Great branding debate. Investing in reputation leads to long-term growth

Published in Philippine Daily Inquirer, Business Features Section, June 11, 2009

SUCCESSFUL BUSINESSES WORLDWIDE has come to realize the importance of branding.

Branding is the key to sustain the growth and life of a commodity product or service from one generation to the next. At its functional level, branding results in differentiating a commodity from another.

The IMD World Competitiveness Report, a bible reference for many global businesses states that brand management is a key area of world competitiveness in its roadmap report for the period covering 2007 to 2050.

Despite the reported advantage of branding, few businesses engage in building brands preferring to allocate resources to diversified commodity products and services, believing that every product and service has a timeline anyway. Others hide behind the all-time reason that brand development and management is too costly to invest in one product or service.

Why not branding?

There are a host of reasons why owners of businesses fail to do branding. Among them include:

Comfort level has been achieved. While founders of businesses theoretically know the advantages of branding, many of these businessmen at the present time have likely achieved their comfort level of material satisfaction and see no reason why they need to aim for further growth of the business or more revenues. Often, at this stage, the business has become a cash cow and a source for sustaining the owner’s present-day interests and activities.

Loss of passion and aspiration. Building a brand is like starting and growing a business. In both instances, the owner’s passion is a key that keeps the founder’s spirits high in times of challenges. Building and managing brands is a constant test of wit and spiritedness of the brand owner as the latter protects the brand from all possible sources of brand erosion i.e. poor and inconsistent customer service; inefficient and wasteful brand awareness programs; customer attrition; weakening brand positioning due to inability to respond to changes in the environment; brand imagery that destroys rather than builds the brand over time; mounting costs of advertising with poor sales recovery, etc.

Here and now versus here, now and future mindset. Traumatized, overwhelmed or worn-out by building and managing a commodity business in his time, most owners of businesses find it difficult to think of managing the business with the intent of strongly fortifying it for the next generation. Often, the founder realizes that raising the commodity to the next level to become a brand is much like giving birth to a new business and will require extensive time, effort and resources. Not many have the will and energy to go through the motion.

Chronological age a hindrance, so one thinks. Without a founder’s inherent personal passion and a strong belief that branding is the best business strategy to protect a product or service from competition and a negative economy; chronological age becomes the convenient excuse not to build a brand. Col. Harland Sanders, founder of Kentucky Fried Chicken, now known as KFC, grew his business through franchising and brand building at age 65 years old. A founder’s age is never a deterrent when a brand owner is resolute in his vision and mission.

Work-horse versus a leisurely lifestyle. Brand building is no easy and quick job. A successful brand is the result of the brand owners’ foresight and diligence at work particularly in overseeing the correct operational execution; a grounded understanding of the business environment; and an insightful understanding of the brand’s potential and existing customers. Building and managing a brand cannot be done at leisure or when one feels like doing it. Thus, not all business owners who are in the milking stage are accepting of a probable rigorous work demand resulting from brand building efforts.

Builder versus steward mindset. Most second and third generation business owners are laggards in managing their businesses, mindful of losing or eroding what their forefathers or fathers before them has built. Thus, they take the easy route of merely following what has long been the tradition despite the need to implement changes that respond to the changing business environment. Seemingly, most are unaware that doing nothing is almost like razing the business to the ground, not realizing that the value of a business without a reputation, which only a brand can bring, is not likely to live up to the next generation. Often, stewards pray that the business can be passed to the next generation, leaving the successors to decide whether they should grow, keep or even sell the business.

Active versus passive income. When a business is at the cash cow stage, relatively adequate revenues come in with negligible marketing and branding efforts. It is at this stage when the temptation not to invest resources into the business is at its highest. Many rely on passive income from the cash cow business for their indulgences and allocate any excess to obtain incremental passive income from stocks, mutual and hedge funds, etc. rather than bringing it back to the business by building brands.

Too much emotional baggage to carry. Stewards of businesses have much emotional baggage to carry – rising up to the founders’ vision, fear of losing it all one’s generation, breaking the mindset from managing to growing the business substantively and restructuring one’s comfort level.

When branding happens

Developing commodity products and services to become brands is not only the handiwork of functional managers but the result of an owner’s vision. Without the support, passion and vision of the brand owner, no successful branding can ever happen. Following are some of the insights that drive business stewards to become builders of brand.

CEO Steward changes heart. The CEO steward begins to personally dream big, taking what was passed on to the next level – from a commodity to a cult brand. The result is growth and expansion versus erosion. When a CEO steward begins to aim for ten times or more of what the present business generates, then the stage has been set for the CEO’s change of heart.

Faith in one’s product and service. Many commodity products and services have been in existence for quite some time but have not reached the level of awareness adequate to be identified as a brand. Even then, their status as a commodity product or service has sufficiently obtained sustained revenues for the business owner. If such were the case, then taking the commodity into the next level signals success specially when branding is done correctly.

Strongly believe that branding is a sustained key business strategy for continuous growth. The key to successful branding is to sustain it. Successful branding cannot happen with one-time wonder branding efforts. Once the momentum is set, brand owners must be careful not losing it. Building a brand is difficult; sustaining it is much easier but brand owners lose it at this stage when the urge to milk the brand happens.

 

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