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What is going on in branding?
* Gatorade, like many strong brands throughout the world, is facing the specter of major competitors entering their market and price erosion. They wonder how to respond without damaging their equity.
* 3M decided that their branding was getting out of control, so they developed a committee of the top executive vice presidents in the company to approve all new brand names. They went from 90 new brand names in one year to four in the next.
* Hewlett-Packard is concerned that their branding is confusing and ineffective--they are worried about "LaserJet" vs. "DeskJet" vs. "Inklet." As a result, they formed a company-wide task force to sort out their branding issues.
* Pepsico, in their annual report, reaffirmed that they are going to invest in and build brands--that is what their strategy is all about.
Why should companies build strong brands? There are two major reasons; the first is that in American businesses, strategists get too preoccupied with short-term financials. Instead, organizations need to learn how to build assets. That should be how firms manage strategically. American executives are burdened by the concept that their primary goal is to maximize shareholder value. There is nothing wrong with that in theory, but in practice, shareholders must base their evaluation of the company on quarterly earnings--there is no real other credible piece of information for them. That focus on quarterly earnings almost always gets translated into management thinking and process. Strategists and planners have become experts at managing short-term financials and designing cost and sales programs, instead of learning how to better build and manage assets that will pay off in the future.
In a study a few years ago, I asked 250 business managers, "What is the biggest asset that gives your firm a sustainable competitive advantage?" The number one answer was perceived quality; number two was brand awareness and number 10 was customer loyalty--all dimensions of the intangible asset called brand equity. Therefore, when a company starts building assets, it makes sense for management to look at brand equity.
Unfortunately, it is very difficult to illustrate the value of investments in brands. The financial people in most firms want to know where and how much this program impacts the...