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BRAND MANAGEMENT FUNDAMENTALS

One of the most important ways executives improve profitability and corporate value is by effectively managing their company’s brand. A strong brand can increase the value of a company by more than 40% relative to a competitor with the same assets and customer base.¹ Even more importantly, a strong brand can dramatically reduce the cost of generating new business. Market leaders intuitively know this, and they carefully manage their brand in the market.

By contrast, the executives of many average performing companies, particularly small and mid-sized organisations, fail to proactively and effectively manage their brand reputation. There are four common reasons this happens. The first is that they do not understand what ‘brand’ is and, as a result, delegate ‘brand management’ to their marketing or creative teams instead of proactively managing it at the executive level. The second is that they aren’t familiar with the building blocks of a strong brand, so they don’t effectively align all of their activities with their desired brand reputation. Third, they don’t understand the impact a strong corporate brand has on revenues, expenses and corporate valuation. Finally, they simply don’t understand the fundamentals of brand management, including the tools and best practices used by market leaders to manage their brand. This chapter examines each of these in turn.

THE DEFINITION OF BRAND

Part of the reason brand is neglected by many companies is that the word ‘brand’ is somewhat confusing. Like the word ‘marketing,’ the term brand means different things to different people. Brand is used to describe anything from a logo, to the visual identity of an organisation, to a product or group of products, to the organisation’s reputation. Although the quantity of academic research on corporate reputation and the impact it has on profitability has soared, the mix of terms used, ranging from brand, to corporate image, to corporate reputation has only made brand more difficult for many people to define.

Many people still associate the concept of brand with a name or the logo of the company or product line. This has its roots in the history of the word brand but is no longer a complete picture of what a brand represents. (See sidebar 3-1, ‘A Brief History of Brand,’ that follows.) Contemporary perspectives on brand are much broader.

A company’s brand is its reputation within the market. It includes the public’s perception of its corporate values, operating philosophy, value proposition and corporate social responsibility, based on how the company actually acts rather than what those documents say. A company’s brand facilitates the customer’s decision-making process. When known in advance, a company’s brand reputation, like a person’s reputation, makes it easy to decide whether you trust what they say or do and whether you want to do business with them.

Sidebar 3-1: A Brief History of the Concept of Brand

A company’s brand is a reflection of the executive team’s mastery of the marketing discipline and its ability to anticipate and mitigate the potential impact the opinions of individuals outside its customer base might have on its customers’ desire to make a purchase decision. A company’s brand is its corporate reputation.

Because brand is a reflection of the company’s effectiveness in managing both the discipline of marketing and those aspects of the company’s reputation that affect purchasing behaviour, managing a brand effectively cannot be done by the marketing team alone. Certainly, the marketing team plays a key role by ensuring that the products and services an organisation sells, the ways they promote and distribute them and the pricing strategies they use are consistent with the reputation the company wants to maintain and the organisation’s corporate visual identity is consistently applied.

However, decisions made in all areas of the company can affect brand by changing the value proposition the company is delivering in unexpected ways. In many cases, the management team is best positioned to identify and take action on these inconsistencies. To do so, the management team must clearly understand the building blocks of a strong brand.

THE BUILDING BLOCKS OF A STRONG BRAND

Brands become strong because they share four characteristics.

Strong Brands Reflect the Companys Value Proposition

First, companies with strong brands excel at the discipline of marketing and ensure everything they do aligns with their understanding of the market and the value they deliver to it. When aspects of that equation are out of alignment, the message to the market becomes confused, and the brand becomes weaker.

To illustrate, consider the impact of Starbucks’ decision to move from grinding coffee in the retail stores to selling pre-ground, packaged coffee and using automated espresso makers. The goal of these changes was to speed up service to customers while making the coffee experience more consistent. Certainly, these things are important to customers. Unfortunately, however, there was an unexpected negative consequence.

The new automation eliminated the smell of freshly ground beans and hot brewed coffee, a key component of the overall experience, and a critical part of that ‘third place’ experience that customers had come to associate with Starbucks.² Some argue that freshly ground coffee also tastes better. Market perception was shifting Starbucks from a provider of a high quality solution to their need for community, to a provider of fast, hot coffee, in the same category as fast food purveyors such as McDonald’s. To be successful, and to align actions with market expectations, Starbucks had to improve speed and consistency while still providing the aroma of coffee to its stores.

In 2007, to realign business operations with market perceptions and business objectives and fix the damage to the brand, Starbucks announced that it was returning to its previous practice of grinding the beans in the store so that the scent of freshly ground beans would return.³ Then, in 2008, Starbucks simultaneously closed all 7,100 of its U.S. stores for a three-hour training programme to ensure that baristas were delivering a consistent customer experience with high quality product.⁴

There are many other ways that brand inconsistencies can manifest. For example, there are companies whose pricing approach is inconsistent with the brand they are trying to sustain. This is most common in companies that are positioned as premium product or service providers but whose prices do not reflect the value they deliver. Often, especially in smaller companies, this is because the management team is concerned about what might happen to revenues if they increase their prices. Specifically, they are worried about losing customers.

This is also related to how well they have defined their market. They are stretching their brand reputation to be both ‘exceptional product’ and ‘a relatively inexpensive solution.’ Yet, if someone tells you something is both cheap and high quality, how likely are you to believe them? Not very. You are likely to reason that one or the other of these statements is not true.

In many cases, this means that some business is derived from people who believe they are relatively expensive, but not good, and pay a lower price as a result. These are the clients they will lose if they increase their prices. Keep in mind these people probably do not value the exceptional product that is the company’s true value proposition. Conversely, there are undoubtedly a number of people who do value exceptional product but who reason that they must not truly have exceptional product if their prices are so low. By increasing their prices, they gain the portion of the market that simply expects to pay a premium for exceptional products, and they will increase their margins as a result.

Strong Brands Are Based on Truth

At some point in our lives, we have all met someone who is trying to be something he or she is not. Whether the person is simply trying to impress a potential employer with misrepresentations or is the proverbial wolf in sheep’s clothing that lies and deceives to achieve his or her desired ends, the end result is the same. It may work for a short period of time, but once the deception is discovered, trust will be lost. The person’s reputation will be discredited, temporarily or permanently, and any real value the person could have delivered will be forgotten.

A company’s brand is similar. By definition, brands are the market’s opinion. Just as we can see through a person whose behaviour does not match his or her true values, it is extremely hard to hide a disconnection between corporate values and actions for a sustained period of time. A company that deliberately tries to misrepresent itself to the market will eventually be discovered and discredited. In some cases, the customer may simply decide she or he doesn’t know enough about the company, or feels a level of mistrust, and will shop elsewhere. This brand is likely to remain, at best, an average performer, whose true values are unclear and reputation is muddy.

However, with more serious deceptions, the customer is more likely to tell others, file a complaint with an oversight organisation or pursue legal redress. In this case, the brand may suffer much more serious challenges, potentially becoming a liability to the company that draws down not only sales but also corporate value.

To illustrate, consider the recent damage suffered to JPMorgan Chase & Co. in the wake of the company’s $6.2 billion trading loss write-off. For many years, JPMorgan was considered one of the strongest banks in the United States. Then, in 2012, a single trader in its London office cost the company a significant loss. Although the bank argued that it was an isolated incident, the Office of the Comptroller of the Currency and the Federal Reserve both ruled that the bank was engaging in unsafe or unsound banking practices and violations of law or regulation. Finally, the Office of the Comptroller downgraded JPMorgan’s management rating.

The company’s market value slipped along with its brand reputation. After the May 2012 disclosure, stock prices plummeted from $41 to $31 in just 23 days. A year later, the company was still suffering from investor and consumer distrust.⁵

Companies With Strong Brands Are Good Corporate Citizens

Companies with strong brands are good corporate citizens. This doesn’t mean that everyone agrees with everything they do or that they are philanthropically inclined. What it does mean is that they operate ethically and within the boundaries of the law. They also do their part to improve the communities they serve in ways that are consistent with their value proposition. When they make decisions about policies that affect their community, they consider both the impact on the bottom line and on that community, whether it is local, regional, national or international.

For example, many companies are moving toward using ‘fair trade’ coffee in corporate coffee makers. Although the coffee is often more expensive than other products, it improves the lives of small scale coffee farmers by improving wages, providing access to technology and capital and linking them to distribution channels. Fair trade coffee is becoming increasingly popular among both consumers and employees. By favouring fair trade coffees over more economical competitors, companies signal to their employees and the customers with whom they interact that they care about the welfare of others.

Many companies demonstrate their commitment to the community through their selection of suppliers whose labour standards comply with those of the world’s more developed countries. For example, the Japanese company Marubeni posts its supply chain management policies prominently, just two clicks away from its home page. The policy describes its commitment to choosing suppliers that share the company’s respect for human rights and the environment and how it will address suppliers that are found to violate the policy.

This does not mean that a company’s policies, even when motivated by a strong sense of corporate social responsibility, will be uniformly popular. After all, not everyone agrees on the best approach to addressing a particular issue or concern. Microsoft, for example, acknowledged that the company’s open support of gay rights legislation was likely to be controversial with some people, including some employees. However, the company felt that it was both an issue of equity for employees and an important recruiting concern for the company. For Microsoft, it made sense from both a business and a corporate citizenship perspective.

Of course, corporations do make mistakes. Companies are managed by humans, and people do make mistakes. Often, the public weighs the gravity of the situation by its management team’s response to the situation.

Crisis managers, public relations professionals who are experts in navigating the outcomes of bad decisionmaking, or even bad luck, will generally tell clients that the best way to minimise negative impact is to correct misstatements promptly, acknowledge true problems, admit responsibility if applicable (with legal input and guidance) and address the situation so that it cannot re-occur. This is what the community/market would expect an upstanding citizen to do if he or she made a poor choice that hurt others in the community.

Strong Brands Reflect the Image of the Merchant With Whom Their Customer Would Like to Do Business

Companies with strong brands behave in ways that are visually, verbally and behaviourally consistent with the image of the type of merchant with whom their customer base would like to do business. This is more difficult than it sounds, and yet, it is probably the most important determinant of successfully building your brand.

To be visually, verbally and behaviourally consistent in a relevant way requires first that the company understand the personality and reputation of the type of person with whom a customer would want to do business if the company was a person, rather than a group of people. This is, of course, part of the discipline of marketing, and it tends to be relatively easy for the executive team, and particularly for the founder. Often, the founder was successful in business because he or she was the type of business person with whom the customer wanted to do business. As the company grew, the founder selected employees who looked and behaved similarly, reinforcing that brand reputation.

However, when a company becomes very big, maintaining that reputation becomes much more challenging. Successfully sustaining a brand’s reputation from the founder’s early days to a size in which the founder no longer has direct influence is very difficult, and few companies do it successfully.

To be successful, the company must become very deliberate about managing and reinforcing the brand image that it wants to project. Decisions regarding policy, operating procedures, internal and external communications, visual identity and other aspects of a company’s business management are often made on a decentralised basis, particularly as a company grows. In order to maintain consistency, the business must have a way of ensuring that the decisions are made in the same way a single individual (the merchant with whom its customers would most want to do business) would make decisions if he or she were to control all corporate decisions.

Successful companies use many approaches to ensuring that decisions made internally are consistent with the company’s desired brand image. Some companies rely heavily on cultural indoctrination, hiring selectively and providing extensive training as part of the on-boarding process. Other companies have strict policies, internal review procedures and centralised decision-making, which offers a greater degree of control. In some cases, the culture itself reinforces behaviour. Although these companies allow their employees great latitude relative to decision-making, the culture ostracises individuals who don’t behave in ways that are culturally correct.

THE VALUE OF A STRONG BRAND

Non-marketing managers should be concerned about their brand because it has such a significant potential impact on corporate valuations. A strong brand can add significantly to a company’s overall value, whereas a weak brand represents untapped opportunity.

Sidebar 3-2: Brand Valuation

Although a brand’s value can be calculated in different ways,⁶ there is little doubt the impact on valuation is significant. According to a 2010 survey of participants in the World Economic Forum, a gathering of the CEOs of the world’s largest corporations, non-profits and political entities, 60% of the forum participants said their brand, and their corporate reputation, represented more than 40% of their company’s market capitalisation.⁷

Large, publicly-held companies are not the only ones to benefit from strong brand value. Research shows that companies with stronger brands, whether they are large or small, out-perform those with weaker brands on profitability, market-to-book value, total sales and total equity return bases.⁸

The stronger the brand is, the larger its impact will be on a company’s overall value. Although market leaders enjoy a significant financial advantage, companies whose brands do not distinguish them from the hordes of alternatives in the industry receive no positive impact. On the other hand, companies with an exceptionally bad reputation in the market may have negative brand impact because they make unattractive acquisition targets. In these cases, their only exit strategy could be liquidation.

SOURCES OF ADDED VALUE ATTRIBUTED TO BRAND

Research indicates that there are several reasons a strong brand helps a company’s ability to meet market needs and serves as a multiplier on its financial performance.⁹ The most important sources of added value derived from a strong brand include the following:

• Increased customer preference

• Reduced promotional costs

• Reduced price sensitivity

• Ability to recruit and retain top talent

• Easier access to capital and financial markets

• Public benefit of the doubt

Increased Customer Preference

This is, perhaps, the most obvious benefit of a strong brand. Because customers recognise the brand, they have a strong understanding of the value it delivers. If both the value that the product or service delivers and the values that the company demonstrates in the market match the customer’s own values, they will choose that brand over lesser known competitors.

People prefer to do business with someone they trust and who they believe shares their priorities and values. According to the Brandz Top 100 Most Valuable Global Brands 2012, a company with a solid reputation, perceived as trustworthy, has a 35% greater chance of standing out in a meaningful way among competitors.¹⁰

Consider your own behaviour. When you are choosing between a well-known brand and an unknown alternative, do you choose the well-known brand? Most people do, especially if the product, service or values are important to them. For example, if you need a sensitive surgery, you will choose the physician and hospital with the best reputations for success. If you are going to dinner for a special occasion, you will probably choose a restaurant you know or at least one about which you have heard good things. Some will favour a brand of attire that is well-known, like Hermès or Nike, because they want to be associated with the type of people who choose their products.

Reduced Promotional Cost

Market leaders talk about the importance of consistent investments in marketing initiatives, including brand management. Creating a strong market perception of what a brand represents takes time and investment, but once that brand reputation is created, the costs of maintaining it decrease. Although sustained investment is important, the overall expenditures drop dramatically when a brand is well-recognised.

Reduced Price Sensitivity

In the same vein, a strong brand provides a distinct advantage relative to price sensitivity. A simple trip down the grocery aisles in your local supermarket makes that obvious. The generic or house brand is often made by the same manufacturer as the premium brand to its side, but the prices are significantly different. Despite few or no differences in product, a significant portion of the market will pay the extra price for the brand name product.

As evidence, consider the coffee comparisons presented by the UK magazine Which? and Consumer Reports in the United States. In 2008, both magazines presented assessments of the quality of Starbucks relative to its coffee house competition. Both Starbucks and its competitors offered the same benefits as a local gathering spot. The primary difference was the coffee that was served. Starbucks serves its own brand, whereas other coffee shops serve other products. Which? magazine pronounced Starbucks to be more expensive and of inferior quality.¹¹ Consumer Reports also rated Starbucks’ in-store coffee and found McDonald’s espresso beverages to be of better quality, and its ground products in grocery stores had a similarly lacklustre review.¹² Yet, despite these apparent quality issues, even before Starbucks reverted to freshly ground products in the stores, Starbucks remained the world’s largest coffeehouse chain. The average Starbucks customer pays a premium for his or her loyalty, spending an average of $3.50 during each of his or her 18 visits to the store each month.¹³

Ability to Recruit and Retain Top Talent

In addition to the clear advantage when it comes to selling products or services, a strong brand also has a distinct recruiting advantage. A comparison of lists for top workplaces and top brands show a significant correlation. Just like the consumers of a company’s products and services, prospective employees find assurance in the clear values inherent in a strong brand. According to a 2011 study by Interbrand, 20% of employees under the age of 30 would prefer to have a lower-paying job with a brand they believe in than a higher wage job with a brand they feel is a poor fit or is weak.¹⁴

Strong brands provide a retention advantage as well. About 80% of employees between 18 and 30 years old say they will leave a company if it has a weak brand reputation.¹⁵

Easier Access to Capital and Financial Markets

According to research done in 1997 on behalf of Ernst & Young’s Center for Business Innovation, ‘not only do non-financial measures matter to corporate executives ... investors take these measures into account when valuing companies.’¹⁶ Financial analysts and others providing capital to companies use the company’s reputation to help adjust financial output. In fact, nearly 35% of investment decisions are based on factors such as reputation and image, rather than financial data.¹⁷ By facilitating access to capital, companies with strong brands can more quickly tap the resources they need to respond to the market opportunities uncovered as they listen to their market.

Public Benefit of the Doubt

Finally, a strong brand provides some insulation against minor missteps. Consider the personal ‘brand’ of a criminal: a mastermind at taking illegal advantage of others with a reputation for dishonesty and misconduct. If, after serving a sentence for misdeeds, the criminal’s behaviour completely changed, he or she would still have difficulty persuading his previous victims to trust him or her again.

Conversely, when we first learn of the misdeeds of a popular public persona whose image was previously untarnished, many will defend him or her on the basis of reputation alone. We give that person the benefit of the doubt because of his or her reputation and prior behaviour. Strong corporate brands enjoy a similar benefit of the doubt, at least with respect to minor indiscretions.

Brand strength can only mitigate the impact of negative news within the market. Significant missteps, whether through continual failure to perform or a failure to live up to core values within the community, can be devastating. In many cases, they can significantly damage or even destroy a brand’s ability to encourage preferential purchasing behaviour. According to The Conference Board, it is ‘harder to recover from a reputation failure than to build and maintain reputation. It takes approximately three and a half years for a company to recover from a reputation failure, and companies with strong track records for corporate responsibility find it easier to recover.’¹⁸

Consider the tremendous blow to Martha Stewart’s company, Martha Stewart Living Omnimedia, Inc., when its namesake and CEO was imprisoned for lying about insider trading. Despite efforts to use her five months in prison constructively and her energetic return to the company after her release, the company’s stock has never recovered. In the five years after her arrest, the company’s stock dropped in value by more than 60% in a period when the Standard & Poors (S&P) 500 increased by 20%. Despite the company’s strong track record in other aspects of brand, such as product quality and fit for the market, the public is considerably more sceptical and less tolerant of any signs of potential misbehaviour, and the impact is most visible in the company’s stock price.¹⁹

BEST PRACTICES AND TOOLS OF THE BRAND TRADE

Many average performers, particularly in small and mid-sized companies, are simply unfamiliar with the tools and best practices market leaders use to help manage their brand reputation. The tools are designed to help ensure visual, verbal and behavioural consistency: graphics standards, key messaging, talking points and brand audits. Familiarity with brand architecture helps managers appreciate how brands work together, and a basic understanding of crisis communications can help a company’s executive and management team better prepare for an unexpected assault on their organisation’s reputation.

Graphics Standards

There is an old saying that ‘a picture is worth a thousand words.’ A picture, or visual image, brings back memories and associations that would take pages of text to describe. The same can be true of components of an image, like a well-worn stuffed animal that reminds you of your childhood, or a battered, black, leather-bound text that reminds you of a favourite book of poems or your family Bible.

An individual’s personal appearance also carries associations that are quite personal, just as a company’s visual identity can carry associations that vary depending on whether you are part of the market. For example, a picture of a friend paints a broader picture of her reputation to you because you know her. However, the same picture given to someone who doesn’t know her might communicate something entirely different. The way she looks might seem friendly or threatening, professional or unprofessional, formal or casual, depending on the person and his or her needs.

A company’s visual identity paints a picture of a company’s brand in much the same way. If the brand is unknown, one of the first impressions a company makes on a particular customer will probably be based, in part, on its visual appearance. Its logo, corporate colour scheme, the way it designs stores or facilities, the colour and design of its packaging, and the way employees look all help paint that first impression.

The colours, style, typeface and pictures a company chooses as part of its visual identity also play an important role in creating a first impression. Most people are familiar with warm tones and cool tones in colours. Warm colours tend to be associated with outgoing, energetic things, whereas cool tones are more reserved. However, colours carry more meanings than just warm and cold. For example, green is often associated with nature or health. Blue tones indicate trustworthiness or security. Yellow can communicate warmth and optimism.²⁰ Font choices, shapes, images and other elements of design also communicate visually with the market. For example, images that incorporate windows or glass can imply transparency. Images of identifiable landmarks, like the Eiffel Tower, suggest geographic boundaries and cultural values the brand might have.

The language of visual identity is complex. If your company is considering revising its visual identity, particularly its logo and other graphic elements, you should consider investing in professional design assistance. Changing your visual identity is costly because you will need to update all your printed materials, from business cards to paint schemes on company vehicles, and it can also be potentially confusing to the market.

To put this into perspective, have you ever run into a business colleague in a social setting and not recognised who he or she was? Perhaps the person generally wears a suit, and you met up with him or her while grocery shopping with his or her kids. Or maybe his or her work attire is a uniform, and you ran into him or her at the gym or at a formal event dressed in a tuxedo. You probably spent several minutes trying to place the person in your mind, searching for a mental association because they were dressed differently and appeared when you were not expecting them.

The same thing happens when a company changes its visual identity—it can take some time for the market’s association with that identity to catch up. When a manufacturer changes packaging, for example, a shopper who is accustomed to picking up a quickly recognised product might opt for a competitor’s product, rather than spending the time required to identify the same product in its new packaging, particularly if he or she considers the brands to be close substitutes.

Although an organised change in visual identity is manageable when needed, the more troublesome problem many organisations face is the inconsistent application of their existing visual identity. This is surprisingly common, even among bigger companies.

It happens for many reasons. Sometimes, it is because there is a specific need for graphic elements, and the current visual identity doesn’t work. For example, consider a company that has a rather long name. When posted on a banner next to competitors at a conference, it is relatively difficult to read. So, designers change it, but not consistently. Sometimes, they simply stack the text, make it larger or change the font to block letters. The problem the company has is that the market won’t study it to figure out why it looks familiar, as you would a friend you didn’t immediately recognise. Its prospective customers are more likely to glance at the logo without reading it, even when the font is big enough, because it doesn’t look like the one they know.

One tool companies use to prevent these sorts of issues and ensure consistency in their visual identity is a graphic standards document. This document contains guidelines on how the company’s logo or logos, taglines, corporate colours, images and other visual elements should be used.

It typically also provides both examples of common applications and templates. For example, a manufacturer with corporate delivery vehicles might include its paint scheme and indicate what messages, logos and colours should appear and where. A retailer with common design elements in each of its stores, like the Gap or Nordstrom, might include both required design elements and guidelines relative to optional or local additions. A company whose employees are uniformed or have clothing guidelines that ensure a uniform look or feel, such as Federal Express or a high end hair salon, may include those standards within its graphics standards.

As a non-marketing manager or executive, you play an important role in managing your company’s visual identity. Although most decisions about company-wide design projects will be managed by in-house marketing teams within larger companies, the greater risk for missteps relative to visual elements is with nonmarketing professionals. Human resources teams, technology professionals, accounting and finance team members will, from time to time, create inhouse or external newsletters or other collateral, staff booths at recruiting fairs or other events or promote the company’s visual identity in other ways using internal non-marketing or external contract design assistance. In the process, it is easy for the brand’s visual identity to become inconsistent and lose some of its power to shape market opinion. When equipped with graphics standards, non-marketing managers are often in the best place to spot these issues and stop them before they become public.

In smaller companies, the executive may monitor decisions directly. Larger companies have marketing teams or brand watchdogs within the company who are responsible for monitoring the brand’s visual identity and who have final approval on all design decisions.

One other role the non-marketing manager often plays relative to the company’s visual identity has to do with visual identity protection. The executive team or the company’s legal counsel is generally responsible for trademark protections and for ensuring that the company does not violate other organisations’ trademarks or copyrights. From a corporate protection perspective, executives should ensure that logos, proprietary design schemes and other important elements of the company’s visual identity are protected appropriately under national and international trademark laws.

Sidebar 3-3: Common Elements in a Graphics Standards Document

From a defensive perspective, the executive team should ensure designers and others who are responsible for developing elements of the firm’s identity, such as the website, understand the copyright laws well enough to prevent inadvertent use or misuse of an image created by someone else or another company’s trademarked design elements. The cost of retooling a company’s visual identity is substantial, and a company can incur substantial legal costs when it fails to safeguard against trademark infringements.

For example, the UK-based New English Tea Company incorporated a red, double-decker bus into its tea tin designs. A competitor, Temple Island Collections, had already been using the red bus image and discovered the apparent infringement and brought legal actions against them. New English Tea Company lost the case and was required to change the design and compensate Temple Island Collections for damages. However, the revised design still used the red bus image inappropriately, and the two companies engaged in a second court battle resulting in additional redesign costs and fines levied against the New English Tea Company. These costs might have been averted with more aggressive efforts to investigate potential infringements prior to approval of the tea tin design.²¹

Key Messages

The second tool companies use to help ensure that the market perceives the brand in a consistent manner is a key messaging document. Key messages help ensure that what the company says, whether in a press release, advertising or collateral materials describing the company’s products and services, accurately reflects the reputation the company wishes to have in a consistent manner.

One of my favourite movies is the 1952 MGM classic, Singin’ in the Rain, featuring American actors Gene Kelly, Donald O’Connor and Debbie Reynolds. In its opening scenes, we see actress Jean Hagen portraying the glamorous looking leading lady, Lina Lamont, as the popular star of the silent picture industry. It isn’t until much later that we hear her voice. When we do, it paints an entirely different picture of Lina Lamont who portrays a sophisticated star on the screen. Lina’s grating voice, incorrect grammar and self-serving statements betray the poorly educated, selfish actress behind the glamorous looks.

When Lina argues to the media manager and studio owner that she ought to be able to address ‘her public,’ the publicity manager protests that ‘the studio’s got to keep their stars from looking ridiculous at any cost,’ to which Donald O’Connor’s character, Cosmo Brown, quips ‘no one’s got that much money.’ Her true character had been shielded from the public because the studio refused to let her talk. However, when it comes to a company and the individuals who speak on its behalf, this is hardly a realistic approach to protecting the brand.

The message that a company communicates is important. Marketing lore suggests there is a ‘Rule of Seven,’ which says that the customer must hear the same message an average of seven times from a company before they remember it. In messaging, as in visual imaging, frequently repeating the same behaviours in exactly the same way is how you improve retention.

In my experience, the Rule of Seven might be closer to the Rule of Twelve, or perhaps the Rule of Twenty. In our world of 24/7 communications via television, Internet and other media, getting one message to stand out and capture someone’s attention is extremely difficult. There is too much competition. Unless the message happens to be relevant at that particular time for that particular customer, it will probably be missed altogether.

To be retained, the same message needs to be repeated in a consistent voice and spoken with consistent language that is meaningful to the target market every time it is communicated. A key messaging document reinforces the image with which the market should be left as a result of the communications, defines the key messages the market should hear and, hopefully, keeps the company from looking ridiculous.

Messaging documents can be prepared for the company overall or for a product or service line within a company, or both. For example, Proctor & Gamble likely has messaging both for the company overall, and for its divisions, such as Pampers.²²

The biggest mistake I see when companies create messaging documents is that they don’t write the messaging from the customer’s point of view. In order to make an impact, the messages must be true, credible and relevant:

• True. As noted previously, a company rarely succeeds in claiming it can do something it actually does not have the capacity to do. When it does, it is generally caught, and the company’s reputation suffers.

• Credible. Often, a company claims something within its messaging that is true and can be supported with proof points but that the market simply may not believe. For example, a new ‘green’ cleaning product company may produce something that is more effective than its less environmentallyfriendly counterparts, but, according to research by Clorox, the market is unlikely to believe the message. The company may choose to include the message within its messaging document, along with ample proof points, but it should also offer other compelling reasons to make the purchase.

• Relevant and important. Finally, the message must be relevant and important to the market that receives it. For example, a company may offer a car that is both safe and attractive. If the messaging is limited to the beauty of the design, and the market is more interested in safety, the company’s message may not be heard.

Creating and ensuring consistent use of a key messaging document for external communications helps ensure that what the market hears from the company is consistent, spoken in the same corporate voice and supported with evidence that proves the point. Although key messaging documents should be updated periodically, doing so too frequently is also a mistake. Returning to the Rule of Seven, if the message changes too frequently, the market may not hear it as many times as are required to retain it.

Sidebar 3-4: Common Elements in a Key Messaging Document

Talking Points

Talking points are closely related to, and generally derived from, key messages. Talking points outline the most important points to be made in a specific situation or by a specific person. Like the key messages in a messaging document, they generally provide the principal point, supported by proof points, from which the speaker or writer can draw. They are often prepared in bullet-point form, with concise supporting data. Unlike key messages, talking points are designed to be quoted verbatim and are often provided to the media to assist them in writing stories about a company.

Talking points are often prepared for executives or other managers for use in discussing specific events or situations, such as acquisitions or layoffs, with either internal or external audiences. They can also be used by executives who speak on a regular basis so that their presentations communicate the same information, using the same basic stories, to multiple audiences.

Like key messages, when used consistently, talking points help ensure that internal and external audiences hear the same messages from a variety of sources within the organisation. They help an organisation portray a consistent and unified front when used during a crisis and can make it easier for executives to field tough questions from audiences, including the media.

Brand Audits

Although messaging and visual identity are commonly associated with brand and heavily influence its external promotions, it is often the myriad of small, behavioural details that prove or disprove the visual and verbal image a company is trying to portray. For example, imagine booking a stay at a luxury hotel. The company’s materials look elegant, the descriptions of the rooms and services all look appealing and the amenities are what you would expect for the premium price you pay.

When you arrive, the hotel is just as beautiful as expected. Visually, it’s a display of elegance. You check into your room, slip out of your shoes and pad your way toward the sliding door to the balcony. It turns out to be somewhat of a challenge to open. Although you manage to open it enough to slide through, you decide to request that it be fixed. A call to the hotel’s facility management desk rings several times before ending up in voicemail. You leave a message. After another 30 minutes pass, you try again. This time, a rather gruff voice greets you and says they will try to work it in within the next two days.

This brand inconsistency, a failure of one part of the organisation to behave with the same gracious elegance associated with the brand overall, may cost them your patronage. More importantly, you may leave the hotel with no intention to return without telling the management about your dissatisfaction and without letting the management know where their brand failed.

One tool that companies use to prevent this type of brand failure is a brand audit. Although there are many variations on the tool, most begin with a clear understanding of ‘who’ the brand wants to be. This includes the value proposition, brand attributes and core values.

Depending on the size of the company and the nature of the brand audit, the company may conduct an entirely internal assessment of where its operations are consistent or inconsistent with its desired brand reputation. The most common brand audits examine promotional materials, internal or external communications and common visual expressions of the company’s brand identity to look for inconsistencies. These types of audits call attention to violations of the company’s graphics standards (or a need to develop them), messaging that is inconsistent with the company voice or positioning and similar issues.

However, more comprehensive brand audits also include feedback about the brand’s reputation from the broader market, including both customers and non-customers, and an examination of elements beyond the visual and verbal expressions of brand personality. This is where behavioural challenges to brand consistency, such as the repair team’s slow, gruff response, are most likely to be identified.

Brand audits can also uncover hidden inconsistencies. One increasingly common challenge to brand consistency is the use of agents or subcontractors to accomplish work in the company’s name. In many cases, agents sell products on a company’s behalf, either as representatives or in a retail environment. Although they may be working for another organisation, when they represent a company’s brand, the market often associates them, and their behaviour, with the brand itself. Because these individuals are likely to be customer-facing, their appearance, communications approach and behaviours have the potential to make a very strong impact on what the market believes about the product.

In 2009, passengers on a Continental Airlines flight were retained on a plane on a taxiway for more than six hours, overnight, when they could have allowed passengers off the plane and into the terminal. Although Continental Airlines suffered the damage to its reputation, the flight was actually operated by a subcontractor, ExpressJet, an independent company. Even though ExpressJet was identified in news stories, most of the negative press carried the Continental name.²³

By conducting a thorough brand audit, a company can identify weaknesses both within its own company and within its partner relationships that can lead to brand damage.

BRAND ARCHITECTURE

The majority of this chapter has discussed brand as if the market associates the company with a single monolithic brand name and reputation. Although most companies have only one corporate brand name with which the market does business, many manage multiple brand names and personas in order to differentiate themselves or expand into different markets. The relationship between those brands, and the degree to which the market understands that they are related to one another, is called the brand architecture, and it is similar to the related reputations within a family in many respects.

Some companies extend a corporate brand, or parent brand, by adding additional descriptors or following consistent visual identity protocols. These are called sub-brands, or sponsored brands. Although this may help to differentiate a product or service line from others within the company, the brand reputation must be consistent. For example Deloitte Touche Tohmatsu Limited uses Deloitte as its parent brand name. However, it uses subbrands around the world to denote specific divisions. For example, in the United States, Deloitte & Touche LLP provides audit services, whereas Deloitte Consulting LLP does management consulting.

Because sub-brands are more of an extension of a brand’s name, they are most successful when they are fundamentally consistent. When a company lends its corporate brand name to a sub-brand that appeals to a different market or has a substantially different reputation, the sub-brand is likely to suffer. Gallo wines, for example, is one of the United States’ leading producers of wines. However, the brand is most closely associated with inexpensive jug wines, rather than premium products. In the 1980s, as demand for low priced, non-premium wines was dropping and the market for premium wines was growing, Gallo attempted to enter the market with a more upscale wine using the sub-brand Gallo Estates. Although product reviews were positive, consumers still associated the product with its jug wine parents, and the product was a failure.

In terms of brand architecture, sub-brands are closely associated with their parent, or corporate, brands. In many cases, sub-brands reflect a naming protocol, rather than true differences in markets or the reputations those markets attribute to the companies serving their needs.

However, some companies’ individual product brands are managed so independently of the parent brand that they are only tangentially associated. In many cases, the market is unaware that they are managed by the same corporation and perceives them to be completely separate companies. Yum! Brands, for example, owns KFC, Taco Bell and Pizza Hut. However, the brands of each of those restaurants have reputations that exist exclusive of Yum!’s involvement.

Individual product brands, when sufficiently separated from a company’s parent brand reputation, can generate independent brand reputations. This makes the use of product brands a popular way to capture new market share outside of the company’s existing market or compete with competitors that are leveraging different operating models with widespread appeal. Wal-Mart, for example, competes with warehouse retailer Costco through its Sam’s Club stores. Sam’s Club is, of course, a tip of the hat to founder Sam Walton, so in some ways, the brand acts as a sub-brand. However, the models appeal to slightly different markets. The association, if it is understood, does not detract from the parent brand because both are variations on discount retail operations.

Gallo found the solution to its premium wine market dilemma by using a product line branding solution. Three years after the failure of its Gallo Estates brand, it re-entered the market under a new brand name: Turning Leaf Vineyards. The new brand did not mirror its parent company’s visual identity or name, and, thus, benefited from a separation of association with non-premium wines. The product line brand was far more successful than its sub-branded predecessor.²⁴

Understanding a company’s brand architecture is critical to the effective management of its reputation with the markets it serves. Although a company’s brand architecture often mirrors its corporate structure, with each sub-brand or product line brand managed within a freestanding organisation, this isn’t necessary. In fact, where brands have similar attributes, leveraging shared operational resources makes strong financial sense.

MITIGATING AND ADDRESSING BRAND DAMAGE

Warren Buffet famously quipped that ‘it takes 20 years to build a reputation, and five minutes to ruin it. If you think about that, you’ll do things differently.’ Unfortunately, brand reputation damage can happen quite easily—and very quickly.

Protecting the company’s reputation from damage requires careful management to ensure the company’s words, appearance and behaviours are consistent with the reputation it wishes to maintain, and prompt attention to potential threats, including employee misconduct, legal allegations, customer discontent and media criticism.

Although internal inconsistencies can often be addressed effectively by management, some of the most rapid sources of damage come as a surprise from external sources. For example, a company may suffer from negative external perceptions that are inherent to the business model, as Wal-Mart has, relative to its compensation structures and heavy use of part-time personnel in order to reduce costs.

A company might also incur damage due to misbehaviour or perceived misbehaviour by employees, including executives or by subcontractors. McDonald’s, for example, came under heavy criticism in April 2013 for a regional ad that parodied issues surrounding mental illness. The ad, McDonald’s said, was not approved, and its advertising agency confirmed the accusation. Still, McDonald’s reputation is suffering the negative impact.²⁵

It might also be damaged by intentional or unintentional mistakes made by the company, such as tainted meat products, which must subsequently be recalled. For example, the Swedish company Ikea recently recalled meatballs and other products due to the discovery that their meat source had included horse meat with the beef used in the products. Unfortunately, this was preceded by a discovery that their chocolate cake contained unusually high amounts of coliform bacteria, which is found in faecal matter.²⁶

In these cases, the reaction of the company and its executives will often determine how much damage will be done to its reputation. When the stakes are high, retaining an experienced crisis communications professional and, if needed, legal counsel is required. In addition, every company should have a crisis communications plan that outlines how the company will handle a crisis situation.

In general, even before a crisis arises, non-marketing professionals, including the executive team, should make sure that every employee understands how to handle inquiries about sensitive topics from external sources, including, but not limited to, the media. When a crisis surfaces, the company should have a designated company spokesperson with expertise in media relations that coordinates communications and is the only person to speak with the media. Executives and other employees should refer all inquiries about the crisis to that individual.

Because the truth will always be discovered, any communications should be factual. If the facts are not yet known, let the person making the inquiry know and call them back as soon as you have additional details you can release. Although crises can sometimes be embarrassing to the company, the executive team and other managers who do talk to the public should not speculate on, lie about or deliberately mislead the press about the situation. Trying to cover up the truth is rarely successful and makes the company look guilty. Once a brand is associated with misconduct, it can be years before the market’s opinion improves, causing the company to lose customers, valued employees and strategic relationships with vendors and other partners and incur extensive marketing and legal expenses associated with its defence and reparation.

QUESTIONS FOR NON-MARKETING MANAGERS TO ASK ABOUT BRAND MANAGEMENT

As a non-marketing manager, you can play a critical role in helping your company maintain an effective and consistent brand reputation. To help you get started, consider the following questions:

• If my company were a person, how would I describe him or her?

• Is that description the type of individual with whom our target market(s) would like to do business?

• Are all of our operations and activities consistent with the reputation we would like to have in the market? If not, what are we doing to address those variances?

• Are we acting as a good corporate citizen, making decisions that are good for the community in addition to being good for business?

• Are we trying to persuade the public that we are, in fact, something that we are not?

• Do we have graphics standards and key messages?

• Do we use talking points when communicating important messages to key internal and external audiences?

• Do we conduct internal audits of our brand consistency?

• If we use more than one brand name, or are considering using more than one brand name, does the brand architecture make sense?

• Do we have a crisis communications plan ready so that we are prepared for the unexpected?

CHAPTER 3 SUMMARY

A company’s brand is the reputation it has within the market, shaped by its corporate values, operating philosophy, value proposition and corporate social responsibility, which facilitates the customer’s decisionmaking process. A strong brand can increase the market valuation of a company by 40%, reduce the cost of new customer acquisitions, improve customer loyalty and contribute to attracting and retaining great talent.

A company’s brand is affected not only by its visual identity and communications with the market but also by its operational processes, the role it plays in the communities it serves and the way it treats employees and vendors. Because brand is affected by almost every aspect of business, brand management, like the discipline of marketing, is the ultimate responsibility of the CEO and the management team.

Companies with strong brands share several characteristics:

• They excel at the discipline of marketing and ensure everything they do aligns with their understanding of the market and the value they deliver to it.

• They base their brands on truth.

• They are good corporate citizens.

• They are visually, verbally and behaviourally consistent with the image of the merchant with whom their customers would want to do business.

Companies with strong brands also think carefully and proactively about what they want the brand to be, tailoring their communications, visual identity and behaviours to fit that personality. However, no brand can successfully portray a false image to the market on a sustained basis. The market will eventually discover the truth. As a result, all brand positioning should maintain a consistent focus on conveying brand attributes that are already true about the company, credible in the eyes of the market in order to be believed and relevant and important to the market and the way they make purchasing decisions.

This chapter also provides an overview of tools non-marketing managers can use to more effectively manage their brand:

• Graphics standards documents

• Key messaging documents

• Talking points

• Brand audits

Although most companies operate under a single brand name, many organisations use sub-brands or product level brands to further differentiate themselves or reach different markets. The relationship between the corporate brand and the sub-brands or product line brands is called a company’s brand architecture. Understanding brand architecture is especially critical when a company uses sub-brands or manages brand names with very different brand reputations.

Even with careful management, brands do come under fire. The more successful and well-known the brand becomes, the more likely it is that the brand will experience some attack. In this case, the best defence is to be prepared with a crisis communications plan, address the issues truthfully and openly and retain professional crisis communications expertise if the situation is serious or has the potential to significantly affect brand reputation.

Endnotes

1 Brigham, Alexander and Linssen, Stefan. Your Brand Reputation is Irreplaceable. Protect It!,’ Forbes.com, February 1, 2010. www.forbes.com/2010/02/01/brand-reputation-value-leadership-managing-ethisphere.html

2 Saporito, Bill. ‘Starbucks: Wake Up, Smell the Coffee,’ Time Business, February 26, 2007. www.time.com/time/business/article/0,8599,1593723,00.html

3 Horovitz, Bruce. ‘Starbucks going back to grinding beans,’ USA Today, March 20, 2008. http:/abcnews.go.com/Business/story?id=4478266&page=1

4 Grynbaum, Michael. ‘Starbucks Takes a 3-Hour Coffee Break,’ The New York Times, February 7, 2008. www.nytimes.com/2008/02/27/business/27sbux.html?pagewanted=print

5 Sources:

Burne, Katy and Colchester, Max. ‘J.P. Morgan Blunder Puts Bank in Regulators’ Crosshairs,’ Wall Street Journal, May 11, 2012. http://blogs.wsj.com/marketbeat/2012/05/11/f-p-morgan-blunder-puts-bank-in-regulators-crosshairs/?KEYWORDS=jp+morgan+london+whale

Vigna, Paul. ‘The Hit to J.P. Morgan’s Reputation “Really Hurts”,’ Wall Street Journal, May 11, 2012. http://blogs.wsj.com/narketbeat/2012/05/11/the-hit-to-j-p-morgans-reputation-really-hurts/?KEYWORDS=jp+morgan+london+whale McIntyre, Douglas A. ‘America’s Nine Most Damaged Brands,’ 24/7 Wall St Blog, April 10, 2013. http:/247wallst.com/2013/04/10/americas-nine-most-damaged-brands-2/3/

6 2012 BranZ Top 100 Most Valuable Global Brands report, produced by WPP, BrandZ, and Millward Brown Optimor: www.millwardbrown.com/BrandZ/Top_100_Global_Brands.aspx

7 Brigham, Alexander and Linssen, Stefan. ‘Your Brand Reputation is Irreplaceable. Protect It!,’ Forbes.com, February 1, 2010. www.forbes.com/2010/02/01/brand-reputation-value-leadership-managing-ethisphere.html

World Economic Forum website and publications: http://www.weforum.org/

8 Sources:

Roberts, Peter and Dowling, Grahame. ‘Corporate Reputation and Sustained Superior Financial Performance,’ Strategic ManagementJournal, September 19, 2002. http://goizueta.emory.edu/upload/155/rad5b4ed.pdf

‘Reputation Risk: A Corporate Governance Perspective,’ published by The Conference Board, Research Report R-1412-07-WG, 2007. www.complianceweek.com/s/documents/ConfBReputation.pdf

Iwu-Egwuonwu, Ronald. ‘Corporate Reputation & Firm Performance: Empirical Literature Evidence,’ InternationalJournal of Business and Management, April 2011.

9 ‘Reputation Risk: A Corporate Governance Perspective,’ published by The Conference Board, Research Report R-1412-07-WG, 2007. www.complianceweek.com/s/documents/ConfBReputation.pdf

10 Gerzema, John and Roth, David. ‘Reputation, Purpose and Profits: Bridging the Gap,’ 2012 BrandZ Top 100 Most Valuable Global Brands report, 2012. www.millwardbrown.com/BrandZ/Top_100_Global_Brands.aspx

11 ‘Independents beat Starbucks for value,’ Which? Magazine, January 24, 2008. www.which.co.uk/news/2008/01/independents-beat-starbucks-for-value-130057/ Which? Magazine survey: UK coffee chains,’ posted in The Shot (blog) on January 24, 2008. http://theshot.coffeeratings.com/2008/01/starbucks-nero-costa-uk/

12 Sources:

‘A triple-venti-American surprise? Consumer Reports finds McDonald’s coffee better than Starbucks,’ Food Inc. on NBCNews.com, February 4, 2007. www.nbcnews.com/id/16951509/ ‘Consumer Reports’ Ground Coffee Tests Reveal Some of the Best Coffee Costs the Least,’ Consumer Reports press release, February 2, 2009. http://pressroom.consumerreports.org/pressroom/2009/02/consumer-reports-ground-coffee-tests-reveal-some-of-the-best-cost-the-least.html

Ancil, Robert. ‘Starbucks Roasted by McDonalds,’ posted in Restaurant Consultants: The Next Idea Blog, December 21, 2009. www.thenextidea.net/content/blog?bid=6

13 Keller, Kevin Lane. ‘The Brand Report Card,’ Harvard Business Review, January 2008. http://hbr.org/2000/01/the-brand-report-card/ar/1

14 Oswald, Nina. ‘Employer Branding—Hit or Miss? Boost the value of your brand by clearly positioning your company on the job,’ Interbrand website. www.interbrand.com/Libraries/Articles/Interbrand-EmployerBranding-EN.sflb.ashx

15 Brigham, Alexander and Linssen, Stefan. ‘Your Brand Reputation is Irreplaceable. Protect It!,’ Forbes.com, February 1, 2010. www.forbes.com/2010/02/01/brand-reputation-value-leadership-managing-ethisphere.html

16 Measures that Matter, Center for Business Innovation (CBI), Cap Gemini/Ernst & Young, December 1997.

17 ‘Reputation Risk: A Corporate Governance Perspective,’ published by The Conference Board, Research Report R-1412-07-WG, 2007. www.complianceweek.com/s/documents/ConfBReputation.pdf

18 Ibid.

19 McIntyre, Douglas A. ‘America’s Nine Most Damaged Brands,’ 24/7 Wall St Blog, April 10, 2013. http://247wallst.com/2013/04/10/americas-nine-most-damaged-brands-2/3/

20 Williams, John. ‘Your Brand’s True Colors,’ Entrepreneur., March 7, 2007. www.entrepreneur.com/article/175428

21 Sources:

Macdonald, Dids. ‘Safeguarding Design Assets: A UK Perspective,’ WIPO Magazine, February 2012. www.wipo.int/wipo_magazine/en/2012/01/article_0005.html

Temple Island Collection website news releases: ‘Temple Island Collection v New English Teas. Second Court Judgment,’ ‘Temple Island Collection v. New English Teas,’ and ‘ACID News Flash: Temple Island Score Copyright Victory over New English Teas.’ www.templeisland.com/new_english_teas_red_bus_copyright.asp Cheesman, Chris. ‘Photographers face copyright threat after shock ruling,’ Amateur Photographer, April 1, 2012. www.amateurphotographer.co.uk/photo-news/534352/photographers-face-copyright-threat-after-shock-ruling

22 Sources for information on messaging:

Morrison, Maureen. ‘McDonalds to launch ad campaign focused on growers,’ Advertising Age, December 14, 2011. http://adage.com/article/news/mcdonald-s-launch-ad-campaign-focused-growers/231579/

Wikiquote.com: Advertising Slogans: http://en.wikiquote.org/wiki/Advertising_slogans

Wikipedia.com: Advertising Slogans: http://en.wikipedia.org/wiki/Advertising_slogan

‘McDonald’s Advertising Taglines and US Milestones,’ QSR Magazine, June 30, 2000. www.qsrmagazine.com/news/mcdonalds-advertising-taglines-and-us-milestones

McDonald’s Website: www.mcdonalds.com

23 Brigham, Alexander, and Linssen, Stefan. ‘Your Brand Reputational Value is Irreplaceable. Protect It!,’ Forbes.com, February 1, 2010.

24 Sources:

(KENDALL JACKSON WINERY LIMITED v. GALLO WINERY, 1998). http:/caselaw.findlaw.com/us-9th-circuit/1139723.html

Funding Universe profile of E&J Gallo: www.fundinguniverse.com/company-histories/E-amp;-J-Gallo-Winery-company-History.html

25 Horovitz, Bruce. ‘McDonald’s pulls mental illness parody,’ USA Today, April 12, 2013. www.usatoday.com/story/noney/business/2013/04/11/ncdonalds-advertisement-mental-illness-nami/2075089/

26 Kavoussi, Bonnie. ‘Ikea Horse Meat Controversy Hurts Company’s Reputation: Analysis,’ The HuffingtonPost, March 26, 2013. www.huffingtonpost.com/2013/03/22/ikea-horse-meat-reputation_n_2933891.html