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The Dangerous Misunderstanding of “Branding”

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Tjaco Walvis,  Managing Partner of THEY in India;  email: tjaco@they.in Twitter: @tjacowalvis

Tjaco Walvis,
Managing Partner of THEY in India;
E-mail: tjaco@they.in
Twitter: @tjacowalvis

“Branding” has often been seen as synonymous with advertising, logo design and packaging – the creative part of marketing. As a result, branding is often thought of as an operational and cosmetic activity. A recent Gartner study indicates that in 2013, American companies spent around 10% of their revenues on marketing and advertising. Indian companies would spend similar amounts, with large FMCG companies like Hindustan Unilever spending around 12%. In sharp contrast, such spending is relatively low for iconic and extremely valuable brands like Google (1.8%), IBM (1.2%) and Apple (less than 1%). In fact, a company like Apple was never a heavy advertising spender throughout its history and hence appears to have not engaged much in “branding”. Does this mean “branding” has just a small role to play in building successful, valuable companies? Or should we change what we mean by “branding” and look at the process in a different way?

It is fair to say that the creative marketing disciplines have always had a large potential role to play in improving the success of companies, ever since advertising became an “industry” in the 1920s in the US. Yet since then, the way we think about what company success is, has changed quite fundamentally. It is no longer just about increasing sales or brand awareness. Over the last 30 years, the central focus of CEO’s and CFO’s around the world has become to improve the cash flow based value of a company. And the marketing profession, let alone the creative disciplines within it, have not found a convincing answer to the question how it contributes to it. As a result, in many cases the creative disciplines have become too far removed from the CEO to add real value, and have often become misunderstood and misused.

At the same time, there is little doubt that strong brands have tremendous financial value. Academic research as well as the work of companies like BrandFinance and Interbrand has made this clear. The stock prices of strong brands tend to outperform those of weaker rivals in the same industry, for example.

To reconcile the strategic value of brands with the operational image of the disciplines helping to build them, we must stop defining “branding” by the means it employs (advertising, design, packaging, etc.). This disqualifies it from the boardroom, because the link between the value of the company and the quality of a logo or advertising campaign is too large. Instead, branding should be defined in terms of its objectives (contribute to value creation), with appropriate approaches, and the role of the creative disciplines should be derived from that.

Many iconic brands have been built around a coherent philosophy about the contribution of the company to society beyond making money, and the beliefs it holds dear. Companies like Disney, Tata and Apple define their primary objectives not in terms of profits in perusing a valuable purpose, like: “to bring happiness to the millions” (Disney). Essentially, vowing to make a long-standing contribution to society is in line with rule #1 of marketing, namely taking the needs of customers and other groups as foundational for everything the brand does. However, iconic brands often actually believe in their own philosophy. And the spirit of really believing in making a contribution to the world and taking customer needs central because that is good marketing, are often very different.

One of the critical roles for CEO’s in such companies is therefore to align the entire organization around their philosophy and string the philosophy seamlessly with the strategy, the operations and the value capture process (i.e. the way its contribution to society is converted into attractive cash flows for the company). People like Ratan Tata, Walt Disney, Howard Schultz and Steve Jobs tirelessly worked to articulate their philosophy and build their companies around it. They created and strengthened a value creation value chain, seamlessly linking philosophy, strategy, operations and value capture together in a coherent system.

The potential role of the creative disciplines in this is huge. Creative people can help companies articulate their philosophies and express them in ways that touch the hearts, minds and memories of the millions of employees, customers, suppliers, investors and members of surrounding communities the company depends on. They can help develop an identity and design style that expresses the intangible philosophy in a recognizable and useful form. They can bring the philosophy to life in the architecture of offices and outlets, packaging, new brand naming, online interaction platforms. Creatives can make sure that what the company stands for is expressed consistently and with impact, where and when ever people come in contact with the brand. They can support the value creation process, by developing long-term communication programs and projects around the company’s value levers – the factors with the highest positive impact on the financial value of the company. Thus, branding becomes an integral part of the company’s strategic agenda to create long-term value.

In a world in which value creation has become the central mantra of companies, it no longer makes sense to equate “branding” with advertising, logo’s, design, packaging, interaction development, etc. Branding is the strategic application of the creative professions to express and project the company’s philosophy and support the key drivers of long-term value. We should change our conception of what branding is. Only then can branding contribute to building a new generation of iconic brands and effectively support the ones that have already reached that status.

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