effect and measure.

In the boardrooms of business, the language remains that of finance. But the events of the past few years have demonstrated that finance is not an exact science. In fact I have read articles in the UK’s Investors Chronicle illustrating how figures can be presented in various forms, still with the auditors complicity, and without breaking any laws. I would suggest that not too many people can explain the statement: “Economic profit measures more than profit alone.” However, aggressive accounting is not simply an Enron phenomenon, but something adopted by many companies from CS Holdings to Shell. If I were to tell you that the top four organisations in one specific industry sector were all facing a number of major legal actions around the world and claims for many millions of rands, you would wonder about the integrity of the sector. Of course, I’m talking of the auditing profession, and their unenviable position illustrates the difficulties the profession find itself in, using standards that are behind the times and out of global alignment. This is a major ‘tension’ point, and despite what one hears locally, internationally the position is far from resolved. This was brought home to me the other evening watching the ceo of Vodafone, one of the global giants discussing his company’s results with a quizzical journalist on an international business television channel. When asked about the loss situation he patiently explained that the real figures to look at were the cash flow generated and the effect of the annual amortisation of goodwill. The loss he explained was simply ‘an accounting entry’! So much for ‘hard’ figures.

Marketers have themselves been guilty of not being accountable, not talking the lingua franca of the boardroom. But perhaps as the financial community and marketing community learn the lessons of the past decade, they will be able to reach out to each other and work more closely together. After all, if a company’s major assets are its brands, they are not the property of the marketing department, nor are they best served by a divided exco, they require the full support of the entire company led from the very top.

But the argument can be taken to a higher plane by arguing that a country’s major assets potentially are it’s brands. The effect on the USA economy of owning a large number of the world’s most valuable brands is profound and the same applies around the world. The impact of ownership of a major brand on a country, company or even a city can be profound. South Africa is just like any other country in that it has lots of things that barely rate brand status. But then there are a whole raft that are an integral part of our lives. The Markinor tables highlight just how strong the home grown brands are, generates much debate, and underlines how the local brands have remained strong despite the influx of imports and global players. Page through the various editions of Brands & Branding and you don’t get too many surprises, nor see many changes. Brands give us reassurance, a certain constancy, but if they don’t keep evolving they become irrelevant and behind the times. It is worth considering that for brands to continually survive they have to withstand changes in management, changes in ownership, overseas challenges etc. Major local brands have disappeared such as Lion Lager, the OK, John Orr’s and lots of banks and building societies, largely a result of mergers, refocusing or simply failing to evolve. Sometimes the realisation by brand owners that less is more. As to the major newcomers of the last decade, many are ‘cool’ i.e. YFM, Cell C and perhaps 20twenty and a pile of fashion brands. But time will tell. And there are masses of new start-ups fighting to earn brand status by really adding value and making their mark. Being risk averse in this 21st century, when every action of a company is under intense scrutiny by its many stakeholders, is a natural conclusion. Whether it be totally new, or perhaps the safer option of a brand extension, is still no guarantee of success.

But for South African brands to grow they will need to take calculated risks if they are to continue to stay relevant and strong. The brand owners must manage out of their systems the tension points. Arguably the last really great chairman of Coca-Cola, Roberto Goizueta, was once quizzed about the number of failed new products launched since Diet Coke. His reply was extremely insightful: “No, you only stumble when you are moving”. In branding terms and general terms, we are moving strongly ahead in South Africa, and to stumble from time to time is a healthy sign.

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Jeremy Sampson
Chief Executive
Interbrand Sampson
Strategic Branding and Design Consultants
Email: jeremy@ibsa.co.za