Strong brands are business drivers

By webadmin on 12:35 pm Jul 23, 2012
Category Archive

Martin Roll

The fast-changing business landscape has made strong brands highly crucial to a company’s success. Countries, regions and continents no more are a barrier to a company, and organizations across the globe are competing with each other.

Even though, for a greater part, it was the Western companies that were entering the Asian markets, the reverse process has already begun with many of the Chinese and South Korean companies gaining a firm foothold in the lucrative Western markets.

When these eventual global business wars are fought, one crucial factor will emerge that will differentiate winning businesses from others – the equity of a strong brand.

Branding has evolved over the last couple of decades from being just an addendum to advertising campaigns, fancy ideas of the marketing department, an optional function of the elite few, to finally being recognized as a boardroom discipline which contributes to the top and bottom line of the company, and aids in enhancing shareholder value immensely by contributing to the market capitalization of the company.

It has been proven that a large part of the market capitalization of companies listed on global stock exchanges is contributed by intangibles, of which brand equity is an important element. Another study examined the casual linkage between branding and creating shareholder value.

By evaluating the risk factor of a portfolio of strong brands against the benchmark portfolio, the study concluded that the strong brand portfolio is much less risky than the benchmark portfolio. This, again, is proof of branding’s contribution to a company’s financial health and performance.

But for companies to leverage on the brand equity, branding must become an organization-wide activity practised by all functions. Moreover, branding must enable the following:

- Channel internal communications
One of the essential elements to realize the full potential of branding is to make it an organization-wide discipline that cuts across functional silos. The fundamental impediment to such an exercise is the lack of proper internal communications between departments and functional units. Branding, through its overarching message, is the ideal agent to bring together employees from all functions and enhance internal communications.

- Align internal stakeholders around the brand mission

Branding calls for a paradigm shift in the way branding has been practiced among companies. For it to become an organization-wide, comprehensive discipline, it must start with internal stakeholders, mainly the employees. The core brand identity and mission should become the underlying theme of all activities the company undertakes. This not only ensures a proper channeling of organizational resources, but will also bring employees around to the idea through consistent brand messages.

- Fuel innovation to stay on the cutting edge

In this over-competitive business world, even though branding provides a firm platform for companies to carve out a competitive position, it does not always ensure sustainable competitive advantage. Constant innovation to be at the leading edge of technology is required. Branding, with its holistic perspective and the power to drive cross functional ideas, should work as an enabler to innovation.
 
Brands and the boardroom

These roles which a brand should ideally perform are easier said than done. In spite of numerous examples that have proven the importance of branding and its role in enhancing a company’s market position, not many companies have actually put in place systems that enable them to extract the maximum mileage out of their brand.

The most important reason for this is the lack of knowledge and support from the company’s top management, including the corporate board and the chief executive officer. Only when corporate strategy is aligned with branding strategies will the company attain a unified direction both internally and externally.

One of the main challenges in practicing sound brand management procedures is to allocate and manage resources, be they managerial, financial, human or technological. Brand building demands a meticulous process wherein a company decides on the brand’s competitive position, its personality, its core identity and the value proposition. All these parameters must be planned with an eye on the available resources.

Further, once there are many brands, the problem of managing this portfolio arises. With a portfolio, often the question is about which brands to support and which brands to retire. Once again, these are resource-related questions. As brands form the basis of a company’s strategy, these resource-allocation decisions can only be made by the top management, which has a holistic view of where the company is heading and thus the short- and long-term priorities.

Another aspect of the paradigm shift discussed earlier is the alignment of corporate business strategies with branding strategies. As brands move beyond the realms of marketing departments and increase their contribution – both tangibly and intangibly – to the company’s top and bottom lines, it is only natural to have branding strategies at the core of a company’s growth. Corporate planners and strategic managers have traditionally relegated branding and marketing activities to a tactical level.

To elevate branding to a strategic sphere, the top management’s involvement and leadership is crucial. Further, the top management should ensure a meeting of minds between the planners and the brand evangelists to ensure that the core brand identity and brand mission drive the strategic activities of the company. Only the top management of a company would have the required power to carry this through.

Furthermore, a major part of the market capitalization of listed companies comes from brand equity. Further, a strong brand affords a company many advantages in each of the 4P dimensions (product, price, place and promotion) – a better product acceptance, ability to command price premiums, favorable relations with distributors and well-received advertisements. Even though the 4Ps themselves are tactical, the growth potential in each of these dimensions and the constant monitoring of those financial contributions require the attention of the top management. Growth of the company and the related financial performance are beyond the scope of any one function within a company. Thus leadership at the top level is essential for branding.

One of the advantages of building a strong brand is it affords the company to signal its competitive position in the market place effectively. When the CEO of a company acts as the chief brand ambassador instead of a marketing manager, it sends a very clear signal to the market participants of the intentions of the brand.

Additionally, brand equity can be leveraged to the maximum only if branding is allowed and supported to play the following roles:

- Shape the organizational culture
- Initiate cross-functional training organization-wide
- Facilitate leadership
- Nurture the right mind set, skills and resources

When the CEO and the corporate management team actively involve themselves in and nurture branding, the above roles of branding can be effectively utilized.

A strong brand with a unique identity and personality would help define the culture of a company. It facilitates companies to either be customer-centric or product-centric and thereby shapes the internal and external relations of the company with its many stakeholders. But for a brand to perform this role, the presence and back-up of a strong leadership is quintessential. By being a strong brand evangelist, a CEO can define and defend the actions of a brand.

For a strong organizational branding culture to thrive, employees across the company should have adequate understanding and appreciation of the many functions within a company. Such cross-functional training would not only allow employees to understand the strategic contribution of their own work, but would also facilitate better participation in various activities. Such a disciplined, cross-functional training program would lead to a favorable atmosphere that would allow a whole generation of leaders to be groomed.

As more employees are trained in the overall business practices beyond their functional duties, they tend to develop qualities and skill sets that can prove useful in building strong leadership traits. Further, change will only be effective if people are really convinced that they are working for a successful business. This entire process can be strategically woven around strong brand vision and identity.
 
Conclusion

These discussions make two aspects of branding very clear. The first is that the role of branding has indeed grown beyond the narrow definitions of marketing. The second is that for a company to fully realize the potential of a brand, the company must create an environment and support system that would enable the brand to fulfill its multiple roles.

The branding implications are indeed very strategic and influence the very nature of business. Such a disciplined function cannot be left to mid-level marketing executives, who would not understand the holistic perspective and appreciate the greater role that branding plays in the larger scheme of things. Only the corporate board would have the necessary information to decide on such strategic issues – the CEO, in consultation with his senior management team, should provide consistent guidance to the branding function.

Going ahead, it will be these strong initiatives from CEOs and corporate boards that will anchor and sustain brands in the highly-competitive global market.
 
Martin Roll is a global business and brand strategist. Website: http://www.martinroll.com