Transforming Your Business into a Brand : The 10 Rules of Branding [1 ed.] 9789812619228, 9789812613868

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JACKY TAI WILSON CHEW

JACKY TAI WILSON CHEW

Marshall Cavendish Business

Published by Marshall Cavendish Business An imprint of Marshall Cavendish International 1 New Industrial Road, Singapore 536196 © 2007 Marshall Cavendish International (Asia) Private Limited All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. Request for permission should be addressed to the Publisher, Marshall Cavendish International (Asia) Private Limited, 1 New Industrial Road, Singapore 536196. Tel: (65) 6213 9300, fax: (65) 6285 4871. E-mail: genref@sg. marshallcavendish.com. Website: www.marshallcavendish.com/genref The publisher makes no representation or warranties with respect to the contents of this book, and specifically disclaims any implied warranties or merchantability or fitness for any particular purpose, and shall in no events be liable for any loss of profit or any other commercial damage, including but not limited to special, incidental, consequential, or other damages. Other Marshall Cavendish Offices Marshall Cavendish Ltd. 119 Wardour Street, London W1F 0UW, UK • Marshall Cavendish Corporation. 99 White Plains Road, Tarrytown NY 10591-9001, USA • Marshall Cavendish International (Thailand) Co Ltd. 253 Asoke, 12th Flr, Sukhumvit 21 Road, Klongtoey Nua, Wattana, Bangkok 10110, Thailand • Marshall Cavendish (Malaysia) Sdn Bhd, Times Subang, Lot 46, Subang Hi-Tech Industrial Park, Batu Tiga, 40000 Shah Alam, Selangor Darul Ehsan, Malaysia Marshall Cavendish is a trademark of Times Publishing Limited National Library Board Singapore Cataloguing in Publication Data Tai, Jacky, 1970Transform your business into a brand : 10 rules of branding / Jacky Tai, Wilson Chew. – Singapore : Marshall Cavendish Business, c2007. p. cm. ISBN-13 : 978-981-261-386-8 ISBN-10 : 981-261-386-2 1. Brand name products. 2. Brand name products – Marketing. I. Chew, Wilson, 1970- II. Title. HD69.B7 658.827 — dc22 Printed by Utopia Press Pte Ltd

SLS2006052562

Contents

Introduction 9 From World-Class Businesses To World-Class Brands

1 2 3 4 5 6 7 8 9 10 11 12 13

Do You Have A Real Brand? 14 Do You Know What Branding Really Is? 22 Branding Myths That Are Killing Businesses 28 Rule No. 1: Perception Is Reality 38 Rule No. 2: Fortune Favours The First 52 Rule No. 3: Create A New Category 68 Rule No. 4: The Power Of Focus 88 Rule No. 5: Differentiate Or Sell Cheap 104 Rule No. 6: Brands Are Built With PR, Not Advertising 124 Rule No. 7: You Better Have A Great Name Or Else 138 Rule No. 8 : The Power Of Consistency 154 Rule No. 9: Make Enemies, Not Friends 168 Rule No. 10: Know When To Launch A Second Brand 178

Closing Words 190

“To my fiancee, Kai, who makes all things beautiful.” Wilson

“This book is dedicated to my wife, Christine, for sticking with me all these years through the ups and downs. Thanks, honey!” Jacky

From World-Class Businesses To World-Class Brands

We entered the twenty-first century under a pall of doom, the new millenia overshadowed by the events of September 11, the Iraq War, SARS, the killer tsunami and the bird flu. After this shaky start, the pace of globalisation is picking up once again. Inspired by the robust economic growth of China and India, and the success of Korean companies like Samsung, LG and Hyundai, the world is once again focusing its attention on Asia. The emergence of a new breed of Asian economic tigers (China, India and Korea), however, is a double-edged sword for many businesses. On one hand, it presents exciting opportunities for companies to export their products and services to these huge markets that are beginning to open up. On the other hand, these opportunities also bring with them powerful threats in the form of aggressive homegrown competitors in these markets. After decades of competing on price, the Chinese, Indians and Koreans are waking up to the importance of building brands. The prospects are frightening for anyone serious about competing in an increasingly globalised Asia because the Chinese and Indians, in particular, already have the advantages of possessing larger domestic markets coupled with lower cost structures. They are also learning how to build powerful brands and they are learning fast. Unless companies are able to transform themselves into strong brands, they will find it increasingly hard to survive. China’s Lenovo signalled its global ambitions in the field of computers and consumer electronics with the purchase of IBM’s PC division recently—an audacious move that shocked the world

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because it came sooner than many anticipated. The Haier home appliances brand, already No. 1 in China, is starting to make its presence felt overseas. Huawei is competing with CISCO for international businesses in the computer networking category. There are more of these brands in the making and they are not content to just compete in China. They have global ambitions. It is only a matter of time before you find these brands in your backyard, fighting for a piece of your market. India, which has established itself as the outsourcing centre of the world, is also building powerful brands in the high-tech sector. Satyam, the Indian computer giant listed on the New York Stock Exchange (NYSE), was voted by famed publishing and media company, Forbes, as one of the 200 best Asian companies under US$1 billion (S$1.62 billion) in turnover.1 The NASDAQ-listed Infosys is already an established Indian brand in IT consulting, and Wipro, another Indian company listed on the NYSE, is a S$3.08 billion-a-year systems integration powerhouse. Considered within this context of intense competition, your company has a very small and rapidly closing window of opportunity to capitalise on these emerging opportunities and counter the attendant threats. In order to achieve these twin goals, you need to build world-class brands that can dominate the categories they compete in, not just regionally but on a global scale. We are not talking about world-class businesses that are efficiently run and professionally managed. There are already plenty of such companies in the world even in Asia’s emerging markets. Perhaps your company also falls into this category. What you need to do now is to transform your company from being a world-class business into a world-class brand. We will discuss the difference between a business and a brand later. In 2004, a valuation study of the 100 most valuable global brands by BusinessWeek and Interbrand listed seven Asian brands: Toyota, Honda, Sony, Samsung, Panasonic and Nissan.2 Samsung was the only Korean brand from Asia. The rest were Japanese. In 2005, things took a dramatic turn. Two new Asian brands made it to the Top 100 and both were Korean—Hyundai at No. 84 (ahead of Nissan) and LG at No. 97.3 1 2 3

Based on the exchange rate of US$1 to S$1.62—Bloomberg, 6 March 2006 BusinessWeek, 2 August 2004 BusinessWeek, 1 August 2005

4 5

BusinessWeek, 7 August 2006 Singapore Brand Awards 2006

11 From World-Class Businesses To World-Class Brands

In 2006, there were 10 Asian brands in the Top 100: seven from Japan and three from South Korea.4 Lexus is the latest Asian brand to make it onto this list, proving that even in the rarefied luxury car market traditionally dominated by the Germans, Asian brands can still make an impact. And Lexus is not even a brand that is sold worldwide—its main market is the United States. In fact, we read somewhere that Lexus is actually a contraction of the phrase Luxury Export USA. We expect that it is only a matter of time before Chinese and Indian brands make it onto this list. Where are the other Asian brands? According to an International Enterprise (IE) Singapore study using the same methodology employed by the BusinessWeek study, the most valuable Singapore brand in 2006 was SingTel, valued at approximately S$2.7 billion.5 The hundredth brand on the BusinessWeek Top 100 in 2006 was Levi’s at S$4.4 billion. While brand value is just one measure of a brand’s performance, it is a good indicator of how strong that brand is. Why is there a lack of globally renowned Asian brands? Perhaps the answer lies in the trading background that many Asian economies were built on. Asian companies are great at trading. Traditionally, that is where Asian companies have excelled. They have traded in commodities or distributed other people’s brands. There is nothing wrong with being a trading-based economy but to survive in the twenty-first century, you also need a strong, global brand because in every category from cosmetics to computers, and from soft drinks to software, the dominant players are increasingly the big global brands. Asia has many companies that can be considered world-class in terms of management, productivity, efficiency and quality. The majority of Asian companies, however, have yet to make the leap from being world-class businesses to being world-class brands. This book will show Asian companies how they can transform themselves into world-class brands using the 10 rules of branding that have made many of today’s successful global brands what they are. These rules of branding do not require a degree in rocket science to understand. They are simple and straightforward. Over the years, an explosion in the number of so-called branding gurus around the world and the rise of complicated branding jargon have

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made it harder to understand the really important things about branding. This book aims to cut through all the complexity and jargon to get to the very heart of the matter. Before these 10 rules of branding can be of any use to you, however, you must understand the fundamental difference between a business and a brand. A business is driven by opportunities. It will do whatever brings in revenue, regardless of the negative consequences this may have on the brand. For example, a company might start out as a department store. Then, as the property sector in that market starts to boom, this company diversifies into property development. After a few years, it might decide that given the rapidly ageing population, there is money to be made in nursing homes. So it starts to divert resources into setting up nursing homes. Does that sound familiar to you? It should. Companies that fit this description dot the Asian business landscape. A brand, on the other hand, is driven by vision. It sets its mind on a specific goal and works towards achieving it. A brand does not chase every single opportunity that presents itself. A brand is willing to forgo 9 out of 10 business opportunities in order to build a strong, dominant position in just one category. In other words, instead of striving to own 5 per cent of 10 markets like what the typical business normally does, a brand aims to own 50 per cent (or more) of one category. That is the fundamental difference between a business and a brand. BMW is a brand because it has a vision and it is driven relentlessly by that vision. BMW’s vision is to be ‘The Ultimate Driving Machine’ and it has chased that vision for many decades. It is more than an advertising slogan. Everything that BMW does is geared towards creating automobiles that live up to their lofty ambitions of out-driving every other car on the road. Since BMW is driven by this vision, it has to give up expanding into other categories such as pick-up trucks, commercial vehicles, budget cars and limousines because they do not fit into the mould of the ultimate driving machine. But because BMW is driven by vision instead of opportunities, it has become the best-selling premium automobile brand in the world.6 To build a strong brand, you need to be driven by vision instead of by opportunities alone. 6

Reuters UK, 9 January 2006

This book is written to help you understand and apply the 10 rules of branding that will help to transform your business into a powerful brand. Whether by design or by accident, all strong brands are built on the back of these rules. As you read this book, we want you to remember that all the examples of successful brands we have used here were once small companies but they did not remain small for very long because they played by these 10 rules. Whether you like these rules or not, you need to understand and apply them because in this day and age, what you do not know can destroy you. Use these rules to build a strong brand and give yourself a definite advantage over your competitors.

From World-Class Businesses To World-Class Brands

13

1. Do You Have A Real Brand?

In order to understand the principles of branding, you must first have a firm understanding of what a brand is. This is a very complex issue because different people have different definitions of what a brand is. Below are some examples of how different people define brands.

“A name, term, design, symbol, or any other feature that identifies one seller’s good or service as distinct from those of other sellers. The legal term for brand is trademark. A brand may identify one item, a family of items, or all items of that seller.” The American Marketing Association “A brand is the sum of all feelings, thoughts and recognitions—positive and negative—that people in the target audience have about a company, a product or service.” Steve McNamara, AdCracker.Com “A brand is a collection of perceptions in the mind of the consumer.” Colin Bates, BuildingBrands.com put, a brand is a promise. By identifying and ““Simply i authenticating a product or service, it delivers a pledge a t of satisfaction and quality.” o s Walter Landor, founder of Walter Landor & Associates

Do You Have A Real Brand?

15

“A set of assets (or liabilities) linked to a brand’s name and symbol that adds to (or subtracts from) the value provided by a product or service…” David Aaker, Building Strong Brands “A brand name is nothing more than a word in the mind, albeit a special kind of word.” Al Ries and Laura Ries, The 22 Immutable Laws of Branding The 22 Immutable Laws of Branding

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So What Exactly Is A Brand? All of the featured definitions of what a brand is are valid but they don’t make it any easier for you to understand what a brand is exactly. Since a brand is targeted primarily at customers, let’s look at the definition of a brand from the customers’ point of view. As far as customers are concerned, they don’t really care about how lawyers, academics, marketing professors and branding gurus define brands. All these definitions merely complicate matters and people don’t like things that complicate their lives. Instead, they look for shortcuts. To a customer, a brand is simply an idea that you own in their minds. Is that all? Could it really be that straightforward? Yes. You are a customer yourself. Test yourself on how you think of brands. Your mind needs to categorise everything that it is presented with in order to make sense out of chaos. The human brain cannot function with disorder and confusion. So what your mind immediately does when it is presented with a brand is to categorise it. In other words, your mind will try to associate a brand with an idea. A brand is something that does not exist in the real world. It only exists in the mind. Remember that. Sure, you can see the product represented by the brand or the brand name in the real world, but if your mind cannot associate that brand with an idea, then that particular brand ceases to exist for you. You are probably familiar with the phrase ‘out of sight, out of mind’. In branding, the converse is true. A brand that is out of mind will be out of the customers’ sight—they simply will not see it.

Do You Y Have Ha A Real al B Brand?

17

TRANSFORMING YOUR BUSINESS INTO A BRAND

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Take a look at some of the top brands in the world. One of the reasons why these brands are so successful is because they own a single idea in people’s minds. Every successful brand needs to own a powerful idea in the mind or it wouldn’t be successful. Much has been written about the Starbucks brand. It is the single most successful coffee chain in the world, chalking up S$10.3 billion in sales in 2005 with a net profit of S$801 million, a respectable margin of 7.8 per cent considering that what they sell is basically a commodity.7 What is the Starbucks brand all about? Well, to answer that question, you need to cut through all the brand jargon and find that single idea that Starbucks own in the mind. What is that one idea? Gourmet coffee. After all that has been said about the Starbucks brand, the Starbucks experience, Starbucks being the third place after your home and your office, etc., it all boils down to this one thing that Starbucks owns in the mind—gourmet coffee. PlayStation is probably Sony’s most successful and profitable product in recent times. The Sony brand itself is in trouble because Sony doesn’t own anything in people’s minds anymore, thanks to decades of line extension that has diluted the brand’s focus. But the PlayStation continues to do well because it stands for something. What is the PlayStation brand all about? What is the one idea that PlayStation owns in the mind? Video games. When you think of video games, you think of PlayStation. PlayStation owns the concept ‘video games’ in your mind and as a result, it dominates the video gaming category with a global market share of about 70 per cent. Despite the mega mergers between Hewlett-Packard (HP) and Compaq, and between Lenovo and IBM, Dell still remains the No. 1 PC maker in the world with an 18.1 per cent global market share compared to HP’s 15.6 per cent and Lenovo’s 7.2 per cent.8 That is because Dell is a strong brand. Why is Dell so strong? It owns an idea in the minds of customers. What is the one idea that Dell owns in the mind? Computers sold direct. What is the Panadol brand all about? What is the one idea that Panadol owns in the mind? Pain relief. Every time someone gets a headache, what do you say to that person? “Do you want a Panadol?” Panadol owns the idea of pain relief in a pill and that is what the brand is. That is what makes Panadol so successful. 7 8

The figures were derived from business research company, Hoover’s Inc., 7 March 2006 ZDNet Research, 21 January 2006

BRAND

THE ONE IDEA IT OWNS

1.

Google

Search engine

2.

DeWalt

Power tools

3.

Otis

Elevators

4.

Getrag

Gearbox

5.

iPod

MP3 player

6.

SKF

Ball bearings

7.

Caterpillar

Construction equipment

8.

Gulfstream

Business jets

9.

Symantec

Virus protection

10. Qualcomm

CDMA technology

11. Gore-Tex

Breathable waterproof fabric

12. Nikon

Cameras

13. Cray

Supercomputers

14. Thinsulate

Thermal fabric

15. FedEx

Overnight delivery

16. YouTube

Video sharing

17. Xerox

Photocopiers

18. Microsoft

Operating systems

19. Kleenex

Tissue

19 Do You Have A Real Brand?

What is the Viagra brand all about? What is the one idea that Viagra owns in the mind? Performance. When Jacky said this to a group of doctors from around the region who work for a Singapore health care company, they objected to that description of the Viagra brand. They argued that Viagra is more than just performance. They went into lengthy explanations of what Viagra is and what it does but Jacky stopped them halfway through and told them that customers of Viagra don’t really want to know all those things. Nor do they really care. To them, Viagra stands for one thing in the mind—performance. It is the Ferrari of drugs. That is the one idea that Viagra owns in the mind and that is what defines the Viagra brand. Look at the table below. It lists strong global brands. And they are strong brands because people can immediately associate that brand with one big idea.

THE ONE IDEA IT OWNS

20. Oracle

Database software

21. Nokia

Mobile phones

22. IKEA

Flat-packed furniture

23. Southwest Airlines

Budget air travel

24. Gallup

Opinion polls

25. CNN

Cable news

26. Toyota

Reliable cars

27. Zara

Just-in-time fashion

28. BlackBerry

Mobile e-mail

29. Skype

Internet phone

30. eBay

Online auction

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BRAND

What Is The One Idea Your Brand Owns In The Mind? What about your brand? What does it stand for? What is the one idea that your brand owns in the minds of people? Does it even own an idea at all or is it just another company in a sea of look-alike companies? If you don’t own an idea in the mind, you don’t have a brand because a brand doesn’t exist in the real world. It exists in the mind. If you don’t own an idea in the mind, you don’t exist there. If you

21 Do You Have A Real Brand?

don’t own an idea in the mind, you have no brand or at best, you have a very weak brand. Furthermore, you cannot own an idea that somebody else already owns. You need to find a new and unique idea that your brand can own. What is the Intel brand all about? Microprocessors. Intel owns that idea in your mind and that is what the Intel brand is. Nobody else can own that space or that idea. You can try to take over that idea, but it would be extremely difficult. Intel is the microprocessor brand. You can probably build a better microprocessor than Intel, but you can’t own that idea. You need to find something else to own. So NVIDIA found its own unique idea to own. NVIDIA is a brand of 3D graphics chips. Advanced Micro Devices (AMD), which has struggled against Intel for so many years, stumbled upon an idea that they can own—server chips. As a result, AMD has seen its share of the server chip market jump from practically zero to over 22 per cent in less than 18 months, thanks to its high performance 64-bit Opteron server chips. A brand is actually very easy to define but hard to build. There are millions of so-called brands out there in the market that are not really brands because they don’t own an idea in the minds of the customers. They are really just names that are slapped onto products or services and since they don’t mean anything in people’s minds, they are of little use or value to the companies that own them. Since you probably do not want to be one of these worthless brands, you need to take branding seriously. Branding is what builds brands. But before you can embark on a branding project, you need to understand what branding is all about.

2. Do You Know What Branding Really Is?

There is a lot of confusion as to what branding is all about because there are many different definitions of what branding is—just as there are many different definitions of what a brand is. We have met many people in our line of work who acknowledge that branding is very important because it is a key driver for their companies’ growth. That sounds impressive and reassuring but the shock comes when we ask them to define what branding is. That is when we realise that although branding is a well-known topic, it is also something that is widely misunderstood. Some people would give us ver y long and impressive sounding definitions of what branding is but very often, they completely miss the point because they would leave out the single most important aspect of branding. Jacky has spent many hours debating with CEOs over the definition of branding during his three years of running IE Singapore’s brand training programmes. Many CEOs simply refuse to believe that the concept of branding is as easy as what Jacky puts forth. That is understandable as some of these companies spend a lot of money on so-called ‘branding activities’ and as such, need to believe that branding is a much more grandiose concept than it really is. So What Is Branding? In order to understand the concept of branding, you have to first know the origins of branding. Although branding may seem like a twenty-first century concept, it is not. It is not even a twentiethcentury invention.

Do You Know What Branding Really Is?

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Branding actually dates back more than 4,000 years.9 In those days, cattle owners used branding to help differentiate their cows from other owners’ cows to prevent thefts and disputes over which cow belongs to whom. A hot branding iron with a unique design— usually sporting the owner’s insignia or initials—was used to burn an identifying mark on the rump of the cows. Even slaves were branded in those days, usually on the chest. Branding is still used on cattle ranches around the world to this day. Branding has evolved tremendously over the last 4,000 years in terms of sophistication as well as scope of application. Branding is now widely used in relation to both commercial as well as consumer products and services. Numerous books and articles have been written on branding. An entire branding industry has sprouted up around the world to help companies brand themselves. Many different schools of thought on branding have also emerged. The end result is a certain degree of confusion on the part of companies regarding what branding really is. Over the last few millenia, the form of branding has changed but not its function. The function of branding is the same today as it was 4,000 years ago. Then, cattle owners used branding to differentiate their cows from their competitors’ cows. Today, the function of branding is to help companies differentiate their products or services from those of their competitors. In other words, branding is differentiation. The process of branding is the process of differentiation. It is really as simple as that. We are usually very wary of so-called experts who try to make branding into something that is complicated and difficult to understand. In all the things that we do, we try to simplify things for our clients because we never mistake complication for sophistication. Neither should you. Jack Trout, one of the greatest branding gurus in the world and the man who invented the concept of positioning way back in 1969, wrote in his book, The Power Of Simplicity: A Management Guide to Cutting Through the Nonsense and Doing Things Right, that you should never trust a consultant that you cannot understand. We think that is fantastic advice. Jack Trout is one of those rare consultants who ‘gives it to you straight’ and we like his style. We 9

http://www.barbwiremuseum.com/cattlebrandhistory.htm

have personally learnt a great deal from this man. If you cannot understand a so-called branding expert, you probably shouldn’t hire him or her. So branding is all about differentiating yourself from your competitors. If you are not differentiated, you don’t have a strong brand. Finding that point of differentiation and fully exploiting it will determine the success or failure of a brand. It is not an easy thing to do but if brands want to live, they need to differentiate themselves. And that is what branding is all about. The activities you do to differentiate yourself is branding. These activities could include but are not limited, to the following: Your name Your logo Your product/store/service/website/packaging design The image you project The customers you target The processes you employ The position you occupy in terms of price, quality, etc. The propositions you make as a company.

In that sense, branding is different from marketing. Marketing is what you do to increase or maintain sales. So all the activities that you do to increase or maintain sales can be classified under marketing. These will include, among others: • • • • • • • • • • •

Advertising Public relations Events Roadshows Promotions Direct marketing Telemarketing Discounts Co-branding Bundling deals Loyalty programmes.

25 Do You Know What Branding Really Is?

• • • • • • • •

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Branding Gives Direction To Marketing And Innovation Peter F. Drucker, the world’s most well-known management guru and the man who has been widely credited as having invented the science of management, once wrote, “A business has only two basic functions—marketing and innovation”. Drucker is right but before you can launch into marketing and innovation, you need to settle the branding part first. The reason is that you can only develop the right marketing and innovation strategies when you are absolutely clear about what you want your brand to stand for. Branding gives direction to a company’s marketing and innovation strategies. Without branding, companies will be pulled in many different directions by both internal and external forces. Volvo is widely regarded as the default brand for safe cars. That is because Volvo is very clear as to what its brand should be and how Volvo is different from the other premium car brands. Volvo is all about safety. That is how the brand distinguishes itself from Mercedes-Benz (prestige), BMW (driving), and the rest. Once Volvo knows what its brand is all about, it can then put in place the innovation and marketing strategies to ensure that the brand is able to successfully occupy the position that it wants.

Hence, Volvo invests heavily in safety research and development and has pioneered many of the safety innovations that are found in most cars today, including the ubiquitous 3-point safety belt, curtain airbags and the anti-intrusion bar that prevents SUVs from riding over lower vehicles and crushing them. It also consistently communicates its safety position. That is why Volvo is synonymous with safety today.

Do You Know What Branding Really Is?

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3. Branding Myths That Are Killing Businesses

Before we launch into the 10 rules of branding, there are some myths of branding that need to be dispelled. So many senior management people that we have met in our line of work believe in these dangerous myths that are distracting many companies from their brand-building efforts.

Myth No. 1: Branding Is Only For Big Companies During the course of our work, we meet many company executives who repeatedly tell us that although they believe in the importance of branding, they are not ready for it. When we ask them why, the answer is, “We are not big enough for branding yet. Wait till we are more successful. Then we will do branding.” That statement certainly has us puzzled. Well, actually, Jacky almost dropped the wireless microphone he was holding the first time he heard it at one of his branding seminars. Many companies think that branding is the reward for success. That is not the case. Rather, branding is the reason why successful brands became successful. Don’t think that just because your company isn’t big and successful yet, you have no need to be concerned about branding. In fact, branding is the very reason Starbucks, The Body Shop, Apple, Google, Yahoo!, Amazon.com, Dell, Coca-Cola, Zara, IBM, Xerox, Red Bull, Procter & Gamble, Caterpillar, John Deere, Nokia and other successful global companies became successful. Branding is not the

29 Branding Myths That Are Killing Businesses

reward for success. The examples of successful companies that we mention here were once small companies (maybe even smaller than yours right now) but they paid attention to their branding strategy right from day one. That was a huge factor in their eventual success. Once you have got your branding strategy sorted out, the rest is easier. Without a branding strategy, you will never grow because you have no direction. Even if you do grow, it will be in a haphazard manner, driven by opportunities and luck rather than proper planning and execution. Without a proper branding strategy to guide you, it would be rather easy for your brand to wander off in different directions. Your brand will get lost as a result. Howard Schultz knew from day one that he wanted the Starbucks brand to be the category leader in gourmet coffee. And everything Starbucks did was consistent with the aim of achieving this. Along the way, Starbucks could have added a whole range of other beverages but they resisted this temptation because it was not consistent with their brand strategy. They could have gone and served sandwiches and pasta but they didn’t because it was not consistent with their brand strategy. Guess who is the biggest coffee chain brand in the world today? Starbucks—the one with the focused branding strategy. Michael Dell knew from day one that he wanted the Dell brand to be known for computers sold direct to end users. Over the years, he could have added more ‘dimensions’ to the brand by opening Dell computer stores and selling all kinds of stuff like computer books, software, accessories, and so on and so forth. But he didn’t because he was very clear about Dell’s branding strategy. This prevented Dell from being buffeted from pillar to post by every opportunity that came along. It kept the Dell brand headed in the right direction. While it is true that Dell has now branched off into TVs, MP3 players, printers and other consumer electronic products, they are still staying true to their direct-to-customers formula. These companies could not have grown into the giants that they are today if their founders had said, “Oh, we are a small start-up. Let’s just wait until we are big and successful before we consider branding ourselves.” If they had done so, their companies would most probably not be the industry leaders that they are today.

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1

2

Branding Myths That Are Killing Businesses

31

3

You may be a start-up, you may be a small company, you may be a medium-sized enterprise or a multinational corporation. It doesn’t matter. Branding is equally important regardless of the size of your company. So start thinking about it now. Do something about it today. If you hold on to the notion that branding is something that you do only when your business becomes big and successful, you will forever remain a small company.

Myth No. 2: Branding Is Only For Consumer Products Or Services

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Many companies think that branding does not apply to the Business-to-Business (B2B) sector. Wilson met with one Singapore Government Linked Corporation (GLC) recently and after he proposed that the company should embark on a programme to differentiate itself more effectively in its key markets so as to build a stronger brand, the CEO raised his hand and said, “Please, please, Wilson. We are not selling Coca-Cola!” Ever heard of IBM? It is a B2B company. In 2005, IBM attained sales revenues of around S$148 billion and net profit of S$13 billion.10 IBM’s net profit in that year alone might have been more than many companies’ total turnover in the last 10 or 20 years. Does IBM make better products than its competitors? Not necessarily. But IBM has a far stronger brand. So strong that it inspired this saying in the business world, “Nobody ever got fired for buying IBM.” When Jacky was working in the United States right after graduation, he often heard purchasing managers saying, “Jacky, when in doubt, always buy Big Blue (IBM’s nickname). You can’t go wrong with good old Big Blue.” When Jacky pointed out that IBM products actually cost more than their competitors’ (sometimes a lot more) and was not necessarily better, he was told it didn’t matter because nobody ever got fired for buying IBM. That is the true measure of the power of a brand. People buy your brand even though it is more expensive. For a lot of people, paying more for IBM is justifiable because IBM is a strong brand. Wouldn’t you like to be in that position rather than having to compete on price all the time? 10

Hoover’s Inc, 8 March 2006

In fact, a study by consulting firm Accenture in 2001 showed that brand reputation and brand familiarity are the two most important factors for B2B customers. 11 For Business-to-Customer (B2C) customers, brand reputation and brand familiarity rank No. 3 and No. 11 respectively. Although the study took place in 2001, we think the findings are still valid today. At the time of this book’s conception, StrategiCom (the B2B brand consulting firm of which Wilson is the CEO) is working with AC Nielsen to conduct a similar study in Singapore on how brands influence companies’ buying process.

1) Technical Risk Will the product perform as it is supposed to? Many B2B products or services are technical in nature. And buyers are very concerned about the technical risks involved. If the product doesn’t perform, then the buyer’s business could be severely affected. So what do buyers do? They buy from leading brands that have built up a strong reputation in that particular category. Many B2B companies are very secure in the knowledge that their products or services are superior compared to those of their competitors. We have consulted for many companies that can actually 11 12

www.integratedmar.com, 1 July 2001 Karen Gedney, “Reduce The Risk In B2B Purchasing”, 15 December 2004. http://www.clickz.com

33 Branding Myths That Are Killing Businesses

What is the main difference between buying a B2B product versus a B2C product? Risk. Buying a B2B product carries a lot more risk because it usually involves more money and it is usually other people’s money. Let’s say that you bought the wrong brand of shampoo for your kids. What is the worst that can happen? They might throw a tantrum and refuse to wash their hair but you will still have your title of ‘daddy’ or ‘mommy’ for a few more decades to come. But if you make a mistake in purchasing a supply chain management software for your company, however, it could affect the company’s operations, cause your company to lose millions of dollars and ultimately cost you your job. That is why, when you buy a highly risky B2B product like a supply chain management software, you will tend to buy from a strong brand. There are basically five major risks that are associated with B2B products or services.12

claim (and prove) that they have a better product or service than the two leading brands in their categories but they are still nowhere near the leading brands in terms of market share. At the end of the day, they find themselves losing out to their competitors. Why is that so? B2B companies often make the mistake of assuming perfect knowledge on the part of their target customers. They think that because their products and services are better, people will automatically buy from them. But customers don’t have perfect knowledge! They can’t possibly know more about your product or service than you. That is why their decisions will still be influenced by the brand.

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2) Financial Risk Is it good value for money? B2B buyers are not just concerned with the cost of their purchase. They are concerned with the value that they are getting. A product or service that is the cheapest is not necessarily the best value for money because it may not be able to perform certain functions or it may become obsolete fast, is not scalable or has a lot of compatibility issues. We have a client that has managed to develop a powerful 3-direction sensor gate that can read RFID-tagged merchandise with almost 100 per cent accuracy. You have probably seen those sensor gates that department stores place at the entrance to detect unpaidfor merchandise. This company’s sensor gate is superior compared to their competitors from Germany, South Korea and Japan. And they are priced lower than their competitors’ sensors. Sounds like a winning formula, right? Wrong. This company only managed to sell a handful of these powerful and cheap sensor gates. Why? Because this company’s potential clients do not perceive it as a strong brand and as a result, they would rather buy from the more well-known brands despite the higher cost and lower accuracy. Strong brands mitigate the financial risks faced by a buyer. 3) Delivery Risk Can the company deliver on time? This is a major concern for B2B buyers. We are sure you have had this experience before.

4) Service Risk Will the company be around long enough to provide after-sales service? If you buy a server from Sun Microsystems, you can be quite sure that the company will be around long enough to service the machines that you purchased but the same cannot be said for a less established server brand. Most B2B products require servicing in order to function properly. And some of these products are so specialised that only the company that made them have the necessary tools and expertise to service them. How many times have you heard companies throwing away a product they had bought simply because their supplier couldn’t provide reliable after-sales service or because the company they had bought from had closed down? Probably more often than you should. If you have a strong brand, it reduces the perceived service risk and as a result, buyers may be more willing to buy from you. 5) Professional Risk How will this purchase affect how my peers view me? This is a very important consideration for many B2B buyers. Let’s say you are an

35 Branding Myths That Are Killing Businesses

Maybe you hired a cheap-and-good but not so reputable printing company to print an important brochure for a new product launch and the printer couldn’t deliver the entire order on time. That would have disrupted your product launch and maybe caused a heart attack or two. We are willing to bet that you will use a more reputable printer next time. Delivery risk is a very real concern for companies. The most direct example would be courier services. If you have an important document to send overseas and it has to be there by a certain time, who would you use? The cheap-and-good but not so wellknown courier or FedEx? Our guess is that you would use FedEx or one of the other reputable brands like DHL or UPS. Maybe the lesser known brand can still deliver as well as the more established brands but B2B buyers are often not willing to take that risk—especially for big and important jobs. That is why they will buy from a strong brand to reduce the risk of non-delivery of the product or service.

architect and you need a Computer Aided Design (CAD) software. You buy a brand that other architects have a low opinion of. That will affect your reputation as an architect and when word gets out that you are using ‘sub-standard’ software, it might affect your business. If you are a professional, you probably want other people to see you as a professional. And part of projecting this image is to use tools or brands that will enhance the image that you are an expert in what you do. For example, if you claim to be a professional video production house, you probably want your clients to see you using professional video editing systems like AVID instead of something that is more mass market.

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The above are very real concerns for the typical B2B buyer. So what do customers do to protect themselves? They buy from companies with strong brand reputations. Strong brands act as a guarantee of performance for buyers. If you are not sure what brand of photocopier to buy, you will probably default to Xerox. Is it the best? Toshiba or Minolta might be just as good if not better but Xerox is a stronger brand, so you will seriously consider it. If you are looking to buy an accounting software and you are not sure what to buy, you will probably go with the brand that other companies buy. It might be ACCPAC. It might be MYOB. But you would buy a known brand. If you want your books audited for a potential investor, do you go with a small CPA firm or one of the Big 5? One of the Big 5 probably. They may not necessarily be better but they have better brands. It gives you and your potential investor that extra ounce of confidence. That is why branding is critical for a B2B company.

Myth No. 3: Branding Is The Job Of The Marketing Department This might be disheartening for marketing people (and we are marketing people) but branding is not the job of the marketing department. It is involved in the process but the responsibility for branding lies with someone else.

37 Branding Myths That Are Killing Businesses

To be successful, a brand needs a brand champion and brand ambassadors. The brand champion has to be the CEO—no one else. And the CEO has to inspire the company’s employees to become its brand ambassadors. This is a task that CEOs cannot delegate. Many companies that we have met delegate the job of branding to the marketing, sales or PR departments. Some even delegate it to their accounting departments! No offense to accountants everywhere (Jacky’s wife is a CPA herself ) but this is not a job that you assign to accounting just because it involves money. The CEO will have to lead the branding project himself or herself. Otherwise, the project will flounder because no one other than the CEO has the authority or perceived authority to do so. Strong brands are usually associated with CEOs who are very pro branding. The CEOs champion the brand and they become very much the brand themselves. Oracle is a strong brand in the category of relational database management software (RDBMS). One of the reasons is that Oracle has a strong brand champion in its founder and CEO, Larry Ellison. Apple was floundering before its founder Steve Jobs came back to revitalise it. Steve Jobs is a consummate branding expert. He managed to inspire not only employees but customers to believe in the brand again. Virgin has Richard Branson who epitomises everything that the Virgin brand is—fun, irreverent, always challenging the status quo. Ferrari had Enzo Ferrari. Even after his death, his vision for the brand continues to drive Ferrari forward and keeps it as one of the most desirable sports car brands in the world despite very stiff competition from the likes of Aston Martin, Porsche and Lamborghini. Enzo Ferrari believed that racing improves a car’s breed and that is why Ferrari still races today. The company bought into Enzo’s vision. To those CEOs out there who are always busy trying to close the next deal, a word of warning. Those deals are important but if you have strong brand, it will make it easier for you to do business. Creating a strong brand is not a job that you can run from. It is your job to champion the brand and inspire your employees to become the company’s brand ambassadors.

4. Rule No. 1: Perception Is Reality

Branding is a battle that is won or lost in the mind of the customer, not in the real world. It is, therefore, a battle of perceptions, not products. In the branding war, perception is all that matters. Whatever the customer perceives, that is the truth as far as the customer is concerned. It doesn’t matter if it really is the truth or not. All that matters is what the customer perceives to be the truth. Many of the companies that we have dealt with can produce test data that prove that they have a superior product compared to their competitors. But despite that, they were unable to increase their market share. The reason for that is very simple. These companies are not perceived to be category leaders but their main competitors are.

Rule No. 1: Perception Is Reality

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A good example is a lens maker that we were called in to meet. Despite having technically superior products, they couldn’t make a dent in market leader Essilor’s market share. Essilor still has a 25 per cent global market share. The reason is that customers perceive Essilor and the No. 2 brand, Hoya, as category leaders. So customers think that what Essilor and Hoya produce must be the best. That is why having a superior product alone is not enough. You also need to be perceived to be superior! We are not saying that quality is not important. It is. Your quality must be at least as good as your major competitors’ or you won’t even be considered by potential customers. But quality alone is not enough to build a brand as many companies have discovered to their dismay. Quality is just the price of entry. To win, you need to engender better perceptions of your products and services. Read the sentence below. What does it say?

OPPORTUNITYISNOWHERE

Some of you will read this sentence as “Opportunity Is Nowhere”. Some of you will read this sentence as “Opportunity Is Now Here”. Whatever you perceive this sentence to be, that is what it is. Your perception of this sentence is what makes it real to you. It doesn’t matter what we, the writers of this sentence, intended it to be. All that matters is how you read it, how you perceive it. Perception is reality. And perception can work for you or against you. The same principle that applies to how you read the above sentence also applies in the battle of brands. Whatever people perceive your brand to be, that is what it is. You can say all you want about what your brand is and what it isn’t. It doesn’t really matter. The success of your brand depends almost entirely on how it is perceived by other people, not by how superior it is. What is more important

than creating a superior product is creating the perception that you have a superior product because in this day and age, technical superiority is fleeting. Within months, your competitors can tear apart your product and produce something as good or even better. We know some of you are shaking your heads in disbelief. How can an objectively superior product be perceived as inferior, and vice versa? Let us prove it to you. We will play a word association game. We name a category and you name the first brand that pops into your mind. Let’s compare the results after that. 1. Soft drinks 2. Massage chairs 3. Instant coffee 4. Computer chips

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6. Computer software 7. MP3 players 8. Premium watch

You probably answered: 1. Coca-Cola 2. OSIM 3. Nescafe 4. Intel 5. VISA 6. Microsoft 7. iPod 8. Rolex

Why? Do these brands really make the best products in their categories? Not necessarily but people perceive them to be the best brands. That is why these brands come to mind when their categories are mentioned. As you will see from some of the surprising examples below, perception can be a very powerful ally or a powerful foe when you are trying to build and maintain a brand. This depends largely on which side of the perception fence you are on.

Rule No. 1: Perception Is Reality

5. Credit cards

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Reality In Soft Drinks Blind taste tests conducted in the United States have shown that more people think Pepsi tastes better than Coca-Cola. When Jacky was studying in the United States in the early nineties, he used to watch TV commercials by Pepsi that advertised this fact. In fact, out of the 800,000 or so people who had taken The Pepsi Challenge blind taste test, 480,000 or 60 per cent said that Pepsi tasted better than Coca-Cola.13 And yet, more people continue to buy Coca-Cola than Pepsi. In 2005, Coke outsold Pepsi 3 to 2 (4.4 billion cases for Coca-Cola versus 3.2 billion cases for Pepsi). We are sure a lot of the people who rated Pepsi as better tasting than Coca-Cola in those blind taste tests still bought Coca-Cola when they went to the supermarket subsequently. Don’t you find this illogical? Pepsi is better tasting after all! It is clearly a superior product and Pepsi proudly advertised the results of these blind taste tests. But it didn’t change a thing. Coca-Cola is still the leading brand in the cola category because people perceive CocaCola as the superior brand. They say Pepsi tastes better but when they are actually faced with a purchase decision, they buy Coke because in their mind, Coke is the best. Perception is reality in the soft drinks market and this is borne out in Coca-Cola’s sales figures. Reality In Microprocessors Jacky used to run the marketing communications department for an education software company. The IT guys were very fond of showing him benchmarking tests that proved AMD microprocessors were faster than Intel’s. And Jacky believed them because at that time, he had an AMD-powered computer at home that definitely ran faster than the brand new Pentium-powered computers from a leading brand (which shall remain nameless) that were used in the office, despite the fact that the AMD chip was rated 0.8 GHz slower than the Pentium chip. Did all that matter? Not to a lot of people, because they perceive Intel to be the best computer chip. Jacky used to tell his former CEO to buy AMD-powered computers because they were faster and cheaper. The CEO was shown the test results. After much consideration, the CEO decided to buy Intel machines. 13

Beverage Digest, 4 March 2005

Naturally, Jacky was more than a little puzzled and questioned the CEO as to his decision. The CEO said he somehow has more confidence in the Intel brand and he sees Intel as a more solid purchase. Jacky argued that the test results clearly showed that AMD was faster but this made no difference to the CEO. In that CEO’s mind, Intel is the best and that is the end of the argument. Perception is reality in the microprocessor market and that must be helping Intel maintain its market share of around 86 per cent. Sure, there are some people who will buy the fastest chip regardless of who makes it. But it would seem that there are more people who would just buy from the brand that they perceive to be best and that would be Intel.

Reality In Coffee Why is Starbucks still the No. 1 coffee chain in the world? Do they serve better coffee than their competitors? To find out, The Straits

43 Rule No. 1: Perception Is Reality

Reality In Photocopiers Why do people continue to buy Xerox photocopiers? Because they are the best? Or because they are perceived to be the best? If we were to give you photocopies made by Xerox, Canon, Minolta, Toshiba and Ricoh machines and then ask you to rank those copies in order of quality, how sure are you that the Xerox copy will come out tops? You would probably have a lot of difficulty telling the copies apart. We know this because we have tried this before and the copy that was rated the sharpest was actually made by a Toshiba machine. The Xerox copy came in third. But when the subject of photocopiers is raised, the first brand that invariably comes to mind will be Xerox. This is because people perceive Xerox to be the leading photocopier brand. Xerox is photocopier and vice versa. We don’t know what other people perceive Toshiba to be but in our minds, it is either a washing machine or a laptop computer. In another person’s mind, it could be a refrigerator. Or an air-conditioner. It could be any number of things. We are sure the Toshiba photocopier salespeople will tell you that there is no difference between one brand and another in terms of quality so you might as well buy Toshiba but there is a difference and that difference exists in your mind.

Times sent Life! reporter and former barista, Sujin Thomas, to conduct a taste test of the various premium coffee brands’ single shot espresso. The test was conducted in Singapore. This is what Sujin discovered:14

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BRAND

PRICE

AROMA

BODY

ACIDITY

Starbucks

S$3.00

Mild and discernible only at close sniff

Watery, lacking volume

Fairly sour aftertaste

Spinelli

S$2.90

So strong it’s a wake-up call

Full and round

The barest hint of sourness

Coffee Club

S$3.00

Zaps you but is not overpowering

Fairly rounded but with a weak feel

Mildly sourish aftertaste

The Coffee Bean & Tea Leaf

S$3.20

Faint

Thin, tastes very diluted

A sharp jolt of it

The Coffee Connoisseur

S$3.90

Strong and inviting

Full and heavy feel that lingers on the tongue

Just a hint of it

From the taste test, you can see that Starbucks does not serve the best coffee. In fact, Spinelli trounced it convincingly in all the three attributes of aroma, body and acidity. Does it matter? Will the publication of these test results cause a cataclysmic downward shift in Starbucks’ fortune? More than a year has passed since that article came out. From our observation, it hasn’t affected Starbucks noticeably. People still perceive Starbucks as the leading brand and therefore they will continue to frequent it. Most Starbucks outlets here in Singapore are doing a roaring trade. This doesn’t seem fair to the other guys who actually have better coffee, does it? But that is the first rule of the branding game. Branding is not a battle of who has the better product but who can create the perception that it has the better product. Perception is still reality in the premium coffee market. 14

The Straits Times, 23 January 2005

45 Rule No. 1: Perception Is Reality

Why Can’t The Better Product Win The Branding War? In the next chapter, we will examine how these leading brands managed to create and maintain the perception of leadership in the minds of their customers but first, we will look at why the better product strategy doesn’t work in branding. We have met a lot of executives at functions and seminars who must have thought that we were prime candidates for the mental hospital when we said that the better product strategy their companies are so hell-bent on using does not work. But being polite people, they tried their best not to laugh. What we are saying here goes against conventional wisdom. How can the better product not win? How can you have the best product in the market and not be the leading brand? The idea that if you build a better mousetrap, you will sell more mousetraps than the other mousetrap makers has been so ingrained in companies that it is actually stopping them from building powerful brands. A brand is nothing more than an idea that you own in the mind and that idea is shaped by perceptions. If you want to buy a safe car, what is the brand that comes to mind? Volvo. Why? Because that is what the Volvo brand stands for. That is what people perceive the Volvo brand to be. If BMW is The Ultimate Driving Machine, then Volvo is The Ultimate Safety Machine. But Volvo really does build very safe cars, you might argue. We don’t deny that. The Volvo brand’s reputation was built on decades of making safe cars. We have met people who have had serious accidents in Volvos before and they assured us that if you have ever had an accident in a Volvo, you will never ever buy any other car. Especially after you have seen how badly damaged the other car is compared to your Volvo. Isn’t that proof that the better product wins? Volvo is clearly the superior product in this case. It built its reputation by consistently building safe cars. Yes, and it continues to make very safe cars even today but that doesn’t mean that nobody else can make safer cars than Volvo. A lot of manufacturers these days can wave around crash test ratings that are as good as, if not better than, Volvo’s. And not all of them are as big or as expensive as a Volvo. Renault is one manufacturer that has very good crash test ratings. In the European New Car Assessment Programme (EuroNCAP) crash

tests in 2000, the Volvo S80 scored four stars.15 EuroNCAP is one of the leading car safety authorities in the world. The Renault Megane scored the maximum of five stars in 2003. So Renault can claim that their cars are among the safest in the world. But can Renault occupy that pigeonhole in your mind that is marked safe cars? Not a chance. Renault can spend hundreds of millions of dollars advertising their five-star EuroNCAP score but it will not change people’s perception of Renault and Volvo. When safe cars are mentioned, what comes to mind? Volvo. Renault is probably perceived as avant garde, individualistic and Gallic but when safe cars are mentioned, Renault is not a brand that will spring to mind as easily as Volvo.

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What About Quality? We are not suggesting that quality is unimportant in brand building. Undeniably, quality is indeed very important because you obviously can’t build a strong brand based on hype, hot air and smoke-andmirrors—not in the post-dot.com world anyway. Your quality must be at least as good as that of your competitors’. But quality alone is not enough to build a brand because quality can be copied. It can be reverse engineered. To build a strong brand, you need to build a very strong perception in people’s mind first. Remember, while perception can be changed, it cannot be reverse engineered. That’s the beauty of it. Jacky grew up around Mercedes-Benz and Toyota cars because many of his relatives and parents’ friends owned them. As a budding car enthusiast, he naturally paid very close attention to every car that he came in contact with. Over the years, he noticed that nothing ever seems to go wrong in a Toyota. In other words, Toyota actually made very high quality cars even in the days when they were labelled as Japanese tin cans. But it is Mercedes-Benz that was seen by most people as the quality benchmark in those days— during the seventies and eighties. Mercedes-Benz cars were not only high quality but they created the perception of quality by using higher grade plastics in the interior, making their doors heavy and needing a firm shove to close, styling their cars to look like they were hewn from solid billets of steel and pricing the cars out of the reach of ordinary motorists. 15

www.euroncap.com

Quality is important but the perception of quality is equally important. The Mind Hates Chaos The mind needs to make some order of the barrage of information it receives every day in order to function properly. Even the most disorderly person has a mind that needs to categorise things for easy reference. Otherwise, there will be utter confusion and chaos. Because of this need to categorise things, your mind will automatically create pigeonholes for everything that it comes in contact with. The pigeonhole marked ‘Safe Cars’ is occupied by Volvo. 47

The pigeonhole marked ‘Driving Machines’ is occupied by BMW. The pigeonhole marked ‘Prestigious Cars’ is occupied by Mercedes-Benz. The pigeonhole marked ‘Sexy Car’ is occupied by Alfa Romeo. The pigeonhole marked ‘Sporty Mass Market Car’ is occupied by Mazda.

This goes on and on. Once a pigeonhole is occupied by a brand, it is very difficult to displace. That is how your mind works. That is how your mind categorises things for easy reference. Once a perception is formed in the mind, it is very hard to change. When was the last time you changed your mind about a brand? Even if you are a fickle-minded person, chances are you have never changed your mind about Volvo. It is the safe car. This is also the reason why our job as branding consultants is so difficult because once a client’s mind is made up, it is extremely difficult for us to get them to change. We may have evidence to show that a particular strategy has the best chance of succeeding but if the client has already made up his or her mind to use another strategy, there is usually very little that we can do to change that mind.

Rule No. 1: Perception Is Reality

The pigeonhole marked ‘Reliable Cars’ is occupied by Toyota.

That is why it is very important for a brand to form the right perception in the minds of its prospective customers from day one. In today’s brutally competitive marketplace, you don’t get a second chance. If your brand fails to make a deep, positive and lasting first impression, you will only increase its chances of failure.

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But I Don’t Want My Brand To Be Stereotyped! A lot of people don’t like the idea of stereotyping or pigeonholing their brands because they think that if the brand becomes too closely identified with a category or product, it will be difficult for that brand to be extended to other categories. This kind of thinking will push companies to try to diversify their brand to the point where it loses focus (more of this in Rule No. 4). Business people are generally uncomfortable with stereotypes but if you want to build a strong brand, you need to get it stereotyped. You need your brand to be strongly identified with a category, product or service. If you don’t, then your brand is weak. Brands cannot stand on their own. You need to attach a category or a meaning to that brand. If Volvo was not so closely identified with safe cars, then the Volvo brand would be weak. A brand is an idea that you own in the mind. The idea that Volvo owns in the mind is safe cars. Volvo is doing fine but its compatriot, Saab, is not doing so well. Although Saab makes excellent cars, it has a weak identity. While you know exactly what a Volvo is—a very safe Swedish tank—do you know what a Saab is? Because the Saab brand is not so strongly stereotyped, it is a weak concept in many people’s mind. Saab is trying to make a comeback by tapping on their aerospace heritage. Saab used to make Viggen fighter jets and is trying to get its brand stereotyped as ‘fighter jets for the road’. We think that is a good strategy but it remains to be seen if Saab can execute it successfully. So do you know how your brand is perceived? What does it stand for? Which pigeonhole in the mind does it occupy? If it is filed under the pigeonhole called ‘Miscellaneous’, then you are in big trouble because if your brand doesn’t stand for anything, it is weak. Of course, a brand that is very closely tied to a category will die when that category dies. That’s the way things are. Polaroid

Perceptual Mapping—A Measure Of Success A lot of company executives (especially those with financial or engineering backgrounds) are still sceptical about branding because they think that since branding is something intangible, it cannot be measured. And if it cannot be measured, then how do you know whether the time, effort and money spent on it is worthwhile? As branding is a battle that takes place in the mind, that is where you measure the success or failure of your branding programme. If you already own a brand that has been in the market for a few years, then you need to undertake a brand audit, which is an exercise to find out how people perceive your brand versus your competitors’ brands. You can measure a number of key attributes to see how you fare. For example, you can do a perceptual map of your brand in terms of price versus quality, reliability versus speed, and so on. That is the before picture. Then you undertake a branding programme to improve how people perceive your brand. After the branding programme is concluded, you measure people’s perceptions of your brand again. If it has improved, then the programme is successful. If nothing has changed, it’s back to the drawing board. (Rule No. 6 of branding will show you the best way to change perceptions of your brand.)

49 Rule No. 1: Perception Is Reality

was so closely tied to the instant photography category that when the category died, the brand died. But the alternative is to have a weak brand. The choice is yours. Personally, we would rather have a strong brand that can dominate one category than a weak brand that straddles many categories because you can always launch a new brand if your current category becomes obsolete. The next question is, how do you anchor your brand in the mind of your customers? How do you own a strong perception in people’s mind? How do get your brand locked comfortably into a pigeonhole in the mind? How do strong brands like Coca-Cola, OSIM, Starbucks, Nescafe, Intel, VISA, Microsoft, Apple, Singapore Airlines (SIA), Rolex and Volvo do it? They did it by being the first, and that is the subject of the next rule of branding in the following chapter.

CASE STUDY ON PERCEPTION: OSIM

g

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OSIM is an excellent example of a company that has succeeded because it harnessed the power of perception to build a strong brand. As we often tell clients, to win in the marketplace, you have to first win in the mind. Without perceptual leadership, it would be extremely difficult to establish market leadership. If customers don’t perceive OSIM as the leader in its category, would they pay a premium price for its state-of-the-art massage chairs? Probably not. To illustrate the power of perception, we often play the word association game with our audience during our branding seminars or workshops. We would ask them to name the first thing that comes to mind when we mention a category, product or service and every time we mentioned massage chairs, members of the audience would yell, “OSIM”. Sometimes, we would ask them why they said OSIM instead of some other brand of massage chairs. The typical answer is, “It’s the best massage chair, that’s why.” But we suspect what they really wanted to say to us was, “What do you mean why? Everybody knows OSIM makes the best massage chairs! What planet are you guys from?” When we asked them why they were so sure that OSIM is the best massage chair, it gave them pause. They did not really know how to answer that question. All they knew was that OSIM is the best. This must be very frustrating if you are trying to compete with OSIM. OSIM’s competitors can claim that their massage chairs are just as good, if not better, and more affordable but it would not matter because in people’s minds, OSIM is the best and therefore, they are willing to pay a premium for it. That is the power of perception. It makes people feel that if they have not forked out lots of money for an OSIM, they are not getting the best. Let’s say you buy another brand of massage chair. You

51 Rule No. 1: Perception Is Reality

keep telling yourself that this brand is just as good but thousands of dollars cheaper. So it is a win-win situation, right? Maybe. But at the back of your mind, you will have this nagging feeling that you might have gotten something that is not exactly the best. How did OSIM manage to build that perceptual leadership in the first place? By using the principles of branding that are outlined in this book. The easiest way for you to create a strong perception in the mind is to get there first. Once OSIM got into the mind with the idea that you can get a good massage just by sitting in a chair, the mind immediately filed the OSIM brand away in that pigeonhole marked ‘massage chairs’. When Jacky met Ron Sim, the founder and CEO of OSIM, Ron told Jacky that OSIM was not the first massage chair brand in the market. Panasonic actually launched its massage chair first. But that doesn’t matter because of the rule of perception. What do people perceive Panasonic to be? A brand for home entertainment systems. Once a perception is formed, it is hard to change. But back then, OSIM was a brand with no perceptual baggage like Panasonic. It was focused on massage chairs. As a result, it succeeded in getting into people’s minds first as the brand for massage chairs. But the power of perception works both ways. A brand like OSIM needs to be careful not to stretch itself too far and in the process, weaken its hold on people’s minds. You cannot slot a brand into two different categories. Panasonic tried to stretch a home entertainment systems brand into a new category called massage chairs. That’s fine if you don’t need to compete with a highly focused brand that stands for just one thing—massage chairs. If you do, you are in trouble. Of course, you cannot build a brand based on smoke-andmirrors. Your quality needs to be at least as good as that of your competitors’. OSIM understands this and the company works very hard to make sure that its products are of a very high level of quality—not just in the way they operate but in the way they look and feel as well. This helps the brand to maintain its perceptual leadership as well as its market leadership.

5. Rule No. 2: Fortune Favours The First

The notion that being first is a business advantage is a controversial issue that usually splits opinions right down the middle. Whenever we mention the importance of being first, there are usually company executives who strongly disagree with us. They would point out that there have been quite a number of first mover failures and that is true. Hence, a lot of executives actually feel that there is no need for a brand to be first in the market to win because the first mover is usually the one that bears the biggest risk if that market fails to develop. Many of the business people that we have met, especially those in the technology sector, told us that the right strategy is to let others make the first move, see if the market catches on and then move in quickly with a better and cheaper product to overtake the first mover. These company executives think that it is better to sit back and learn from the mistakes of the pioneers before entering the market themselves. If you are one of those people who think like that, we have bad news for you. On paper, the make-it-better-and-sell-it-cheaper strategy seems like the most logical thing to do but the reality is quite different. Johnny-Come-Lately brands seldom make it big. That alone should be enough to warn you that this strategy is not viable. Many have cited Samsung as the perfect example of a brand that uses speed to overcome the disadvantages of not being first. One of the most visible Samsung products in the market today is their sleek and sexy mobile phones. Yet, despite all of Samsung’s speed, it still lags behind Nokia (the first mover in digital mobile phones) with a 35 per cent market share and Motorola (the first mover in analog mobile phones) with a 22 per cent market share.

Rule No. 2: Fortune Favours The First

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Samsung did well to move up the ladder despite being late in the mobile phone market but do you have any idea how much money and time Samsung invested in research, development, innovation, design and marketing? You probably don’t have that kind of money, resources or time, so do not try to do a Samsung. But what about those brands that made it to the market first but still failed? We agree that being first in the market is no guarantee of success but being first in the market gives you the license to establish your brand in the minds of customers before anyone else does—and that is what really matters because, as we have established in earlier chapters, the real battlefield of branding is in the mind.

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Survival Of The ‘Firstest’ If you study the history of brands, you will find that the first brand in the market usually becomes the leading brand, and remains the leading brand for a very long time despite stiff competition. That is usually true unless the first brand makes a fatal mistake and allows its competitors to overrun it. 1) Coca-Cola Coca-Cola was the first cola in the market. It was invented in 1886 by John Pemberton, a pharmacist from Atlanta. The name came from coca leaves and kola nuts. By 1895, this fountain soda drink was available throughout the United States and Coca-Cola started exporting it in 1898. Coca-Cola is over 120 years old but it is still the No. 1 cola brand in the world and also the most valuable brand according to BusinessWeek. Coca-Cola’s brand value in 2006 was pegged at S$108.6 billion. Coca-Cola is still No. 1 despite an impressive challenge mounted by Pepsi (which we will talk about in Rule No. 5 later). In 2005, according to Beverage Digest, Coca-Cola outsold Pepsi in the US market 3 to 2. Being first also allows Coca-Cola to establish itself as The Real Thing. And who in the world wants to drink the fake thing? Everybody wants the real thing. That is a big plus for companies with first mover advantage.

2) CNN CNN was the first cable news network in the market. Broadcasting veteran Ted Turner launched it in 1980 despite criticisms. Today, cable news stations abound across the world. Many came but none managed to wrest away the top spot from CNN, which is broadcasted to 200 countries around the world. For example, Singapore’s Channel NewsAsia got into the market very late compared to CNN and the others. Naturally, its share of the global cable news market is small compared to CNN. But Channel NewsAsia has carved out its own niche despite being late—it is the Asian news network.

4) TSMC TSMC (or Taiwan Semiconductor Manufacturing Company) was the first semiconductor foundry in the world. Is TSMC the best semiconductor foundry in the world today? Maybe. Maybe not. But it did get into the market first before its chief rival—UMC from Taiwan—and Singapore’s own Chartered Semiconductor. Despite the extremely cut throat semiconductor market, TSMC is still No. 1. In 2005, it had a net profit of S$4.7 billion from a sales turnover of S$13.3 billion, giving it a whopping net profit margin of 35.3 per cent.16 In the first three quarters of 2006, TSMC reported sales turnover of S$11.37 billion and net income of S$4.66 billion giving it an even more mind boggling net profit margin of 41 per cent.17 And this is just for the first three quarters. 16 17

Hoover’s Inc., 9 March 2006 www.tsmc.com

55 Rule No. 2: Fortune Favours The First

3) IBM IBM was the first computer company in the market, established in 1914. Who is No. 1 in the computer industry today? IBM—by a huge margin. Is IBM better? Not necessarily. But IBM got there first. And despite the stiff challenges mounted by nimble and innovative new competitors like Dell, Sun Microsystems and HP, IBM is still king of the hill. Why? They got there first. They got into people’s minds early and planted the IBM flag there. That flag is still there today. Because IBM got there first, it became very successful early on and they leveraged on that success to move quickly and decisively into other areas like IT consulting and business process outsourcing (BPO).

In stark contrast, Chartered Semiconductor posted a net loss of S$258.6 million on sales turnover of S$1.7 billion in 2005. Chartered performed much better in 2006. In the first three quarters, Chartered had sales revenue of S$1.7 billion and a net profit of S$100.5 million, giving it a net profit margin of 5.9 per cent.18 This, however, is still a long way off TSMC’s performance. Although we do not doubt the technical capabilities of Chartered Semiconductor, we believe that because TSMC got into the semiconductor foundry business before anyone else, it helped them to establish a strong position in the market before competition showed up. Being first in the market certainly didn’t hurt.

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5) Oracle Oracle got into the relational database management system (RDBMS) first in 1977. Despite stiff competition from IBM and Microsoft, Oracle still managed to hang on to its No. 1 position with a 44.6 per cent share of the global RDBMS market in 2005. The table below was taken from a report by global market intelligence firm, IDC, which was published by Oracle on its corporate website. Worldwide RDBMS Software Revenue by Top 5 Vendors, 2003–2005 (US$M)

2003

2004

2005

2004 SHARE (%)

2005 SHARE (%)

20042005 GROWTH (%)

Oracle Corporation

5,362.7

5,982.4

6,494.7

45.0

44.6

8.6

IBM

2,825.0

2,923.0

3,113.0

22.0

21.4

6.5

Microsoft Corporation

1,650.0

2,013.0

2,441.0

15.1

16.8

21.3

Sybase Inc.

442.0

470.9

502.6

3.5

3.5

6.7 8.5

VENDOR

NCR Teradata

325.4

390.0

423.0

2.9

2.9

Other

1,441.3

1,528.8

1,590.8

11.5

10.9

4.1

Total

12,046.4

13,308.1

14,565.6

100.0

100.0

9.4

Note: 2005 values are estimates. Source: IDC 2006

18

www.charteredsemi.com

Is Oracle the best database software in the world? We don’t really know. After experiencing an Oracle-based customer relationship management (CRM) software at work, Jacky was not at all impressed as it was not user friendly. But that does not matter because Oracle got there first and will probably remain No. 1 for a long time.

57 Rule No. 2: Fortune Favours The First

The Fallacy Of The First Mover Advantage Before you get overly excited with the idea that being first in the market is all that it takes for success, let us warn you that being first in the market is no guarantee that you will make it big. As many of our clients have correctly pointed out, there are many brands that got into the market first but have failed to become No. 1. Nevertheless, that doesn’t mean that the brands that beat them were better. As mentioned earlier, being first in the market in itself is of no use if you don’t use this advantage to get into the mind and establish a position there before your competitors come along. Branding is a battle that is won or lost in the mind. So the brand that gets into the mind first will usually win in that category unless it violates the rules of branding or that category becomes obsolete. Being first in the market only gives you the license to get into the mind first. If you don’t exploit the license that your first mover advantage gives you, then you are giving competitors an opportunity to establish their brands in the minds of customers even though they entered the market late. That was what happened to Creative Technology in relation to MP3 players and Trek2000 in thumb drives. Creative Technology was first in the MP3 player market but Apple got into the mind first. Guess who won the MP3 player war? Although Creative Technology was first in the market, it squandered this advantage by not getting into the mind first. Creative did get into the mind first in another category—the sound card. Creative’s Sound Blaster sound card was first introduced in 1989 and it soon became the industry standard. You can read more about Creative in the case study at the end of this chapter. Trek2000, likewise, was a first mover in thumb drives but failed

to establish itself firmly in the mind before a horde of competitors arrived on the scene. So even if you do get into the market first, your job is only half done. To win the branding war, you need to fully exploit this first mover advantage and establish yourself in the customers’ minds first. If you don’t and somebody else does, then the battle for No. 1 is lost as far as your brand is concerned. If you are lucky enough to be the first in the market, do whatever is necessary to flood the market with your products and get into the mind first.

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The First Man In Space The first man in space was Yuri Gagarin, the Russian astronaut. He blasted into space on board the Vostok 1 on 12 April 1961. You have probably heard of Yuri Gagarin because he was the first man in space. Who is the second man in space? The American astronaut, Alan Shepherd. Your mind is probably a blank right now. Alan who? That’s the problem with being No. 2—nobody remembers you. But Alan also scored a first. He is the first American in space. Big deal. Who cares about that? All people want to know is who the first man in space was and that is Yuri Gagarin. Being the first American in space is not really something that is important enough, so hardly anyone remembers Alan Shepherd. So if you are not first in the market, what do you do? What do most companies do? To find out, read on. The First Man To Fly Solo Across The Atlantic Ocean At 7:52 a.m. on 20 May 1927, Charles Lindbergh gunned the engine of the Spirit of St Louis and directed her down the dirt runway of Roosevelt Field, Long Island. Thirty-three and a half hours and approximately 5,790 km later, he landed in Paris as the first person to fly solo across the Atlantic. The second person to fly across the Atlantic Ocean solo was Bert Hinkler. Bert was not the first so he had to be better—and he was. He crossed the Atlantic in less time and used less fuel compared to Charles. But who is remembered by people more? The first pilot or

the better pilot? The first pilot, of course. If you are first, you can get into the mind first and once you have established a position in the mind, it is hard for another person (or brand) to dislodge you. Bert was better (he flew faster) and cheaper (he used less fuel) but unfortunately for Bert, Charles got into the mind first.

• Who is the leading cola? Coke. Who is the first cola? Coke. • Who is the leading energy drink? Red Bull. Who is the first energy drink? Red Bull. • Who is the leading sports drink? Gatorade. Who is the first sports drink? Gatorade. • Who is the leading pepper cola? Dr Pepper. Who is the first pepper cola? Dr Pepper. • Who is the leading natural fruit drink? Snapple. Who is the first natural fruit drink? Snapple. Are these the best drinks in their category? Not necessarily. Are they the cheapest? Not necessarily. But they were there first. End of story. The Danger Of Market Research Most of the new brands being launched today are created to serve an existing market rather than to create new markets. That is why

59 Rule No. 2: Fortune Favours The First

What Is The Strategy Most Companies Use? Most companies are not first in the market, so they try to use the Bert Hinkler strategy. They study what the leading brands are doing, and then they reverse engineer the product to make it better and sell it cheaper. You would think that such a strategy would work but it doesn’t. We know it goes against the grain of conventional marketing wisdom but that is how the game of branding is played. The leading brands in any market, industry or category are usually the first brands into the market. And they will remain the leading brand for a very long time unless they shoot themselves in both feet. The examples below from the beverage industry illustrate the power of being first:

you get so many me-too products out there in the marketplace today. We are not against market research. In fact, we do a lot of market research in the course of our work but market research alone will not help you create the next big brand. Market research can only tell you the size of an existing market and what customers have bought (or not bought). It cannot help you to create a new market. If you cannot create a new market for your brand, your brand cannot grow. The reason is very simple. If you launch a brand that is designed to serve an existing market, that market will already have been dominated by some big players and a lot of smaller ones. It is tough launching a brand into a market that already has so many battlehardened competitors.

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1) Xerox This is one of the most famous cases that every first year marketing student would have been taught. Market research would have killed the 914—Xerox’s first plain paper photocopier. Because the market research showed that nobody was willing to pay US$0.05 for each plain paper copy, the researchers concluded that the plain paper photocopy market did not exist—not at the kind of prices that Xerox needed to charge. Of course the market was non-existent! Nobody had bothered to create this market yet. Customers indicated that they were not willing to pay 5 cents a copy but at that time nobody had actually given them the choice between a cheap but terrible thermal copy and a sharp, easy to handle, easy to sort but more expensive plain paper copy before. Xerox ignored the research and launched the 914 in 1959. The rest is marketing history. The Xerox 914 was launched to create a new market, not to serve an existing one. The existing market is the thermal paper photocopier market. If Xerox had launched a thermal paper copier, they would have run into stiff competition. But they didn’t. They created a new market—the plain paper photocopier market. 2) Coca-Cola Coca-Cola has one of the slickest marketing machines in the world. But even Coca-Cola managed to shoot themselves in both feet when

3) Lexus If Toyota had done (and they probably did) its market research properly, they would have found that back in 1989, nobody would have been willing to pay US$35,000 for a Japanese luxury car because that was simply unheard of. If you forked out US$35,000 in 1989, the car better be German in origin. But of course people will say that. These people had never been given the choice of a US$35,000 Japanese luxury car before. Lexus went ahead anyway and launched the first generation LS400 to compete head-on with the Mercedes-Benz S class and BMW 7 series in the United States. It was a big hit. Lexus has been the best-selling luxury car in the United States since 2000. In 2005, they sold over 300,000 Lexus cars in the United States. You can still do your market research but bear in mind its limitations and be careful how you interpret the findings. Market research can only tell you all about an existing market and what people have done in the past and are doing now. It cannot predict the future for you. If you are doing market research, perhaps you

61 Rule No. 2: Fortune Favours The First

they let market research run amok. Market research showed them that an overwhelming majority of people preferred the taste of a new soft drink formulation that they were testing (New Coke) to the original Coke formulation. So they went ahead and did away with the original Coke. In our opinion, that was the biggest blunder in Coca-Cola’s history. Some marketing experts have even gone as far as saying that it was the single biggest marketing blunder in history. People protested and boycotted the New Coke. The company had no choice but to revive the original Coke and rename it Coke Classic. Part of the problem, as the marketing books will tell you, is that Coca-Cola did not take into account the emotional bond that people have with the original Coke but that is not all. New Coke was actually launched to serve an existing cola market. And the incumbent brand in that market is the original Coke. New Coke did not create a new market for itself. Diet Coke, on the other hand, was a different story because it was launched to serve a new and hitherto non-existent market and hence Diet Coke had a lot more success.

should find out what people are not doing instead of what they are doing and capitalise on that. Generally speaking, successful global brands were usually not market researched before they were launched.

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The Paradox Of Logic The typical market research will tell you that customers want a better product at a lower price. So companies duly deliver better products at lower prices. But this strategy almost always never works. Why wouldn’t it work even though that was what customers said they want? Time and time again, you will find that what customers say they want and what they actually buy are two different things. How many times has your own company launched a better and cheaper product than the leading brand and yet fail to make a dent in the leading brand’s market share? The reason for this seemingly weird phenomenon is what we call The Paradox Of Logic. There is a discrepancy between how companies think and how customers think. At the start, both companies and customers think the same. “The best product should be the No. 1 brand.” Thereafter, the thinking diverges. Companies think that if they have the best product, they will be No. 1. Therefore, they should concentrate on making better products than their competitors. Customers, on the other hand, think that the No. 1 brand has the best product. If you are not No. 1 then you don’t have the best product. They don’t really care that the No. 1 brand usually became the No. 1 brand because it got into the market first! All of us adopt either a company mode of thinking or a customer mode of thinking in different situations. But how we think in our capacity as employees or managers of an organisation with a product or service to sell is very different from how we think in our capacity as a customer. When you are trying to sell something, you think like a company— if I have a better product than the leading brand, I will win. When you are trying to buy something, you think like a customer—the leading brand must have the best product. You should think like a customer all the time—even when you are trying to sell something or especially when you are trying to sell

something. Ask yourself whether you would buy whatever it is you are selling. Be honest. Very often, you will find that if you had been the customer, you might not have bought your own product. Why? Because you are not the leading brand. A bitter pill to swallow but that is the truth that we are very often faced with.

CASE STUDY ON BEING FIRST: CREATIVE TECHNOLOGY

g Through two separate cases, Creative Technology illustrates the advantages of being first in the market but also the importance of

63 Rule No. 2: Fortune Favours The First

Check Your Zippers If you are wearing pants, check your zippers now. Not because we think your fly might be open, although that is a distinct possibility. Chances are, you might find that your zipper is made by YKK. YKK is the leading zipper brand. If you are a potential customer and we approach you with our J-Wil brand of zipper which we claim to be better, lighter, more durable and cheaper, you know what you are going to say to us? “If your J-Wil brand of zipper is so good, why aren’t you the leading brand?” That is a really difficult question for marketing people to answer and no matter what you say, the answer will seem quite weak. That is why it is important to be first. What if you are not first? Are you doomed? No. Fortunately, there are other rules of branding to help you out. In the next chapter, we will look at the third rule of branding—the power of a new category. If we are not the first in zippers, the next best thing for us to do is to create a new category of zippers. Perhaps we can create self-closing zippers—a new category—and that would give us the ammunition to use against YKK. That would have allowed our brand of zippers to be first in the mind in a new category of zippers called ‘selfclosing zippers’.

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using that advantage to establish your brand in the minds of the customers first. On the first occasion, Creative was late into the market but first in the mind, so it won. On the second occasion, it was first in the market but late to get into the mind, so it lost. Sound cards for PCs were not very common until about 1988 when AdLib produced a card based on the Yamaha YM3812 sound chip, also known as the OPL2. Creative Technology did not introduce its Sound Blaster sound card until a year later but soon after its introduction, it quickly became the de facto industry standard. AdLib had the first mover advantage but Creative was the one that became the category leader. Why? The sound card category was still in its infancy at that time and AdLib did not seize its early advantage to establish the brand firmly in the mind. This allowed Creative to steal the lead from AdLib through a series of smart marketing manoeuvres. First, Creative designed a sound card with the same Yamaha YM3812 sound chip but added a sound co-processor which was presumed to be an Intel microcontroller. Second, Creative called its sound co-processor a ‘DSP’ which suggested that it was a digital signal processor although it was several years before Creative released a card which could even record and play back sound at full-duplex mode, without, however, any real-time sound processing capabilities. Third, Creative gave its sound card a powerful sounding name—the Sound Blaster. All these factors combined to give Creative favourable publicity which imprinted the Sound Blaster brand firmly into customers’ minds. The brand has never looked back since. The success of its sound card gave Creative the financial muscle to branch out into other sound-related products. In 1999, it introduced the first portable MP3 player, the Nomad, in the United States. Given Creative’s expertise and track record in sound cards, you would have thought that its leadership in this category was secured. Unfortunately, Creative was overtaken by the now ubiquitous iPod from Apple, which was launched much later in October 2001, barely a month after the September 11 attacks. Apple did to Creative in the category of MP3 players what Creative did to AdLib in sound cards. Despite a two-year lead, Creative still failed to establish a leadership position in the mind. That was why

65 Rule No. 2: Fortune Favours The First

Apple could overtake it quite easily. Creative was first in the market but Apple was first in the mind. Why was Creative unable to turn its first mover advantage to establish a leadership position in the minds of customers? First, Creative was perceived as a sound card company, not an MP3 player company. Therefore, Creative should have not have used a line extension name for its MP3 players. Calling it a Creative Nomad is very different from just calling it Nomad. When you call it a Creative [something], you automatically link it back to sound cards. So that makes it harder to establish that MP3 player in the mind. Apple just called its MP3 player iPod. The whole world knows it is made by Apple but it is known simply as the iPod. You may think it is a subtle difference but sometimes that is all it takes. Second, the iPod looked very, very different from any portable music player that had come before it. The Nomad, although it was a breakthrough product, did not look much different from the previous generation of portable music players, a fact which did not help it much in promoting this new category. When you have a next generation product, you need a next generation look and feel. That was what Red Bull did. Red Bull purposely made its cans smaller and shorter than the traditional Coke/Pepsi can that every other beverage company uses. This helped to inform people that Red Bull is something different, something new. And the small size also suggests its potency. Finally, Apple promoted the MP3 player category relentlessly. It focused a huge chunk of its resources on this category while Creative did not. Creative had too many products that it had to manage and so spread its marketing efforts too thin. When you are the first in the market with a product like the MP3 player, you have to be aggressive in promoting it so that you can establish a position in the minds of your potential customers. Apple did that. Apple managed to make the iPod stand for a category called MP3 players in the minds of people. Creative wasn’t alone. There have been other first movers who have failed to capture the lead in the market place because they failed to capture the mind first. IBM wasn’t the first in mainframes. It was UNIVAC. But IBM focused nearly everything it had on this category and made it into the mind first. Nokia wasn’t the first mobile phone

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but under its new CEO Jorma Orlilla, Nokia dropped all of its other businesses in 1991 to focus on mobile phones and that helped it edge Motorola into second place. The key lesson here is that having the first mover advantage is no guarantee of success but merely a license for you to get into the mind before anyone else does. Creative was not the first in sound cards but it got into the mind first and so it won the sound card war. Creative was first with the MP3 player but let Apple get into the mind first. Today, Apple has the lion’s share of the market. Creative is struggling to hold on to its distant second place, facing tough competition from Rio, iRiver, Samsung, Sony, etc. What should companies do then? Blaze the trail as a pioneer and risk losing to a newcomer? Or sit back, watch as new markets or categories emerge before jumping in and trying to steal the lead from the pioneering brand? We would recommend the former. As you have seen, the first brand in the market usually becomes the leading brand even in the face of tough competition—provided the first brand doesn’t squander its lead by violating the rules of branding. You will see some examples of how leading brands can lose out by getting complacent.

Rule No. 2: Fortune Favours The First

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6. Rule No. 3: Create A New Category

In the war of brands, fortune favours the first. We have shown that the easiest way for a brand to become No. 1 is by getting into the market first because being first allows that brand to establish itself in the minds of customers before anyone else does. What if somebody else got into the market first? What do you do? You have two options. One, you can roll over and die. That is quite easy to do but not a whole lot of fun. Two, you can create a new category where your brand can be the first. The first person to fly solo across the Atlantic Ocean is Charles Lindbergh. As a result, he has a place in the minds of people. The second person is Bert Hinkler. Despite being faster and using less fuel than Charles, Bert never had much hope of being as famous as Charles because people are not interested in who is better, they are interested in who is first. But the third person to fly solo across the Atlantic Ocean is probably even more well known than the first. How is that possible when you don’t even know who No. 2 is? We are quite certain that you have heard of Amelia Earhart. But she is not just the third person to fly solo across the Atlantic Ocean. She is widely known as the first woman to fly solo across the Atlantic Ocean. Amelia Earhart became famous because she set up an important new category. Her case also illustrates why new categories can be so powerful. The first man in space is Yuri Gagarin. Although Alan Shepherd, the second man in space, set up a new category for himself—the first American in space—that category wasn’t interesting enough or important enough to make him famous.

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Who is the 58th man in space? Neil Armstrong. Neil is probably the most famous astronaut in history, even though he wasn’t the first man, woman, American or chimpanzee in space, because he created a new category that he could own. He is the first man to step foot on the moon. This rule works for brands as well.

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Building A New Category IBM is the equivalent of the 800-pound gorilla in the computer business. IBM was the dominant brand in mainframe computers and as everyone knows, the mainframe was the father of all computers. How do you compete with a company like IBM? You can go head to head with IBM, which is quite a dangerous game, or you can establish a new category to get around this 800-pound gorilla. What new category propelled Dell ahead of IBM in the PC business? PCs sold direct. Dell is the first PC to be sold directly to customers—bypassing any middlemen. By selling PCs direct to customers, Dell managed to lower its costs substantially. That made Dell computers attractive to the consumer market. And it also allowed Dell to find a back door into the corporate market that was dominated by the likes of IBM and HP. This is what Jeremy Fontaine, CEO of The Fournaise Marketing Group, calls reverse segmentation at its best. Jeremy had consulted for Dell before and he mentioned this case study at a workshop that Jacky attended. Dell realised that the consumers it sells to are often decision makers or influencers in the companies or organisations that they work for, and these consumers’ positive experience with Dell at home would help to push the Dell brand into the corporate world. And push the Dell brand into the corporate world it did. Dell today sells more PCs than IBM and Lenovo combined. Sony is the leader in rear projection TVs (RPTV), an S$8 billion category. According to the March 2005 edition of EE Times, Sony saw its unit share of the RPTV market rise from 28 to 40 per cent worldwide, pulling away from second-ranked Samsung. And according to The NPD Group’s research unit DisplaySearch, Sony’s market share in the fourth quarter of 2005 jumped to 53 per cent.19 19

www.twice.com, 3 March 2006

The Way Forward For Your Company There are two strategies that might work for you if you are not the first in your market. The first is to find uncontested markets where you can be first. This is similar to the Blue Ocean strategy that Professor Chan Kim—who lectures in Strategy and International Management at INSEAD—champions and this is the strategy used by companies such as TT International. Its AKIRA brand of consumer electronics and home appliances products is sold in over 60 emerging markets, mainly in Africa and Central Asia— areas where global brands have traditionally paid less attention to, perhaps due to the smaller market size and/or lower margins. AKIRA is a leader in many of the markets that it competes in by virtue of being there early. The second strategy is to create new categories. Stikfas and abKey are examples of companies that have done that. Stikfas pioneered the ball-jointed action figure with a high degree of ‘play’—meaning it can be twisted into many different poses and positions. Stikfas has gone from an underground label to a mainstream item for collectors worldwide. In fact, the toy giant, Hasbro, was impressed enough that it agreed to be Stikfas’ manufacturing partner. 20

Wireless News, 26 February 2005

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For decades, Sharp was a small player in TVs. Sharp was never a threat to Sony until it decided to create a new category of TVs— LCD TV or Liquid Crystal Display TV. This new category allowed Sharp to become a highly profitable player in the TV market. In 2004, Sharp shipped 1.9 million units of its Aquos brand of LCD TVs compared to Sony’s 968,000 units.20 Even more impressive is the fact that Sharp’s Aquos is more expensive than the other brands so their success is not because of lower prices. In the last two years, however, Sharp has lost its lead in the LCD TV category. But that does not invalidate Rule No. 3 because as you will see in Rule No. 10, every new category needs to have a new brand. We believe that Sharp would have done better if it had made the Aquos a stand alone brand instead of being a subbrand of Sharp. But we will discuss this rule in more detail at the end of this book.

abKey is a very young Singapore brand. abKey (pronounced ‘a-b-key’) created a new category of keyboard to challenge the 126-year-old QWERTY. The letters on an abKey keyboard are arranged in a more logical manner and as a result, it takes less time to learn and master. abKey has generated lots of publicity and interest in the United States and Europe as a result of this new category.

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Which Is The Better Way? History seems to suggest that creating a new category reaps bigger rewards than competing in an established category. Starbucks is the first gourmet coffee chain in the United States and it is the No. 1 coffee chain today, with S$12.6 billion in sales in 2006, a 22 per cent increase over 2005.21 Southwest Airlines is the first budget airline to be established. It made its first scheduled flight in 1971 and has been highly profitable since. In 2005, it had a turnover of S$12.3 billion and net profits of S$887.8 million. Red Bull is the first energy drink and chalked up an estimated S$3.4 billion in sales in 2005. Zara is the first just-in-time fashion store and today, Zara has 760 stores in 55 countries.22 eBay is the first online auction website. YouTube is the first video sharing website. Mont Blanc is the first premium pen. Caterpillar is the first construction equipment company. Selangor Pewter is the first handcrafted pewter company. Microsoft is the first operating system for PCs. The list goes on and on. Companies need to remember, however, that it takes time to build a category into a big business. You simply cannot force a category to grow. Just like growing a plant, growing a category takes time, effort and patience. You cannot force-feed the category or it will die, just like a plant that is overfed with fertilisers and water will die. Starbucks did not achieve overnight success. It took them close to 10 years to crack the US$50 million mark. But after that, sales just exploded. Likewise with Zara. It was 13 years before they opened their first store outside of Spain.23 21 22 23

www.starbucks.com All figures for Southwest Airlines, Red Bull and Zara are from Hoover’s Inc, 9 March 2006 Al Ries and Laura Ries, The Fall of Advertising and the Rise of PR, New York: Harper Business, 2004, p.103

Current Market Size Is Not That Important One of the biggest mistakes that marketeers make (something that we ourselves were guilty of on countless occasions in the past) is to ask, “What is the size of the market?” But isn’t that what they teach you in business schools? One of the first things you learn is that you need to find out the potential size of the market. Yes, we know that but we maintain that market size is really not that important. First of all, if you want to build a powerful brand, you need to set up a new category that you can dominate. When you set up

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Promote The Category, Not The Brand Companies must always remember that they need to promote the category, not their brand. Nobody is interested in the brand. People are interested in categories, especially new ones. And when you promote a category, you are naturally seen as the leader. And as the leader in your category, it is your job to promote and expand the category. Anita Roddick did not promote The Body Shop. She promoted the category pioneered by The Body Shop—natural ingredients for cosmetics. And when that category grew, The Body Shop grew along with it. As you promote the category, competitors will appear on the scene. That is almost as certain as death and taxes. But you need not worry if your market share starts to shrink as competitors join in. In the beginning, Coca-Cola had 100 per cent of the cola market. But because they promoted the category so aggressively, it grew and as it grew, the category became very attractive for competitors. Hordes of brands entered the cola market and Coke’s share dropped as a result but that is all right because 30 per cent of a S$5 billion category is still far better than 100 per cent of a S$100 million category. Today Coca-Cola has a lot less than the 100 per cent it had in the beginning but its sharply reduced market share now is still worth a lot more than its original 100 per cent share. Keep promoting the category. That way, you will keep yourself ahead of the pack. You will be seen as the market leader. If you are perceived as the market leader, that is what you are. Remember Rule No. 1? Perception is reality. And perceptual leadership can often be translated into actual sales leadership.

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a new category, the answer to the question of how big the market is right now will most likely be a resounding “ZERO”. So market size is really not relevant in this case. Every new category will have a market size of zero as its starting point. Don’t let that discourage you. Most of the big, successful global brands today started with a market size of zero because they created a new category but they promoted their category, grew that category and ultimately dominated it. If you have figures regarding the size of the market in question, then it is probably the wrong market for you to build a new brand in. If you know the exact market size of a category, then it is an existing market and existing markets are usually dominated by a few big, powerful players. What you need to do is to create a new category (new market) instead of launching a me-too brand into an existing market—unless the brand which you launch into the existing market can be effectively differentiated. Remember that the market size of new categories is always zero. Look at the examples below. 1) Walkman What was the market size for portable cassette players before the Walkman came along? Nothing. It was a new category. Sony eventually sold 340 million units of the Walkman cassette player in its lifetime. The Walkman brand name became a generic term for this category and even entered the Oxford English Dictionary.24 2) Dell What was the market size for computers sold directly to end users before Dell came along? Non-existent. It was a new category. Dell set up this new category and promoted it aggressively. It eventually became the biggest seller of PCs as this category grew rapidly. 3) Gulfstream What was the market size for private business jets before Gulfstream came along? Probably not even worth mentioning. But Gulfstream promoted the category steadily and today, the private business jet category has become a lucrative one. 24

The Evening Standard (London), 21 July 2004

4) Starbucks What was the market size for gourmet coffee before Starbucks came along? Miniscule. Nobody paid US$3 for a cup of coffee before Starbucks came along. And if Starbucks had asked the question, “What is the market size for coffee that costs US$3 per cup?” they might have been discouraged from venturing into this new category. 5) Xerox What was the market size for plain paper photocopiers before Xerox was launched? What market? There was no such market before Xerox launched the world’s first plain paper photocopier, the Xerox 914 series.

The Most Valuable Brands In The World Are Built Through New Categories If you look at the 10 most valuable brands in the world according to a study conducted by Interbrand and published by BusinessWeek in its 7 August 2006 issue, you will find that all of them were launched not to compete in an existing market that was already dominated by strong players but as new categories.25 1) Coca-Cola Brand Value: S$109 billion The world’s most valuable brand wasn’t launched to serve an existing market. Coca-Cola pioneered a new category of soft drinks in 1886 called cola. What was the market size of the cola category in 1886? Zero. But Coca-Cola promoted that category aggressively 25

The following brand values of the various companies listed were calculated using Interbrand’s proprietary brand valuation methodology which is accepted worldwide.

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6) Lexus What was the market size for expensive Japanese luxury cars before Lexus was launched? There was no market. Before Lexus launched the LS400 in 1989, there wasn’t such a thing as a luxury Japanese car that could compete with the established players. If you wanted a luxury car before 1989, you would have bought a Mercedes-Benz, BMW or Audi. The landscape has changed considerably since Lexus crashed the party.

and consistently. When that category grew into a multi-billion dollar industry, guess who became No. 1? Not Pepsi, even though blind taste test after blind taste test demonstrated that respondents rated Pepsi as the better tasting cola. That is how crucial a new category can be.

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2) Microsoft Brand Value: S$92 billion What Coca-Cola did for low-tech brands, Microsoft did in high-tech. It is the 800-pound gorilla in the software jungle. How did Microsoft become so big and powerful? It was the first in a category called 16-bit operating system for personal computers. The rest were 8-bit systems at that time. Although Microsoft is trying to do all kinds of things these days, what really propelled the brand to the top initially was the 16-bit operating systems, which found its way into IBM PCs and, subsequently, other computers. 3) IBM Brand Value: S$91 billion IBM didn’t start out as a computer company. In fact, IBM made all kinds of office machines (hence the name International Business Machines) like calculators and electric typewriters. And IBM wasn’t even the first in the mainframe category that made them famous. The first mainframe computer on the market was UNIVAC but as discussed in Rule No. 2, being first in the market is no use unless you use that advantage to get into the mind first. IBM concentrated all its resources on the mainframe. They got into the mind first and the rest is mainframe history. 4) General Electric Brand Value: S$79 billion Thomas Alva Edison didn’t make a better, longer lasting and cheaper candle or paraffin lamp. He created a new category called the electric light bulb that was probably as revolutionary as the invention of the wheel and, in today’s context, the birth of the Internet. His company eventually became General Electric (GE) and although it is a highly diversified company today, mention GE

and light bulbs will still come to mind. That was the new category that launched the GE brand that is now 114 years old and still going strong.

6) Nokia Brand Value: S$49 billion Mention Nokia and what comes to mind? Mobile phones. But Nokia didn’t invent this category, you might point out. Motorola did. Yes, but like IBM before it, Nokia dropped all of its other businesses such as pulp and paper, radios, tyres, rubber footwear, cable and electronics manufacturing, chemicals, machinery, television and IT to try and dominate this new category. That is why they managed to dominate the category. Despite stiff competition from Samsung, Sony Ericsson, Motorola and others, Nokia is still No. 1 with a market share that hovers around 35 per cent. 7) Toyota Brand Value: S$45 billion Toyota is the world’s most profitable car manufacturer, chalking up S$18 billion in net profits in the financial year 2005/2006. It is currently in second place overall in terms of units sold behind General Motors (GM) but GM is nowhere near Toyota in terms of profit or brand value. What new category did Toyota create? The first reliable car. A Toyota may not be the most exciting or stylish car on the road but it is super reliable even by Japanese standards and apparently that is what millions of people want.

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5) Intel Brand Value: S$52 billion Intel used to make memory chips when it first started but competition from the Japanese, the Taiwanese and the Koreans forced prices down. This category quickly became a commodity. Intel wisely dropped its memory chips business and focused on a new category —the microprocessor. The microprocessor made Intel famous. And this time around, Intel wisely spent resources on building up the Intel brand of microprocessors to prevent this category from being commoditized by brutal price competition.

8) Disney Brand Value: S$45 billion What new category made Disney famous? Animated cartoons. Characters like Mickey Mouse, Donald Duck, Pluto, Snow White, Chip & Dale, etc., burnt the Disney brand into the minds of millions of people. Mention Disney today and you will still think of Mickey Mouse. Disney wasn’t launched to serve an existing market. It created a new market. And as that category grew, so did Disney’s fortunes.

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9) McDonald’s Brand Value: S$45 billion McDonald’s is the first fast food hamburger chain—a new category that built McDonald’s into the world’s biggest fast food chain with more than 31,000 restaurants in over 100 countries. In 2005 alone, McDonald’s raked in around S$33.1 billion in sales with a net profit of S$4.2 billion.26 Who would have thought the simple hamburger could have resulted in such a big success. That is the power of a new category. 10) Mercedes-Benz Brand Value: S$35 billion Mercedes-Benz has the enviable reputation of being the first car manufacturer in the world. It was launched to create a new market, not serve an existing one. Back in a world that was still dominated by horse-drawn carriages, Mercedes-Benz boldly launched a new category—the horseless carriage. Was it an easy task? Not at all. But this new category helped to propel Mercedes-Benz into stardom. Many people around the world still regard Mercedes-Benz as the most prestigious car to own and a symbol of success. The Question You Must Ask One of the most important questions that brand owners and marketeers must ask is this: Is my brand serving an existing market or is it creating a new market? If you are serving an existing market, you will be faced with powerful, entrenched competitors. You won’t be making a lot of headway but if you are all right with being a small player, go ahead and do it. 26

www.mcdonalds.com

How Do You Create New Categories? 1) Break Things Apart You don’t need to own the final product in order to build a powerful brand. The easiest way to set up a new category is to take a complete product and break it apart. Look at the individual components or functions. Pick one to focus on. Many big and successful brands have been built this way, both in high-tech as well as low-tech.

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But if you want to build a brand, you need to create a new market. Set up a new category that you can own. Promote that category (not the brand) relentlessly. It is not an easy job. It takes years but that is how valuable brands are built. It is not too late for you to start but you better get a move on before all the possible avenues are closed by the relentless march of new brands from countries like China and India. For example, Lenovo, Haier and Huawei are already giants in computers, home appliances and networking systems respectively in China. Furthermore, given China’s huge domestic market, these top brands already have a size advantage even before they venture overseas so you have to move faster in your brand building efforts. You can’t possibly compete with China on cost. Not many countries can. Therefore, you have no choice but to rely on the intangibles and the most important intangible that you can own is the brand. So start thinking of new categories that you can possibly set up and dominate.

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The computer industry provides many examples of brands that were built by taking out specific functions or components from a computer. Palm took the organiser function out of the computer and created a new category—the PDA. Palm is the leading brand of PDAs today. BlackBerry took the e-mail function out of the computer and created a new category—the portable e-mail computer. BlackBerry has become the leading brand for portable e-mail computers. Creative Technology took the sound card out of the computer and created a powerful component brand around this category. Now, Creative is going the other way—making complete products like MP3 players which account for about one-third of their sales. NVIDIA took the graphics chip out of the computer and built a powerful brand around it. Its GeForce graphics chips is used by almost every major computer maker in the world. Intel took the microprocessor out of the computer and built a brand that is even bigger and more profitable than established computer brands like Dell. Asus took the motherboard out of the computer and built a powerful brand around this category. We suspect that most people base their computer purchase decisions partly on whether that computer has all the right brands of components like an Intel Pentium CPU, a GeForce graphics chip, an Asus motherboard, a Sound Blaster sound card, etc. In the low-tech sector, the department store has spawned many component brands that have become bigger and more successful than the department store brands that inspired them. Look at a typical department store like Robinson’s, Takashimaya, Seiyu, Isetan, JC Penney or CK Tang. They have many different departments selling all kinds of things. What happened to these different departments? The specialists came, took each department out one by one and turned it into a separate category. The brands listed below all started out as specialists. They decided early on to focus on just one of the department stores’ many offerings and make it big in that category. Instead of being everything to everyone, the specialist brands decided to focus on a specific area and that subsequently made them very successful.

G2000 took the affordably-priced men’s and women’s business wear department out and turned it into a new category. Giordano took the casual clothing department out and turned it into a new category. Americaya took the shoes department out and turned it a new category. Victoria’s Secret took the lingerie department out and turned it into a new category. Royal Sporting House took the sporting goods department out and turned it into a new category. 81

new category. Gap took the high-end casual clothing department out and turned it into a new category.

The list goes on. That is one way for you to create a new category for yourself. Look at the final product, take it apart and try to figure which component or function you can turn into a category that you can dominate. And make your brand stand for that category. The possibilities are not limited only to the computer industry and the retail sector that we have cited as examples. 2) Evolution Evolution is one of the ways that new categories are created. The process of evolution is usually linear and the advent of a new category usually does away with the existing category. Look at typewriters. First, there was the mechanical typewriter. And Remington Rand was a powerful brand in the mechanical typewriter category. Then came a new category called the electric typewriter. The electric typewriter was a natural evolution of the typewriter category. But Remington Rand did not move fast enough to dominate this category. Brother became a more successful brand than Remington

Rule No. 3: Create A New Category

Aussino took the bedding department out and turned it into a

Rand in this new category. And this new category eradicated the existing category of mechanical typewriters. After this came the word processor which was again a natural evolution of the electric typewriter. This new category practically killed the electric typewriter and made Wang into a powerful brand. But Wang in turn fell victim to a new category called personal computers which was dominated by Compaq.

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3) Divergence Another way to create a new category is through divergence. Divergence refers to the process whereby a new category diverges from the original category. Divergent categories can usually co-exist with the original category. An example of divergence at work can be found in the software industry. Microsoft was the original software company and stands for operating systems for PCs. But over time, other software categories diverged from this original category. Today, you have all kinds of divergent software categories existing side by side with Microsoft. Symantec in anti-virus software. Trend Micro in Internet security. AdAware in anti-spyware. Intuit in financial software. Oracle in database software. SAP in enterprise resource planning software. ACT! in contact software. Linux in open source operating systems software. Siebel in customer relationship management software. Datastream in asset management software.

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What Do You Use Your New Category For? If you have a new category, that means there must be an old category. Therefore, you should use your new category to attack the old category. What you are trying to tell the world is that your category is the latest thing. It is next generation and it is going to make the existing category obsolete. The Sony Boombox was the first portable music player. Remember those big boxes that people used to carry on their shoulders while they danced their way down the street? New category. It was a major hit. Then Sony created a new category called the portable cassette player under the Walkman brand. The Walkman made the Boombox obsolete as a portable music player. What Sony did here is a classic example of a company attacking its own category and making it outdated before a competitor does. And this is a good thing because it pre-empts the market and stops competitors from establishing a foothold with their own new categories. After that, Sony again attacked itself with a new category called the portable CD player. The Discman became a big hit. Sony’s drive petered out after the Discman and this allowed Apple to seize the initiative. Apple attacked Sony with a new category called the MP3 player and the iPod made the Discman (and everything else) obsolete. So if you are Sony or Creative Technology, how do you attack Apple? With a better, cheaper, features loaded, longer battery life MP3 player? No. If you want to succeed against Apple, you need to create a new category and attack the MP3 player as a category. Make the MP3 look last generation. Make it obsolete. That is how you attack Apple. Intel and Microsoft are two other classic examples of companies that continuously create new categories to maintain their brands’ leadership position. Intel launches new categories of microprocessors with lightning speed and clockwork regularity: 286, 386, 486, 586, Pentium I, Pentium II, Pentium III, Pentium IV, Pentium D, Celeron, Centrino, Xeon and Core Duo. As a result, it is difficult for any other brand to attack Intel and make its category obsolete. But AMD found a way with a new category. AMD decided to focus its efforts on dominating a category that is fast becoming

very important in the Internet era—server chips. AMD’s 64-bit Opteron server chip managed to chalk up impressive growth, going from less than 1 per cent market share to over 22 per cent in less than two years. Microsoft likewise maintains its leadership by launching new categories to make its existing categories obsolete. Windows 95 was quickly followed by Windows 98, Windows 2000, Windows NT, Windows ME, Windows XP, Windows XP Pro and now Windows Vista. Although all these sub-brands fall into the operating system category, they can be viewed as new categories within ‘operating system’.

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Categories Come And Categories Go It is possible that one day your category will become obsolete. And it is much better for you to be the one making your category obsolete than for a new upstart to do that. When your category starts to become obsolete, you need to jump ship. Find a new category to anchor your company. Don’t hang on to the obsolete category for too long. And most importantly, don’t bring your existing brand name (which is tied to the old category) into the new category. That is a recipe for disaster. Kodak invented digital photography in 1976. That was the beginning of the end for film photography. It took a long time, yes, but it was bound to happen. Kodak had a new category that would make the old category obsolete but Kodak made two big mistakes that hampered its efforts to dominate the digital photography category. First, it did not use the new category to aggressively attack the old category. That allowed other companies like Canon, Sony and Olympus into the game. Second, when Kodak finally jumped onto the digital camera bandwagon, it chose to keep the Kodak name which stood for film, not digital cameras. Many years ago, when Jacky was working in the marketing department of an education software company, he missed the opportunity to use a new category (e-learning) to attack the old category (conventional classroom learning). Although the company marketed its brand of education software very aggressively, its

campaigns would have been more successful if they had been geared towards making the existing way of learning look outdated and prehistoric instead of competing with the other brands that began appearing in this new category. It is not an easy task but that is what the category pioneer needs to do. Promote the category. If a category pioneer does not actively promote the category, then it is fighting the wrong war. Remember that.

CASE STUDY ON NEW CATEGORY: HEALTHSTATS

HealthSTATS International is a homegrown Singapore company founded by Dr Ting Choon Meng. HealthSTATS’ star product is a blood pressure monitoring device. While HealthSTATS is not the first company to make blood pressure monitoring equipment— devices that have been around for quite some time—their version is truly something special. HealthSTATS’ BPro is the first blood pressure monitoring device that you can wear 24 hours a day. It is built into a wristwatch and you can just slap it on your wrist and carry on with your daily activities. Conventional blood pressure monitoring devices require you to be strapped to a stationary machine and apparently if you wear a conventional monitor for over an hour, it can cause bruising of the arteries. BPro will not cause any damage to a patient’s arteries and it can record the patient’s blood pressure readings around the clock, which actually gives doctors a better idea of what type of treatment to prescribe. While HealthSTATS is a brand new company, we believe that it stands a very good chance of becoming successful on a global scale as it has created a new category that it can dominate and this category is an important one, with more and more people suffering from hypertension due to stress. At the time of writing this book,

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HealthSTATS has already attracted some S$13 million in funding from investors as well as a lot interest from medical distributors. It has also been approved for sale in the United States by the Food and Drug Administration (FDA). The challenge now is for HealthSTATS to generate a blaze of positive publicity in its key market: the United States. Brands are launched with a blaze of publicity, not advertising, and HealthSTATS needs to create that publicity in order to quickly establish itself in the minds of potential customers as the brand that means 24/7 portable blood pressure monitoring. Failing to do so would result in competitors seizing the lead. And given its limited resources as a start-up company, HealthSTATS should pick its battles carefully. When Jacky met Dr Ting, his advice was for HealthSTATS to focus its resources on one key market and try to conquer this market first. Once that has been accomplished, the rest of the markets will be easier to tackle as HealthSTATS will have established its credibility. As the pioneer of this new category, HealthSTATS’ job is to promote the category, not the brand. When you promote the category, you establish yourself as the leader. When you promote the category, your brand will be perceived as the leading brand, and will naturally gain prominence. After all, who else promotes the category but the leader? Howard Schultz promoted not Starbucks but coffee as a lifestyle and because of that, Starbucks is seen the leader in this category. Anita Roddick promoted not The Body Shop but natural cosmetics. BMW promoted not the brand but driving machines and thus the BMW brand is seen as the leader in cars that are designed to be fun to drive. This is something that Dr Ting and his team have been doing aggressively. Dr Ting travels to Europe, China, Malaysia, the United States and other countries to give talks at medical symposiums on the benefits of 24/7 monitoring of blood pressure. When you promote the category as the next generation thing, people will naturally be interested. After all, nobody wants to be left out of the loop. Nobody wants to be seen as outdated.

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There is one other thing that HealthSTATS needs to watch out for. Which brand to use as the front for this new category? HealthSTATS or BPro? HealthSTATS is the name of the company. BPro is the name of the product. Ideally, the company name and the product name should be the same but since HealthSTATS has several brands under it, it is not possible. Normally, we would recommend pushing the product brand over the company brand but in this case, given that HealthSTATS is the new kid on the block, it is best not to fragment the company’s marketing focus. Hence, it is probably better to promote HealthSTATS as the brand that is the leader in 24/7 blood pressure monitoring. Keep it simple. Rally the whole marketing push around one simple idea and that idea is 24/7 blood pressure monitoring. And HealthSTATS is the brand that stands for that idea.

7. Rule No. 4: The Power Of Focus

In the battle between generalist and specialist brands, the specialists usually win because they are highly focused. When you are focused, two things happen. One, you actually become very good at what you do because that is all that you do. Two, other people will perceive you to be very good at what you do since that is all you do. Remember that in branding, perception is reality. Besides being good, you need to create the perception that you are good. And focus is a very good way for brands to create the perception that they are good in something. Which Is The Better Brand? Who makes the better air-conditioner? Daikin or Sanyo? Most people we know will automatically say Daikin because that is all that Daikin does—air-conditioners. Sanyo, on the other hand, makes a lot of things. While it is entirely possible that Sanyo airconditioners are as good as, if not better than, Daikin units, the common perception is that Daikin has got to be better because it is an air-conditioner specialist. That is why Daikin is able to charge a premium for its products. Who makes the better watch? Seiko or Guess? Well, Seiko may not be a very hip brand but most people would think that Seiko makes a better watch than Guess because Seiko only makes watches. Guess makes all kinds of things and because of that, people tend to perceive it as less superior compared to a specialist watch brand like Seiko. After all, how can you make clothes, fashion accessories and watches, among other things, and be good at everything? That is how people perceive things. However, people do still buy Guess

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watches because they regard them as fashion accessories rather than watches per se. Who makes better sunglasses? Ray-Ban or Prada? Most people will say Ray-Ban because Ray-Ban is highly focused on sunglasses. Most people are not experts in sunglasses technology but that doesn’t matter. Ray-Ban is focused on sunglasses so people think that RayBan must be better when it comes to sunglasses. Who makes better off-road vehicles? Land Rover or BMW? Most people will say Land Rover because Land Rover is a highly focused off-road vehicles specialist. Yet how many people actually go off-road? Not that many. But whenever people talk about serious off-road driving (even people who know very little about off-road driving—like us, for instance), the Land Rover brand will always come to mind because the reasoning is if it is focused on off-road driving, it must be good. Who makes a better golf club? Nike or Titleist? Wilson is an avid golfer and has tried all kinds of golf clubs. He finds Nike golf clubs quite good but when he had to buy a set for himself, he decided to buy Titleist. When asked why, he said that Nike is famous for sports shoes, not golf clubs. Titleist is famous for golf clubs. Therefore, no matter how good a Nike golf club is, he will never buy it because there will always be this nagging feeling that because he is not buying from a specialist, he may not be getting the best. Some golfers would probably buy Nike but we believe that for most, they would prefer to go with the specialist brands like Titleist or Callaway. Who makes better vacuum cleaners? Dyson or Electrolux? Most people will say Dyson because it is a highly focused vacuum cleaner brand. Electrolux, on the other hand, makes a lot of things other than vacuum cleaners. Besides being highly focused, Dyson vacuum cleaners are also highly differentiated because of their striking design and innovative technology. Who makes better computer servers? Sun Microsystems or HP? Most people would say Sun Microsystems because it is a more focused brand while HP makes a lot of other things such as desktop computers, laptops, printers, digital cameras, handhelds, software, plasma televisions, DVD players, etc.

Who makes a better beer? Heineken or Budweiser? Although both companies are focused on beer, we believe more people will see Heineken as a better beer as Heineken only makes one kind of beer—lager. Budweiser has so many types of beer that it is no longer easy to order a Budweiser. Tell a bartender, “Give me a Heineken,” and he will know exactly what you are talking about. Tell him, “Give me a Budweiser,” and he will probably ask, “Which one? Budweiser, Budweiser Select, Bud Light, Bud Ice or Bud Ice Light?” In the end, the confused customer will probably say, “Oh, never mind. Just give me a Heineken.” Unfortunately, Heineken is beginning to lose that focus. They have recently introduced a light beer under the Heineken brand. 91 Rule No. 4: The Power Of Focus

Focus Requires Sacrifice A curious thing happens when a brand becomes successful. It will gradually lose focus. Jack Trout calls it FWMTF which stands for ‘Forgot What Made Them Famous’. It happens to successful companies all over the world and across all types of industries. We call this The Closet Phenomenon. Have you ever noticed that no matter how neatly you arrange your closet (or your cubicle at work), it will get messy over time? It happens to everyone, even people who are pathologically neat, like Jacky. The same thing happens to companies once they become successful. They get messy. They lose their focus. They start line-extending their brand into every area—some related to their core business, some totally unrelated. For a lot of companies, once they become successful, they plan for an Initial Public Offering (IPO). There is nothing wrong with that. But the problem arises when these newly listed companies go on an acquisition spree in the name of growth. Many of these acquisitions have nothing to do with the company’s core competency. As a result, the company starts to lose its brand identity. If you need any convincing, just take a look at the companies listed on the Singapore Exchange. Many of them are so diversified that you cannot describe what they do and what they do becomes no different from what other listed companies do. A property company may decide to go into the food and beverage sector. A trading company

may decide to enter the health care sector. Everybody is jumping into everyone else’s business.

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What made GE so successful? The electric light bulb. And once they became successful, they expanded their focus and went into all types of businesses. Look at GE today. Can you really describe what they do? It is not easy. What made IBM successful? The mainframe computer. And once IBM became successful, they expanded into all kinds of business. Look at IBM today. It is a very diversified conglomerate with a finger in every pie. What made BMW successful? Making the ultimate driving machines. And once they were successful, they started to lose focus. BMW is now in the process of launching a whole new range of SUVs and MPVs. Can these behemoths drive like a real BMW? Jacky test drove the BMW X5 4.4 once and found it to be a highly compromised vehicle. It is tall and heavy (over 2,000 kilograms) so BMW had to fit very stiff suspension to make it handle remotely like a BMW. But it only serves to ruin the ride and still doesn’t make the X5 handle as well as a regular BMW saloon or station wagon for that matter. The typical CEO will look at these companies and say, “Look, these companies are successful brands. And see how line extended they are? Why shouldn’t we do the same thing?”

93 Rule No. 4: The Power Of Focus

If you are thinking along these lines, you need to read the next paragraph carefully. If you want to become a successful entrepreneur like Sir Richard Branson, what do you do? Buy expensive houses, drive flashy cars, wear high-end tailor-made suits, travel in private jets, entertain guests at your own exclusive island? If you do that, you will end up making a big hole in your bank account. And you will probably go bankrupt. If you want to be successful like Richard Branson or Li Ka Shing, don’t do what they did after they become successful. Look into their pasts and study what they did before they became successful. Emulate what they did in order to become successful. The same applies to brands. A lot of successful brands today are unfocused and heavily line extended but that doesn’t mean you should do the same. What made these brands successful in the first place is usually a single-minded focus on one thing and one thing only. These brands narrowed their focus in order to become successful. Plus, a narrow focus is necessary for a company that is still trying to become a global brand because it has limited resources and can’t possibly do everything. You need to focus. Pick your battles carefully. But focus requires sacrifice. In order to have a focus on one thing, you cannot focus on other things. That is the price you have to pay to build a focused brand. A lot of companies are reluctant to make this sacrifice because they are afraid that being focused on one thing will mean that they could possibly lose out on opportunities in other areas. Fear and greed are the two factors that usually drive companies to diversify. Sure, when your diversify your business, you diversify your risks but at the same time, you will also dilute your brand’s power. If you want your brand to stand for something in the minds of your customers (and the mind is where the branding war is won or lost), you need to focus. And focus requires sacrifice. FedEx focused on overnight letters when it first started. That focus imprinted the brand into people’s mind. FedEx owns this pigeonhole in the mind that is marked ‘overnight letters’. But being focused on overnight letters meant that FedEx had to give up all the other things that it could possibly do. Was the sacrifice worth it? According to the FedEx 2005 Annual Report, FedEx had a net profit of S$2.3 billion on sales turnover of S$47.6 billion. Considering that the

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logistics business is capital intensive and ultra-competitive, we would say that it is worth it. Only when FedEx became successful based on this single-minded concept of overnight letters did it expand into other areas. The lesson of FedEx is this: when you are first starting out, narrow your focus; sacrifice everything else. Once that narrow focus has made you successful and famous, then you can branch out into other areas. Domino’s Pizza focused on pizza delivery. That means it had to give up dine-ins, take-outs, sandwiches, pasta, etc. But that sacrifice helped Domino’s to dominate the category known as pizza delivery and it is second only to Pizza Hut worldwide. Not bad. OSIM focused on massage chairs. That meant that when OSIM first started, it had to give up doing all the things that it does today like selling home appliances, health supplements and exercise machines on top of massage chairs. But if you were to play a word association game and mention OSIM, chances are people will say ‘massage chairs’. That’s the power of focus. Today, OSIM is into a lot of things but if you look back at its history, you’d see that it was a very narrow focus at the beginning that made OSIM successful. Microsoft focused on operating systems. That meant Microsoft had to sacrifice other types of software that it could have ventured into. But that focus built Microsoft into the dominant operating system brand in the world as well the most successful software company. Now Microsoft is trying to get into all types of software and even gaming consoles and MP3 players. But remember that what made it successful in the first place was the resolute focus on operating systems. Sun Microsystems focused on Unix-based servers. Although that meant that the Sun brand could not stand for other types of servers, Sun eventually became a powerful global brand because of that focus on Unix servers. Intel focused on microprocessors. Intel had to sacrifice all its other businesses including the memory chip—its staple for decades. But today, Intel owns about 86 per cent of the world market for microprocessors and is the world’s fifth most valuable brand. With its new CEO Paul Ottelini, Intel is trying to branch out into other

A Rocky Road Called Mitsubishi In 2004, Mitsubishi had the dubious distinction of being the only Japanese car company to lose money. In fact, on a sales turnover of S$38.6 billion, Mitsubishi Motors Corporation lost a whopping S$3.3 billion!

Brand

2004 Sales (US$ Million)

2004 Profit/Loss (US$ Million)

Toyota

279,853

17,669

Nissan

113,542

7,698

Honda

130,742

7,057

Mazda

44,719

520

Suzuki

33,721

672

Daihatsu

15,237

Mitsubishi

38,636

265 (3,304) Source: Hoover’s, 23 July 2005

And according to business information database Hoover’s (a Dun & Bradstreet subsidiary), Mitsubishi Motors Corporation did 27

Hoover’s Inc, 10 March 2006

95 Rule No. 4: The Power Of Focus

areas. While it is too early to tell if it will be successful, Intel risks diluting the power of the Intel brand by broadening its focus. TSMC focused on semiconductors. It is the world’s first semiconductor foundry. Being focused meant that TSMC could not do what a typical contract manufacturer like Flextronics and Beyonics do today, which is everything under the sun. But that sacrifice is well worth it because TSMC is an extremely profitable brand. In 2005, TSMC had net profits of S$4.7 billion on sales turnover of S$13.3 billion, which translates to a whopping margin of 35.3 per cent. In 2005, Flextronics made a net profit of S$551 million on a turnover of S$25.8 billion, a margin of 2.1 per cent.27 Flextronics’ turnover is 94 per cent higher than TSMC and yet TSMC’s net profit is 753 per cent higher than Flextronics. There may be a lot of reasons why TSMC is more profitable than Flextronics but at least one of them is its focus. TSMC is a highly focused brand. This focus not only makes it good at what it does, it also creates the perception that TSMC is good at what it does.

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even worse in 2005 with a net loss of S$6.6 billion on sales revenue of S$32 billion.28 Does Mitsubishi make bad cars? No. Mitsubishi is, in fact, quite an innovative car company. It pioneered the Lancaster balancer shafts that quells vibration in 4-cylinder engines and makes them run very smoothly. The Honda Accord 2.4 is equipped with this Mitsubishi innovation and that is one reason why the engine is so smooth. Mitsubishi also pioneered direct injection petrol engines that produce 20 per cent better fuel consumption compared to normal petrol engines. But Mitsubishi is an extremely unfocused brand. That is why it does not have a strong hold on the mind. Mitsubishi is now trying to turn the brand around by differentiating its cars through aggressive-looking designs. The concept cars look very promising but it is too early to tell if the Mitsubishi badge will hinder sales. Toyota seems like an unfocused company as they make all kinds of cars and trucks but Toyota’s focus is actually on reliability. Toyota stands for reliability. That focus made the brand powerful. For decades, Toyota was so focused on reliability that it would even settle for a car design that looks boring if that design is easier to build and results in better reliability, fit and finish. Nissan is starting to find a focus. In recent years, Nissan has begun to make distinctive-looking cars. You may or may not like the looks but they definitely stand out from the crowd. We are talking about cars like the March, Latio, 350Z, Murano, FX45, G35, etc. Honda has always been focused on engines. Honda is widely acclaimed as one of the best engine makers in the world. We are not too crazy about the looks of recent Honda cars which are yawninducing but their engines are definitely top of the line. Mazda is focused on sporty cars. Take a look at Mazda’s lineup. Every single one looks sporty, even their MPVs and SUVs —traditionally the most boring of vehicles. Suzuki is focused on quirky SUVs. Daihatsu is focused on small cars. What is a Mitsubishi? It is a refrigerator, an air-conditioner, a bank, a car and a computer chip, among other things. So Mitsubishi 28

Hoover’s Inc, 18 November 2006

has a weak brand. It stands for so many things that it stands for nothing. It has no hold on your mind whereas a brand like Toyota will immediately conjure up highly reliable cars that never break down. Diversification, line extension and brand-stretching strategies will ultimately damage the brand. Of course, in the short term, you will see an increase in sales because you have more products to sell but over time, a line-extended brand loses its power because it stands for so many things that it will start to lose its distinctive identity.

10-yr revenue (US$ billion)

Net Profit/ Loss (US$ billion)

Net Margin

Brand

Core Business

Sony

Video game players, TVs, DVDs, MP3 players, cameras, camcorders, phones, laptops, etc.

556

4.8

0.9%

Nintendo

Video game players

43

5.9

13.9%

Samsung Electronics

Microchips, mobile phones, MP3 players, DVDs, LCD panels, cameras, computers, color monitors, DRAM, SRAM, etc.

333

34

10.3%

Intel

Microchips

247

52

20.9%

Hitachi

Semiconductors, PCs, elevators, TVs, robots, power plant equipment, metals, wires, cables, etc.

719

(1.7)

(0.2%)

TSMC

Semiconductors

28

7.8

27.9%

Source: Hoover’s, February 2005

97 Rule No. 4: The Power Of Focus

Focused Brands Make More Money The table below shows you the total revenue and net profit/loss for focused versus unfocused brands over a period of 10 years. You will find that focused brands tend to be more profitable even though their revenue may be smaller in comparison to diversified brands.

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Wait a minute! Samsung Electronics is doing very well despite being an unfocused company. While that is true for now, they still make less money than Intel. Samsung’s turnover is 35 per cent higher than Intel’s but comparatively, Intel’s net profit is 53 per cent higher than Samsung’s. While you may argue that Samsung’s net profit is still fantastic no matter what and it is therefore all right to copy their strategy, you need to bear in mind that you are not Samsung. Samsung spends heavily on R&D, innovation and design. They are also willing (and able) to sustain these efforts over a very long period of time. Samsung introduces a lot of innovative products every year. For example, Samsung was among the very first to introduce colour LCD monitors for mobile phones. Do you have the time, money, expertise and people to do all the things that Samsung does? Being an unfocused company also leaves Samsung vulnerable to attacks. Right now, Samsung’s rivals from Korea, Japan and Europe are equally unfocused. What if they decide to drop everything else to focus on the one area that they can do really well? For instance, Sharp is a strong player in the LCD TV category. That is because Sharp pioneered that category with its Aquos brand and got into the mind first as the ‘LCD TV Brand’. Even in its current unfocused state and despite its LCD TV being twice as expensive as Samsung’s, Sharp outsells Samsung by a huge margin. According to research firm IDC, Sharp shipped an estimated 2.45 million units of LCD TVs in 2004. Sharp’s market share is 30.9 per cent. Samsung is in third place with 721,000 units and a market share of 9.1 per cent. What if Sharp were to drop everything and focus on LCD TV? What if Samsung’s many competitors decide to narrow the focus to just one category that they can dominate? What will that do to Samsung? It will then face formidable competitors with brands that stand for something in the minds of customers. It will also face competitors that can focus all their resources on just one thing that will make it easier for them to overtake Samsung in the category that they choose to focus on. Samsung is riding high for now. But the results of branding mistakes like line extensions will not be immediately apparent. It takes time but it will eventually hurt you. How soon that happens

Why Do Companies Refuse To Focus? Most companies refuse to focus because they think it is too risky. What if the category becomes obsolete or does not take off? Andy Grove, the founder of Intel, has this to say, “Put all your eggs in one basket and watch that basket carefully.” If you refuse to focus out of the fear that you may fail, then you will find it hard to build a strong brand. Intel started out by making memory chips. Intel became the No. 1 memory chip maker but competition from the Koreans, Japanese and Taiwanese made the memory chip a commodity. That should have killed Intel because it was so focused on memory chips and couldn’t match the Asian companies on cost. But Intel refocused the company on microprocessors in 1985. It gave up the memory chip market completely. But the difference this time around is Intel built a brand around its microprocessors. You remember the famous ‘Intel Inside’ campaign? Intel is less susceptible to price competition now because it has built a strong, focused brand around its microprocessors. Intel, in effect, built a brand out of what should have become a commodity like memory chips. Normally, we would recommend that when companies change their focus, they do so with a new brand because the old brand

99 Rule No. 4: The Power Of Focus

depends on how soon your competitors wise up to the fact that they can create a powerful brand by narrowing the focus and making their brand stand for something in people’s minds. When mobile phones are mentioned, what comes to mind? Nokia and Motorola. Not Samsung. Nokia and Motorola are No. 1 and No. 2 respectively. When computer chips are mentioned, what comes to mind? Intel and AMD. Not Samsung. When MP3 players are mentioned, what comes to mind? iPod and Creative. Not Samsung. The brands cited above have a narrow focus and hence a strong association with something. That makes them strong. When the name Samsung is mentioned, what comes to mind? Lots of things. As far as we are concerned, that is not good for a brand. Standing for lots of things makes a brand weak everywhere. Standing for one thing in the mind makes a brand strong somewhere.

probably has too much baggage attached to it. In Intel’s case, it was all right for them to use the Intel brand because: 1. The memory chip is a commodity. A low-interest category. So nobody really identified memory chips with the Intel brand. Furthermore, Intel never really put in enough effort to tie Intel to this category. While this made Intel’s memory chip business susceptible to price competition, it also allowed Intel to refocus the brand more easily. 2. The microprocessor is still regarded as a chip. This facilitated the refocusing of the Intel brand on this new category.

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How Do You Find A Focus? You have to make a judgement call. Let’s say you are an unfocused company with multiple products or services. You need to decide which one has the most potential and focus on developing that into a category leader. For example, you have a portfolio of all these products and services under your brand: • • • • • • • • • • •

Pulp and paper Radios Tyres Rubber footwear Cables Electronics Chemicals Machinery Telecommunications Television Information technology

You are highly unfocused. What do you do? You need to be ruthless. You cannot have it all. Don’t be greedy. Which of these categories do you think has the greatest potential? Which one of these do you want to dominate? Once you have decided, then sell off or close down all the other divisions to focus on that one category that you have decided on.

Can You Be Focused And Still Not Do Well? We have often been challenged on this point. Among the 10 rules of branding, this is the one that very often gets CEOs all charged up in disagreement. As you can see, their thinking is different. Some of our clients have pointed out that Chartered Semiconductor is a focused company but it is not doing as well as its Taiwanese rivals such as TSMC and UMC. Why is that so? Does this invalidate the rule of focus? Chartered is indeed a focused company but it was neither the first to enter the semiconductor foundry category, nor was it the second. Chartered is a brand that was launched into somebody else’s category. TSMC was the pioneering brand in this category. It was the first semiconductor foundry in the world. UMC followed closely behind. Once the No. 1 and No. 2 spots have been firmly established, it is hard for a No. 3 brand to establish itself as the lion’s share usually goes to the top two brands.

101 Rule No. 4: The Power Of Focus

That was what Nokia did. In fact, the example given above was in actuality Nokia, which was founded in 1865 and over time became very unfocused. But Nokia decided that they wanted to be a leader in mobile communications. Consequently, they sold off everything else to focus on mobile phones. They poured all their resources into becoming the No. 1 mobile phone brand in the world and launched their first digital mobile phones in 1993. Today, Nokia is still No. 1 despite stiff competition from Motorola, Sony Ericsson and Samsung. Although Motorola was the father of the mobile phone category, it lost the lead to Nokia because Nokia became a specialist. That focus burned the Nokia brand into people’s minds. Today, Nokia is still the clear leader in the mobile phone market. According to research firm Gartner (22 November 2005), Nokia’s global market share in the third quarter of 2005 was 32.6 per cent (up from 31 per cent) compared to Motorola’s 18.7 per cent and Samsung’s 12.5 per cent (down from 13.7 per cent). Nokia has sold over 266 million mobile phones to date. Is Nokia a better phone than Motorola or Samsung? We are not really sure but what we do know is that one out of every three mobile phone buyers choose Nokia.

Focus is important but category leadership is even more important. The best time to establish yourself in a new or emerging category is right at the start. Many companies wait until a category is established before they jump in with a better, cheaper product. By then, it is already too late. So what can a company like Chartered do? Differentiate. Rule No. 5 of branding is on the power of differentiation, which will be covered in the next chapter.

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CASE STUDY ON HAVING FOCUS: SMARTBRIDGES

g smartBridges is a good example of a company that experienced rapid growth once they made up their mind to focus on one specific area of development. Established in 1999, smartBridges initially experimented with different types of electronic products. That is not unusual as many successful global brands also follow the same route in their early days and try to get a feel of the market to see what works and which area they can do well in.

29

Hoover’s Inc, February 2005

103 Rule No. 4: The Power Of Focus

IBM used to make typewriters, calculators and other office automation products until it stumbled upon the one thing that made them into a global powerhouse—mainframes. Nokia used to make all kinds of totally unrelated products until it found a focus that turned Nokia into one of the most valuable brands in the world—mobile phones. Intel used to manufacture memory chips (DRAMS and EPROMS) but in 1985, made a dramatic shift when it decided to focus the company on microprocessors which today accounts for an estimated 80 per cent of its income.29 Sharp makes a lot of consumer electronics products but it was only regarded as a serious player in this field when it focused on a new category called LCD TV that its Aquos brand dominated initially. Second place that year went to Sony with a distant 9.4 per cent market share. smartBridges decided quite early in its life that it should focus on wireless broadband networking products with its rallying cry of ‘Unwiring Our World’. Broadband access to the Internet has traditionally used the wired approach—ADSL, cable, fibre optics, etc. smartBridges is offering a different approach, which is wireless broadband access. It further narrowed its focus by concentrating only on the hardware for wireless broadband access. Although it faces stiff competition from competitors with much deeper pockets, smartBridges is making rapid inroads in this category because it is more focused. We have said before that two things usually happen when you focus your brand. One, you become very good at what you do because that is all that you do. And smartBridges has won many awards for its products to prove that they are very good at what they do. Two, other people perceive you to be very good at what you do because that is all you do. These two factors will combine to drive the brand into people’s minds. That was what happened to smartBridges. Focus was the key to smartBridges’ rapid growth in its category. The tendency for most companies, however, is to diversify into other non-core businesses once they become moderately successful. If smartBridges can resist the temptation to line extend the brand into all kinds of non-related products or services, then it has the potential to become one of the key players in this category globally.

8. Rule No. 5: Differentiate Or Sell Cheap

Take a look at the two vans below. They are both brand new and they come with a 3-year warranty. Now, assuming that you need to buy a van for your business, which van would you buy? Look really hard at the two vans. What do you see? Can you tell the difference between the two? Probably not. So what do you do? You buy whichever is cheaper.

The moral of this story is that if your customers can’t tell you apart from your competitors, they will buy on price. When there is parity between the brands, the cheapest one wins. You don’t want to be caught in that situation because there will always be somebody somewhere in the world who can make it cheaper than you. But that doesn’t mean that you can’t compete on price. There are many successful brands whose main value proposition is that they are cheaper than everyone else. Wal-Mart is the world’s largest retailer. In 2005, Wal-Mart’s sales turnover was a mind-boggling

105 Rule No. 5: Differentiate Or Sell Cheap

S$462 billion dollars. That is 462 followed by nine zeroes behind! What makes the Wal-Mart brand so strong? People go to Wal-Mart because they offer ‘everyday low prices’. Simple as that. Wal-Mart equals cheap. So why have we constantly warned clients about the dangers of falling into the price competition trap? Because most of you are not Wal-Mart, that’s why. Wal-Mart knows that its brand is all about being cheap. Wal-Mart is very sure that it can maintain its price advantage in the long run. Therefore, it can continue with its strategy of competing on price. eSys is a Singapore company that makes and distributes really cheap computers and other consumer electronics products. eSys is very sure it can maintain its price advantage even against Chinese competitors, and as such, it can continue competing on price. Can you be sure of sustaining your price advantage the way WalMart and eSys do? Can you be sure that you can be the lowest cost player five years down the road? If you are absolutely sure you can maintain your cost leadership, then go ahead and compete on price. For the rest of you (and that will probably be the majority of you), it is best to start thinking of ways to differentiate your brand effectively. Otherwise, you will be whitewashed by cheaper competitors. Ho Kwon Ping, the founder of Banyan Tree, said in his speech at the International Enterprise Forum 2004 organised by IE Singapore that his own lessons in branding were learnt the harsh way. He used to run his family business, which resembled a typical mini Chinese conglomerate—they had their fingers in all kinds of businesses but none of them came close to being category leaders. Ho Kwon Ping also recounted how he had to close a factory one year after opening it because cheaper competitors just stampeded all over them. So what did he do when he started Banyan Tree? He decided right from day one that he had to make Banyan Tree highly differentiated so that it would not be susceptible to price competition. Did it work? You bet. People still queue up to pay S$800 a day for the privilege of staying at Banyan Tree. Banyan Tree is different from other types of resorts because it is one of the first high-end, modern resorts with a distinctively Asian feel. People who have personally experienced Banyan Tree tell us that it feels very special. There is a uniqueness that they can’t

quite explain but every single one of these people have said that they can’t wait to go back again. That is the power of differentiation.

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Structural Cost Advantage Is About Being Different As we mentioned earlier, you can build a strong brand on the back of a low price strategy provided you can sustain that low price in the long run. Keep in mind that in order to sustain that low price, your cost advantage needs to be structural in nature. A structural cost advantage is something that is intrinsic to your business model. It is something that is built in. And very often, a structural cost advantage comes from being different. Yes, differentiation can actually help you to achieve a low price. We have mentioned Wal-Mart and eSys as examples of strong brands that have been built on this strategy. To that list, we would like to add brands like Toyota, IKEA, Dell and Southwest Airlines. These are also strong brands that were built on low prices and their low-price strategy is sustainable because their cost advantage is structural. Toyota did it differently with its kanban just-in-time production system that allowed it to achieve dramatic improvements in efficiency and cost. This system is now copied by manufacturers all over the world, even those who are not in the automobile manufacturing business. IKEA did it differently by using flat packed furniture which saved them a tremendous amount of storage and transportation space. That allowed them to compete effectively on price because by being different, IKEA found its structural cost advantage. Dell did it differently by using a direct to customer sales channel that allowed them to bypass the middlemen. That saved them a lot of money in terms of distributor commission. They pass this savings to their customers—a win-win situation for both Dell and their customers. Southwest Airlines is the world’s first budget airline. It was set up 34 years ago by a brilliant man called Herb Kelleher. Southwest Airlines achieved its structural cost advantage by doing things differently. They fly only one type of aircraft, the Boeing 737, and that made it easier and cheaper to train crew and service the aircraft. They don’t

serve meals. They don’t have seat reservations which means they don’t need expensive ticketing systems. And they fly direct to destinations that bypasses expensive hubs. Southwest Airlines’ model is extremely profitable and it is now being copied by other budget airlines. If you want to be cheap, you have also got to be different!

107 Rule No. 5: Differentiate Or Sell Cheap

What About Quality? Although quality is important in building a brand, quality alone is not enough. Not these days. The reason being the quality gap between the best and the worst is constantly narrowing thanks to technology and this wonderful thing called benchmarking. Every manufacturer will rigorously benchmark their products against the best in the class. This is great for consumers because it makes it very hard to actually buy a lousy product. But what all this benchmarking does is create products that are very similar to each other in all the functional aspects like performance, reliability, durability, features, specifications, etc. It makes it much harder for brands to differentiate themselves. Remember we said earlier that when there is parity between the brands (or even the perception of parity), price will then become a very important factor in determining the purchase. Take a look at the worst product in any category today and chances are you will find that it is still quite acceptable. Quality is something that customers expect even from entry level brands. Therefore, it is no longer a differentiator. Today, quality has become nothing more than the price of admission into the market for any brand. You won’t even get to play unless your quality is at least as good as your competitors’. The JD Power & Associates ‘Initial Quality Survey’ is one of the most widely recognised benchmarks in automotive quality. It surveys car owners on what problems or defects they encounter during the first 90 days of ownership. Take a look at the survey published by JD Power & Associates on 7 June 2006. (Chart 1) The best brand in terms of quality is Porsche, with 91 defects per 100 cars. Lexus is second with 93 defects per 100 cars. And surprisingly, Hyundai is in third place with 102 defects per 100 cars.

Chart 1

J.D. Power & Associates 2006 Initial Quality Study (IQS) sm

2006 Nameplate IQS Ranking Problems Per 100 Vehicles Porsche

91

Lexus

93

Hyundai Toyota

TRANSFORMING YOUR BUSINESS INTO A BRAND

108

102 106

Jaguar

109

Honda

110

Cadillac

117

Infinti

117

GMC

119

Acura

120

Chrysler

120

Lincoln

121

Nissan

121

Chevrolet

124

Industry average

124

Ford

127

Mercury

129

Saturn

129

Audi

130

Dodge

132

Pontiac

133

Volvo

133

Buick

134

Mitsubishi

135

Kia

136

Mercedes-Benz

139

Scion

140

BMW

142

Subaru

146

Mazda

150

Mini

150

Jeep

153

Saab Suzuki

163 169

HUMMER

171

Volkswagen

171

Isuz Land Rover

191 204

What Is The Meaning Of Differentiation? Being different is all about being unique. That was how the term Unique Selling Proposition, or USP, came about in 1960. The man who invented the phrase was an advertising genius by the name of Rosser Reeve. In his book, Reality In Advertising, Reeve defined a Unique Selling Proposition as something that a brand offers to its customers that the competition cannot, or does not, offer. It must be unique—either

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So why pay so much more for a BMW when a Hyundai is a better quality car? The answer lies in differentiation. BMW is highly differentiated in terms of look and feel, ride and handling, and so on. There is nothing else like it in the world and because of that, BMW buyers would be more willing to forgive its low score of 142 defects per 100 cars. Not even Mercedes-Benz or Audi or Lexus can duplicate that BMW magic. We know because we drove a BMW 5 series back-to-back with a Mercedes-Benz E class and an Audi A6 recently for a comparison. A Hyundai, on the other hand, does not quite stand out from the crowd. Remove the logo from a Hyundai car and it can be passed off as a Toyota or a Honda or a Nissan or a Mitsubishi. Take the badge away from a BMW and it is still recognisable as a BMW. Because it is differentiated, a BMW is infinitely more desirable. Korean cars have generally been known for their low prices, generous standard equipment and not so generous build quality. Over the last six years, however, Korean cars have rapidly closed the gap between themselves and quality cars so that Hyundai is now ranked ahead of Toyota according to the JD Power & Associates survey. Because of this, even Toyota is starting to feel the need to differentiate its cars more thoroughly these days. If you look at the new generation of Toyota cars launched from 2006 onwards, you will see that a lot of effort has been put into differentiating them from the crowd. In the past, Toyotas used to blend into the scenery. Back then, Toyota would not have hesitated to make a design blander or more boring if it meant easier manufacturing and better quality. Not any more. These days, a Toyota strives to look stylish. Check out the new Mark X and Camry.

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a uniqueness of the brand or a claim not otherwise made in that particular category. When Otis incorporated remote diagnostics into its elevators that can warn of impending breakdowns, it created a USP that other brands did not have at that time. When AT&T developed its self-restoring fibre-optic network that can automatically re-route data seamlessly in the event that a cable is accidentally severed, it created a USP that other telephone companies did not have. When SKII launched its range of cosmetics with a yeast-like substance called Pitera, it created a USP that other cosmetics brands did not have. Only SKII products are created with Pitera that works very well in creating smoother skin. We know this, not because we use SKII products (although we know of some men who do), but because we have seen the results in people who use SKII. When Xerox launched the 914 in 1959, it created a USP that other photocopier brands did not have. Xerox was the first and only automatic plain paper photocopier, which made it far superior to all the other brands that were still using thermal technology. But a USP is not easy to find and even harder to defend, especially in these days of hyper competition. If you have a USP, you can be sure that within a short span of time, your competitors will try to tear that USP apart, analyse it and reverse engineer it to create something that is both better and cheaper. Yes, the USP is under attack and some marketing professionals claim that USP is an outdated concept. We disagree. The USP is not dead, except that it is now known as differentiation. So how exactly do you differentiate your brand?

The Ten Ways For You To Differentiate Your Brand Effectively

g 1) Design As A Differentiator Design has increasingly become a key differentiator and identifier

2) Sales Leadership As A Differentiator If you are fortunate enough to have sales leadership in a particular geographic market or product/service category, use it to differentiate yourself. People are generally impressed with sales leaders. They

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of a brand. Does Apple make a better MP3 player than Creative or Sony or iRiver? Hard to say. So why pay more for an iPod? It’s highly differentiated. It’s cool. How was this achieved? Design. An iPod looks like nothing else on Earth. Why pay more for a Mazda compared to a Hyundai since Mazda is nowhere near Hyundai in terms of quality according to JD Power & Associates? Differentiation. A Hyundai is still a bland, derivative design—borrowing elements from other cars. A Mazda looks sporty, young, unique. In the customers’ mind, Mazda equals ‘sporty’. Compare the Hyundai Tucson SUV to the Mazda CX-7 and you will see what we mean. We don’t need to tell you which one the Mazda is. You will know because it looks like no other SUV in the world. And people would probably be willing to pay more for the CX-7 because of the high degree of design differentiation. If you are not differentiated, you can only compete on price. Hyundai is still competing on price despite its huge quality gains because it is not very differentiated. What if Hyundai starts charging Toyota prices? People will just buy a Toyota. Let’s face it, a Toyota is still a more differentiated (and hence a more desirable) brand than a Hyundai. And if there is no price difference between a Hyundai and a Toyota, we think most Hyundai owners would have bought a Toyota. It is not true that only products can be differentiated by design. Steve Jobs stated in the book iCon: The Greatest Second Act In The History Of Business that design is not just about how things look but about how they work. A service can be differentiated by design as well. Apple’s iTunes online store is differentiated by design—from its clean and simple user interface to the way its navigation is set up. Likewise, other web-based services like Google, Yahoo!, eBay, Digg.com, YouTube, Facebook and MySpace were also differentiated by the way they are designed. You can use design to differentiate almost anything.

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tend to think that a brand that has sales leadership must be quite a good brand to buy. Remember that buying any product or service involves risk. To minimise this risk, people tend to buy from leading brands. There are two types of buyers. The type who wants to buy from the leader and the type who does not. Evidence suggests that there are more of the first type of buyers. If you have sales leadership, let the world know. Toyota used to advertise the fact that its Corolla is the bestselling car in the world. Thirty million Corollas have been sold since 1966. Potential car buyers will think, “30 million people can’t possibly be wrong.” When Jacky was studying and later working in the United States in the first half of the nineties, he used to see Goodyear blimps that proclaim, ‘Goodyear. #1 In Tires.’ Now, tyres are notoriously difficult to differentiate because they are just not very exciting. They are all round and black. Unless you have a puncture, tyres are not something that you think very much about. But what Goodyear has done is a great way to differentiate a low interest product. The typical motorist will probably think, “If Goodyear is No. 1 in tyres, it must be quite good.” Hence, he or she may just buy Goodyear and be done with it. 3) Technology Leadership As A Differentiator Technology leadership is also a way to differentiate your brand. Technology has become such an important part of our everyday life that technology leaders are well regarded. If you have technology leadership, you are differentiated. AccuRay is a division of Johnson & Johnson. It makes medical equipment such as the awesome-looking CyberKnife that is actually a radiosurgery device. Radiosurgery refers to the use of radiation to kill cancerous cells. It is nothing new, having been around for over 30 years. But what helps to differentiate the CyberKnife is its technology leadership. CyberKnife is the first to combine image guidance technology with advanced robotics which gives the CyberKnife extremely high levels of accuracy and the ability to treat multiple

areas all at the same time. This impressive technology leadership differentiated the CyberKnife effectively. Since its launch, over 20,000 patients have been treated using it.

5) The Next Generation Product As A Differentiator Nobody wants to be labelled a dinosaur. The fear of being seen as outdated is a strong motivator for people to get the latest in everything. That is why being ‘next generation’ can be a powerful way to build your brand. The only downside is that the next generation brand must constantly innovate and re-invent itself so that it remains ‘next generation’. In other words, a next generation brand needs to constantly attack itself and make itself obsolete so that competitors can’t. Intel is a great example of such a brand. Intel has always been at the cutting edge of microprocessor technology. But Intel had to constantly launch new versions of its chips at breakneck speed to stay ahead of the curve. It was not that long ago that we were using the now ancient 286 chip. Before long, the 386 came along and this was followed in quick succession by the 486, 586, Pentium 1, Pentium 2, Pentium 3,

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4) Performance Leadership As A Differentiator Performance can be used as a differentiator provided that two conditions are met: one, performance is very important in the category you are competing in; two, you can maintain your performance advantage. FedEx was established in 1975. It was late into the air courier services market—Emery got there first in 1946. But FedEx still managed to beat Emery by focusing on its higher performance. FedEx differentiated itself by being the delivery company that can get your letters and packages to your shipping destination by 10 a.m. the next day. AMD differentiated its Opteron server chip on the basis of faster performance and became very successful. Whether it can continue to be successful depends on whether it can maintain this performance leadership in the face of a much improved Xeon server chip from Intel.

Pentium 4, Pentium D and the latest one is the Core Duo. In between, Intel also launched other categories like the budget-priced Celeron, the mobile Centrino chip, the Xeon server chip and Viiv.

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6) How A Product Is Made As A Differentiator Very often, any product within a given category performs the same functions and provides the same benefits as the other products in that category. What differentiates it is very often found in the way the product is made. Pizza is pizza right? Could you really tell one premium pizza from another? Might be quite difficult. So what differentiates Papa John’s pizza so effectively? The way its pizzas are made. Papa John’s pizza dough is made with filtered water to ensure a purer taste. The difference here is actually in the process employed to make the dough. Harley Davidson is an American institution. A Harley Davidson bike is almost entirely hand built by a team of dedicated and enthusiastic craftsmen. That makes it very different from the bikes from Honda, Yamaha, Suzuki and Kawasaki that are manufactured in ultra modern factories with a high degree of automation where robots do much of the work. 7) Attribute Ownership As A Differentiator Brands are like people. They have attributes. Some attributes are more attractive than other attributes. But once an attribute is owned by one brand, it cannot be owned by another brand. Attribute ownership is mutually exclusive. For example, BMW owns the attribute driving. BMW is positioned as The Ultimate Driving Machine. You could possibly make a car that performs and drives better than a BMW but you cannot own the attribute of driving that belongs to BMW. Volvo could make high performance cars like the S60R that can outaccelerate and out-grip a similarly priced BMW 3 series. But Volvo cannot own the attribute of driving. Volvo owns the attribute safety. You could make a safer car than Volvo. But you cannot own that attribute which belongs to Volvo. To use attribute ownership as a differentiator, you have to first identify the attributes within your category that are important

and try to own the one that is at the top of the list. If you can’t, then move down the list until you find something that you can own. But to own a particular attribute, you should ideally be positioned as a specialist. BMW is a specialist in driver oriented cars and that makes it easier for BMW to own the attribute of driving. Volvo is a specialist in cars that are extremely safe and that specialisation makes it easier for Volvo to own the safety attribute.

Fast Food McDonald’s is No. 1 in fast food. But McDonald’s strength lies in kids who form the bulk of their customers. In fact, the adults are there only because their kids want to go there. So Burger King differentiated itself by being the brand for adults. That is taking the opposite position. That helped Burger King to become a strong No. 2 brand until it abandoned this strategy and

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8) The Opposite Position As A Differentiator One of the best ways to differentiate yourself is actually not up to you, unless you are the category pioneer. If you are jumping into a category that is already populated by competitors, how you differentiate your brand will depend on what your competitors are already doing. Since most companies will not find themselves in the enviable position of being market or category leaders, how they differentiate their brands is entirely dependent on their competitors’ strategies. REMEMBER THIS VERY IMPORTANT LESSON: You can differentiate yourself by turning your competitors’ strengths into weaknesses. In other words, you must get to know what your major competitor’s strength is and try to discover if the very thing that makes your competitor strong is also a weakness that you can exploit by positioning yourself exactly the opposite. This is especially important for a No. 2 brand. You have to take the opposite position from the leading brand. But taking the opposite position also applies to brands that are not No. 2 in their categories. The following case studies are excellent examples of how to take the opposite position.

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started going after the kids’ market. It lost its point of differentiation and things went downhill from there. In-N-Out Burger is a highly profitable burger chain in California which averages around US$1.9 million in sales per store compared to McDonald’s average of US$1.5 million per store. 30 What is their secret? They took the opposite position from McDonald’s. McDonald’s stands for mass market burgers. In-N-Out stands for premium burgers. That point of differentiation worked very well for In-N-Out. White Castle is also a hamburger chain that is quite successful. What is White Castle’s secret? They also took the opposite position from McDonald’s. While McDonald’s burgers are round, White Castle serves square burgers called sliders. This may seem very trivial to a lot of people. Square burgers to take on round burgers? But it worked in White Castle’s case. Wendy’s also took the opposite position route to success. McDonald’s is the epitome of the modern fast food franchise. Wendy’s serves traditional style burgers and that made Wendy’s into a strong brand. McDonald’s is modern. Wendy’s is traditional. But the best position is the one that Burger King pioneered but abandoned. Your customers are either adults or kids. If McDonald’s is for kids and Burger King is for adults, that just about covers everyone in the market. That leaves very little room for other burger brands to manoeuvre. Computers IBM is the king of the computer jungle. IBM’s strength lies in its corporate accounts. IBM sells through distributors just like every other computer maker. Dell differentiated itself by going after the consumer market with its direct sales model. This actually opened a back door for Dell into the corporate world because many consumers are also decision-makers or influencers in the corporate world. Their positive experience with Dell at home translated into them buying or recommending Dell at work. Taking the opposite position helped Dell to become a powerhouse brand.

30

Al Ries and Laura Ries, The Origins of Brands: Discover the Natural Laws of Product Innovation and Business Survival, New York: HarperCollins, 2004, p.119

Soft Drinks Coca-Cola is the real thing. So what does that leave Pepsi with if it takes the opposite position? The fake thing? That doesn’t sound too good. But Pepsi found a weakness in Coke’s strength. Coke may be the real thing but it is also a very old brand—120 years old. So Pepsi took the opposite position. Pepsi became the brand for young people—The Pepsi Generation. That allowed Pepsi to become a strong No. 2 brand. 9) Preference As A Differentiator The type of customers who prefer to use your brand can also be used as a differentiator. For example, when Continental Airlines advertised that it is the preferred airline for business travellers, it became differentiated. But when you claim preference, you must be able to back it up with data. 10) Heritage As A Differentiator Heritage can also be used as a differentiator because if you have a long heritage, it gives customers more confidence. It shows that you must have done something right to have survived this long.

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Cars The toughest job for any car manufacturer is to go up against Mercedes-Benz, which has a stranglehold on the luxury car sector. But BMW cleverly took the opposite position. Mercedes-Benz is known for big, luxurious and comfortable cars. BMW focused on smaller, lighter, nimbler cars that are sportier in appearance and easier to drive. The general rule of thumb when we were growing up was this—for smaller premium cars, go for a BMW like the 3 series. For a bigger premium car, go for a Mercedes-Benz like the S class. That high degree of differentiation and BMW’s consistent execution of this strategy of building ‘The Ultimate Driving Machine’ over decades allowed the brand to become strong and in 2005, BMW overtook Mercedes-Benz as the best-selling premium car brand in the world. According to a report in Reuters UK, BMW saw a 10.1 per cent jump in number of units sold to 1.13 million cars. MercedesBenz saw a smaller gain of 1.6 per cent to 1.08 million units.

And when people can see a line to your past, it is easier for them to believe that you have a line to the future.

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What About Service As A Differentiator? Service is considered by many branding experts as a hygiene factor— something that is a given. If you can’t provide good service, you should not even be in the game. Service is now generally regarded as the price of entry into the playing field, not a differentiator. However, this is not always true for a simple reason. Service quality is not as easy to duplicate as product quality. Therefore, service can still be used as a differentiator. Unfortunately, it is very hard for companies to hire good service personnel. In fact, most of the companies that we have encountered in Singapore in our capacity as customers are themselves quite clueless about what good service is and how to achieve good service consistently. In 1994, when Jacky first visited Hong Kong, he was shocked at how rude Hong Kong people were. When he was standing in a line to get onto buses, he would be constantly pushed by people behind. More than once, some woman would poke him in the back with an umbrella to prod him to move faster even though it was impossible to do so. At the train station, when the train door opened, people would rush in, forcing passengers coming out of the train back in. It was actually quite hilarious to watch, provided you were not the one being pushed. Shop assistants were also rude, sulky and not very helpful. Jacky’s friend was once scolded by a Hong Kong shop assistant for looking around the shop for too long. He was told, “Are you buying anything? If not, don’t get in the way of my doing business!” Since then, things have changed so much that Hong Kong is almost unrecognisable. Jacky still goes to Hong Kong once a year because his wife’s family is there. Now, when he is in Hong Kong, he feels as if he is back in the United States because the level of service in Hong Kong has improved immeasurably. When he walks into a shop, the store employees will actually smile and greet him before coming up to introduce themselves and invite him to look around. If help is needed, they are there to provide it. And they

Whatever You Do, Don’t Imitate The Leader! Many brands try to copy the leader. After all, the leading brand must be doing something right if it is the leading brand in the

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don’t practise the irritating habit of following customers around the store anymore. On several occasions, Jacky would try on lots of clothes in shops and then not buy anything because he couldn’t find something suitable. Upon walking out, instead of being scolded for not making a purchase, he would be told pleasantly, “Thank you for visiting us, sir! Come again when you are free. Have a nice day!” Positively shocking. That actually made him feel bad about not buying anything and he would try to return and buy something the next time. Hong Kong businessmen know that in order to stay competitive, they have to differentiate themselves and they use service as a differentiator. Not just good service but superlative service. Even the hawkers and vegetable sellers, who are usually not very serviceoriented, are getting into the act. Jacky went to a wet market near his mother-in-law’s place once and was shocked by the level of service that the vegetable sellers and fishmongers there provide. On another occasion, Jacky and his wife decided to eat at a roadside stall in Mongkok. His wife asked for a bottle of mineral water and the stall owner said, “No problem.” Ten minutes later he reappeared with mineral water. Jacky’s wife, who was parched by then, asked him why he took so long and the hawker told her that he had to run to the nearest convenience store to buy the mineral water because he doesn’t sell it at his stall. He only sells noodles and tea. We were stunned. Now that is service. Try that in a country like Singapore and you will be told, “Mineral water, ah? Don’t have! Tea can or not?” Service is not an easy thing to get right, unlike manufacturing, because people are not easy to train. A machine will do exactly what you programme it to do. People, on the other hand, have minds of their own. Because service is not an easy thing to duplicate, it will give you a differentiated edge if you can get it right. But you need to understand that as a company expands, it gets harder to maintain that level of service.

category, right? Yes. The leading brand did something right—it usually got into the market first. The leading brand usually created that category and used its first mover advantage to entrench itself in the minds of customers. You can’t copy that strategy simply because you did not get there first. So you have to do it differently. Take the opposite position. If you copy the leader, you will be seen as a me-too competitor. A copycat. Would anyone want to buy from a copycat because it’s cheaper? Perhaps, but that will mean that you have to compete on price and you know there will always be somebody cheaper than you!

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Don’t Try To Outdo The Leader, Either! An equally unsound strategy is trying to outdo the category leader. Creative Technology paid a heavy price trying to outdo Apple. Longer battery life! More storage space! More features! Lower prices! Sounds good, right? But why didn’t it work? Because once a brand is firmly entrenched in the mind, you cannot dislodge it by being better. People perceive the leading brand to be the best brand. People don’t care that the leading brand usually got to be the leading brand by virtue of being there first. They just think that the leading must be better than the rest. Besides, the leading brand can just copy what you do. Apple can very easily install longer-life batteries and a bigger hard drive. So where would that leave Creative? Between a rock and a very hard apple.

What makes a strong brand strong? It stands for something in the minds of people. Why is SIA a strong brand? It stands for the best service in the air. Why is eBay a strong brand? It stands for online auction. Why is Rolex a strong brand? It stands for the original expensive Swiss watch. Why is Dell a strong brand? It stands for computers sold direct to you. Why is Panadol a strong brand? It stands for pain relief. Why is Volvo a strong brand? It stands for safe cars. Why is Zara a strong brand? It stands for just-in-time fashion.

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Why Are So Many Brands Accident Prone? Do you know why you scream at your children when they play in the middle of the road? Because that is where accidents happen. The same thing can happen to a brand if it adopts the kind of middle-ofthe-road strategy that many companies seem to favour. Ask most companies what their USP is and more often than not you will get this answer: “We are as good as the premium brands but almost as cheap as the entry level ones. We give our customers the best of both worlds.” In other words, these brands are stuck in the middle. A dangerous place to be because they will be squeezed by premium brands from the top and by budget brands from the bottom. There is no such thing as the best of both worlds. Premium quality demands premium pricing. We used to think that you can have the best of both worlds but experience has taught us that in branding, you are either on this side of the road or you are on the other. You can’t be in both places at the same time. If you try, then you become undifferentiated.

Why is Viagra a strong brand? It stands for performance enhancement. Why is DeWalt a strong brand? It stands for power tools for professionals. Why is Gore-Tex a strong brand? It stands for breathable waterproof fabric. Why is Caterpillar a strong brand? It stands for construction equipment.

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Look at any leading brand and you will find that it stands for something that you can immediately identify. That is why it is so important to differentiate your brand by taking a clear position! Make sure your brand stands for something different from other brands. And don’t ever pitch your brand in the middle where you will be lost among a sea of me-too brands. In fact, you should remember the key function of branding that we defined earlier in the book: differentiate your brand from your competitors’ brands. And to be differentiated, you need to stand for something.

CASE STUDY ON DIFFERENTIATION: AMORE

g If you are a woman who wants a fuss-free environment to exercise, where would you go? California Fitness Centre? Planet Fitness? Fitness First? Those are fine if you don’t mind sharing the facilities with men or if you happen to find sweaty men grunting and heaving away particularly attractive. For the woman who wants a womenonly fitness centre, one name pops up immediately—Amore. Amore is not the first fitness centre but it has managed to become a strong brand by successfully differentiating itself from the run-ofthe-mill fitness centre. Amore is a women’s fitness centre with eight locations in Singapore, all conveniently located near MRT stations. It was set up in 1985 and all these years, it has remained consistent to its brand DNA—a fitness centre for women.

31 32

Hoover’s Inc., July 2005 W. Chan Kim and Renee Mauborgne, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant, Boston, Mass: Harvard Business School Press, 2005, p.56

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This differentiation strategy not only allows Amore to stand out from the crowd but also allows it to simplify its operations because it is only for women. For example, you don’t need a men’s and women’s changing room, locker room and shower facilities. And it also allows Amore to offer highly tailored aerobics classes that are designed to target specific needs or areas of the female anatomy. As a result, Amore has remained a popular brand among women in Singapore. In fact, Amore has 70,000 members, which is more than the combined membership of 48,000 people that California Fitness Centre, Planet Fitness and Fitness First have. It was named the AsiaFit Club of the Year in 1999 and was picked as a winner of the Singapore Promising Brand Award in 2005. What Amore needs to do now is find ways to export this concept to the region. With 20 years of experience in women’s fitness, Amore is in a good position to go regional. In fact, Amore was way ahead of another women’s fitness centre called Curves. Curves was started in Harligen, Texas, USA in 1992 by Gary and Diane Heavin.31 Since franchising began in 1995, Curves has attracted over 4 million members and opened over 9,000 centres in the United States and internationally. Turnover has exceeded the US$1 billion mark.32 Curves proved that this concept is a very powerful one but is Amore too late? We don’t think so. Amore still has room to grow in the world market because it can still leverage on its point of differentiation even in markets where Curves is already present. Curves is a general fitness centre for women. Amore can position itself as the aerobics centre for women. We believe that is a key differentiator that can be used to build Amore into a stronger brand.

9. Rule No. 6: Brands Are Built With PR, Not Advertising

When was the last time you read an advertisement? (And we are not talking about recruitment advertisements.) More importantly, when was the last time you actually believed something you read in an advertisement? You probably don’t really remember. The fact is, we are bombarded by so many advertising messages a day that we just tune out most of them. Now even if you do read an advertisement and it advertises a product at an unbelievably good price, you would still be sceptical wouldn’t you? If you see a new freehold condominium in a good location being advertised at a very low per square foot price, what would you think? You would probably think that in order to get that low per square foot price, you have to buy the really big unit with a roof garden that is for the most part, unusable. If you want the 3-bedroom, 1,200-square-feet unit (like most people), it will probably cost you 50 per cent more in terms of price per square foot compared to the advertised price. We have been ‘conned’ by such advertisements before so that these days, we take every advertisement with a pinch of salt. Every time people read an advertisement, they will be thinking at the back of their mind, “Sounds good but what’s the catch?” If it is an advertisement from a mobile phone service provider offering the latest model of mobile phone from Nokia or Sony Ericsson for an incredible price, the catch is usually this: you have to sign up for a new line for two years and have a suitable phone to trade in. But then again, you already knew that, right? That is why you always ask, “What’s the catch?” when you read an ad.

Rule No. 6: Brands Are Built With PR, Not Advertising

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Furthermore, people don’t really pay attention to advertisements these days. Here is a typical scenario that happens at our branding workshops. When we ask the participants if they read advertisements, some will shake their heads. Others will answer with a degree of indignation, “Of course we read advertisements!” Interesting. But our follow-up question reveals something even more interesting. “Why do you read advertisements?” At this point, those executives must be thinking how on earth village idiots like the two of us could become brand consultants (some of you might actually say that it is precisely because we are village idiots that we became brand consultants). A typical answer to that second question would be, “We need to monitor what our competitors are doing, you know? That’s what companies do. That’s why we read advertisements diligently.” Yes, we know. You read advertisements because you need to monitor what your competitors are doing. Are you getting it yet? The only people who will diligently read your advertisements are your competitors. They will read every single word, look at every single picture, take note of the size of the ad, how many times it has appeared and where. Things like that. But your target audience, your customers, those people who really matter, don’t pay attention to your ads. While you are busy reading your competitors’ ads and they are busy reading yours, your customers are reading something else. There are many companies out there bombarding you with print ads, TV and radio commercials, direct mail, e-mail ads, flyers, posters, bus/MRT/taxi ads, etc. Do you pay much attention to them? Did any of these ads motivate you to buy something? Did any of these ads even stick in your mind? Did any of these ads change the perceptions that you already have of the brands being advertised? Did any of these ads change the perceptions that you already have of the advertised brands’ competitors? Probably not. According to Al and Laura Ries in their book, The Fall Of Advertising And The Rise Of PR, the average person is bombarded with 237 marketing messages in a day. That was in the year 2000. When we first read that book, we thought that Al and Laura must

Do As I Say But Don’t Do As I Do Have you ever wondered why the advertising agencies will happily recommend millions of dollars in advertising for their clients but they themselves do not advertise? When Jacky first started working in advertising in 1996, he asked his boss during a brainstorming session why the agency did not advertise to increase its sales. After all, we recommend advertising to clients and if we are so good at what we do, why don’t we advertise ourselves? How naive of him. Jacky’s boss told him that they don’t advertise because first of all, the only people who will read the ads are the agency’s competitors and secondly, nobody will believe the ads. Huh? And we are still recommending advertising to our clients? After Jacky left that advertising agency, he couldn’t get another job as a copywriter although he went for interview after interview. The problem wasn’t that Jacky couldn’t write creatively. That he could do reasonably well. The problem was advertising agencies only want to hire award-winning copywriters, art directors and creative directors. The first question that was usually directed at Jacky was, “How many awards have you won?” His standard answer—“None. I don’t believe in awards. I believe in effective advertising campaigns

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have gotten it wrong. We did not feel as if we were being bombarded by 237 marketing messages a day. After some reflection, we realised why. Our society is over-communicated. The media clutter is incredible. As a result, we tend to tune out most of the marketing messages that are targeted at us. That is really bad news for advertisers. The clutter is so bad that people just don’t notice ads any more. The advertisements just fade into the background; they are just like wallpaper. And what solution does the advertising industry recommend? Outspend the competition. In fact, one of the first things that advertising executives do is ask clients what their annual advertising budget is. The advertising industry has often warned clients about under-spending. We know because we used to work in advertising and marketing communications. But before you launch your next advertising campaign, there are several issues that you need to consider.

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that increase clients’ sales.” Saying something like that is the biggest mistake you can ever make when interviewing for a job in an advertising agency. Jacky was extremely discouraged back then because he had always thought that the aim of advertising is not to win awards but to increase the clients’ sales. Here lies the crux of the problem. Advertising agencies don’t advertise because they know that no one is going to read their advertisements. Why? Advertisements have no credibility. Advertising is what you say about yourself and of course you will say good things about yourself, right? Where is the credibility in that? Well, credibility lies in what others say about you. Credibility lies in public relations or PR. That is why advertising agencies are hellbent on winning creative awards. These awards create publicity and they use the publicity to win business. That is why a guy like Jacky who believes that awards are not as important as running effective advertising campaigns will never get a job in advertising. If advertising is the lifeblood of a business as the advertising industry keeps repeating, why don’t advertising agencies advertise? Why do they rely on PR to promote their brand? Some advertising executives that we have met tried to explain that advertising agencies don’t need to advertise because their work speaks volumes and they need to hire award-winning copywriters, art directors and creative directors to ensure that their work is up to scratch. Well, we disagree. How do clients know your work is good? When you tell clients that you have won such-and-such award. And that is PR because that is somebody else (presumably a panel of experts) saying that you are good by giving you an award. Those awards usually generate positive publicity that help to build the advertising agency’s brand. The bottom line is, even advertising agencies use PR to build their brands. How Many Advertising People Are Trained In Marketing? We are not saying all these things to spite the advertising industry but advertising is part of marketing so it is important for advertising people to understand marketing if they want to run effective campaigns. But the advertising industry is more interested in winning creative awards.

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The next time an advertising agency makes a pitch to you, ask them this question, “What percentage of your staff is trained in marketing?” It is a valid question. Jacky once attended an executive training programme called ‘Measuring ROI In Branding’, run by The Fournaise Marketing Group. The CEO of Fournaise, Jeremy Fontaine, told the participants, who were all marketing managers, that they better ask this very important question or they could put their advertising campaign at risk. His point is that if your advertising people are not marketing trained, how on earth can they be expected to run an effective campaign? We could not agree more. Yes, you need to express your marketing messages creatively but if you don’t even understand marketing, how can you come up with a strategy that has a chance of succeeding? We suspect the reason why there are so many shockingly bad advertisements out there is because the people who created the ads have no understanding of marketing. Advertising—An Honest Profession? The chart on the opposite page shows the results of Gallup Poll’s Honesty Survey (see Chart 2). The American public was asked to rank which profession they felt to be honest or dishonest. Results showed that nurses are perceived to be the most honest, with an honesty rating of 79 per cent. Car salesmen are perceived to be the most dishonest, with a rating of 9 per cent. Advertising practitioners are rated as the second most dishonest profession in the list—ranking even lower than lawyers, politicians and business people! So if advertising is perceived as a dishonest profession, what are the chances of your potential customers believing anything you say in your ad? That is why you need to use PR to launch and build your brand. PR has credibility because it is what others say about you. People still believe what they read or see or hear in the media more than advertisements. But PR is not easy to manage. It is slow, it is hard to get and it is even harder to control—sometimes reporters say things about you that you don’t want them to. But what choice do you have? PR has credibility, advertising doesn’t. Hence, you need to rely on PR to build your brand.

Chart 2

Gallup Poll Honesty Survey 21 November 2004 Nurses

79

Grade School Teachers

73

Druggists, Pharmacists

72

Military Officers

72

Medical Doctors

67

Policemen

60

Clergy

56

Judges

53

Day Care Providers Bankers

36

Auto Mechanics

26

Local Officeholder

26

Nursing Home Operators

24

State Officeholders

24

TV Reporters

23

Newspaper Reporters

21

Business Executives

20

Congressman

20

Lawyers

18

Advertising Practitioners Car Salesmen

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49

10 9 Source: www.gallup.com

How Do You Generate Good PR? We are often asked by companies how they can generate good PR. Bear in mind that PR is basically what the media say about your brand so it has credibility, but PR is not easy to manage. We have outlined some steps below that might help but it is still no guarantee. 1. Ask yourself if you have a new category or a next generation product/service that is new and interesting. People (journalists

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included) are not interested in what is better. They are interested in what is new. That is the reason the PlayStation received so much media coverage when it was first launched. Have you seen a PlayStation ad before? Neither have we but the PlayStation sells millions of units a year. It was something new and interesting. Consequently, it received a lot of publicity. Dell also received a lot of publicity because it was something new—the first computer to be sold direct to consumers. Gateway 2000 that came along later with the same concept didn’t generate the same amount of publicity. Why? It’s not new. Dell got there first with the concept of direct sales. 2. Are you differentiated? If you are a me-too, same-same kind of brand, forget about getting good PR. Nobody is going to be interested in you. “But we are better than the leading brand!” many companies will argue. Maybe you are but that’s not enough. How are you different? That is more important. Microsoft dominates the market for operating systems. So how did Linux generate so much publicity? It was different from Microsoft. It was the first open-source operating system. 3. Are you focused? If you do everything under the sun, people will quickly lose interest in you. What does your brand stand for? What is your brand all about? The typical company that we meet will say very excitedly, “We are doing this! We are really good at that. We are also doing that other thing.” Are you interested in such a company? Probably not because at the back of your mind you are thinking this company can’t be any good if it does everything under the sun. You need to find a strong focus if you want to generate good publicity. NVIDIA focuses on 3D graphics chips. Every time somebody writes a story about graphics chips, guess who they will interview? NVIDIA, who else? Oracle is focused on database software, so who do journalists quote when they are writing a database software story? Oracle. The Million-Mile ‘Bimmer’ An example of a good PR campaign is the one that Mobil did in 1990 in the United States. Mobil wanted to find out how good

their Mobil 1 synthetic engine oil really was. So they took a new BMW 325i (model type E30) and ran it for a million miles (1.62 million km) using only Mobil 1 synthetic engine oil. The test took four years to complete. In 1994, they dismantled that BMW’s engine and measured the wear and tear. The components looked almost brand new. Virtually no wear at all. That quickly resulted in a host of positive publicity for Mobil. Today, more than a decade later, people still talk about that test in car clubs and online car forums around the world. Good PR has the potential to live a very long time.

So Does That Mean You Don’t Need To Advertise? On the contrary. Successful brands, be they consumer or business brands, are almost always launched and built with PR. Microsoft, IBM, Linux, Cisco, Oracle, SAP, Siebel, Intel, Dell, Xerox, Sun, Callaway, Yahoo!, Google, PlayStation, Volvo, Coca-Cola, Ben & Jerry’s, Starbucks, Gatorade, Red Bull, The Body Shop, Zara were all built by PR.

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The 3M Safety Glass 3M recently ran a very successful PR campaign in Canada that created ripples around the world. They put up a glass display at a bus stop. They put what looked like tens of thousands of dollars in the glass display and put a small ‘3M Safety Glass’ logo on it. A lot of people attempted to break the glass to get to the money. Many tried. But none succeeded because the 3M safety glass is really tough. One man even took a flying kick at the glass. The reporter who was there said that the glass wasn’t even scratched but the man looked like he might have broken a few toes. That campaign generated a lot of publicity all over the world.

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But there comes a time when a brand runs out of PR potential. That’s when you switch to advertising. Coca-Cola is heavily advertised today but in the distant past, Coca-Cola was built with PR. But the advertising has to be consistent with the perception that PR has already built up in the mind. When Volvo launched the world’s first 3-point safety belt, the world’s media praised it as a breakthrough in car safety. That built Volvo into the ‘safety’ brand. In the nineties, Volvo tried to take on BMW in the performance sector. Volvo built a series of fast, turbocharged cars like the 850 T5. These cars were faster and cheaper than similarly-priced BMW models and Volvo advertised them aggressively. Did it work? No. Because people perceive Volvo as the safe car and BMW as the performance car, never mind that the Volvo is actually faster! THE MOST IMPORTANT LESSON: Brands are born and built with a blaze of publicity but it needs advertising to survive. However, the advertising messages must agree with the perception that PR has already sowed in the mind or the brand will lose credibility. The Problem With Many PR Professionals That We Have Met The one thing that strikes us as very strange about the many PR professionals that we have come across—whether they work for local or international PR agencies or the PR department of a corporation—is that they don’t see themselves as brand builders. In our experience, PR people get uncomfortable when you talk to them about their roles as brand builders. What do they see their roles as? Issuing press releases to announce the company’s financial results and organising events and road shows as well as managing crises (basically putting a positive spin on bad news). While those are important, PR professionals should play a more active role in building brands. And to all you PR people out there, we strongly encourage you to read The Fall Of Advertising And The Rise Of PR by Al and Laura Ries if you have not done so already. It is a really excellent book on public relations and it will change the way you see your role and how you do your work.

CASE STUDY ON PR: ABKEY

g

135 Rule No. 6: Brands Are Built With PR, Not Advertising

abKey is a newly founded Singapore company that specialises in ergonomic computer keyboards. Its founder and CEO, Bob Teo, was watching The Wheel of Fortune while he was a graduate student in the United States when it occurred to him that the most commonly used letters—all the vowels, R, S, T, and L, M, N—are scattered on the QWERTY keyboard. He later discovered that this was deliberately done to slow down the typist in order to prevent typewriters from jamming. But today’s electronic keyboards don’t jam and that thought led him to develop an alternative keyboard. To Bob, it simply didn’t make sense to continue with the 128-year-old QWERTY design in this day and age. But why was the QWERTY keyboard designed to slow down typists? In the good old days, the keys on mechanical typewriters used to stick together when typists went too fast. The only way that the inventors of the typewriter could think of to prevent the keys from sticking was to slow down the typists. Hence, the arrangement of the letters on a QWERTY keyboard were random and nonsensical for that very purpose. Also, the keys are staggered in QWERTY— again to prevent type bars from getting in each other’s way— increasing difficulty and errors. The keys in abKey are aligned for ease and accuracy. But these days, with computer keyboards, input speed is not an issue any more so why stick with the QWERTY? In fact, there have been attempts to challenge the QWERTY’s dominance before but those attempts have not been successful. In the early days, there were alphabetical keyboards but these didn’t take into account the frequency of occurrence among certain letters. The DVORAK keyboard, on the other hand, grouped the vowels and most common consonants together on the home row and was able to achieve faster speed. But its arrangement was not in order and has been shown to be more prone to errors than QWERTY and it takes longer to learn. Chorded keyboards are

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more ergonomical but are also more expensive and even harder to learn. abKey is the latest attempt to dethrone the QWERTY. The company did a number of things right. First, it is a new category of keyboards. By calling its product an ergonomic keyboard, abKey is effectively positioning QWERTY as the un-ergonomic keyboard. That is the right thing to do—create a new category and use your new category to try and make an existing category obsolete. Second, it is a highly focused company. abKey doesn’t try to see beyond what some marketing experts would (wrongly) term as marketing myopia and try to upgrade the company into an ‘ergonomic computer peripherals company’ and make other things like chairs, computer tables, lamps, mouse, etc. abKey is keeping its eyes on the ball and concentrating just on the keyboard. Third, it successfully differentiated itself through design—not just in terms of how its keyboards look but more importantly in terms of how it works! The arrangement of the letters is alphabetical as well as logical. They are organised in related groups of fives, threes and twos so as to tap into the associative learning disposition of the brain. According to Teo, touch-typing can be learnt in one hour. All these have combined to generate favourable publicity for abKey after it was previewed at the Las Vegas Consumer Electronics Show in 2005. Reputable publications such as CNET, Guardian UK, PC World, EverythingUSB.com, Consumer Electronics Net, The Edge and others have talked about abKey in a positive light. This type of positive publicity is what a brand needs to build up credibility. But relying on PR is a slow process that you cannot control as we are sure Bob Teo and his team have found out by now but it is critical to generate such publicity, especially for a new brand. What the team at abKey needs to do right now is escalate the PR blitz. Work with a good PR agency which will take what they already have right now and pitch it up the PR value chain. Getting mentions in specialist or tech magazines is not enough. Tech magazines are more inclined to feature tech products so the general public would expect to see something like abKey in these magazines. Now, the task is to get the general publications like newspapers, business magazines, etc., to talk about abKey. Why? Because

137 Rule No. 6: Brands Are Built With PR, Not Advertising

publications like BusinessWeek, Newsweek, Forbes, Fortune, Time and The Wall Street Journal can write about all kinds of things under the sun but if they choose to write about you, then people will think it must be important. Being featured in a mainstream publication is one step towards being accepted as a mainstream product. abKey has done well so far. It is still a very young brand but if it can keep up the momentum and stay focused, it should do well. It has already made a powerful enemy, the QWERTY keyboard. Now it needs to escalate the war against QWERTY. It has also generated good publicity. Now, it needs to find ways to permeate its story into the mainstream media. It also needs to always remember that building a brand requires a lot of patience. Some brands lose patience and lose focus before they truly take off. Even brands like Starbucks, Zara, Apple, Microsoft, Pixar, etc. took many years to reach the S$100 million annual turnover mark. But once they crossed that mark, sales just skyrocketed.

10. Rule No. 7: You Better Have A Great Name Or Else

Do not underestimate the power of a great name in building brands. By the same token, do not underestimate how detrimental a bad name can be to your brand. If you are one of those people who think that a name is just something that you slap on to your products so that you have a brand to call your own, think again. That name can make or break a brand. Companies very often attribute failures to cut throat competition, changing market conditions, insufficient marketing resources and everything else under the sun. But we have never seen a company attribute its failures (or successes) to the name. After all, a name is just a name, right? How important can that be? Well, what if you have a name like Sum Ting Wong? We think it would be very hard for you to do business with anyone because they will think that there is something wrong with you. Can you imagine introducing yourself to a prospective client, “Hi! My name is Sum Ting Wong from IES and I would like to introduce to you the next generation of…” Your prospective client will probably fall off the chair laughing his head off or turn blue trying to hold his laughter in the interest of politeness. You can’t build a strong brand on a bad name. In the long run, the name may be the single most important asset that you can have. The reason is very simple. In the beginning, what makes a brand successful is a unique idea that the brand can own in the mind. But in the long run, that unique idea or concept will disappear as competitors copy it. So what remains in the long run to differentiate a brand is just the name.

Xerox Xerox was launched in 1959 as the first automatic plain paper photocopier. It was easy to sell a Xerox in the beginning because its copies were cleaner, sharper, easier to handle and easier to sort. Before Xerox came along, there were only thermal photocopiers available. If you have ever used a thermal fax machine before, you will have an idea how bad those thermal copiers were. Today, all photocopiers are automatic plain paper copiers. In fact, you probably can’t tell the difference between a copy made by Xerox and one made by its competitors. We were once shown five photocopies made by different photocopier brands. We were asked to rank them in order of quality. It was difficult but we finally ranked them. And the one with the best quality was not a Xerox. The best copy was actually produced by a Toshiba machine. Second was Canon. Xerox came in third. So what is left to differentiate Xerox from all the other photocopiers out there is nothing more than the name. And in this respect, Xerox wins hands down because it has got by far the most superior name

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in photocopiers. A name that is short, unique, memorable, easy to pronounce and closely linked to the category called photocopiers. Is Xerox the best photocopier today? It is hard to tell. But we do know Xerox has the best photocopier name. .

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Nokia Nokia managed to dominate the mobile phone category because in 1991, it dropped everything that it was doing to focus on mobile phones. A Nokia phone used to be so much more superior than other phones in terms of user-friendliness, design, fit-and-finish, material quality, and so on and so forth. But its competitors have caught up (and in some cases, eclipsed) Nokia in all those aspects. From a consumer’s point of view, Sony Ericsson’s material quality and fit-and-finish outclasses Nokia’s. A lot of Nokia models today look cheap and flimsy in our opinion. A Sony Ericsson looks very expensive next to a Nokia even though it is not. And Samsung phones probably have the best colour LCD screens. So why is Nokia still No. 1 in mobile phones although it no longer has a unique advantage over its competitors? Nokia’s market share remains around 35 per cent globally. Nokia is a specialist. As we have shown earlier, people generally trust specialists more than generalists. Besides this relentless focus on mobile phones, Nokia also met all the 10 characteristics of a great brand name that we are going to outline later in this chapter. Incidentally, the Nokia name is derived from a black, furry weasel that is found in Finland’s forest, according to Matt Haig in his book, Brand Failures: The Truth About the 100 Biggest Branding Mistakes of All Time. Nokia began as a forestry company. Sony Ericsson is saddled with a line-extended name that stands for mobile phones and a thousand and one other things. The same goes for Samsung, Motorola and LG. Plus, those other brands somehow don’t sound as good. What about Motorola—the company that pioneered the mobile phone? Compared to Nokia, the Motorola name has two strikes against it. First, it is not a name that is unique to Motorola’s mobile phones. The company also uses the name on a lot of other things. Second, the name is longer than Nokia’s. Perhaps that is why

Motorola is trying to shorten it to just Moto. Hence, the ‘Hello, Moto’ campaign.

Google Another fantastic name. So good that a lot of people no longer say, “I will perform a search on the Internet for the information.” They just say, “I will Google it.” It is a made up name that is short, sweet, memorable and easy to pronounce. Google has become synonymous with Internet search engines the way Xerox has become synonymous with photocopiers.

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Lexus Lexus made its name in the luxury car market by being the first Japanese luxury car. It is a new category. Lexus is known for its uncompromising build quality and refinement. ‘The Relentless Pursuit Of Perfection’ is not just a marketing slogan for Lexus. They actually live by this philosophy in everything that they do. Lexus has consistently topped quality and customer satisfaction surveys such as the influential JD Power & Associates Initial Quality Study. But can Lexus’ capabilities be duplicated by another Japanese car brand like Nissan’s Infiniti or Honda’s Acura? Most definitely yes. But Lexus will still have an edge over its competitors because it has a fantastic name. It sounds expensive, luxurious and very premium. Infiniti is too long, bland and generic. Acura sounds more like a contagious disease in our opinion but you are free to disagree. Plus, Acura did not go all out like Lexus. Acura still sells lower end cars like the 4-cylinder RS-X which is actually the Honda Integra in other markets. Lexus started right at the top with the V8-powered LS400 targeted squarely at top of the line German luxury cars like the Mercedes-Benz S class and BMW 7 series. In the long run, Acura and Infiniti can catch up with Lexus in all those areas that made Lexus famous but they will be disadvantaged by their names. After all, if everything is equal among these three Japanese luxury car brands, which one would people choose? The one with the name that is synonymous with Japanese luxury cars—Lexus. You will also see that Lexus meets most of the 10 characteristics of a great brand name.

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What Makes For A Good Brand Name? 1) Short From the examples that we have given above, you would have guessed that brevity is an important criteria for a good brand name. A good brand name must be short. Long names are harder to remember and pronounce. Furthermore, a long name is very hard to turn into a generic for the category. People say, “Xerox a copy of this document for me,” even if they are actually using a Minolta machine. If Xerox had used a long and convoluted name then it would have been hard to make people use that name as a generic for the category. That is why Federal Express changed its name to FedEx. Because it is easier for customers to say, “FedEx this to Tokyo” than “Federal Express this to Tokyo.” If you look at successful global brands, you will notice many of them invariably have short names like Google, Xerox, Intel, Zara, Oracle, Siebel, Cisco, Viagra, Yahoo!, eBay, Linux, Starbucks, Red Bull, Sony, Lexus, Hertz, Avis, Christie’s, Palm, Visa, Linux, BlackBerry, Botox, Dell, Rollerblade, Kleenex, Playboy, Q Tips, Nokia, Disney, Kellogg’s, Wrigley’s, Avon, Nestle, Gucci, Chanel, Kraft, Nike, Rolex, Prada, Nivea, Porsche, Boeing, Amway, Compaq, Apple, Kodak, Pixar, Disney and so on. 2) Unique Having a unique name is very important because you do not want to share your name with other brands. You want that name to belong only to your brand so that it stands for one thing and one thing only. iPod is a unique name. It stands for MP3 players. Starbucks is a unique name. It stands for gourmet coffee. Ya Kun is a unique name. It stands for kaya toast. When you mention Ya Kun, people will know exactly what you are talking about. There is no confusion because the name is unique to Adrin Loi’s company. Jacky used to work for a Singapore education software company with a name that was not unique. So it was hard to build a strong brand around it. But the company found a solution to that problem by giving its flagship product a unique name and then focusing its brand building efforts around the product and not the company.

That strategy worked very well until a few years later when the company found out that it actually shared its name with an American company that hosts gay pornographic content on its website! To make matters worse, a number of potential overseas investors and partners actually went to the other company’s website by mistake. So make sure you choose your name carefully.

4) Easy To Pronounce If people can’t even pronounce your brand, what are the chances of them buying it? It will probably take you two whole weeks to learn how to pronounce Tokyo Tsushin Kogyo. That is why, two years after it was incorporated, Tokyo Tsushin Kogyo changed its name to Sony, which comes from the Latin word sonus meaning sound and the English word sunny. It is much easier to say, “I am going to buy a Sony DVD player” than to say “I am going to buy a Tokyo Tsushin Kogyo DVD player”. Of course, Sony’s success cannot be fully credited to its name but in a market that is so crowded, it certainly helped.

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3) Memorable Creative Technology was the first to launch portable MP3 players but they have extended their line and do not have very memorable names. Creative Zen, Creative MuVo, Creative Nomad, Creative Jukebox, Creative Zen Micro are not names that are very memorable compared to iPod. iPod is a made up word. It is short. It is unique. And it is memorable as it connotes a few things. The ‘i’ in iPod alludes to the fact that it is intelligent and personal. The ‘Pod’ in iPod tells people that this is something small and portable. Since iPod, many companies have tried to incorporate the ‘i’ into their brand names. Look at OSIM’s latest range of massagers—iSqueeze, iMedic, iDesire, iSymphonic. What made Creative Technology successful was the sound card, a category that they dominated since 1989. Besides setting the standard for the industry, Creative Technology’s sound card was also blessed with a memorable name. Sound Blaster. Sounds memorable. The bottom line is this—if people can’t remember your name, why would they buy your brand?

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5) English-Sounding It doesn’t need to be an English word but it must work well in English. For some reason, English words are the easiest for people of other nationalities to pronounce. Perhaps that is due to the influence of American TV programmes or the wide availability of American brands or the fact that English is accepted as the international language of commerce (although we know of some French people who think that French is the international language of commerce). What do you think of the name Krating Daeng? Would you drink something that is branded Krating Daeng? Maybe not because you would be wary of anything that sounds like cow dung. Fortunately, the company changed its name to Red Bull. The brand took off and chalked up S$3.3 billion in sales in 2004 and is now the best-selling energy drink in the world.33 There are many brands with non-English names but that is all right provided those names are easy to pronounce in English. Heineken, Porsche, Nike, Ya Kun, Nokia, Honda, Sikorsky, Haagen Daz, Haier and Samsung are not English names but they work well in the English language. 6) Language Neutral Many brands have failed when they crossed borders simply because their names are not language neutral. The names actually meant something bad in other languages. That is why we always advise clients to test a new brand name in either 10 of the most commonly used languages or in their major markets before the name is launched. The Ford Pinto did not do well in Brazil because ‘pinto’ is a Portuguese slang word for small penis. The Chevrolet Nova did not sell well in South America because ‘nova’ means ‘no go’ in Spanish. Clairol’s Mist Stick did not do too well in Germany because it sounds like manure stick in German. And there is a German brand of engine oil called Fuchs being sold in Singapore. We are not sure how well it is doing but we suspect that the name might hamper it because it sounds like the ‘F’ word. That’s why we use Mobil 1. 33

Hoover’s Inc., July 2005

7) Linked To A Category Name This is actually an area that many people overlook. So we will spend more time looking at this.

145 Rule No. 7: You Better Have A Great Name Or Else

You Need A Good Category Name To be successful, a brand needs its brand name to be closely linked with a category. It needs to be seen as the leader or the ‘owner’ of that category like the way Coca-Cola is seen to own the category called cola. Quite a number of marketing people and branding consultants that we have spoken to are sceptical about having brands so inextricably linked to the categories they are competing in. The reason given is that if a brand is tied to a category then it loses its ability to stretch into other products, services and categories. We become very concerned when consultants and marketing professionals start talking about brand stretching because the more you stretch your brand, the weaker it becomes. The more you stretch your brand, the less meaning it has in the mind. And once your brand starts to become fuzzy in the mind, it becomes vulnerable to attacks. What is a Hewlett-Packard? It used to stand for business computers. But HP’s management, in an effort to grow the business, has stretched the brand to cover various segments. Nine out of 10 business people that we have come into contact with are very, very enthusiastic about HP’s strategy. They hail it as a successful model that should be emulated by all. But if that model is so successful, why didn’t former HP CEO Carly Fiorina last longer? In order for a brand to be successful, it needs to own a powerful brand name and it also needs to have a good category name. Having a great brand name alone is not enough. Brand names mean nothing unless they can be immediately linked back to a category. If you study the history of successful global brands, you will find that besides owning a great name, these brands are also synonymous with a category. You need to first set up and define a new category that your brand can dominate. And you need a simple and easy to remember category name. Next, you need to superglue your brand name to that new category. If that category grows, your brand will grow. If that

category dies, your brand will die. That is the risk that you have to take. But that is the way strong brands are built. Strong brands are only strong when they are tied in to a category. Stretch that brand like HP did and you risk weakening it. Dell is strongly identified with a category called ‘PCs sold direct’. Dell is doing much better than HP which doesn’t have a category to be linked to. If PCs sold direct as a category dies, then Dell will probably die along with it. Dell is strong only because its brand stands for a certain category. But in an effort to grow, Dell is now moving into other products like printers, ink, toners, TV, software and other accessories. We are not sure how that strategy will work out in the long run but at least Dell is staying true to its direct-tocustomer formula.

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A Good Category Name Needs To Be Simple Long, complicated category names won’t fly with customers. The mind cannot store those well. Take a look at the brands that are listed in the table below as well as their respective categories. Each one has a good brand name and a simple category name. Brand Name

Category Name

Xerox

Photocopier

Google

Search engine

Intel

Computer chip

Zara

Just-in-time fashion

Oracle

Database software

eBay

Online auction

Linux

Open source OS

Starbucks

Gourmet coffee

Red Bull

Energy drink

Gatorade

Sports drink

Christie’s

Auction

Hertz

Rental car

Visa

Credit card

Category Name

Rollerblade

In-line skates

Kodak

Photographic film

Nokia

Mobile phone

Wrigley’s

Chewing gum

Kellogg’s

Breakfast cereal

Kleenex

Pocket tissue

Boeing

Passenger plane

Gulfstream

Business jet

DeWalt

Power tools

Caterpillar

Construction equipment

Otis

Elevator

Pyrex

Fire glass

Gore-Tex

Waterproof fabric

Lycra

Stretchable fabric

Dri-Fit

Fast drying fabric

John Deere

Farming equipment

Cray

Supercomputer

Symantec

Anti-virus software

Trend Micro

Internet security

SKF

Ball bearings

Hyflux

Water treatment

OSIM

Massage chair

NVIDIA

Graphics chips

Gallup

Opinion poll

Yahoo!

Free e-mail

Skype

Internet telephony

AC Nielsen

Consumer research

Resist the temptation to give that new category a pretentioussounding, bombastic name. It’s very easy to fall into that trap. It must be a simple name—preferably generic, everyday words. When

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Brand Name

creating brand names, avoid the generic. When creating category names, try to be as generic as possible because if it is complicated, people won’t know what the category is.

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8) Has A Dot.com Suffix On the World Wide Web, there are first class netizens and second class netizens. In this hierarchy, a dot.com suffix is the first class netizen followed by a dot.com with a country suffix behind it. It does not mean that a brand without a dot.com suffix is not as good but remember Rule No. 1 of branding? Perception is reality. And people perceive a dot.com to be superior to the other suffixes including dot.biz and dot.net. Perhaps that has to do with the fact that the Internet boom was driven by the United States which made the dot.com suffix famous. A dot.com suffix is also more universal. In this age of globalisation, a dot.com allows you to set up shop in other countries with more ease. The Singapore education software company that Jacky used to work for did not have a dot.com suffix initially. When the company started its regionalisation drive, it ran into some difficulty due to the lack of a dot. com suffix. Why? Because you cannot go into a market like Taiwan and use a dot.com.sg suffix. A dot.com would be more readily accepted by foreign markets. So for every market that the company entered, it had to register a new domain name with the new market’s country suffix. A tedious process and the suffix was not always be available. What if the dot.com suffix is already taken up? Then, you have three options. Option One: Attach something else to your brand name in the hope that the domain name is available. But that is not an ideal solution. Can you imagine if Google’s domain name is www.googlegroup.com or www.googleinternational.com or www. googlesearch.com? It would impede the brand’s progress. Option Two: Buy the domain name. This is our preferred option but it can be costly. When Wilson started StrategiCom, www.strategicom.com was not available. So the company used www.sc-asia.com as a domain name. But that was not ideal so the company spent money and bought www.strategicom.com. We normally advise clients to buy the dot.com if they can afford it.

Sometimes you get lucky and get the domain name really cheap. For example, one of Jacky’s clients, Sei Woo Polymer Technologies, managed to buy www.seiwoo.com for only a few thousand dollars. Other clients are not so lucky. Option Three: Change the brand name. However, most companies are resistant to this option because it involves a lot of work, especially if they are publicly listed companies. So make sure that when you create a new brand, the dot.com is available.

10) No Acronyms Acronyms are close cousins of generic words. If you have a name like World Trading Corporation, you are in trouble as the name is not unique and it is way too long. As a result, companies with names like World Trading Corporation will eventually shorten it to WTC, which is equally bad because acronyms are also not

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9) No Generic Words It is hard to build a strong brand if you use generic words. Generic words are forgettable. And generic words cannot be trademarked. One of the reasons the Chinese computer giant, Legend, changed its name to Lenovo is because the Legend name is too generic to be registered in most countries. So they had to create a unique name like Lenovo to overcome that problem. A generic word is also generally quite forgettable. Let’s say that you have a company called World Trading Corporation. You can bet that there will be a lot of other companies in other countries that have the same generic name. As a rule of thumb, try not to use words that you can find in the dictionary or in the Thesaurus because it betrays your laziness and lack of imagination. Besides, there are millions of other people around the world who are already doing that. However, you can use a generic word out of context to build a brand. For instance, Mango, Orange and Apple are not really selling fruit. Mango is a Spanish fashion brand. Orange is a telecommunications company. And Apple is a computer company. But those generic words were used out of context so that is all right.

unique. What’s a WTC? It could be anything—Wild Tofu Company, World Tomyam Conglomerate, Web Transaction Corporation, Wet Teriyaki Chicken, etc. What about IBM, BMW, KFC and GE—strong brands that use generic words that are then shortened into acronyms? Well, you are not IBM, BMW, KFC or GE. These brands got into the market long before many of you were born. IBM was incorporated in 1924, BMW in 1913, KFC in 1939 and GE in 1892. They have had a long time to establish themselves in the market and back in those days, competition was not as brutal as it is today. If you try to launch your brand into today’s crowded and ultra competitive market with a name that is generic or uses acronyms, you have already lost half the battle.

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What If You Don’t Have A Good Name? You must first have the common sense to recognise a good name from a bad one. The above rules of naming should give you an idea. Next, if you have a lousy name like Sum Tim Wong, you must have the courage to admit that it is a lousy name. There is no shame in it. Then, change it to a better name! There are no rules that say that you cannot change your name. Don’t get too sentimental about the name. If it’s bad, it’s bad. Change it. Otherwise, you will be saddling your brand with an unnecessary burden. Having a bad name is like trying to swim across the Straits of Malacca with a 7-kg bowling ball tied around your leg. Business is hard enough without having to overcome the negative perceptions a lousy name can give you. We have consulted for many companies with Chinese names that are long and difficult to pronounce. The names made it difficult for these companies to compete internationally. And they are reluctant to change the name because that is the name of the founder. Even if the founder is no longer around, his sons or grandsons who are now running the business still wanted to keep the name. There is nothing we can do as consultants if clients insist on keeping a bad name. However, it doesn’t mean that if you have a Chinese name, it can’t work in international markets. We have often been asked about Eu Yan Sang. We think Eu Yan Sang is a great name because

despite being a Chinese name, it is quite easy to pronounce and more importantly, Eu Yan Sang is operating in a category known as Traditional Chinese Medicine. You need to have a Chinese sounding name if you are selling Traditional Chinese Medicine. You better not have a name like Novartis, Pfizer, Glaxo or Johnson & Johnson. Would you buy a cologne or a shirt from Ralph Lauren? Probably. But what if Ralph Lauren had kept his original name? “My given name has the word shit in it. When I was a kid, the other kids would make a lot of fun of me. It was a tough name. That’s why I decided to change it.” Ralph Lauren

CASE STUDY ON NAMING: HYFLUX

g Hyflux has come a long way since it was founded in 1989 by Olivia Lum. It started out as a trading company selling water treatment systems but moved quickly into the manufacturing of membrane and related technologies for liquid-solid separation. Hyflux has a wide range of water treatment products ranging from customised liquid treatment plants for both industrial and municipal applications to faucet filters using advanced membrane filtration technology for the consumer market. The company has grown tremendously over the years because of its relentless focus on R&D. It is constantly searching for more

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Would you wear a Ralph Lifshitz cologne? Or a Ralph Lifshitz polo shirt? We doubt it. That is why Ralph Lifshitz changed his name to Ralph Lauren. That probably upset his parents very much but it helped his brand make it big. So if you have a name like Sum Ting Wong, what should you do? We would suggest that you change it to something like Wang De Foo, which reads like ‘wonderful’.

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cutting-edge materials and more innovative solutions to water treatment. In 2003, it even introduced the patented DragonFly, which looks like a normal water dispenser that you find at the office except this one actually produces water from the air. It draws moisture from the air, filters it and turns it into drinking water. From a turnover of S$3.9 million and a net profit of S$125,000 in 1997, Hyflux posted a turnover of S$88.7 million in 2004 with a net profit of S$26.8 million (a whopping margin of 30.2 per cent).34 Hyflux was also named by Forbes as one of the 200 best Asian companies with revenues under US$1 billion in 2005. While many people see Hyflux’s advantage as a technological one, they overlook the fact that the Hyflux name in itself gives the company a powerful edge. Competitors can copy its innovations but they can’t copy the name. What is so great about that name? It is short. It is unique because it is a manufactured name like Google or Xerox or iPod. It is easy to pronounce and easy to remember. Most importantly, although it is a made-up name, it gives a sense of what the company is doing. The name Hyflux conjures up images of a high-tech water treatment company. And Hyflux even managed to trademark that name. When the company first started, they were known as Hydrochem. Although the name is still relatively short, it is not that special. It was a combination word—‘hydro’ and ‘chemical’. Although there is nothing wrong with combination words, it was predictable. There would be many companies around the world who could think of such a name to use for their brand. Hyflux is a much more superior name. Type in Hyflux into any search engine and chances are, most of the returns will be Olivia Lum’s Hyflux. Being a unique name, Hyflux has the chance to one day become the nickname for its category—water treatment. Just like you would say, “Xerox 10 copies of this for me” even when the photocopier in question is a Canon, or “I need a Kleenex to wipe this spill” when talking about tissues, or “I want to FedEx this package to Hong Kong immediately” even though you are not specifically asking for FedEx to do the job. If Hyflux gets it right, people might one day say, “We need to Hyflux this” when they are talking about the need to get a water treatment solution. 34

www.hyflux.com

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But the challenge for Hyflux now is to make its name stand for that one thing in the minds of its customers. As we mentioned earlier, a brand needs two names—a brand name and a category name to be attached to the brand name. The larger category is water treatment but Hyflux is not the first water treatment company. It will thus need to narrow the focus a little. What is Hyflux known for? Membranebased filtration systems. That could be the category. Although Hyflux probably does not want to see itself in such a narrow focus, it needs that focus to build an even stronger brand. It needs to promote the category and use it to attack the other categories of water treatment systems. Why use membrane filtration systems? How is it different? When people know how you are different, they will then make the connection as to why you are better. When you use the category to attack another category, people are more likely to pay attention because it is something new. Human beings are curious by nature. You are not promoting your company per se but the category as a whole. By constantly promoting the category, Hyflux will be seen as the leader in this category. Over time, competitors will appear in this category in greater numbers but hopefully, by then, the Hyflux name will become the synonymous with this category.

11. Rule No. 8: The Power Of Consistency

Why do you trust the people whom you trust? Because they are good people. People who have integrity. People who have kept your trust. But that alone is not enough. In order for you to trust them, these people have to be good people consistently. They have to have integrity consistently. They have to keep your trust consistently. You wouldn’t trust people who behave erratically in all those key areas that are important to you, would you? Brands are just like people. In order for brands to earn your trust (and with it your wallet), they have to behave in a consistent manner all the time. People generally do not like to hang around schizophrenic people. They also do not like to patronise schizophrenic brands—brands that are not sure of who or what they are, brands with multiple personalities. In order to build a strong brand, you need to have consistency. Contrary to what a lot of people believe, branding is a boring game because to build strong brands, you need absolute consistency, not just for the first few years but for as long as you have that brand. You need to do the same thing day in, day out. You don’t mess with a winning formula. No matter how strong your brand is, inconsistency can destroy it. That is why if you are a person who is easily bored or the type who can’t help tinkering with things, you probably shouldn’t be in the brand management business. We meet a lot of companies in the course of our work. Other than on a few occasions, the companies that we meet invariably want to expand the scope of their brand. It seems that management is naturally inclined to want to stretch the brand and line extend it. You will rarely find CEOs who say that they want to maintain a tight

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and narrow focus for their brand. Sometimes CEOs will say that they need to focus the brand but very often that focus is so broad that it doesn’t really count as focus anymore. Everybody wants to grow. And to a lot of companies, growth means sexy little things like doing a brand extension or stretching the brand or implementing a master branding strategy. That usually means broadening the scope of the brand, which is usually the first step in destroying the brand’s consistency. We often try to convince these companies that such strategies are detrimental to their brands but most people won’t listen. Why should they? After all, everybody is doing it! Many marketing gurus recommend it. The companies’ competitors are doing it so they cannot afford to be left out. You know the saying, “A million people can’t be wrong”. If everybody is doing it, it must be the correct thing, right? Well, a million people can be wrong. One thousand five hundred years ago, everybody knew that the sun and the moon revolve around the earth. Five hundred years ago, everybody knew that the earth is flat. One year ago, everyone knew that Pluto is a planet. Just because everybody is doing it or saying it doesn’t mean it is right. The only thing that brand extensions will do is extend the list of problems that your brand will face in the market even if your brand is one of the most powerful brands in the world. The MercedesBenz case study is an interesting one. Why Do People Buy Mercedes-Benz? Mercedes-Benz owners will tell you it is because of the brand’s engineering integrity, cutting edge technology, quality, durability (you can drive a Mercedes-Benz to the moon and back and it will still be as good as new) and a whole lot of other things. Sure, MercedesBenz has all of that but so does a BMW, an Audi, a Lexus, a Jaguar and even a Volkswagen. So why buy a Mercedes-Benz? Prestige. We know many Mercedes-Benz owners. Most of the high-tech functions in their cars are lost on them. They don’t really need or use all those gadgets. All they do is get into the car and drive. So why buy a Mercedes-Benz? Prestige.

So How Did The 3-Pointed Star Get Rusty? In an interview with Inside Line (21 November 2005), Dr Dieter Zetsche, the new Chairman of DaimlerChrysler, made the following comment to the question of how recent quality problems have hurt the image of Mercedes-Benz:

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That is the overriding reason for buying the 3-pointed star. It is prestigious. If a Mercedes-Benz owner is honest enough, he or she will tell you that above everything else, it is the prestige that made them buy that brand of car. Prestige is intangible. Prestige is not something that can be copied easily by another brand. A Lexus is quieter. A Jaguar rides better. A BMW handles better. An Audi is more elegant. But none of them occupies that special position in your mind marked ‘Prestigious German Automobile’. Wilson bought one recently despite being a long-time Audi fan. When asked why, he thought long and hard before saying that a Mercedes-Benz does not cost a lot more than an Audi or a BMW but it is perceived as more prestigious. There you go! Confessions of a Mercedes-Benz owner. Mercedes-Benz built this reputation by consistently overengineering their cars. A Mercedes-Benz might not be the most fashionable car or the most generous with standard equipment but it is luxurious, it is built to last and it has a general air of superiority (some would say arrogance) around it that grows on you. You know exactly what a Mercedes-Benz is because it consistently delivers on the brand’s core attributes—right down to the way it smells! There used to be a time when you could enter a MercedesBenz blindfolded and know what car you were in just from the smell and the way the door shuts with a solid thunk. In the past, it used to take at least nine years to complete the development work on a Mercedes-Benz compared to the four years that most Japanese manufacturers take. Jacky read in car magazines that back then, once a new model was launched, Mercedes-Benz engineers would immediately start working on its replacement because it takes nine years to perfect the next model. By doing this, Mercedes-Benz set the standard by which all other luxury cars are judged.

A brand is like a savings account. For most of the past 100 years, Mercedes has paid into this account and built its brand equity. We have withdrawn from that account in recent years. But it is still a strong account and we certainly intend to build it up again in the future.

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In other words, Mercedes-Benz hasn’t been behaving in a consistent manner. Hence, the brand was damaged. Fortunately for Mercedes-Benz, it is a very strong brand and strong brands can weather shocks like these and bounce back provided they take corrective measures. With Dieter Zetsche at the helm, things should take a turn for the better as he is a Mercedes veteran, having joined the company in 1976. Zetsche is also the man who ran Chrysler for the past five years and is widely credited for its turnaround. But let us now look at how the Mercedes-Benz brand ran into trouble. For a start, it expanded the brand in all directions. Somebody in Mercedes-Benz probably said that they should not limit the brand’s potential by concentrating on the high end of the market. That was the beginning of the downhill spiral for Mercedes-Benz. It began in 1983 with the launch of the original Baby Merc—the 190E. It is a BMW 3 series competitor but that was still all right because the 190E was built solidly like a real Mercedes-Benz although it was cramped and did not have much of a road presence. The real problem started in the early nineties when MercedesBenz shortened its development time to around five years instead of the usual nine. They rushed through the development of new models. As a result, cars like the latest E class (W211 model) left the assembly line with a whole list of faults. That eroded customer confidence and sales went down dramatically—about 32 per cent in the first half of 2005. And that is Mercedes’ bread-and-butter model. To make things worse, the E class is widely used as a taxi in many countries, including Singapore! How prestigious is that? For the taxi company’s customers, it may be fantastic, but what does that do to the Mercedes brand? It even went downmarket with cars like the A class which is really too small to be a real Mercedes-Benz! Its interior was covered in low grade plastics! It is a cynical marketing exercise that exploited the

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prestige of the Mercedes-Benz brand instead of building on it. Then, they launched the Vito MPV which is nothing more than a glorified commercial van with seats. And the American-built M class SUV was so badly made that car journalists all over the world expressed shock. All these things were inconsistent with the Mercedes-Benz brand promise. Then Mercedes-Benz merged with Chrysler. We are told by experts that 90 per cent of mergers and acquisitions end up in failure. This one ended up destroying billions of dollars in market value. It was the mother of all mistakes to merge with Chrysler. What is a Chrysler? It is a cheap American car. Merging with such a company means that the two entities need to share components in order to cut costs. That is good for Chrysler as it gets to use Mercedes platforms, engines and gearboxes. The Chrysler 300C uses the platform from the E class and the Crossfire sports car is basically a re-skinned version of the previous generation SLK. This is bad for Mercedes’ image as a prestigious car brand. Furthermore, in an effort to boost sales, Mercedes-Benz started selling their engines to Korean car makers like Ssangyong who can then proudly claim that their cars are ‘Powered By Mercedes-Benz’— great for Ssangyong but damaging for the 3-pointed star’s reputation. Worse, Mercedes-Benz even sold the W124 E class (launched in 1988) and its entire manufacturing facility to Ssangyong. Granted, the W124 had been replaced by the W210 by then but this move did not do Mercedes-Benz’s image any good because Ssangyong promptly launched the Chairman which is based on the W124 and styled to look like an S class! All these things were thoroughly inconsistent with what the Mercedes-Benz brand stood for. To make matters worse, scores of branding experts jumped to the conclusion that the Mercedes-Benz brand had been able to stand up very well to the brand extension exercise. They pronounced the brand extensions to be highly successful as they boosted sales substantially. What MercedesBenz executives and these branding experts missed out on is that the effects of inconsistency take time to manifest, just as the right marketing moves take time to bear fruit. And they also forgot that brand extensions will actually boost sales in the short term as

you have more products to sell. But these extensions weaken the brand in the long run. When you extend a brand in all directions like Mercedes-Benz did, that brand no longer stands for anything concrete. That will hurt your sales eventually. Mercedes-Benz used to top the JD Power & Associates quality surveys. In recent years, however, they have dropped out of first place. In 2006, Mercedes-Benz dropped to the 25th position on the JD Power & Associates Initial Quality Study with an average of 139 defects per 100 vehicles.35 Twenty-fifth place is not a position for a premium brand to be. Mercedes-Benz is all about luxury, prestige and engineering. How can a car that is so high in prestige be so low in quality? How did this happen? Inconsistency.

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Inconsistency Allows Competitors To Overtake You Actually, BMW fared even worse with 142 defects per 100 cars and a No. 27 spot on the Initial Quality Study rankings but a BMW is first and foremost about the driving experience. In this respect, BMW has remained true to its DNA. A BMW is still focused on driving and BMW still creates some of the best driver’s cars in the world with clockwork consistency. Despite BMW’s worse quality ratings, it is still the more consistent brand and that has allowed it to overtake Mercedes-Benz in sales. In 2004, Mercedes-Benz sold 1.06 million cars compared to BMW’s 1.03 million. In 2005, BMW sales jumped 10.1 per cent to 1.13 million cars compared to Mercedes-Benz’s 1.08 million cars.36 Don’t get us wrong. We are not saying that Mercedes-Benz is a lousy brand. On the contrary, Mercedes-Benz is a very strong brand but even strong brands can be damaged if treated inconsistently. Some people have argued with us that Mercedes-Benz’s woes have nothing to do with inconsistency or brand extensions. They pointed out the obvious—the quality has dropped. The quality dropped so sales dropped. Yes, but why did the quality drop? Because MercedesBenz did not remain true to its roots of testing every component to destruction in the toughest real world situations. Instead, they let their suppliers do the testing. Later, they admitted that this move was not ideal as they needed to see how these components interact with one another in the real world. 35 36

www.jdpower.com Reuters UK, 9 January 2006

The Way To Do It Among the top tier luxury car makers, Lexus is by far the youngest. It was launched in 1989. But Lexus has been the best-selling luxury car in the United States since 2000. They sell over 300,000 units a year in the United States. How did Lexus do it? It was the first serious Japanese luxury car brand, a new category. And it was resolutely consistent in delivering on its brand promise, ‘The Relentless Pursuit Of Perfection’. Lexus might have been called boring and derivative in

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My Star Is Bigger Than Your Star For a brand that trades on prestige, it is strange to find the MercedesBenz logo on the most unglamorous objects on the road such as commercial vans, buses and even garbage trucks. To make things worse, the 3-pointed star on a garbage truck is much bigger than the one on the top-of-the-line S600 luxury model. How would that make the rich towkay (boss) who just plonked down a few hundred thousand of his hard earned dollars on an S class? How would that make you feel if you own a Mercedes car? Not very good. MercedesBenz is a very strong brand. That is why it could be abused for so long before it started to crack under the strain. If you don’t have a brand that is as resilient as Mercedes-Benz and you attempt to do what the Mercedes-Benz people did, you will be destroyed in no time. Fortunately, Mercedes-Benz realised its mistakes and has put in place a new management team that will likely refocus the brand on its core values. Its new CEO, Dr Dieter Zetsche, has promised a return to Mercedes-Benz’s roots and the signs are encouraging. Let’s see if the company can turn the tables on BMW. The second generation A class looks to be a very high quality item but that may not be enough because it is not a true Mercedes-Benz. Can a small front wheel drive car that competes with the likes of Volkswagen’s Golf and Opel’s Astra be seen as a real Mercedes-Benz? We think not. And Mercedes-Benz needs to stop its luxury cars from being used as taxis. Do you see a BMW 5 series or an Audi A6 being used as taxis? Maybe a handful are in Germany but definitely not as many as the Mercedes-Benz E class. They also need to re-name their commercial vehicles division. You cannot have a luxury car and a garbage truck sharing the same brand. It’s a recipe for disaster.

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the past but in quality, reliability, refinement and customer service (all the things that are critical for a luxury car), it has outpaced its rivals year in and year out. That is consistency. And you don’t see a Lexus being used as a taxi. You don’t see a Lexus commercial vehicle. You don’t see a low-end Lexus. BMW has also been very consistent to its brand promise of being ‘The Ultimate Driving Machine’. Every single BMW that has left the production line was designed to be the ultimate driving machine. All of them handle superbly, even the X5 SUV which weighs over 2 tonnes although it would have been better if BMW had not built that behemoth in the first place. That level of consistency has built BMW into the brand that it is today. REMEMBER THIS: Inconsistency brought the powerful Mercedes-Benz brand to its knees. Inconsistency will destroy your brand. Maybe not overnight. The effects of inconsistency are insidious. They take time to manifest. But they will destroy your brand. Make no mistake about that. The next time you think of extending or stretching your brand, think again. If you insist on all these extensions, your brand will suffer eventually. Even MercedesBenz suffered and it is probably a far stronger brand than yours. So what makes you think you can pull it off? Look at all the new, line-extended businesses that you have launched under your original brand. Have they done well? Have the extensions started to affect your core brand? It will very soon. It took many years for Mercedes-Benz to suffer the effects of violating this rule. It won’t take you that long. Why Is It So Hard To Remain Consistent? Branding is boring because you need absolute consistency. Once people get bored, they will try to change things, tinker around with the formula. That is when trouble sets in. Plus, if you look at successful brands, the one thing that most of them seem to do when they become successful is to forget the thing that made them successful in the first place. Success breeds confidence. And also amnesia. Once a company becomes successful, it will think that it is invincible and start to line extend the brand into all kinds of things.

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Mercedes-Benz wasn’t alone in this. Xerox was the most successful photocopier company in its time because it did everything right. It invented a new category called plain paper photocopiers at a time when everything else was a thermal photocopier. They promoted the category. They came up with a great name. They were highly focused and consistent. But some years later, buoyed by the success of their photocopiers, Xerox began to think that they could extend the brand into other high-tech areas like office automation and even computers. Xerox set up a lavish and cutting edge R&D centre called the Palo Alto Research Centre or PARC. It was the dream of every high-tech entrepreneur to get invited to PARC to peek at what they were doing. In fact, that was one of Steve Jobs’ dreams, according to the book iCon: The Greatest Second Act In The History Of Business. When he finally got his invitation, what he saw there blew his mind. PARC was doing things that were far more advanced than anything he had ever seen at that time. In fact, Xerox had a graphical user interface (GUI) for personal computers up and running five years before Apple launched its GUI that became the industry standard. You could say that Steve Jobs was inspired by the research he saw at PARC. No one doubted Xerox’s capabilities in high tech. They spent tens of billions of dollars on high-tech R&D but the only problem was that the Xerox name stood for photocopiers, not computers, not scanners, not fax machines, not even printers. So Xerox failed in this area and refocused its attention on photocopiers. Xerox forgot what made them successful. Photocopiers. Xerox did not stand for computers or office automation. Launching all those other products was inconsistent with what people see Xerox to be. Volkswagen also fell into this trap. Volkswagen used to mean ‘The People’s Car’. In fact, its name means exactly that in German. Volkswagen was very successful when it was making mass market cars like the Beetle, Golf, Polo, Lupo, Fox. Then it moved up the value chain to compete in the luxury car sector which is not a very good move. We are saying this not just as professionals but also as exVolkswagen owners. Moving the brand up the so-called value chain resulted in a lot of undesirable outcomes.

CASE STUDY ON CONSISTENCY: HTL

g It is human nature to want to upgrade everything. We see upgrading as part of progress. So we strive to upgrade. In an effort to break out of what some marketing experts see as the marketing myopia that is limiting the growth of brands, many companies have strived to upgrade the scope of their functions.

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First, it made Volkswagen cars expensive. Second, it eroded the Volkswagen brand equity because Volkswagen no longer has a consistent identity. Volkswagen is a mass market brand. Maybe it is the premium mass market brand but it is mass market nevertheless. It is not a premium brand. As a result, the Phaeton, which was conceived to compete with the Mercedes-Benz S class, BMW 7 series, Jaguar XJ series, Lexus LS430 and Volkswagen’s own Audi A8, was a flop. Third, it made things very difficult for Volkswagen’s upmarket division, Audi. Why have two brands from the same group competing in the same sector? Volkswagen should take care of the mass market and Audi the premium sector. Worse, Volkswagen started sharing platforms and engines with Audi and even styled the face of its new generation Passat, Jetta and Golf to mimic Audi’s, which made things even more complicated. This inconsistent behaviour started to erode Volkswagen’s sales and profits even in its home market of Germany. This should serve as a warning to anyone who thinks that they can pull off brand extensions successfully. Mercedes-Benz failed. Xerox failed. Volkswagen failed. Creative Technology, despite its leadership in sound cards, got burnt badly in the MP3 players sector. HP got into trouble because its brand was so heavily line-extended. Many, many others have failed. What makes you think you can succeed? We would hate to see your brand extension strategies put your company in trouble a few years down the road.

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Insurance companies have become financial services firms and insurance salesmen have become your personal financial planning advisors. Warehouses have become logistics centres. Couriers have become fulfillment companies. Taxi companies have become transportation companies. In most of these cases, the words get upgraded but not the actual meaning. New language, same meaning. Our favourite example is outsourcing. Outsourcing has become best sourcing, which we think is particularly dumb. What is best sourcing? We know what outsourcing is but what on earth is best sourcing? If it looks like a dog and barks like a dog, it is a dog. Speaking of that, we would not be surprised to find that one day, dogs will be known as personal household companions. Companies all over the world are trying to break out of the narrow definitions of what their brands stand for instead of remaining consistent to the formula that made them successful in the first place. They want to move up the brand value chain. What is a brand value chain anyway? We don’t know. Do you? These ‘upgrading’ efforts usually end up decimating the brand. HTL is a highly successful leather sofa manufacturer. From its modest beginnings in 1976 in Singapore, the company grew by leaps and bounds. In 2004, HTL registered a sales turnover of S$490.43 million and a net profit of S$41.54 million which represents a margin of 8.5 per cent. In 2005, those figures grew to S$597.9 million turnover and S$54.1 million net profit (9 per cent).37 Pretty decent we think. And it was recognised by Forbes Global as one of the ‘World’s 200 Best Small Companies’ in 2002, 2003 and 2004. What is the secret behind HTL’s success? Good old-fashioned consistency. For 30 years, HTL has kept the brand focused on making high quality leather sofas. They were not tempted to upgrade anything except what really matters—their design capabilities and manufacturing processes. Some people may think that HTL is not maximising its potential. We disagree. HTL knows what it is good at —making high quality leather sofas. HTL could have let success go to its head. It could have done what many companies do when they become successful, depart from the formula that made them successful in the first place. HTL could have upgraded itself from a mere sofa manufacturer to a ‘world 37

www.htlinternational.com

class provider of high quality leather products’. It is easy to fall into this trap. After all, it doesn’t take a wild leap of imagination for HTL to see itself in that light. It already knows all about leather. Why not use this knowledge to make other leather products like wallets, bags, jackets, gloves, watch straps, car upholstery, etc? Therefore, we find it very encouraging to find a successful and profitable Singapore company that understands the importance of consistency in building the brand. Leather sofas made HTL famous and people see HTL as a leather sofa brand. So what HTL did correctly (and should continue to do no matter how boring or limiting it may seem to some marketing experts) is to continue what it has done for 30 years—making great leather sofas.

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12. Rule No. 9: Make Enemies, Not Friends

When you were growing up, your parents probably told you that you should play nice with the other kids. They probably told you that you should make friends, not enemies. And for those of you who are now parents, you are probably telling your kids the same thing. It is great advice and the world will be a much better place if we can all get along. Unfortunately, if you want to build a strong brand, you will have to make some enemies. Strange as it may sound, you actually need to have enemies to ensure that your brand becomes successful. Yes, you need to beat your enemies in the marketplace but at the same time you also need them to help you grow. Nobody ever acknowledges their enemies for their brand’s success but after reading this chapter, you might think differently.

Enemies Give Your New Category Credibility Creating a new category can be a great way to build a brand as we

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Enemies Give Your Brand A Reason To Exist People love to see a good fight. It is human nature. And having an enemy to fight gives your brand a reason to exist. It also focuses and energises your brand, giving it a mission in life. You might think, “Hang on a second. My brand exists to fulfill a market need, not to make enemies.” That is what you would like to think but if your brand does not have an enemy to fight, it will be quickly forgotten because it will become less interesting. Let us give you some examples from the world of superheroes. One of the most successful and enduring superhero brands is none other than Superman. And what is the reason Superman is so successful? He has to fight a powerful enemy—Lex Luthor—and that gives Superman a reason to exist. Without an enemy to defeat, Superman would just be a super-powered weirdo who wears his underwear on the outside. Why is Pepsi a strong brand? It has a powerful enemy, Coca-Cola. Fighting Coca-Cola gives Pepsi a reason to exist. Coca-Cola tells the world that it is the real thing. Everything else is an imitation. But Pepsi challenges that. Pepsi tells the world that Coke may be the real thing but it is also the old thing. Pepsi is the anti-Coke. Pepsi is the young thing. So Pepsi has a right to exist. To give the young and the young at heart an alternative to the old thing that is Coke. When Duracell challenged Energizer in the battery category, it gave Duracell a reason to exist. By focusing on fighting a wellestablished enemy like Energizer, Duracell made its brand important in the eyes and minds of potential customers. Duracell exists to give customers an alternative—the long lasting alkaline battery—to what Energizer was offering at that time. Burger King has a reason to exist because it is fighting the most powerful enemy you can find in the world of fast food—McDonald’s. McDonald’s is fast, clean, efficient and consistent. But McDonald’s is all about standardisation and homogeneity. Burger King is now fighting that with its Have It Your Way concept where you can customise your burger just the way you want it. Burger King exists to give customers an alternative to McDonald’s.

have shown you earlier in Rule No. 3. However, in order for that category to have credibility in people’s mind, it will need to attract more brands into it. If you are the only brand in that category, then there is no competition. No competition means that the category will not draw the attention of the media as well as potential customers. And when you introduce anything new to potential customers, they will ask three questions that will determine whether your brand or category will make it or not.

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1) Is this something new? People are interested in what’s new—not what’s better. If what you’re offering is something new, people will show interest. If it is just a better product based on a theme that is already established by someone else (usually the category leader), it will be seen as a me-too brand. Just calling something ‘new’ doesn’t make it so. It needs to be really new. Here is another example of how language is upgraded but the meaning is not. You know how car manufacturers nowadays like to label a face-lifted version of an existing model as a new car? Well, people are not that stupid. They can tell that it is the old model with some cosmetic changes. So don’t try that. When Sony launched the Walkman, it was something new. Really new. The world’s first portable cassette player. Naturally, people were interested. The MiniDisc was likewise a new category. Therefore, it also generated interest. 2) Who is the leading brand? The second thing that people will look for is the leading brand in this new category. When they saw that Sony was the leading brand in both the Walkman and MiniDisc category, they thought, “Great! I know Sony. Great brand.” So far, so good. 3) Who else is in this category? This last question is equally important. If people find that there aren’t too many other brands in the category, they may get suspicious. They might think that there is something wrong with the product. When people asked who else was in the Walkman category, they found

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plenty of competitors like Aiwa, Philips, Panasonic, Samsung, etc. If so many brands are in it, people will naturally think the category must be important. In our opinion, this is the hurdle that the MiniDisc failed to cross. It never became as big as the Walkman or the Discman that came before it because Sony’s competitors didn’t storm this category with the same gusto that they did in the Walkman category. Hence, the category never really made it into people’s mind. You need competitors in your category to give it credibility. You need competitors to attract attention to the category. The media and your potential customers will think the category must be important if so many brands are fighting for a slice of it. Only if your category is credible can it grow. A lot of people think that having an entire category to themselves is a good thing. No competition. Actually, the reverse is true. When you start a new category, you will naturally have no competitors in the beginning. But as categories grow, competition will definitely show up on the horizon. This competition will erode your market share from the 100 per cent that you enjoyed in the beginning to maybe only 40 per cent in the long run depending on the intensity of the competition and the pace of technological changes in that category. It is usually difficult for a leading brand to maintain a market share of over 40 per cent in the long run. Not impossible but it is difficult. In the relational database management systems (RDBMS) category, the leading brand is Oracle, with a 41.3 per cent market share, according to a 2005 report by IDC, a global provider of market intelligence and advisory services for the technology markets. In the mobile phone category, the leading brand is Nokia. According to a CNET News report dated 10 February 2006, Nokia shipped 265 million mobile phones in 2005, an increase of 27.6 per cent over the previous year and outstripping the market growth rate of 14 per cent. Nokia had 32.6 per cent of the global mobile phone market in 2005, ahead of No. 2 Motorola at 18 per cent. In the digital camera category, the leading brand is Canon, with a 17.1 per cent market share according to an article in Let’s Go Digital dated 18 April 2005. Canon maintained this lead for the first

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half of 2006 with a market share of 21 per cent according to an IDC study published on 4 September 2006. Even for entrenched brands like Coca-Cola, which was established in 1886, it is hard to maintain a market share much higher than 40 per cent. According to CNN Money (8 March 2005), Coca-Cola’s share in the US soft drinks market is 43.1 per cent. But that is all right because 40 per cent of a big market is still better than 100 per cent of a small one. When Coca-Cola first started, the market for carbonated soft drinks was almost non-existent but Coke had a 100 per cent market share. Coke promoted the category. The category attracted competitors. The Cola War between Coke and arch rival Pepsi helped the category gain visibility, credibility and growth. Today, Coke’s market share is 43.1 per cent but that’s 43.1 per cent of a multi-billion dollar category. Much better than 100 per cent of virtually nothing, isn’t it? So instead of engaging in a destructive price war with new entrants and trying to block competitors from entering, the category leader should concentrate on promoting and enlarging the category. It should also constantly remind the market of its leadership position and that it is the real thing. This will allow it to rise further above the crowd and cement its position as No. 1. As long as you promote the category, you will be perceived as the leader. And if you have perceptual leadership, it will be easier to maintain your market leadership in the long run. That is how things work. A Strong Enemy Helps To Protect Your Market Share When you have two strong brands fighting each other in a category, and each one is taking the opposite position from the other, then it forms a barrier that makes it difficult for other brands to eat into the top two brands’ market share. Yes, you need competitors to jump into a new category in order to give it credibility but at the same time, you do not want this slew of competitors to eat too much into your market share. For decades, the battle between Mercedes-Benz and BMW left no room for other luxury car brands like Audi, Jaguar and Cadillac to really grow in that segment. That is another reason to make enemies. If Mercedes-Benz is the leading brand and BMW is the challenger

WARNING: If You Are Not No. 1 Or No. 2, You Will Probably Be Small Competitors are good for growing a category but keep this in mind. In most categories, the top two brands will usually command the lion’s share. If you are launching a new category or entering someone else’s category, make sure you are among the top two. Otherwise, you will probably have a very small market share. • Oracle and IBM have 72 per cent of the database software market. (Source: IDC) • PlayStation and Nintendo have 85 per cent of the gaming console market. (Source: Hoover’s Inc.) • Sony and Samsung have 68 per cent of the rear projection TV market. (Source: EE Times)

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brand, then in the minds of car buyers, there is no room for anything else. It keeps other brands out of the game. When you pick an enemy, it is good to pick the leading brand and then position yourself opposite that brand—provided, of course, that the opposite position has not been occupied. You must take the opposite position from the leading brand because with two brands occupying different spectrums, it will be difficult for other brands to establish a foothold in the category. If Coca-Cola is for old people and Pepsi is for young people, that covers almost every cola drinker in the market. There is very little room for a third brand to thrive in this environment. That may explain why the No. 3 brand, Crown Cola, is so small. If McDonald’s is for kids and Burger King is for adults, that just about covers every potential customer in the market. As a result, there is very little room for a No. 3 brand to thrive in such a market. But Burger King abandoned its position in the nineties and that allowed other brands to make inroads into the fast food industry. If Mercedes-Benz is about prestige and BMW is about driving, that covers almost every potential luxury car buyer in the market. That is why Mercedes-Benz and BMW are still the two biggest players in this market—the only luxury car brands to sell over one million cars a year.

• Coca-Cola and Pepsi have 75 per cent of the carbonated soft drinks market. (Source: Beverage Digest) • Intel and AMD have 98 per cent of the microprocessors market. (Source: ArnNet) • Nokia and Motorola have 52 per cent of the mobile phone market. (Source: Gartner) If you are not No. 1 or No. 2 in your category, you will probably have to be content with a much smaller market share than the category leaders.

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When Is Being No. 2 Not Acceptable? Microsoft is No. 1 in PC operating systems. Who is No. 2? No one. Because this is a standards game. When you are trying to get the industry to adopt your product as the industry standard, there is no place for No. 2. As Microsoft has become the industry standard for the PC operating systems, there is very little or no room for a No. 2 in this category. So if you are battling to be the industry standard, then it is winner takes all. Otherwise, there is nothing wrong with staking out a strong No. 2 position. Therefore, despite Apple’s superior Mac OS X operating system, it is unlikely that Apple will make much inroad into the OS market because the industry has already accepted Microsoft as the standard. In fact, Microsoft is so dominant that people used to tell this joke: “How many Microsoft engineers does it take to change a broken light bulb? None. They will just declare darkness as the standard.” The Problem With Being No. 2 The only problem with being No. 2 is management’s attitude. Management doesn’t like the idea of playing second fiddle. Management doesn’t take too kindly either to people who suggest that they should settle for No. 2. Everybody wants to be No. 1 but what a lot of management types don’t understand is that to be No. 1, you need to get into the mind first. If you are not first in the mind, it is hard to be No. 1 in the marketplace. But then, not many business executives are keen on creating a new category whereby their brand can be the No. 1 because it is not an easy task. So what they try to

do instead is muscle in on an existing category by sheer brute force. Let’s outspend the leading brand in advertising and marketing, goes the conventional thinking. Many car manufacturers outspend Toyota in advertising and promotions. So what? The Corolla is still the best-selling car in the world according to a Seattle Times article (17 November 2006). Management has to understand that if they are not willing to create a new category where they can be first in, the best they can do is stake out a strong No. 2 position provided there isn’t already a strong No. 2 in that category. There is nothing wrong with being No. 2.

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The Strategy To Use If You Are Not No. 1 If there is already a clear No. 1, then you just have to take the opposite position. Hertz was No. 1 in car rentals for as long as people could remember. Avis cleverly staked out the No. 2 position with the tagline, ‘We Are No. 2 So We Try Harder’. That was an excellent strategy not because of what most branding experts think. Avis was often applauded for trying harder but that wasn’t what built the Avis brand. What built the Avis brand was their declaration that they were No. 2! Everyone knew that Hertz was No. 1 but until then, the No. 2 brand was a bit fuzzy. Avis’ strategy allowed them to be the clear No. 2. Hertz is No. 1 in car rental but if you don’t want to rent from Hertz for whatever reason (maybe you don’t like white rental cars), then what do you do? You go down the ladder to the No. 2 brand which is Avis. But that strategy wasn’t as solid as most people thought because trying harder is not really a powerful differentiating idea. Customers expect you to try harder no matter what. If you don’t try harder, they simply go somewhere else. Enterprise Rent-A-Car—although they were nowhere near Hertz —came up with a strategy that was even better than Avis’. They took the opposite position from Hertz. Hertz can often be found in airports. That is where Hertz is strong in. So Enterprise avoided the airports. Enterprise located its rental offices in suburban areas where Hertz is weak in.

By taking this opposite position, Enterprise managed to become a real enemy to Hertz. Not by trying harder but by being different. Enterprise now has a reason to exist. Hertz serves the airports. Enterprise serves the suburban areas. Opposite positions. This strategy allowed Enterprise to overtake Hertz. Surprised? So were we. Although Hertz is still perceived as the king of rental cars, Hertz trails Enterprise in terms of sales. In 2005, Hertz had S$12.1 billion in sales while Enterprise chalked up S$13.3 billion. Enterprise wasn’t No. 1 or No. 2 but it has become a serious enemy to Hertz. While Avis was trying harder to match Hertz in the areas where Hertz is strong, Enterprise attacked Hertz where it was weak—in suburbia.

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CASE STUDY ON MAKING ENEMIES: MUVEE

g You know the saying, ‘Be careful who you take on as an enemy’? Well, the same applies in branding. You need enemies to give your category and your brand credibility but you need to be careful what type of enemies you make. muvee knows how to make enemies. In fact, it has figured out the art of making enemies right from the start. muvee is not the first company in the world to make video editing software. To distinguish itself, the people behind the company ingeniously created a new category called automated video production that makes it easy for anyone to make movies. The company released its first automated video production software, autoProducer v1.0, in 2001. At the time of this book’s publication, muvee is already on version 7 of its flagship autoProducer software. The software allows you to produce a movie from raw footages in five easy steps: 1. Select your video and pictures. 2. Add in some music (MP3, WAV, WMA). 3. Choose from 24 cool editing styles. 4. Click ‘Make muvee’. 5. Burn the finished movie into a DVD or VCD.

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Today, muvee has a group of competitors that also offer automated video production so they now have enemies within the category. As muvee promotes the category, the number of competitors will likely grow but that’s all right because it will give the category credibility. It will increase the pace at which this new category grows. But when muvee first started, they didn’t have any competitors in this category because it was a brand new category. So who did they take on as an enemy? You must remember that one of the most important things that you do with a new category is to use that new category to make an existing category obsolete. That means you need to use your new category to make an enemy of the existing category. Who is the enemy for muvee’s automated video production category? Manual video production— the established way to make videos. muvee wisely pitched its new category against the existing category which makes it exciting for the media as well as potential customers. People are always interested in new things and even better, they like to see the new kid on the block pick a fight with the established giants. muvee also licensed its core engine to other software companies early on which helped other players get into the category. In the words of Terence Swee, muvee founder and its Chief Opportunities Officer, “We created our own competitors early on.” This was a good move as it helped to establish the muvee system as the industry standard. It was the difference between IBM and Apple. IBM allowed clones of its PC in the early days that helped the category to grow so the PC operating platform became the industry standard. Apple refused to allow clones and as a result, PCs outsell Apples 95 to 5. Needless to say, muvee grew by leaps and bounds. It is still a small company but it has tremendous potential. As the category grows, muvee—the pioneer of this category—will grow along with it. Its actual market share will probably drop as a result of the increased competition within the category but its revenue will increase. muvee used to sell its automated video production software bundled together with PCs, mobile phones or video camcorders. Now, it is moving into the consumer space. This will be an interesting battle to watch.

13. Rule No. 10: Know When To Launch A Second Brand

One of the biggest mistakes that a company can make is to think that its brand can stand for everything under the sun. But that is what many business executives think the moment their company becomes successful. Success naturally breeds confidence. And because they have made it in one category, many business executives think they can use their brand name in other categories. Very often, they forget what made them successful in the first place and start to line extend their brands into other products or services. The typical argument that management puts forward is that the brand is already well known, therefore it will be easier and less costly to launch a new product or service under that name. Plus, the market place is so crowded with brands and their marketing messages that it would make better sense to use an already well-known brand to launch that new product or service. That way, the new product or service will be able to rise above the clutter by leveraging on the parent’s powerful brand name. We are sure many of you have made this argument before and we know it seems to make a lot of sense but doing that could turn out to be a very costly mistake—not just for the original brand but also for the new products or services launched under that line-extended brand. New products and services, especially in a pioneering category, need new brand names. Management can usually point to increased sales to justify this move but here is the danger. Branding mistakes don’t immediately hit you on the head. They build up over time. The problem with line extension is that it may give your sales a boost in the short

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term simply because you are now selling more products! But in the long run, line extension damages both the core brand and the new products launched under the core brand. The reason is simple. With line extension, the core brand is weakened because it no longer stands for the one thing that made it strong in the first place. It now stands for several things and when you stand for several things, you end up standing for nothing. And the new product or service using the line-extended name is also disadvantaged because it is using a name that stands for something else. In branding, there is no such thing as being neutral or having the best of both worlds. You are either this or you are that.

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Do You Brush Your Teeth? One of Jacky’s clients was debating with him endlessly on the merits of using line extensions as a way to build brands quickly. After a while, Jacky suddenly asked the client, “Do you brush your teeth?” prompting everyone in the room to glare at him for being so rude. The client looked puzzled. He must have thought that Jacky was implying that he had bad breath. Nevertheless, the client regained his composure and said, “Yes. At least twice a day.” Jacky then asked the client again, “What brand of toothpaste do you use?” The client replied, “Colgate.” Jacky asked, “Why Colgate? Why not Oral B? I hear that they make excellent toothpaste and Oral B is a well-known brand in oral care.” The client paused before answering, “I see where you are going with this. Well, Oral B is known for toothbrushes, not toothpaste.” Jacky pressed on, “Would you buy Colgate toothbrush? After all, Colgate is a famous brand for toothpaste so why not make use of that famous brand and extend into toothbrushes. It is the same thing after all—toothbrush and toothpaste both fall under the category of oral care, right?” The client said, “Actually, I would buy Colgate toothbrushes. I have bought them before so it would seem to me that Colgate can be line extended into something other than toothpaste.” Jacky asked, “If the Colgate toothbrush is priced the same as the an Oral B toothbrush, would you still buy it?”

Disposable Contact Lens Bausch & Lomb is one of the top contact lens makers in the world. It started to focus on contact lenses after the US Food & Drug Administration (FDA) approved its soft contact lenses in 1971. If you started wearing contact lenses in the eighties or nineties, chances are you would have bought a pair of Bausch & Lomb. In those days, you couldn’t talk about contact lenses without the optical shop recommending you a pair from Bausch & Lomb.

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The client answered with a shrug, “I’ve never thought of it that way but if they are the same price, then probably not.” Toothbrushes and toothpastes are two very low-interest categories, don’t you agree? They are not something that most people spend a lot of time thinking about. Even then, most people would make a clear distinction between what the Colgate brand is and what the Oral B brand is. Colgate stands for toothpaste and Oral B stands for toothbrush. If Colgate wants to compete with Oral B in the toothbrush category, it would need to have a lower price because as famous as the Colgate brand is, it is not famous for toothbrushes. Even in the toothpaste category, Colgate still can’t stand for everything. Colgate stands for protection toothpaste—protection against cavities, plaque and tartar. Colgate also makes toothpaste for sensitive teeth. But when sensitive teeth toothpaste is mentioned, most people would think of Sensodyne. And Colgate also makes whitening toothpaste but when whitening toothpaste is mentioned, chances are, most people would think of Pearly White or some other brand. Colgate needs a second brand if it wants to enter another category effectively but even with a different name, it will still find it hard to compete against entrenched competitors like Listerine in mouthwash, Oral B in toothbrush, Sensodyne in sensitive teeth toothpaste and Pearly White in whitening unless it can find a useful point of differentiation. So do you still think that just because your brand is famous in one area, it can be successfully extended into other categories? Even if it is a related category, you might still have difficulties as illustrated by the Colgate example.

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Today, the contact lens category has grown a lot and it has even divided itself into new categories. Today, you have general vision contact lens, colour contact lens, astigmatism contact lens, multifocal contact lens, daily wear contact lens, flexible wear contact lens, extended wear contact lens and daily disposable contact lens. And probably some other categories which we are not even aware of. If you walk into an optometric shop today to buy daily disposable lenses—which is a new category—the brand that comes to mind first is 1-Day Acuvue, a Johnson & Johnson product. Focus Dailies from Ciba Vision is the other brand that might come to mind. Why not Bausch & Lomb? Because daily disposable contact lens is a new category and you need a new brand to go along with it. Using an old brand that is well known for something else in a new category will hamper its chances for success. The next story is probably one of the best examples of this. Who Invented Digital Photography? Canon? Nikon? Olympus? Sony? Nope. It was Kodak. Surprised? We were when we first found that out. Yes, Kodak pioneered this category way back in 1976. So they should have dominated this category with an iron fist, right? Polaroid pioneered a new category called instant photography and dominated that. Of course, Polaroid is no more because digital photography has made it obsolete but when the category was still relevant, Polaroid was king of the hill in instant photography. Nikon was one of the pioneers of the single lens reflex (SLR) camera and today, Nikon is one of the leading brands of SLR cameras. Carl Zeiss is a pioneer in camera lens and Carl Zeiss is today a leader in this category. So Kodak should be No. 1 in digital cameras but it is not. What happened? Because Kodak is a brand that is known for photographic film. Launching a new category called digital photography would mean going head-to-head with their own photographic film business. But Kodak should have launched the digital camera nevertheless. After all, most things that used to be analog eventually went digital and Kodak would have known that cameras would eventually go that route too. But Kodak waited too long to get into the game, giving

Canon, Sony and the rest a head start. On the other hand, when Kodak eventually did enter the digital camera category, it made a big mistake by not launching a new brand for their digital cameras. They insisted on using the Kodak name because it is a well-known name but the problem was that Kodak is not a name that is known for digital cameras—or any type of cameras for that matter. That mistake probably caused Kodak the lead in this sector. Look at the market share of the various brands of digital cameras. Kodak is in third place, quite a distance behind Canon and Sony, and only slightly ahead of Olympus.

Canon

Market Share (%)

Market Share (unit)

17.1%

12.65 million

Sony

16.7%

12.36 million

Kodak

11.8%

8.73 million

Olympus

11.2%

8.29 million

9.3%

6.88 million

Nikon

Source: Let’s Go Digital, 18 April 2005

New Categories Need New Brands Have you ever wondered why those big luxury cars from mass market car makers like Peugeot, Rover, Fiat, Citroen, Renault, Opel, Ford, Volkswagen and Mitsubishi don’t sell very well despite the fact that they are very well-equipped and priced cheaper than the equivalent Mercedes-Benz, BMW, Audi or Lexus? You don’t need to be a genius to figure this out. Who wants to buy a luxury car from companies that are known for making cheap mass market cars? No matter how good the cars are, as long as they wear the wrong badge, they won’t sell in the luxury car sector. The latest casualty is the Phaeton from Volkswagen, designed to compete with the Mercedes-Benz S class, BMW 7 series, Lexus LS430 and the Volkswagen Group’s own Audi A8 (go figure this one out). We have a lot of respect for Dr Ferdinand Piech, the former Volkswagen Group chairman but the Phaeton is surely one of the biggest mistakes in his illustrious career. Volkswagen has all the

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Digital Camera

technical expertise that is necessary to make a world-class luxury car but who in his right frame of mind wants to buy a luxury car with a Volkswagen badge? A Beetle or a Golf, maybe. But a luxury car? The Phaeton is not selling well. It would have been a shock if it did. Volkswagen already has an elegant, advanced (it is made entirely from aluminium unlike the Phaeton’s all-steel construction) and highly capable contender in this sector—the aforementioned A8 from its subsidiary Audi—so why even bother with the Phaeton? Is the Phaeton a good car? Yes. We have read the test reports. So why did it fail? Perhaps this line from a Business 2.0 article would give you an idea: It might be the most compelling luxury vehicle currently sold. It is overwhelmingly the best value among high-end luxury cars. Without question it is a magnificent vehicle. And yet the company can’t give them away. Blame two minor faults: a VW badge on the front grille, and another on the trunk.38

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It’s the brand. Magnificent car. Wrong brand. Now consider the watch category. Take two well-known brands —Seiko and Rolex. Rolex is a premium Swiss watch. Even entry-level Rolex watches cost around S$6,000 or so. Seiko is a mass market Japanese watch. Seiko makes very good watches for the mass market. Its watches usually retail for a few hundred dollars. Even if Seiko comes up with much better, much higher quality watches than Rolex, do you think it will be able to penetrate the high-end market if they use the Seiko name? If Seiko wants to go upmarket, it needs a new brand. Just because Seiko is successful in the mass market sector doesn’t mean that it can sell watches in the S$6,000-and-above category. Likewise, if Rolex wants to go downmarket, it needs a new brand—like Tudor, for example. If they go downmarket with the Rolex brand, guess what will happen? They will destroy the brand equity of the upmarket Rolex watches. Why pay S$6,000 for a high end Rolex when you can get a $1,000 low end Rolex that is still a Rolex? And that $1,000 Rolex 38

Business 2.0, 1 June 2004

will probably not do very well either because who wants a cheap Rolex in the first place? When you buy a Rolex, you want people to know that you have paid for an expensive watch. New categories need new brands. That is why Toyota, despite being such a powerhouse in cars as well as being the world’s most profitable car maker, wisely chose to launch a new brand when it ventured into the luxury car segment in 1989. The rest, as they say, is Lexus history. Take the drinks and beverage category for example. Each new category has been dominated by a new brand, not a line-extended brand. No matter how powerful a brand is, you cannot make it stand for a category that it is not known for. The new category called energy drink has a new brand called

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The new category called sports drink has a new brand called Gatorade. The new category called bottled spring water has a new brand called Evian. The new category called spicy carbonated drinks has a new brand called Dr Pepper. The new category called natural fruit drink has a new brand called Snapple.

None of these brands are line extended from an existing brand. That is why they are strong. They are new brands that stand for the new categories they were launched into. When you launch a new category or enter a new category, make sure you do so with a completely new brand. What’s Up With HP? What made HP famous in the first place was not the computer even though HP is widely regarded as a computer company. HP became a powerful brand because of a new category called the laser printer.

Rule No. 10: Know When To Launch A Second Brand

Red Bull.

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HP pioneered that category and became a powerful printer brand as a result. After HP became successful in printers, it decided to branch out into other categories. HP became what Nokia was pre-1991. It stood for everything. Do you know that besides printers, PCs, laptops and servers, the HP brand can also be found on things like fax machines, scanners, computer software, projectors, plasma TV, DVD players, digital cameras, PDAs and other things? That is not the right way to build a brand. Once HP became successful in printers, it should have launched a separate brand if it wanted to enter a new category. All these line extensions did nothing for HP’s net profit margin which dropped to just 2.8 per cent in 2005 from 6.7 per cent 10 years earlier. In 2004, HP’s net profit was S$8.6 billion. Out of that S$8.6 billion in net profit, S$6.2 billion (or a whopping 72 per cent) came from printers. So what is the point of line extending the brand into all kinds of things when the core printer business contributes more than two-thirds of HP’s net profit? In other words, the line-extended products didn’t help HP much, did it? But When Do You Launch A Second Brand? There is a caveat to Rule No. 10. While it is necessary for companies to launch a second brand when they enter a new category, this doesn’t mean that companies should launch brands indiscriminately. Before you run off and order a slew of new brands to be launched, you must understand that you need to do it at the right time and the right time is when your existing brand has become a dominant force in its category or if the existing category is becoming obsolete due to technological changes. There are too many small companies out there with more brands than they can manage. If you only have a fraction of your category’s market share, don’t launch new brands. Focus on getting your brand to the top. If you are too busy launching multiple brands while you are still a small player, you will waste a lot of time and energy managing a plethora of brands, none of which are significant players. Many companies that we have met would rather have 5 per cent of 10 markets than 50 per cent of one market. When we

CASE STUDY ON SECOND BRANDS: SINGAPORE AIRLINES

g It is all too easy for a big and successful brand like Singapore Airlines to succumb to the temptation of line extending its powerful brand name into other categories like HP did but luckily it did not. Singapore Airlines is a good model on how brand building should be done. The company was single-minded in the way it built the Singapore Airlines brand. Although some people may argue that it was impossible for Singapore Airlines to fail because it was well-funded to begin with, having deep pockets is no guarantee of success. Remember all those extremely well-funded start-ups during the dot.com era? Singapore Airlines began operations on 1 May 1947 as Malayan Airways. In 1963, the creation of the Federation of Malaysia brought

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asked them why, the answer was always the same. Growth and diversification of risks. But being a 5 per cent player in 10 markets is actually very risky. Look around you. The big, global brands are dominating even local markets. Everywhere you go, you see global brands dominating every category. So if you are a small player in 10 categories, you will eventually have to come to terms with 10 global giants and if history is anything to go, you will probably get steamrollered 10 times. It is better to focus your energy on building a powerful brand in one category and then launch a new brand into a new category. But you need to be successful in one category first before moving on. If you cannot even grow in a category that you know well, how can you grow in a category that you know nothing about? Toyota didn’t launch Lexus until its Corolla model was firmly entrenched as the best-selling car in the world. And only after Lexus became the best-selling luxury car in its key market, which is the United States, did Toyota launch Scion, a US-market only brand aimed at the young, sporty types.

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about a change of name to Malaysian Airways. In 1966, the name was changed again, this time to Malaysia-Singapore Airlines (MSA), following Singapore’s independence from the Federation of Malaysia the previous year. MSA ceased operations in 1972, when political disagreements between Singapore and Malaysia resulted in the formation of two new airlines: Singapore Airlines and Malaysia Airlines. The 1970s saw rapid growth for Singapore Airlines. In 1976, Singapore Airlines wanted to venture into the chartered aircraft category. Instead of line extending the Singapore Airlines brand, the company created Tradewinds Charter. In 1991, Singapore Airlines wanted to launch a regional airlines to specifically cater for short haul flights to 25 cities in Southeast Asia, South Asia and China. That new category required a new brand and as Singapore Airlines wanted to cease its charted aircraft operations, Tradewinds was renamed as SilkAir. As the regional wing of Singapore Airlines, SilkAir enhances Singapore Airline’s vast international network by developing new destinations in Asia and serving regional connections using Singapore as the transit hub. SilkAir became a strong brand in its own right. As we entered the twenty-first century, a new category called budget airlines started to gain prominence in Asia. Budget airlines like AirAsia and JetStar Asia were perceived as a threat to the full service carriers and Singapore Airlines needed to counter that threat. In response, on 31 August 2004, it launched a third brand—Tiger Airways—to compete in the budget airlines category. The Singapore Airlines method is the correct way. It is the same method that Toyota used. Launch a brand. Build that brand into a dominant force. Then, launch a second brand and repeat the process. Singapore Airlines was already an established international airline when it launched Tradewinds Charter which later became SilkAir. And SilkAir was an established regional airline brand before Tiger Airways was launched. Singapore Airlines understands that its brand cannot stand for everything under the sun. That is why it spun off its air cargo operations, SIA Cargo, in 2001. If Singapore Airlines had succumbed to the temptation of using its brand name on all of its categories

—international flights, short haul regional flights and budget carriers —then the brand could have been seriously damaged. There is no guarantee that Tiger Airways will be successful but at least by having a separate brand, Singapore Airlines can focus on being a full service international carrier while Tiger Airways focuses on fighthing the budget carriers. We are not sure where all this will leave SilkAir which is now sandwiched between the full service carriers and the budget carriers. That is a rather uncomfortable zone to be in—stuck in the middle— but if SilkAir can maintain its unique selling proposition by being a regional airline that flies to cities that are other airlines rarely service, then it might still be a viable brand.

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Closing Words g

Business executives often ask us when they should start to look into branding. This question often gives us pause as it demonstrates that many companies still do not understand branding. Branding is not something you do when your company gets to a certain size or age. Branding is what you need to do even before you open your doors for business for the first time. Without branding, it will be hard to compete on anything other than price. Is the iPod really a better MP3 player than all the rest? We doubt so but the iPod is the most powerful brand in the MP3 player category. Hence, Apple can charge more for the iPod. Is Aquos the best LCD TV in the world? Maybe. Maybe not. But it is the most powerful brand for LCD TVs. Hence Sharp can charge so much more for the Aquos compared to Samsung or Sony. Is Intel a better microprocessor than AMD? We don’t think so. But Intel has the stronger brand. Hence, computer companies buy more Intel chips than AMD, and Intel owns around 86 per cent of the computer chip market. Just because you are a small company right now, don’t ever make the mistake of thinking that you cannot build a world-class brand. The big brands that you see today started out as tiny brands. The next big brand will almost certainly come from small companies or startups in spite of the fact that big corporations have all the resources, people, credentials, distribution channels and marketing muscle to launch the next big brand. Look around you. When was the last time a big company introduced the next big brand? Even successful brands find it hard to launch a second brand that is equally successful.

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Linux was not created by IBM. BlackBerry was not created by AT&T. Google was not created by Microsoft. Amazon.com was not created by Barnes & Noble. Red Bull was not created by Coca Cola. eBay was not created by Sotheby’s. Digg.com was not created by CNN. MySpace was not created by Yahoo! Skype was not created by Nokia. YouTube was not created by AOL. Papa John’s Pizza was not created by McDonald’s. Silicon Graphics was not created by Dell. Pixar was not created by Disney.

Protecting The Existing Category Vs Creating A New One What made those big brands successful in the first place was usually the creation of a new category or a next generation product. Once they successfully cemented their position as the leader of that category, however, they needed to play a defensive game and protect their turf. That is the right thing to do. But not all categories live forever. New categories will continue to come along that will make the old ones obsolete. Successful companies are stuck between the need to grow and protect the category they invented and the need to create the next generation product that will make the current category obsolete. Most companies choose the former route, naturally, and this opens up opportunities for competitors to attack them with new categories. If you don’t establish your brand right at the formative stage of a new category, you are too late, no matter how powerful or how big your corporation.

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Even the big brands created in the past like Apple, Microsoft, Dell, Sun Microsystems, Hewlett-Packard, Oracle, Siebel, Compaq, McDonald’s, Pizza Hut, Starbucks, Gatorade, Mountain Dew and a host of others were not the work of big corporations. Why can’t big corporations create the next big thing?

What Does This Mean For You? If you are a small company or a start-up, take heart! You have a much better chance than the large, established companies at creating the next big brand. Rarely do the next big brand come from these large corporations. They are too set in their ways to do the necessary outof-the-box thinking. But that doesn’t mean that you will automatically succeed. There is a long, hard road ahead of you. But we are hopeful. We see a lot of potential for powerful global brands to be built out of some of the smaller companies in Singapore that we have come across such as:

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HealthSTATS in 24/7 blood pressure monitoring Stikfas in ball-jointed action figures muvee in automatic video editing Genometri in automated design generation MXR Cubes in mixed reality software abKey in ergonomic keyboards MicroAppli in mobile content sharing platforms Y3 Technologies in real time supply chain management Tunity Technologies in wireless tracking solutions smartBridges in wireless broadband equipment.

Not all of them will make it big but if they play by the rules of branding, they have a good chance. And so do you!

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