Last year, workshopping issues that related to the future of a company, we came to the subject of corporate reputation and brand. One of the topics was: how many brands can we support financially? And the answer was quickly apparent - none! The company was a major South African global player, and in the past has won major awards, yet given the financial muscle of its main competitors, it was being badly beaten up.
This was quite a shock to the Exco, who had gathered in Johannesburg from around the world.
When asked how much they should be spending on marketing, I had to first define marketing. The fact that they didn't have a marketing plan, simply a media plan from an ad agency, didn't help. Being an industrial group, whose main marketing thrust was business to business, there seemed to be a feeling around the table that marketing was not something to be treated seriously, nor was necessary.
When we stated that many top US industrial companies spent around 50% of their marketing budget on internal communications we were greeted with a look of bemusement. But what really got their attention was when we started talking about how much they should be budgeting, as a percentage of revenues. Now that was something they could all understand, something tangible. The fact that they were not exactly sure how much they were spending on marketing, but that their best guess was around 1%, showed how out of touch they were with the challenges of business today - unless they could be exceptionally creative.
However, when sums that are 5 - 10% of revenues are being put behind the brand, and in some industry sectors such as luxury goods, over 15%, then the marketing director has to have his or her finger very firmly on the pulse all the time. The bigger a budget, the more attention the other members of an Exco will be paying to the results. Its all very well tracking sales against ad spend, but that is very much short termism. The reality is that the entire brand experience, and all its major touch points, need to be monitored. Models such as "Brand Performance Management" and "Before-the-line" are increasingly in demand as ways of measuring and systemizing in a tangible manner, exactly what is going on with a brand.
One problem we find that consistently appears is that marketers are often bad at marketing what they actually do and achieve, to their colleagues. One Global Marketing Director in a major, major financial institution, shortly after his appointment, was once famously asked by a fellow GM: "how was 'the colouring in department' today?" Perhaps not surprisingly, this particular top marketer realized that he needed to quickly engage with his fellow Exco members to explain and educate them in the value marketing brought to the organisation. He then went further, setting up a series of measures, measures Exco accepted and recognised, to be monitored on a regular basis, which helped to demonstrate and emphasise how marketing indeed creates value. He then went further again, setting up a workshopping system to educate the whole organisation, on an ongoing basis, to be more sensitive to the importance of marketing and branding. As David Packard of Hewlett Packard reportedly said many years ago: 'marketing is too important to be left to the marketing department'.
As a consequence of all this, companies increasingly apply various ways of measuring ROMI (return on marketing investment) and BRV (brand and reputation value). The most startling current increase in BRV is Samsung, which has transformed itself from being a manufacturer and supplier, for others to badge their products, to being the fastest growing brand by value in the world. Starting a process in the late 90's, the target was to overhaul Sony within five years. This was achieved in 2005.
In reading the above, it becomes apparent that any Board of Directors or Exco needs to be asking some very pointed questions of themselves and their marketers:
1. Do we have any brands?
2. If so, how many?
3. Are our brands properly focused, defined, visually attractive and differentiated?
4. What is the value and future potential of each?
5. What are we investing in each brand, and is it too much or too little?
6. What is the stretch potential of each?
7. How is the industry sector looking, full of potential or maturing?
8. As a company, where do we want to be in 5-10 years, and will our brands deliver?
9. Which marketing activity is producing the best results (not simply awareness and sales)?
10. Are we leveraging all or assets to gain maximum competitive advantage?
Major trends at the moment are the ever increasing buying and selling of brands; private equity players investing in brands, sometimes putting together portfolios, sometimes to split up and sell off, always to add value and leverage assets. Often with starting results. The sort of exercise Campbell Soups has just gone through in the UK resulting in the statement: "explore strategic alternatives including possible divestiture". The reason: portfolio fragmentation and lack of financial revenue.
Writing last issue I posed the question: who are the Brand Heroes? One hero to many is Anita Roddick of Body Shop fame. Back in 1976 she started something that has made her a global figure. By saying things such as: 'the business of business should not just be about money, it should be about responsibility. It should be about public good, not private greed', she struck a cord with many. And over the years she has said many memorable things, another being: 'In Nigeria it's easier to bury the protestors than the oil pipes'. Over the years professional managers were brought in to manage what had become a huge organisation, yet always staying true to her original vision. Her chairman of the last few years, a former CEO of Edgars back in the 80's. But at a time when mergers and acquisitions are often consumated at around five times earnings, it has a shock when French group L'Oreal bought it earlier in March at a figure that is 22 times expected earnings for the year to February 2006. And who said there was no money in being ethical?
So in looking at your company and its brands, take great care. They may have little or no value, on the other hand like Body Shop, huge value. In many companies, the major assets are increasingly the brands, and in dealing with anything of great value, you need the best advice you can get. Perhaps in listing 'Ten ways of assessing your brands' next issue we should publish the article from Brandchannel entitled: 'Ten ways to screw up your brand!'.