Number 27: Summer 2004
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The Brand is the Strategy
Or How You Can Create Your Very Own Monopoly
By Dan Herman
Editor's comment: Branding is about differentiation. Much of what a product or service delivers is the same as the competition. The brand is the key element of strategy that provides anticipated benefits and helps to deliver those benefits.
About 95% of what executives in competing companies do is pretty much the same all around. This is good management. If you are CEO’ing a wireless communication services provider services, you strive to put up an advanced technological infrastructure with a promising future, cool end-user phones, other devices and accessories, a great service system, attractive added-value services, and competitive prices. Well, this is precisely where your competitors put their efforts as well. The 5% (give or take) that you do differently constitutes your strategy. The CEO of Southwest Airlines, the revolutionary domestic American airline, most of the time does exactly what her colleagues do. But her firm offers Ticketless travel, and serves meals in the airport during waits, and not on the plane.
Doing well what you are supposed to be doing – is a prerequisite for competing. It is definitely not a strategy. Being better - is a deserving effort, yet it is not a strategy either, especially not in the long run. Categories tend to converge into an equable level, more or less, of prices/costs, product quality and features, technological sophistication, and service quality. How, then, are you supposed to compete? Well, you could offer your clients more than what your competition offers, for a higher price, for the same price, for a lower price, or – offer them less value for a lower price. All of these options can give you an edge, but usually not for long.
You could also offer something different than what your competition does. You can cater to a need not formerly satisfied by your category. Nokia, for example, did just that when it decided to treat cell phones as fashion accessories and later as entertainment devices. Even this approach could not be considered as an insurance policy. There are no insurance policies in the world of business. But, if it is difficult or impossible to imitate, or it is something not likely to be imitated by your competition – then you might just have created for yourself a mini-monopoly of your own. Well, this is surely an accomplishment that should not be underestimated in a competitive market.
So, what really is a strategy? By definition, a strategy is the way by which you are planning to obtain your goals. In a competitive environment, your goal is that the consumer will prefer you to your competition. That is why the strategy is, in fact, the way by which you plan to achieve an advantage over your rivals – in the eyes of your consumers. Almost always, preference can be achieved only by differentiation, by either doing something other than what your competitors are doing or by doing things in a markedly dissimilar manner. By being different you supply some of the consumers in some of the buying/consuming opportunities with a good reason to want you more (and if you are a great strategist indeed – to want you only).
There are three types of differentiation and only one of them constitutes a strategy (or strategic differentiation). The transient differentiation is often achieved by promotional activities, such as a big sale. The circumstantial differentiation consists of things like a historical monopoly, or some kind of personal connection between the consumer and someone in the firm, or a convenient store location, etc. However, the differentiation we want to focus on is the strategic differentiation, such that provides a long lasting, circumstance-crossing advantage.
Is differentiation absolutely necessary? In any case where the consumer must choose between options, the answer is definitely yes. Why? Because the consumer chooses between alternatives on the basis of the differences as he or she perceives. Zoom-in on that sentence for a second. Do not fall into the most common trap of all: the consumer makes choices according to his perception of differences between alternatives, and not on the basis of what he values most in a product of that kind. More often than not, most of the available options in the market offer their consumers ‘what matters most’. Certainly, when the consumer purchases a car, ALL of the brands and models that are considered are believed to provide those things that are important: affordability, reliability, safety, comfort, etc. The consumer’s choice of different brands and models could very well be based on something secondary in importance, such as the design of the tail lights or some gadgety features.
Competitive strategy, the idea or concept that is supposed to deliver advantage over competitors or even a unique status in the eyes of the consumers, is always a simultaneous answer to two questions. The first one is: in which consumer group do you identify a potential for buying your product? By 'group' I do not mean necessarily shared socio-economic and demographic characteristics or even a similarity in personality or life style. What I mean is that they have in common some factor, enabling you to make them an offer, which will be more attractive to them than the options they already have, or at least a refreshingly new one. The second question is: what could you offer them that would help you realize that potential? The competitive strategy is a concept, which answers both questions at the same time. HBO for instance, saw a potential in the fact that most people in the United States are accustomed to television series in which the main characters are usually outstandingly handsome, and live extraordinary lives (think about ER, NYPD, and The Practice). They differentiated themselves with new and highly successful series such as “The Sopranos”, and “Six Feet Under”. These series deal with the routine lives of people who have something unusual about them, and that something could turn their every day existences into a drama.
By the way, a strategy is not a beauty contest or a popularity poll. The goal is not to reach a consensus, nor is it to be OK by everyone. Experience has taught us that the key is to make a specific group of consumers – even a small one – think that you are irreplaceable. They will act as your success engine, even amongst consumers who are not as definite in their attitudes. BMW fans do not believe that Mercedes is a bad car; it’s just that it is not a BMW. For them, Mercedes is simply incomparable to BMW. That’s how Apple fans feel about IBM.
What has all this to do with branding? A brand is the consumer’s anticipation for a unique and defined experience, or for a certain unique benefit obtainable solely through consuming/owning a specific product/service manufactured/offered by a specific company. Thus, the anticipation from a trip to Paris would be to experience a romantic vacation. The anticipation from Ikea would be – “state of the art design at a reasonable price”. It is fair to say that a brand is really a brand only when there exists – among its consumers – such anticipation. If this anticipation is both exclusive and attractive – you might say that it is a strong brand. A familiar name or logo - do not suffice to make for a strong brand.
This consumer anticipation is evoked and upheld by the marketer’s consistent execution of a business concept providing the consumer with a unique benefit or with a unique/novel way to deliver a benefit. This concept is the brand strategy, its promise and its commitment to its target consumers. The Krispy Kreme Doughnut Theater is definitely a unique experience. The consumers experience a process that is a celebration of senses, with all the scents and flavors. Besides being pleasant in itself, it supports the formation of beliefs regarding authenticity and freshness. This is a brand strategy. The ‘third place’ – the neighborhood place you frequent in between work and home offered by Starbucks - is a brand strategy. But, wait a minute! It is also the differentiation - the competitive strategy itself! These ARE the 5% that executives do differently in order to gain an advantage. This is why the brand IS the strategy. Or more accurately – the brand strategy is the translation of the competitive strategy – into a language of promises made to the consumer.
Decisions on the specific benefit that the company will provide whatever group of consumers - in which it identifies a business potential - in order to realize that potential, and of which concept to use in supplying the benefit, are decisions on the level of competitive strategy. Even if the choice would be to offer a mainly psychological benefit, such as in the perfume business (supportive of a consumer's fantasy), or a social benefit, such as in the case of prestigious pens (a symbol of status), either way, the decision is still strategic.
The brand’s role in the realm of marketing has changed dramatically during the past decade. In the past, we used 'to brand’ already existing products or companies, in order to make them more attractive to consumers. It was definitely cosmetic branding. In contrast recently, developing a brand means devising and implementing a way by which to deliver a benefit to consumers. Such concepts direct the development of products and services designed to supply the benefit, and even shape entire organizations for this purpose. This is strategic branding. One of its consequences is that “brand extension”, and the carefulness that it involves, had become somewhat anachronistic. The identification between a brand and one product category is still possible of course (FedEx is a wonderful example), yet this restriction is no longer mandatory. The brand ‘Manchester United’ had entered successfully even to categories such as bedding and banking. The original category of the ‘Virgin’ brand will soon be remembered only by few. This is the direction towards which the world of branding is headed.
The new and strategic role of branding has remolded the concept of branding. Today, brand building no longer constitutes a mere manipulation of the consumer's perceptions and desires, but it is a creation of a system that on the one-hand makes promises and arouses anticipations, while on the other-hand it delivers and realizes the promises that it makes.
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